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Washington’s protectionism lobby – that conspiracy of interests, which includes certain members of the House and Senate, steel and other import-competing producers, organized labor, and creative trade lawyers existentially determined to broaden the definition of unfair trade both statutorily and in the public’s mind – succeeded in extracting rents from President Obama and congressional Republican leadership in the deal that produced Trade Promotion Authority last month.

In addition to reauthorizing Trade Adjustment Assistance, which after 53 years of failure as economic policy has succeeded only at reinforcing the myth that job loss due to trade is especially problematic, Congress passed and the president enacted the American Trade Enforcement Effectiveness Act, which reduces the burden of proof on domestic industries seeking protection from import competition under the U.S. Antidumping and Countervailing Duty laws.

As we at the Cato Institute have documented over the past 16 years in more than a dozen policy papers and a book, the so-called trade remedy laws are already way too accessible and prone to abuse.  The abuse of these laws has caused enormous amounts of collateral damage, especially to downstream U.S. industries whose access to needed raw materials and intermediate goods can be shut down at the request of a single domestic producer.  These laws have never made sense economically, but are especially deleterious in a globalized economy.  Today, these so-called unfair trade laws are used primarily by U.S. companies and their workers to cripple the supply chains of other U.S. companies and their workers.  The rhetoric says “Us versus Them,” but the reality is “Us versus Us” – with net economic welfare losses being the typical result. 

Tomorrow, the U.S. International Trade Commission will render judgment in antidumping and countervailing duty cases involving automobile tires imported from China.  None of the domestic producers supports the petition for duties, which was brought by the United Steelworkers union, representing workers at domestic plants accounting for only 40 percent of U.S. tire production.

The case is not really about unfair trade.  It’s about the union attempting to obtain leverage over management so that it can extract production and wage concessions it might not gain under normal labor-management negotiations.  This is just one of the myriad ways in which the trade laws have been abused in recent years.  With further loosening of the evidentiary thresholds in the new law, we should expect to see more and more cases, and more and more economic damage.

I write about the tires case in greater detail over at Forbes.

I recently objected to Treasury Secretary Jack Lew’s proposed demotion of Alexander Hamilton on the ten-dollar bill. Hamilton was not only the first and most distinguished Treasury Secretary, but was also an accomplished professional in many other fields outside the confines of finance.

During his varied career, Alexander Hamilton was a profound journalist. His most famous journalistic project was a series of 85 opinion pieces that called for the ratification of the Constitution. These essays are called The Federalist Papers, and are the most cited sources by the U.S. Supreme Court. The Federalist Papers were published in 1787 and 1788 in New York City’s Independent Journal. These important essays — written under pseudonyms by Alexander Hamilton, James Madison and John Jay — were of very high quality and set the stage for the Constitutional Convention and the resulting product.

Hamilton organized this project, wrote most of the essays, and, of all the Founding Fathers, performed most of the intellectual work for the least historical credit. That said, two notable economists have given Hamilton his due. Lionel Robbins thought The Federalist Papers was “the best book on political science and its broad practical aspects written in the last thousand years.” And if that were not enough, Milton Friedman wrote in 1973 that The Federalist Paper, No. 15, written by Hamilton, “contains a more cogent analysis of the European Common Market than any I have seen from the pen of a modern writer.”

Hamilton’s prowess as a writer and journalist wasn’t a one-shot affair. He drafted a large part of George Washington’s famous Farewell Address, which was published in the American Daily Advertiser. And only three years before his untimely death, resulting from a wound inflicted in a duel with Aaron Burr, Hamilton founded the New-York Evening Post.

Treasury Secretary Lew’s proposed demotion of Hamilton throws into question both the Secretary’s grasp of history, as well as his judgment.

Now that the coast is clear, Slate has an honest assessment of ObamaCare premiums. Helaine Olen writes

Under this assault [from ObamaCare opponents], all too many ACA defenders turned into fanboys and fangirls, dismissing any issue raised against the law as inconsequential and exaggerated…

But this strategy might well come back to bite the Democrats. The bill for the health care expansion is coming due, just as the recipients will be heading to the ballot box to vote in the first primaries for the 2016 election. More than a few are likely to be annoyed.

Last week Oregon’s insurance commissioner, Laura Cali, announced that the state had approved a 25 percent premium increase for the largest health insurer on the state’s exchanges. The second largest insurer did even better: It received permission to boost its monthly charge to consumers by 33 percent…

And that sounds like a relative bargain compared with Minnesota and New Mexico, where the BlueCross BlueShield family is looking for increases of more than 50 percent. Even if the final numbers are lower than the asks, it seems quite likely these states will approve substantive premium increases.

The problem is simple. As Trudy Lieberman reported this month in Harper’s, the ACA made a decent stab at solving the problem of Americans lacking insurance. Unfortunately, the bargain struck to get the bill to a point where lobbyists for the hospital, insurance, and pharmaceutical industries to sign on, or at least not fight it, did not adequately address the issue of overall medical costs.

And that’s where the consumer comes in. Someone is “it,” the party paying the bill. And that “it” is increasingly you, whether you receive insurance on the exchanges or from an employer.

Or as I like to put it, ObamaCare doesn’t make health insurance more affordable. It robs Peter to pay Paul. When selling ObamaCare, supporters told everyone, “Don’t worry, you’re Paul.” But as time goes by, more Americans are realizing they’re not Paul. They’re Peter.

“You ought not to forget that the credit system and the tax apparatus remain in the hands of the workers’ state and that this is a very important weapon in the struggle between state industry and private industry….

The pruning knife of taxation is a very important instrument.  With it the workers’ state will be able to clip the young plant of capitalism, lest it thrive too luxuriously.”

–Leon Trotsky, The First 5 Years of the Comintern, Vol 2 (London, New Park, 1945) p. 341

I don’t know about you, but I’m tired of hearing that Greece is being “deprived of fresh Euros” by the ECB, or by the European Commission, or that those bodies are “moving toward cutting off its money supply.” That’s to say nothing of the Greek government’s suggestion that Greece is being “blackmailed” by these authorities.

Such talk seems to suggest that Eurozone members are like so many helpless hatchlings, their outstretched beaks agape in anticipation of the ECB’s regular and solicitous regurgitations of liquid sustenance.

At the risk of belaboring the obvious, I’d like to take a stab at putting this misguided metaphor to rest.

Consider for a moment, then, how two other Balkan states — Kosovo and Montenegro — manage to get hold of the euros they need to support their economies. Although the euro is their official currency, neither is part of the Eurozone, and neither has had a formal agreement of any sort with ECB such as could allow it to count on being able to borrow euros from that institution, strings or no strings, in a pinch.

