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The alleged murder of Kate Steinle in San Francisco by illegal immigrant Juan Francisco Lopez-Sanchez has reignited the debate over the link between immigration and crime. Such debates often call for change in policy regarding the deportation or apprehension of illegal immigrants. However, if policies should change, it should not be in reaction to a single tragic murder.  It should be in response to careful research on whether immigrants actually boost the U.S. crime rates. 

With few exceptions, immigrants are less crime prone than natives or have no effect on crime rates.  As described below, the research is fairly one-sided.       

There are two broad types of studies that investigate immigrant criminality.  The first type uses Census and American Community Survey (ACS) data from the institutionalized population and broadly concludes that immigrants are less crime prone than the native-born population.  It is important to note that immigrants convicted of crimes serve their sentences before being deported with few exceptions.  However, there are some potential problems with Census-based studies that could lead to inaccurate results.  That’s where the second type of study comes in.  The second type is a macro level analysis to judge the impact of immigration on crime rates, generally finding that increased immigration does not increase crime and sometimes even causes crime rates to fall. 

Type 1: Immigrant Crime – Censuses of the Institutionalized Population 

Butcher and Piehl examine the incarceration rates for men aged 18-40 in the 1980, 1990, and 2000 Censuses.  In each year immigrants are less likely to be incarcerated than natives with the gap widening each decade.  By 2000, immigrants have incarceration rates that are one-fifth those of the native-born.  Butcher and Piehl wrote another paper focusing on immigrant incarceration in California by looking at both property and violent crimes by city.  Between years 2000 and 2005, California cities with large inflows of recent immigrants tended have lower violent crimes rates and the findings are statistically significant.  During the same time period, there is no statistically significant relationship between immigration and property crime.   

Ewing, Martinez, and Rumbaut summarize their findings on criminality and immigration thusly:

“[R]oughly 1.6 percent of immigrant males 18-39 are incarcerated, compared to 3.3 percent of the native-born.  The disparity in incarceration rates has existed for decades, as evidenced by data from the 1980, 1990, and 2000 decennial census.  In each of those years, the incarceration rates of the native-born were anywhere from two to five times higher than that of immigrants.”

They continue by focusing on immigrant incarceration rates by country of origin in the 2010 Census.  Less educated young Mexican, Salvadoran, and Guatemalan men (poorly educated young men are most likely to be incarcerated) make up the bulk of the unlawful immigrant population but have significantly lower incarceration rates than native-born men without a high-school diploma.  In 2010, 10.7 percent of native-born men aged 18-39 without a high school degree were incarcerated compared to 2.8 percent of Mexican immigrants and 1.7 percent of Guatemalan and Salvadoran immigrants.  These are similar to Rumbaut’s older research also based on Census data from 2000.  Controlling for relevant observable factors, young uneducated immigrant men from Mexico, El Salvador, and Guatemala are less likely to be incarcerated than similarly situated native-born men.

However, studies of immigrant criminality based on Census data alone could fail to give the full picture.  First, many of the answers given to the Census may have been educated guesses from the Census workers and not the inmates.  Second, the government has done a very poor job of gathering data on the nationality and immigration status of prisoners – even when it has tried.  That biases me against the accuracy of prison surveys by the Census Bureau.  Third, incarceration rates may better reflect the priorities of law enforcement than the true rates of criminal activity among certain populations.

Type 2: Macro Level Analysis of Immigrant Criminality

To avoid the potential Census data problems, other researchers have looked at crime rates and immigration on a macro scale.  These investigations also capture other avenues through which immigration could cause crimes – for instance, by inducing an increase in native criminality or by being easy targets for native criminals.

The phased rollout of the Secure Communities (S-COMM) immigration enforcement program provided a natural experiment.  A recent paper by Thomas J. Miles and Adam B. Cox used the phased rollout to see how S-COMM affected crime rates per county.  If immigrants were disproportionately criminal, then S-COMM would decrease the crime rates.  They found that S-COMM “led to no meaningful reduction in the FBI index crime rate” including violent crimes.  Relying on similar data with different specifications, Treyger et al. found that S-COMM did not decrease crime rates nor did it lead to an increase in discriminatory policing that some critics were worried about.  According to both reports, the population of immigrants is either not correlated, or negatively correlated, with crime rates.         