Yet neither territory complains of being “deprived” of euros by European authorities, much less of being “blackmailed” by them. Nor do Panama, Ecuador, and El Salvador — all dollarized Latin American nations — complain that the Fed isn’t sufficiently forthcoming with dollars. (Panama did once have reason to complain of blackmail, when the U.S. blocked paper dollar shipments there as part of its effort to topple Manuel Noriega. But that was a special case.) If the ECB and the Fed won’t deal directly with these countries, on any terms, how do they manage to get their hands on the euros or dollars they need to keep their banking systems and their economies functioning, if not thriving?

The answer is that both the euroized states of the Balkans and the dollarized ones of Latin America have no choice but to get hold of euros and dollars the old fashioned way: by earning them. That means that, to add to their stock of currency, they must bring in, through exports, remittances, and tourism, more euros or dollars than they spend on exports, remittances, and tourism, or else they must get foreigners to invest more in their country than they themselves invest abroad. In other words, euros flow into Kosovo and Montenegro when they have a surplus balance of payments, and flow out when they have a deficit. The same goes for Panama and dollars. Ditto, for that matter, for Alaska and dollars. In still other words, these states import their currency, and must pay for it, in the same way that they and other states import automobiles, and have to pay for those.

In principle, Greece could have imported all the euros it needed, without having to get them directly from the ECB, provided it exported enough goods, or attracted enough foreign capital, to end up with a sufficiently large balance of payments surplus. For some years, while newlywed Eurozone members were still enjoying their long honeymoon, Greece did just that, relying mainly on foreign capital inflows to stay flush. The trouble is that the flows in question consisted largely of revenue earned on sales of Greek government debt, and that the Greek government, instead of employing that revenue productively, so as to be able to collect taxes sufficient to keep its credit afloat, used the money it borrowed to further fatten an already bloated public sector. The subprime crisis, to be sure, confronted Greece — along with much of the rest of the world — with tight money. But with the help of a more responsible government Greece might eventually have gotten through its debt crisis, as Spain and other formerly debt-crippled Eurozone members have managed to do. European authorities, it’s true, contributed to Greece’s spending spree, by giving Greece’s creditors reason to assume that they’d never let any eurozone state default and that they’d never let the eurozone shrink. Those authorities may also be faulted for not recognizing the futility of their attempts to make a Greek bailout conditional upon severe austerity measures. Still, the Greek government is ultimately to blame for having borrowed, and then squandered, so much.

Now Greece, its credit in shambles, is on the verge of collapse. For some time now it has had to depend on direct ECB support of its monetary system, and unless Greece’s latest reform proposal is accepted by the EU, that support will run out. Yet it blames its predicament, not on its own government’s profligacy, and not on its resulting inability to raise the euros it needed to stay solvent through the normal operations of international exchange, but on the strings the ECB and other lenders have attached to their offers of emergency funds.

Stuff and nonsense. When an entire multi-national currency area runs short of money, it is presumably some central bank’s fault. But when one country alone runs short, the blame rests squarely with that country’s own misguided policies.

This is cross-posted from Alt-M.org.

This is the fifth post in a series covering the advance of educational choice legislation across the country this year. As of my last update in mid-June, there were 13 new or expanded choice programs in 10 states. Since then, South Carolina has adopted a new school choice program and three states–Florida, Ohio, and Wisconsin–have expanded existing programs, bringing the total to 17. That’s considerably more than the 13 new and expanded programs that led the Wall Street Journal to dub 2011 the “Year of School Choice.”

Here’s the updated tally:

New Educational Choice Programs

  • Arkansas: vouchers for students with special needs.
  • Mississippi: ESAs for students with special needs.
  • Montana: universal tax-credit scholarship law.
  • Nevada: tax-credit scholarships for low- and middle-income students.
  • Nevada: nearly universal ESA for students who previously attended a public school.
  • South Carolina: voucher-like “refundable” direct tuition tax credit for students with special needs. 
  • Tennessee: ESAs for students with special needs.

Expanded Educational Choice Programs

  • Alabama: Raised the annual scholarship tax credit cap from $25 million to $30 million and raised the contribution cap from $7,500 to $50,000. However, the expansion came at a price: the legislation lowered income eligibility threshold from 275 percent of the federal poverty level to 185 percent (from about $67,000 to about $45,000 for a family of four). Current scholarship recipients are grandfathered in.
  • Arizona: Expanded ESA eligibility to include students living in Native American tribal lands.
  • Arizona: Expanded the types of businesses that can receive tax credits for donations to scholarship organizations.
  • Florida: Expanded ESA eligibility to include more categories of students with special needs and increased the budget from $18.4 million to nearly $55 million.
  • Indiana: Increased amount of tax credits available for donations to scholarship organizations ($2 million over two years).
  • Indiana: Eliminated cap on the number of vouchers available for elementary school students.
  • Louisiana: Expanded school voucher program (funding roughly 600 additional vouchers).
  • Ohio: Increased the value of several categories of vouchers and raised the funding caps for special-needs vouchers.
  • Oklahoma: Expanded eligibility for its special-needs tax-credit scholarships and raised the tax credit value from 50 percent–tied with Indiana for the lowest in the nation–to 75 percent. 
  • Wisconsin: The state budget raises and eventually eliminates the statewide voucher cap. Gov. Walker is expected to sign the budget by Monday.

Pending Legislation 

The previous entry in this series also included an update on the status of school choice lawsuits around the country. Since then, one has been decided. The Colorado Supreme Court struck down Douglas County’s school voucher law for violating the state’s historically anti-Catholic Blaine Amendment, but the county’s board of education will appeal the decision to the U.S. Supreme Court. AEI’s Rick Hess has more on the anti-Catholic origins of the Blaine Amendments and their implications at the Supreme Court, and Cato’s own Neal McCluskey explains how the Blaine Amendments block “the only way to deliver education consistent with a harmonious, diverse society: choice.”

I cannot tell you how many loved ones I have lost to this totally preventable illness

I would like to tell you about a serious condition afflicting thousands of policy analysts.  It’s called Petty Little Dictator Disorder, or PLDD, and you or someone you love could be suffering from this epidemic sweeping through our think tanks, advocacy groups, and government offices.  According to the description pending for inclusion in the DSM V, here are the warning signs of PLDD:

  • Do you spend a fair amount of your time imagining how the government could be used to shape people’s behavior for their own good?
  • Do you tell yourself and others that you believe in liberty and stuff but there are negative externalities, information costs, and children who need protecting from their parents, so we need to step in?
  • Do you use the word “we” a lot to refer to government action by which you really mean you and your friends?
  • Do you consider yourself an expert despite having never really done anything or rigorously studied anything in your life?
  • Do you feel the need to communicate your expert opinions in no more than 140 characters more than 1,000 times a year because you need constant reinforcement in the belief that you are changing the world?
  • Do you sit in cafes or bars with your colleagues and have conversations that resemble dorm room pot-smoking bull sessions about how it would be best for families to live in apartments above bodegas with the sound of light rail roaring just outside their window because, after all, the life you currently have and enjoy is the same thing that families with three children and a dog should want?
  • Do you think science or a panel of experts can identify the right way to do almost anything?

If you answered yes to any of these questions, you may be suffering from PLDD.  But don’t worry, help is available.  Here are some steps that may address your PLDD:

  • Think about how others have plans for their own lives just as you have a plan for yours.  Just because you don’t understand their plan doesn’t mean that theirs is not legitimate or that you should impose your vision on them.
  • Recognize that just as others are subject to limited information and systematic deviations from rationality, so are you.  You shouldn’t imagine that you are the rational, well-informed one whose plan can fix the defects from which others suffer.
  • Remember that you and your friends are not the government.  Once the government takes responsibility for an issue, no one can completely control what the government will do and those with the strongest vested interests (and often not the best intentions) are likely to have more influence than you.
  • Be humble about the limits of your knowledge and expertise.  You may have gone to an elite school and have always been told how smart you are, but that doesn’t mean that you understand everything.  Understanding comes from real experience and/or rigorous examination of an issue.  Reading a bunch of articles or having spent a few years as the deputy assistant director of whatever does not count as experience or rigorous examination…

Read the whole thing.

Bravo, Jay P. Greene. (HT: Jason Bedrick.)

Monday is Scott Walker’s turn to join the crowded presidential field. Walker has served as Wisconsin’s Governor since 2011. He rose to prominence quickly after the State Capitol in Madison was overtaken by protesters opposing his labor reforms. Walker has passed a number of government-limiting measures, earning a “B” on Cato’s Governor Report Card in both 2012 and 2014, but he continues to support higher spending.

When Walker took office Wisconsin had a $3.6 billion budget deficit and needed urgent reform. His first big legislative achievement was Act 10 which overhauled the state’s collective bargaining rules and benefit programs for state employees. Under Act 10, state employees must contribute 12 percent of premium costs to their state-provided health insurance plan. In addition, pension contributions are now split evenly between the employee and the employer. In 2015 that contribution was 6.8 percent of income.

Act 10 also limited collective bargaining subjects to base wages, removing the ability to negotiate on overtime, pension, and health benefits. It has saved taxpayers in Wisconsin $3 billion since its passage in 2011.

Walker has also passed several tax cuts while in office. In 2013 Walker signed a plan that cut the state’s personal income tax by almost $500 million a year. The plan consolidated the state’s five income tax brackets into four brackets, with the larger cuts skewed towards the lower end of the income scale. In 2014 the state made further cuts to the lowest income tax bracket. In total, the lowest bracket fell from 4.60 percent to 4 percent. Work is still needed. Wisconsin’s total income tax rate of 7.65 percent is still one of the highest in the country, and its Business Tax Climate is a discouraging 43rd in the nation, according to the Tax Foundation. 

Walker has had success on labor and tax issues, but spending continues to grow rapidly in Wisconsin. From fiscal year 2012 to fiscal year 2015, Wisconsin state spending grew 15 percent. For comparison, state spending grew by 8 percent nationally during this period.  So while Walker turned a $3.6 billion deficit when he took office into an $800 million surplus by June 2013, he has continued to spend excessively.  His budget for fiscal years 2016 and 2017 included another $1 billion in increased spending. 

Walker’s policies have targeted numerous areas of Wisconsin’s budget. He reformed the state’s labor laws as they related to state employees and saved $3 billion in four years. He cut personal income taxes. Overall, his actions have helped restore fiscal sanity to Wisconsin. But voters concerned about Washington’s debt and profligacy should be aware Walker’s record of increasing state spending even while cutting taxes.

My first, but not remotely my last, oped on the Supreme Court’s ruling in King v. Burwell appears in today’s Washington Examiner. Excerpt:

Obamacare supporters are mistaken if they think the Supreme Court’s King v. Burwell ruling settles the issue. Even in defeat, King threatens Obamacare’s survival, because it exposes Obamacare as an illegitimate law…

By overriding the operative language of the statute, the Supreme Court colluded with the president to impose taxes and entitlements that no Congress ever approved; to deprive states of powers Congress granted them to block parts of the ACA; and to disenfranchise Republican and independent voters who swept ACA opponents into state office in 2009, 2010 and 2011 for the purpose of blocking the ACA.

The Supreme Court did not lose its legitimacy with King v. Burwell — it has made worse mistakes. Obamacare did. Having been rewritten over and over by the president and the Supreme Court rather than Congress, Obamacare cannot claim to be a legitimate law.

Read the whole thing.

On June 17th, Treasury Secretary Jack Lew shocked many, including former Chairman of the Federal Reserve Ben Bernanke, when he proclaimed that Alexander Hamilton (1755-1804) – the first and foremost Treasury Secretary – would be demoted and share the ten-dollar bill with a yet unnamed woman. Undaunted by wide-spread criticism, Secretary Lew continued to press his case at an event at the Brookings Institution on July 8th. Asked about the ten-dollar bill’s selection, Secretary Lew insipidly claimed that the ten-dollar bill was the “next up” for redesign to help combat forgery. The diminution of Hamilton, for whatever reason, is simply indefensible.

Just how great was Hamilton? A recent scholarly book by Robert E. Wright and David J. Cowen, Financial Founding Fathers: The Men Who Made America Rich, begins its pantheon of greats with a chapter on Alexander Hamilton. It is aptly titled “The Creator.”

After the Constitution was ratified and George Washington was elected President, the new federal government lacked credibility. Public finances hung like a threatening cloud over the government. Recall that paper money and debt were innovations of the colonial era, and that, once the Revolutionary War began, Americans used these innovations to the maximum. As a result, the United States was born in a sea of debt. A majority of the public favored a debt default. Alexander Hamilton, acting as Washington’s Secretary of the Treasury, was firmly against default. As a matter of principle, he argued that the sanctity of contracts was the foundation of all morality. And as a practical matter, Hamilton argued that good government depended on its ability to fulfill its promises.

Hamilton won the argument and set about digging the country out of its financial debacle. Among other things, Hamilton was – what would today be called – a first-class financial engineer. He established a federal sinking fund to finance the Revolutionary War debt. He also engineered a large debt swap in which the debts of individual states were assumed by the newly created federal government. By August 1791, federal bonds sold above par in Europe, and by 1795, all foreign debts had been paid off. Hamilton’s solution for America’s debt problem provided the country with a credibility and confidence shock.