Ousey and Kubrin looked at 159 cities at three dates between 1980 and 2000 and found that crime rates and levels of immigration are not correlated.  They conclude that “[v]iolent crime is not a deleterious consequence of increased immigration.”  Martinez looked at 111 U.S. cities with at least 5,000 Hispanics and found no statistically significant findings.  Reid et al. looked at a sample of 150 Metropolitan Statistical Areas (MSAs) and found that levels of recent immigration had a statistically significant negative effect on homicide rates but no effect on property crime rates.  They wrote, “[i]t appears that anti-immigrant sentiments that view immigrants as crime prone are not only inaccurate at the micro-level, they are also inaccurate at the macro-level … increased immigration may actually be beneficial in terms of lessening some types of crimes.”  Wadsworth found that cities with greater growth in immigrant or new immigrant populations between 1990 and 2000 tended to have steeper decreases in homicide and robbery rates. 

Using panel data on U.S. counties, Spenkuch finds that a 10 percent increase in the share of immigrants increases the property crime rate by 1.2 percent.  In other words, the average immigrant commits roughly 2.5 times as many property crimes as the average native but with no impact on violent crime rates.  He finds that this effect on property crime rates is caused entirely by Mexican immigrants.  Separating Mexicans from other immigrants, the former commit 3.5 to 5 times as many crimes as the average native.  However, all other immigrants commit less than half as many crimes as natives.  This is the most deleterious finding that I discovered. 

Stowell et al. looks at 103 different MSAs from 1994-2004 and finds that violent crime rates tended to decrease as the concentration of immigrants increased.  An immigrant concentration two standard deviations above the mean translates into 40.5 fewer violent crimes per 100,000 compared to a decrease of 8.1 violent crimes in areas that experienced a change in immigration concentration two standard deviations below the mean.  It is easy to focus on the horrible tragedies when somebody is murdered by an immigrant but it’s very hard to imagine all of the people who weren’t murdered because of the lower crime rates created by increased immigration.  In their summary of the research on this topic, they write:

“[T]he weight of the evidence suggests that immigration is not associated with increased levels of crime.  To the extent that a relationship does exist, research often finds a negative effect of immigration on levels of crime, in general, and on homicide in particular.   

Some immigrants from certain countries of origin may be more crime prone than others, as Spenkuch finds above.  To test this, Chalfin used rainfall patterns in Mexico to estimate inflows of Mexican immigrants.  The idea is that lower rainfall and a decrease in agricultural productivity in Mexico would push marginal Mexican immigrants out of Mexico and into the U.S. labor market.  Mexican rainfall patterns and the subsequent immigration had no effect on violent or property crime rates in major U.S. metropolitan areas.    

These trends have also been found on the local level.  Davies and Fagan looked at crime and immigration patterns at the neighborhood level in New York City.  They find that crime rates are not higher in areas with more immigrants.  Sampson looked at Chicago and found that Hispanic immigrants were far less likely to commit a violent criminal act then either black or white native Chicagoans.  Lee et al. found that trends in recent immigration are either not correlated with homicides or are negatively correlated in Miami, San Diego, and El Paso.  The only exception is that there is a positive relationship between immigration and black homicide rates in San Diego.      

Numerous studies also conclude that the high immigration rate of the 1990s significantly contributed to the precipitous crime decline of that decade.  According to this theory, immigrants are less crime prone and have positive spillover effects like aiding in community redevelopment, rebuilding of local civil society in formerly decaying urban cores, and contributing to greater economic prosperity through pushing natives up the skills spectrum through complementary task specialization. 