Doesn’t the 76th Secretary of Treasury have better things to do than to diminish the presence of our 1st and most distinguished Secretary of Treasury?

Anyone who follows the  stress tests conducted by the Fed and various European banking authorities can’t help poking fun at them.  After all, it’s hard to repress a chuckle when, time and again, a bank passes one of these tests with flying colors only to end up failing not long afterwards.  Whether it’s Iceland in 2008, Ireland in 2010, or Cyprus in 2013, the story is the same: all three national banking systems collapsed shortly after being signed off as safe following regulatory stress tests.

When putting banks to such a test, a central bank or other banking authority starts by imagining  one or more “stressful” scenarios to which banks might be exposed, uses a bunch of models to determine how those scenarios will affect the banks’ capital adequacy (that is, their ratio of capital to assets), and then passes or fails banks depending on whether their capital remains adequate at the end of the test.

The Bank of England reported the results of its first set of annual stress tests in December.  Its message was a reassuring one: the UK banks are safe.  Unfortunately, there’s no good reason to trust that assessment than there was to trust the others, for the Bank of England’s stress tests are also deeply flawed, in ways that, besides obscuring the significant vulnerability of the UK banking system, actually tend to accentuate it.

For starters, the tests are based on a “risk-weighted asset” metric, which depends on models that underestimate banks’ risks.  Worse still, these models are eminently gameable, and banks have every incentive to game them, since doing so can reduce their capital requirements and allow them to distribute greater false profits.

Abundant research—from the Bank of England itself, among other authorities—has convincingly established that lower risk-weighted asset scores do not necessarily mean lower risk.  In fact, the risks are often greater; they just happen to be among those that are invisible to the risk measure.  We saw precisely this problem in 2008–2009, when UK banks appeared to be well capitalized using risk-weighted asset metrics, but actually turned out to be massively undercapitalized when the financial crisis hit.

These points alone ought to be enough to discredit the Bank of England’s stress tests.   Still, there are a plenty of other problems  to consider.

First, the Bank’s stress tests are based on just a single scenario.  This approach cannot possibly give us confidence that the banking system is safe against all the other possible scenarios that were not considered.  Indeed, the Bank acknowledged the need to consider multiple scenarios in one of its preliminary discussion papers, but then inexplicably ignored its own advice and opted for a single scenario in its final report.

Second, the Bank describes its stress tests as ‘extremely tough,’ but in reality its scenario is a mild one: GDP growth falls to -3.2 percent before bouncing back, inflation rises to peak at 6.5 percent, long term gilts peak just below 6 percent, and unemployment hits 12 percent.  This is not particularly stressful by historical standards, and also pales in comparison to the Eurozone’s recent (and on-going) strife.  The Bank of England scenario also has only a mild impact on bank capital and profitability—and if a stress scenario doesn’t actually stress the banking system, what is the point of the exercise?

Third, the Bank uses a very low “pass” standard—a 4.5 percent minimum ratio of capital to risk-weighted assets.  This is lower than the 5.5 percent ratio that the European Central Bank used in its widely discredited 2014 stress tests, and is well below the capital requirements coming through under Basel III.  Had the Bank carried out a test using these Basel minimums, the UK banking system would have failed.  Same exercise, higher safety standard, opposite result.

Fourth, the Bank also failed to carry out any tests based on leverage—the ratio of capital to total, unweighted assets—which offers a much less gameable measure of a bank’s financial health.  Even an undemanding such test, based on the Bank’s required minimum leverage ratio of 3 percent, would have revealed how weak the UK banking system really was.  Of course, many experts recommend a minimum leverage ratio of 15 percent or more, at least five times larger than the leverage test that the Bank failed to conduct—or, at least, to report.  Had the Bank based its stress tests on this measure, December’s comforting financial headlines would have been very different indeed.

Fifth, stress tests impose a single view of risk on the banking system—one based on the same flawed models, with the same blind spots.  This creates systemic instability: if the stress test’s view of risk turns out to be wrong, all the banks subject to it are likely to run into trouble at the same time.

Finally, stress tests have all the credibility of a Soviet election.  Even if the central bank discovers there are major problems in the banking system, it will be loathe to publicly admit to them.  Doing so would undermine confidence and also lead to awkward questions about the central bank’s own supervisory competence.

The bottom line is this: official stress tests are like a lookout who has trouble seeing big, white icebergs.  If you wouldn’t travel on a liner with such a lookout, you shouldn’t trust a banking system based on some stress test that detects every sort of risk—except the sort that’s about to sink it.

(This post is based on Kevin Dowd’s recent in-depth report for the Adam Smith Institute, “No Stress: The Flaws in the Bank of England’s Stress Testing Programme,” in which he critically assesses the stress tests conducted by the Bank of England and other central banks.)

For the past few months, nearly thirty communities around the country have been anxiously awaiting an announcement from the Pentagon concerning the military bases that would be affected by the planned drawdown of 40,000 active-duty Army personnel, plus another 17,000 or so civilian employees. Local news outlets have been filling in the details as they become available. Some communities, including Leesville, Louisiana (Fort Polk), and northern New York (Fort Drum) are breathing a “sigh of relief.” Others, in Georgia (Fort Benning) and Alaska (Joint Base Elmendorf-Richardson), are crying foul.

Sen. Johnny Isakson (R-GA) seems especially peeved. “I am demanding answers from the Department of Defense on how they are justifying these troop cuts in Georgia,” Isakson said. And, in the meantime, he plans to block the nomination of a “new congressional liaison for the Department of Defense in light of the Department’s failure to give Congress a heads up before these cuts were made public.”

This is what defense consolidation looks like without the formality and relative transparency of the Base Realignment and Closure (BRAC) process.

I am in the midst of a major research project studying the effects of military spending cuts on local communities. With the help of my excellent research assistant, Connor Ryan, I am looking at some familiar cases, such as San Francisco’s Presidio and Monterey’s Fort Ord, and some that are more obscure (e.g. Portsmouth, New Hampshire’s Pease AFB). I’m also writing about some bases closed before BRAC (e.g. Frankford Arsenal in Philadelphia; the Springfield Arsenal in Massachusetts; and Dow AFB in Bangor, Maine), and some facilities that were privately owned and operated, but that grew primarily by supplying products to the military (including the Tredegar Iron Works in Richmond, Virginia; and DuPont’s Eleutherian Mills in Wilmington, Delaware). The project aims to go beyond studying the economic effects predicted and observed by economists (e.g. here and here), but to also get a feel for the history of each place, what it built, or how it fit into the nation’s defenses, and, ultimately, each facility’s denouement. To oversimplify: “How’s it goin’?”

My preliminary conclusions, after having visited about half of the places that I plan to study (and I will visit all of them), is that communities do adapt and recover, some more quickly than others, and many emerge after the transition period with a robust and more diversified economic base. In other words, the resources once directed toward the military do eventually find their way to more productive uses.

All that said, communities that have grown dependent upon defense dollars are understandably anxious whenever major realignments are in the offing. Change can be (and often is) difficult, and transitions are precisely that. But it gets better.

Which seems to argue on behalf of another BRAC round. Or several. 91 percent of National Journal’s “security insiders” say we need one. A bipartisan defense reform consensus wants one. And three successive SecDefs – Leon Panetta, Chuck Hagel, and now Ashton Carter – have called on Congress to authorize another round of base closures under BRAC. Congress, so far, has refused.

As a practical matter, then, we are back to about where we were in the early 1970s, when a major personnel-intensive land war was drawing to a close, and the U.S. military was getting smaller. Congress effectively blocked any base closures in the late-1970s, and finite defense dollars were misallocated to excess base capacity, which, in turn, contributed to a hollow force. The defense build-up of the early 1980s relieved the hollow force problem. Eventually, five BRAC rounds (in 1988, 1991, 1993, 1995 and 2005) dealt with the excess base problem. 

Writing in 2007, in his introduction to David Sorenson’s book Military Base Closures, former Assistant Secretary of Defense for Manpower, Reserve Affairs, Installations, and Logistics, Lawrence J. Korb (now at the Center for American Progress), described the rationale behind BRAC: 

Bases had been closed since the end of World War II, but the process was uneven and often hints of political favoritism clouded base closure policy….Congress created BRAC to do two things: create a process that would determine what bases might be excess and close them, and, in addition, remove political considerations from the procedure. 

The politicization of defense realignment was not an idle concern. Speaker of the House Sam Rayburn reportedly advised new members against bringing a military base into their districts because then the President couldn’t hold its closure over their heads. Rayburn’s protege, Lyndon Johnson, was suspected of doing precisely that when he sought to close facilities in states that had voted for Barry Goldwater in 1964, including Brookley AFB in Mobile, Alabama. Similarly, Richard Nixon’s critics speculated that his proposal to close Otis and Westover AFBs, both in Massachusetts, was a form of retribution. Massachusetts, you will recall, was the only state (plus DC) to vote for George McGovern in the 1972 presidential election. 

BRAC didn’t remove politics from the base closure process entirely, of course. No reform could do that. Bill Clinton, for example, was accused of circumventing BRAC with his “privatization-in-place” proposal for Kelly and McClellan AFBs. Both bases had wound up on the BRAC commission’s recommended closure list in 1995, and he wanted to shore up support in Texas and California before his 1996 reelection. But perhaps the other examples from that earlier pre-BRAC period, combined with the uncertainty in advance of today’s announcement, and the seemingly arbitrary way in which these decisions were made and communicated, might convince BRAC opponents that it is better than the alternative.

 

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

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Just five weeks after Science magazine prominently featured a paper proclaiming that the multidecadal slowdown in the rate of the earth’s average temperature rise—aka, the “pause” or “hiatus”—was but a figment of bad data, comes a new paper in Science magazine explaining the physical mechanisms that have led to the slowdown.

Wait, what?

You read it right. What Science laid to rest but a month ago, Science has now resurrected. Science (with a capital “S”), and those dedicated to it, should not be amused.

But such is the nature of the game. Science the magazine is more interested in generating publicity for itself than in best serving Science the field—a point being increasingly raised by prominent scientific figures.

The new paper, whose title even contains the dreaded H-word (“Recent hiatus caused by decadal shift in Indo-Pacific heating”), is authored by Veronica Nieves and colleagues from the Jet Propulsion Lab (JPL). The paper itself is rather technical look at how the hiatus has manifested itself in various compilations of measurements (and models) of the ocean’s temperatures at depth.

Never once do the authors act as if the hiatus didn’t exist, but rather present data showing how the pause in the rise of the oceans near-surface temperatures came to be. Basically, they identify a broad and shallow patch of the Pacific Ocean as being primarily responsible for slowing the rise in global near-surface temperature, but find that the cooling of that patch during the past decade has been offset by a warming in an adjacent and deeper patch of the Pacific and Indian Oceans. They write:

[T]he decade long hiatus that began in 2003 is the result of a redistribution of heat within the ocean, rather than a change in the net warming rate.”

The authors do not describe how this behavior, either spatially, temporally, or in magnitude, compares with climate model expectations of the behavior, although they do reject a recent prominent finding that claimed there was not a “systematic overestimation of the temperature response to increasing atmospheric CO2 concentrations in the [climate model] ensemble” after correcting for the recent downturn in solar activity coupled with uptick in low-scale volcanic activity (Huber and Knutti, 2014).

But, the main story here is not the new findings  (which will require further analysis to unpack their significance), but that Science magazine is publishing a paper describing physical mechanisms behind the hiatus that was accepted in its final form on June 24th, three weeks after Science’s paper announcing the hiatus to be a non-event.

The new paper contains a lot of science while the earlier paper rehashed some old findings (published elsewhere) and then spun them to make it seem as if the hiatus didn’t exist.

Which one do you think was published to grab headlines and generate attention?

But, really, what should you expect from a journal whose editor-in-chief, Marcia McNutt, last week wrote in an editorial about climate change titled “The two-degree inferno,” things like “time for debate has ended,” that “action is urgently needed” and this gem directly aimed at those who stand in the way (like trying to publish research findings to the contrary?):

In Dante’s Inferno, he describes the nine circles of Hell, each dedicated to different sorts of sinners, with the outermost being occupied by those who didn’t know any better, and the innermost reserved for the most treacherous offenders. I wonder where in the nine circles Dante would place all of us who are borrowing against this Earth in the name of economic growth, accumulating an environmental debt by burning fossil fuels, the consequences of which will be left for our children and grandchildren to bear? Let’s act now, to save the next generations from the consequences of the beyond-two-degree inferno.

It is high time for everyone to realize that Science magazine can no longer be considered a science journal, but instead has joined the ranks of advocacy publications, for better or for worse.

References:

Huber, M., and R. Knutti, 2014. Natural variability, radiative forcing and climate response in the recent hiatus reconciled. Nature Geosciences, 7, 651–656, doi:10.1038/ngeo2228

Karl, T.R., et al., 2015. Possible artifacts of data biases in the recent global surface warming hiatus. Science Express, published on-line, June 4, doi:10.1126/science.aaa5632

Nieves, V., J.K. Willis, and W.C. Patzert, 2015. Recent hiatus caused by decadal shift in Indo-Pacific heating. Science Express, published on-line, July 9, doi: 10.1126/science.aaa4521

Remember Megaupload.com? It was once the 13th most popular website on the internet, with more than 82 million unique visitors and a billion total page views during its seven-year operation. The site allowed people to store files on the cloud for later use — and some users inevitably stored copyrighted TV shows, films, songs, and software.