Note on Illegal Immigration

The public focus is on the crime rates of unauthorized or illegal immigrants.  The research papers above mostly include all immigrants regardless of legal status.  However, every problem with gathering data on immigrant criminality is multiplied for unauthorized immigrants.  There is some work that can help shed light here.

With particular implications for the murder of Kate Steinle, Hickman et al. look at the recidivism rates of 517 deportable and 780 nondeportable aliens released from the Los Angeles County Jail over a 30-day period in 2002.  They found that there is no difference in the rearrest rate of deportable and nondeportable immigrants released from incarceration at the same place and time.  Their paper is not entirely convincing for several reasons, the most important being that their sample does not include the higher risk inmates who were transferred to state prison and were subsequently released from there.  There are also findings in their paper that seem to contradict their conclusion that aren’t adequately accounted for.  This is only one study of one sample in one city but the results should be incorporated into any argument over sanctuary cities.     

Conclusion

Both the Census-data driven studies and macro-level studies find that immigrants are less crime-prone than natives with some small potential exceptions.  There are numerous reasons why immigrant criminality is lower than native criminality.  One explanation is that immigrants who commit crimes can be deported and thus are punished more for criminal behavior, making them less likely to break the law. 

Another explanation is that immigrants self-select for those willing to work rather than those willing to commit crimes.  According to this “healthy immigrant thesis,” motivated and ambitious foreigners are more likely to immigrate and those folks are less likely to be criminals. This could explain why immigrants are less likely to engage in “anti-social” behaviors than natives despite having lower incomes.  It’s also possible that more effective interior immigration enforcement is catching and deporting unlawful immigrants who are more likely to be criminals before they have a chance to be incarcerated.          

The above research is a vital and missing component in the debate over the supposed links between immigration and crime.  

Today’s Iran deal is a victory for U.S. nonproliferation efforts, and while it may not be perfect, it goes a long way towards ensuring that Iran cannot develop nuclear weapons, and that the IAEA will regain crucial oversight access to Iran’s nuclear facilities. But though it is fundamentally an arms control agreement, some of the biggest impacts may in fact be felt in global oil and gas markets, as easing sanctions allow Iran’s hydrocarbon sector to reopen to the world.

Much of the text of the deal focuses on the sanctions which will be lifted in exchange for Iranian concessions on nuclear enrichment and processing. These include agreement by both the U.S. and EU to permit the import of oil and gas, as well as lifting asset freezes and bans on the export to Iran of technology and equipment for oil and gas extraction. More importantly, bans on investment, financing and service provision in the industry will be lifted, paving the way for European and American firms to provide technical services and invest in the country.

Oil prices have been volatile since the deal was announced, falling almost two percent before recovering. The initial price drop reflects the expectation that Iran may release some of its approximately thirty million reserve barrels of oil onto the market as soon as it is able. Iran also has the potential to impact oil prices in the long-term, holding the world’s fourth-largest reserves of crude oil, and second-largest gas reserves. Production has been depressed by sanctions, but once they are lifted, it is plausible that Iran could increase production to its pre-sanctions levels (2-3 million barrels a day) within several years.

A surge in Iranian production will only increase the current global oversupply of oil, driving prices lower, and setting Iran up for a confrontation with its partners in OPEC. This would be good news for consumers, but bad news for American shale producers, whose profits have already been dented by falling global oil prices. Yet, it could also be good news for large U.S. oil firms, opening the door to exploration and joint ventures in Iran.

Such investment may be particularly tempting given the recent closure of Russia’s oil market by sanctions. Companies like ExxonMobil, which lost access to its $3 billion joint Arctic exploration project with Rosneft, may find Iranian alternatives attractive.  The fact that most of Iran’s reserves are onshore fields - rather than hard-to-access offshore or arctic deposits – may also prove popular. American firms will likely be engaging in competition with European firms like ENI and Total, who were the major international players in Iran’s oil industry prior to the current sanctions regime.