In 2012, the U.S. government charged the owner, the colorful Kim Dotcom, and the website’s operators with conspiracy to commit copyright infringement. The defendants are currently resisting extradition to the United States (Dotcom lives in New Zealand), as is their right under extradition treaties. In 2014, the seemingly frustrated government moved to seize the defendants’ considerable assets in a civil forfeiture action, claiming that the assets are probably connected to the alleged criminal activity.

Under civil forfeiture laws, the government can take property without an underlying criminal conviction based only on the allegation of a crime. Those whose property has been seized can get it back by proving that their property is “innocent.” The government, however, is preventing the defendants from even making that argument. Using the “fugitive disentitlement” doctrine, the government is blocking the defendants from challenging the forfeiture.

Fugitive disentitlement has historically been applied only to criminals who escaped custody while appealing a conviction, the idea being that a court could decide to dismiss the appeal because any judgment would be unenforceable against an absent defendant. Here, the government has decided that, because the Megaupload defendants aren’t coming to the United States to defend their property, they are “fugitives” who have lost the ability to defend against that seizure — and the district court agreed. Cato, joined by the Institute for Justice and the National Association of Criminal Defense Lawyers, has filed a brief in the U.S. Court of Appeals for the Fourth Circuit arguing that it’s unconstitutional for the government to use fugitive disentitlement in civil forfeiture proceedings against non-fugitives.

The Fifth Amendment’s Due Process Clause requires an opportunity to be heard and an opportunity to defend against government-initiated actions against your property. Unlike an escaped criminal appellant who is scorning the court’s jurisdiction, in civil forfeiture, it’s the government that has dragged Dotcom and the others into court. Moreover, given the amount of abuse in civil-asset forfeiture, the government shouldn’t be allowed both to profit from the forfeiture and suppress defenses by calling residents of other countries “fugitives.” Finally, the reasons for fugitive disentitlement in criminal appeals simply can’t be transferred to civil-asset forfeiture. When an individual is “on the run” from criminal prosecution, courts can’t enforce judgements against them, but a valid forfeiture order would be fully enforceable against Dotcom if the court has jurisdiction over the property. Fugitive disentitlement is also used to deter felons from escaping justice, but there’s no similar concern here, where the property can’t run away and the claimants are merely residing in their home countries. The Fourth Circuit should not only allow the Megaupload defendants to challenge the seizure, it should also consider striking down as unconstitutional all uses of fugitive disentitlement in civil-forfeiture cases.

Several days ago, I pointed out that a married couple earning $62,000 in Wisconsin could get health insurance under Obamacare with no monthly premiums. Now it’s time to move onto Connecticut. Connecticut runs its own exchange, known as access health CT.

Among the 114,000 individuals aged 55 to 64 in Fairfield County, Connecticut, roughly two-thirds – or 77,000 people – rely on employer coverage, where the odds are high that they’re paying something out of their own pocket for monthly premiums.

Consider married couple earning $62,000. Each is 64-years-old, a non-smoker, and lives in Fairfield County, Connecticut. The structure of Obamacare subsidies means that many individuals who are not poor can find health plans with such large subsidies that they pay virtually nothing for premiums out of their own pocket. In this case, the couple would qualify for the HealthyCT Bronze Basic HSA 1 Plan for $4.79 per month in premium – or $2.40 per month for each person in that household. If the couple chooses this plan, it pays less than 0.1% of its total income towards health care premiums. That’s not a typo – and it doesn’t say one percent – the household would pay one-tenth of one percent of their income towards premiums. Subsidies pay for more than 99% of the monthly premium.

See the graphic below for this married couple:

Married Couple, Both Age 64, Earning $62,000, Fairfield County, CT

Pay $57.48 per year for premiums

Although plenty of other plans exist – with higher premiums but less cost sharing –  this plan is essentially a giveaway for the near-elderly who didn’t want to purchase coverage, but were mandated to do so by the government.

It is also the case that it is sometimes better to be 64 than 30 in Connecticut. For a couple where both are age 30 (instead of 64), but otherwise identical (earning $62,000, living in the same location, and choose the identical plan), they’d pay $3,441 per year for the same plan or 5.5% of their total income. See the graphic below for this younger couple:

Married Couple, Both Age 30, Earning $62,000, Fairfield County, CT

Pay $3,441 per year for premiums

These sorts of findings – both with respect to the relatively high income thresholds where a couple (or individual) gets near-free coverage and where younger people in identical situations pay more for the exact same plan – are a prominent feature in Obamacare, and relates to the unusual structure of the subsidy. As mentioned previously, these findings related to the fact that the subsidy is pegged to the more generous second-lowest-cost silver plan rather than the most efficient plan in terms of premiums.

The Connecticut example presents two public policy lessons. First, it is important to realize just how large the redistribution can be. The near-elderly married couple near 400% of the poverty line pays virtually nothing out of pocket for health insurance premiums in this example. Government reports emphasize affordability (such as noting that 46% of individuals pay less than $600 per year for premiums), but they do not emphasize nearly as much the near-free, giveaway nature that many people face.

Second, it should be noted that the free plans are almost always high deductible plans. If consumers are more careful shoppers of healthcare services when they initially face the actual out-of-pocket cost of those services (such as with these bronze plans until they reach the deductible), this will enhance efficiency. Offsetting this, however, is the fact that some healthcare services can be postponed, and the consumer can migrate later on to more generous plans when they anticipate greater use of the healthcare system. This is discussed in Apostolova and Yelowitz (2015) with respect to Massachusetts health reform in the 2006; they note that women can move in and out of generous health plans easily, which would allow them to purchase more comprehensive coverage when anticipating pregnancy. To the extent that individuals enroll in high deductible plans until they get sick (and then migrate to more generous plans), the efficiency gains under the current Obamacare design are likely to be small.

Aaron Yelowitz is an associate professor in economics at University of Kentucky and a Visiting Scholar at Cato Institute.

 

There are many good reasons to oppose a federal school voucher program, but a supposed lack of evidence that school choice improves student outcomes isn’t one of them. Sadly, Sen. Patty Murray (D-WA), the ranking minority member of the U.S. Senate’s education committee, repeated this canard during the debates over a proposed amendment that would have added a federal school voucher program to the No Child Left Behind replacement bill:

What’s more, studies of voucher programs in Milwaukee and the District of Columbia have shown that they do not improve students’ academic achievements, she said. “Study after study has shown that vouchers do not pay off for students or taxpayers,” Murray said. 

That’s simply not true. According to Dr. Patrick Wolf, coauthor of the only longitudinal study of the effect of Milwaukee’s voucher program, “school choice in Milwaukee has had a modest but clearly positive effect on student outcomes.”

First, students participating in the Milwaukee Parental Choice (“voucher”) Program graduated from high school and both enrolled and persisted in four-year colleges at rates that were four to seven percentage points higher than a carefully matched set of students in Milwaukee Public Schools. Using the most conservative 4% voucher advantage from our study, that means that the 801 students in ninth grade in the voucher program in 2006 included 32 extra graduates who wouldn’t have completed high school and gone to college if they had instead been required to attend MPS.

Second, the addition of a high-stakes accountability testing requirement to the voucher program in 2010 resulted in a solid increase in voucher student test scores, leaving the voucher students with significantly higher achievement gains in reading than their matched MPS peers.

In the final year of the study, Milwaukee voucher students in grades 3-9 performed about 15 percent of a standard deviation higher on standardized reading tests, “a modest but meaningful educational difference.” Moreover, the study concluded that Milwaukee district-school students were “performing at somewhat higher levels as a result of competitive pressure from the school voucher program.” And contrary to Sen. Murray’s assertion that “vouchers do not pay off for taxpayers,” the study found that the voucher program saved the state nearly $52 million in fiscal year 2011 because the vouchers were worth about half of the cost per-pupil at the district schools.

Wolf also studied the effects of Washington, D.C.’s voucher program under the auspices of the U.S. Department of Education. The study found that students offered vouchers graduated high school at a rate 12 percentage points higher than the control group, 82 percent to 70 percent respectively. In a follow-up study, Wolf and his team determined that the voucher program was a boon to taxpayers as well:

The District of Columbia Opportunity Scholarship Program (OSP) produced $2.62 in benefits for every dollar spent on it. In other words, the return on public investment for the private-school voucher program during its early years was 162 percent. 

In total, there have been a dozen random-assignment studies–the gold standard of social science research–by researchers at Harvard, Princeton, the University of Chicago, the Brookings Institution, and elsewhere examining the impact of private school choice programs. Of those, 11 found modest but statistically significant positive impacts on student performance, including improved test scores and higher rates of high school graduation and college enrollment. One found no statistically discernable difference and none found any harm. For Sen. Murray’s benefit, here is a sampling:

• Joshua M. Cowen, “School Choice as a Latent Variable: Estimating ‘Complier Average Causal Effect’ of Vouchers in Charlotte,” Policy Studies Journal, May 2008. – After one year, voucher students had reading scores 8 percentile points higher than the control group and math scores 7 points higher.

• William G. Howell and Paul E. Peterson, The Education Gap: Vouchers and Urban Schools, Brookings Institution, 2002, revised 2006. – After two years, African-American voucher students had combined reading and math scores 6.5 percentile points higher than the control group.

• Jay P. Greene, “Vouchers in Charlotte,” Education Next, Summer 2001. – After one year, voucher students had combined reading and math scores 6 percentile points higher than the control group.

• Cecilia E. Rouse, “Private School Vouchers and Student Achievement: An Evaluation of the Milwaukee Parental Choice Program,” Quarterly Journal of Economics, May 1998. – After four years, voucher students had math scores 8 NCE points higher than the control group. NCE points are similar to percentile points.

In recent years, left-wing politicians and organizations have repeatedly closed their eyes and plugged their ears with regard to the copious evidence that school choice works. But ignoring the evidence doesn’t make it go away.

Yesterday, the Department of Housing and Urban Development (HUD) approved a new fair housing rule called Affirmatively Furthering Fair Housing. This follows the Supreme Court’s recent ruling allowing HUD to use disparate impact as a criterion for determining whether a community is guilty of unfair housing practices.

 Wikimedia photo by Bernard Gagnon.

In one form of disparate impact analyses, HUD compares the racial makeup of a city or suburb with the makeup of the urban area as a whole. If the city doesn’t have enough minorities, it is presumed guilty and must take steps to attract more. Under the Affirmatively Furthering Fair Housing rule, that could mean subsidizing low-income housing or rezoning land for high-density housing.

While I have no doubt that prejudice is still a factor in housing in America, there are many other factors that influence the distribution of people across an urban area. These include religion, education, and personal tastes in food, recreation, and other activities. For example, low-income families with children will be more likely to live near a Walmart Supercenter while high-income families with no children will be more likely to live near a Whole Foods. To expect every suburb, most of whose borders are based on little more than historical accidents, to have a perfect mix of races is absurd.

For this and other reasons, looking at individual cities and suburbs is the wrong level of analysis. What’s more, HUD’s high-density housing remedy is completely wrong.

This remedy is based on two fallacies. First, it assumes that high-density housing is more affordable than single-family housing, when in fact it costs more per square foot and only saves money if people are willing to sacrifice space and privacy. Second, the rule assumes that it is somehow “fair” to pack low-income minorities in apartments while higher-income whites get to live in single-family homes so long as the apartments and single-family homes are in the same municipalities. This is far more racist than the current situation.

The real problem with housing affordability is not at the community level but at the regional level. In a region that has few land-use restrictions, a community that has attracted wealthy people is not going to have much of an effect on the affordability of the region as a whole because builders can always construct more affordable housing elsewhere. The problem is in regions with urban-growth boundaries and other restrictions that limit the construction of affordable housing over the entire region.

If HUD were to apply disparate-impact criteria to regions, it might look at the change in African-American populations between 2000 and 2010. Nationwide, the black population grew by 11 percent in that time period, which was about 1.3 percent faster than the population as a whole. Regions whose black populations grew less than 1.3 percent faster than their whole populations could be considered guilty of housing discrimination.

Based on this, the most racist major (more than a million people) urban area in America is San Francisco-Oakland. Though that region’s population grew by 285,000 people between 2000 and 2010, or 9.5 percent, the region’s black population actually shrank by nearly 49,000, or 14.2 percent, for a difference in growth rates of minus 23.7 percent. 

That decline was entirely due to strict land-use policies that prevent development outside of the 17 percent of the region that has already been urbanized, making the Bay Area one of the least affordable housing markets in the nation. Moreover, a recent plan to improve affordability by following HUD’s prescription of building more high-density housing was found to actually reduce affordability.

Other major urban areas that would be found racist include Austin (-21.5% difference between black and overall population growth), Riverside-San Bernardino (-17.5%), Honolulu (-15.4%), San Diego (-14.6%), Los Angeles (-14.5%), Bakersfield (-13.6%), and San Jose (-11.1%). All of these regions except Austin have some form of growth-management policy, while Austin has become the least affordable housing market in Texas due to local housing policies.

By comparison, the least racist major urban area is Salt Lake City, whose black population grew 57 percent faster than its total population. Other non-racist areas include Minneapolis-St. Paul (42%), Phoenix (34%), Providence (25%), Boston (19%), Las Vegas (17%), Columbus (14%), Orlando (14%), Atlanta (13%), Tampa (13%), and Miami (10%). Of these, only Providence and Boston are surprises since both have serious housing affordability problems.

If HUD is serious about fair housing, and not just jumping on the density bandwagon to please special interest groups, it should consider ordering urban areas in California, Hawai’i, and other states to relax their land-use laws and allow more home construction on the urban fringe. This will have the effect of restoring property rights to landowners whose uses have been restricted by land-use regulations. Otherwise, the Supreme Court’s ruling will only result in making housing even more unfair than it was before.

Readers who follow the battles over forfeiture law may recall the recent case in which a North Carolina convenience store owner from whom the government had seized $107,000 without any showing of wrongdoing decided to fight the case in the press as well as in court, backed by the Institute for Justice. Lyndon McLellan’s decision to go public with the dispute drew a menacing letter from a federal prosecutor about the publicity the case had been getting:

“Your client needs to resolve this or litigate it,” Mr. West wrote. “But publicity about it doesn’t help. It just ratchets up feelings in the agency.” He concluded with a settlement offer in which the government would keep half the money.

That case ended happily, but the problem is much broader: many individuals and businesses fear that if they seek out favorable media coverage about their battle with the government, the government will find a way to retaliate, either informally in settlement negotiations or by finding new charges to throw against them.

That such fears might not be without foundation is illustrated by last week’s widely publicized Oregon cake ruling, in which a Gresham, Oregon couple was ordered to pay $135,000 in emotional-distress damages for having refused to bake a cake for a lesbian couple’s commitment ceremony. Aside from the ruling’s other objectionable elements, the state labor commissioner ruled it “unlawful” for the couple to have given national media interviews in which they expressed sentiments like “we can see this becoming an issue and we have to stand firm.” Taking advantage of an exception in free speech law in which courts have found that the First Amendment does not protect declarations of future intent to engage in unlawful discrimination, the state argued – and its commissioner agreed – that the “stand firm” remark along with several similarly general comments rallying supporters were together “unlawful.”

That ought to bother anyone who cares about free speech. I’ve got a piece up at Ricochet.com, my first there, exploring the question in more detail. Check it out.  

 

For a few years, I have been posting an evolving list of empirical studies that have found that federal student aid programs help fuel rampant college price inflation. Why? Because I continually encounter people, often who work for or in higher education, who insist that there is no meaningful empirical evidence of big subsidies enabling big price increases, even if the possibility makes mammoth intuitive and theoretical sense.

A few days ago a new entry arrived for the list, a paper from the Federal Reserve Bank of New York. It finds that student loans have big inflationary effects, especially at four-year private schools not focused on top academic performers, and that Pell Grants have smaller direct effects, but also likely lead to reductions in aid funded by institutions. It is yet one more study that shows that, contrary to the hopes of the American Council on Education–the premiere higher ed advocacy group–the inflationary effect of student aid is absolutely a subject that should “play a major role” in discussions about college affordability.

And now, the updated list:

David O. Lucca, Taylor Nadauld, and Karne Shen, “Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs,” Staff Report No. 733, July 2015.

Dennis Epple, Richard Romano, Sinan Sarpça, and Holger Stieg, “The U.S. Market for Higher Education: A General Equilibrium Analysis of State and Private Colleges and Public Funding Policies,” NBER Working Paper No. 19298, August 2013.

Lesley J. Turner, “The Incidence of Student Financial Aid: Evidence from the Pell Grant Program,” Columbia University, April 2012.

Stephanie Riegg Cellini and Claudia Goldin, “Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges,” NBER Working Paper No. 17827, February 2012.

Nicholas Turner, “Who Benefits from Student Aid? The Economic Incidence of Tax-Based Federal Student Aid,Economics of Education Review 31, no. 4 (2012): 463-81.

Bradley A. Curs and Luciana Dar, “Do Institutions Respond Asymmetrically to Changes in State Need- and Merit-Based Aid? ” Working Paper, November 1, 2010.

John D. Singell, Jr., and Joe A. Stone, “For Whom the Pell Tolls: The Response of University Tuition to Federal Grants-in-Aid,” Economics of Education Review 26, no. 3 (2006): 285-95.

Michael Rizzo and Ronald G. Ehrenberg, “Resident and Nonresident Tuition and Enrollment at Flagship State Universities,” in College Choices: The Economics of Where to Go, When to Go, and How to Pay for It, edited by Caroline M. Hoxby, (Chicago, IL: University of Chicago Press, 2004).

Bridget Terry Long, “How Do Financial Aid Policies Affect Colleges? The Institutional Impact of Georgia Hope Scholarships,” Journal of Human Resources 30, no. 4 (2004): 1045-66.

Rebecca J. Acosta, “How Do Colleges Respond to Changes in Federal Student Aid,” Working Paper, October 2001.

The U.S. Women’s World Cup team is back from Canada with victory in its players’ pockets, but not much else, to judge from media reports now unfolding. The question just above led a CBS Evening News story tonight about the gross income inequality between male and female professional soccer players—and in today’s battle between the sexes, few issues are more demagogued or more inflame the adversarial passions than inequality between the sexes. Indeed, we’re told that star goalie Hope Solo took a picture of one fan’s sign calling for equal pay for women athletes. Say no more.

But more was said, and the facts speak volumes. It seems that the women’s team will split $2 million for their victory whereas the winner of last year’s Men’s World Cup team, Germany, was awarded $35 million. The prizes, however, are based on revenue, says FIFA, which runs the World Cups, and the facts here are stark:

This year’s figures have not been released, but four years ago the Women’s World Cup brought in almost $73 million. The 2010 Men’s World Cup in South Africa made almost $4 billion. Those players got $348 million, or 9 percent of the total revenue. The women’s team got a higher percentage with 13 percent, but the bottom line was still much less, $10 million.

But don’t let those facts get in the way of sound egalitarian reasoning. We get that from Deborah Slaner Larkin with the National Women’s Sports Foundation:

We shouldn’t keep deciding who’s more important, our sons or our daughters, our husbands or our wives. People should be treated equally. We need to have some more male allies who will say this is not acceptable.

Not acceptable? If so, then what’s to be done? It’s unclear since we learn here that two women’s soccer leagues have already failed in the U.S. and the current one, the National Women’s Soccer League, averages only about 4,400 spectators a game. If you think this a tempest in a teapot, think again. It’s a microcosm, with a thousand and one more complex variations, of the debate that lies ahead in the political season that’s already under way.

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