Certainly, there are still obstacles to overcome before Iran reenters the market, a fact reflected in the volatility of oil prices this morning. The deal must clear congress, though opponents of the deal are unlikely to successfully overcome a presidential veto. Sanctions mitigation will not take effect for at least ninety days, as the lifting of the sanctions is tied to successful completion of many of the deal’s requirements by Iran. And there is always the risk of ‘snapback,’ the idea that sanctions may be suddenly reinstated if Iran fails in its obligations. American oil companies may be hesitant to get involved in Iran until these risks diminish.

There is no denying, however, that the successful implementation of the deal will have major consequences for global oil markets, driving prices lower and opening up new investment opportunities. Ultimately, some of the biggest winners of the Iranian deal could be U.S. consumers and companies.   

When Kelly Rindfleisch became a policy analyst for Scott Walker, and then his deputy chief of staff, she didn’t expect all of her personal emails to be the subject of a search into the criminal investigation of another person, but that’s Wisconsin politics for you.

In 2010, state officials opened a “John Doe” investigation (essentially Wisconsin’s version of a grand jury inquiry) into another Walker staffer, then-Chief of Staff Tim Russell. In their investigation, law enforcement sought and obtained a warrant for Google and Yahoo to turn over all ~16,000 emails held on Rindfleisch’s personal email account in order to find possibly incriminating emails sent between her and Russell—no narrowing, minimization, key-word searching, or independent third-party review required.

Through their fishing expedition, prosecutors were able to find enough evidence to support a charge against Rindfleisch, claiming that the incriminating content of those emails was in “plain view” subsequent to the incredibly broad search. Due to the unconstitutional search, Rindfleisch eventually plead guilty to misconduct in public office.

The Wisconsin Court of Appeals upheld the validity of the search warrants, and the Wisconsin Supreme Court declined to hear the appeal—leaving law enforcement with carte blanche to rummage through personal emails. Rindfleisch’s case provides an excellent vehicle for the U.S. Supreme Court to address the degree to which the Fourth Amendment requires a warrant for searching electronic data, tailored to probable cause. That’s why Cato filed a brief, joining the DKT Liberty Project, supporting Rindfleisch’s cert petition.

The Wisconsin courts’ decisions stand in direct conflict with many of the Supreme Court’s precedents; just last year in Riley v. California (2014), the Court addressed the precise privacy concerns at issue here. In Riley, the Court unanimously ruled that the Fourth Amendment requirement of a warrant applied to the digital contents of a locked cell phone. Now the issue has morphed to where lower courts are increasingly confronted with broad searches of all of a citizen’s electronic footprint when there is only probable cause to search a specific and identifiable subset of that information.

Issuing such warrants directly conflicts with the Fourth Amendment’s requirements of reasonableness and specificity. The practice of granting these warrants, particularly in the digital age, amounts to the grant of general warrants—or writs of assistance—to British officials in the colonies, the chief evil at which the Fourth Amendment was aimed.

The Supreme Court should take up this case and articulate meaningful requirements for specificity and reasonableness for electronic search warrants. It should invalidate the fishing expeditions that have become prevalent in political battle zones like Wisconsin.

The Supreme Court will decide whether to take Rindfleisch v. Wisconsin this fall after the justices return from their summer recess.

Every year around this time, a ritual is underway that quietly moves the ball forward on creating a U.S. national ID. That ritual is the annual appropriations process in Congress, which doles out money for everything the government does—including weaving together a system that may one day identify, track, and control each one of us.

As I noted last year in my policy analysis, REAL ID: A State-by-State Update, DHS has spent over a quarter billion dollars on REAL ID since the 2008 fiscal year. Beginning in 2012, grants supporting state efforts to implement REAL ID were moved into the State Homeland Security Grant Program, which fairly well keeps the amounts hidden from you and me. But appropriators at any time could deny the expenditure of funds to implement REAL ID.

Why don’t they do it? Judging by their records, appropriators are a strongly pro-national-ID group. Appropriations committee members who were in Congress when it passed tended to favor the national ID law—Republicans almost without exception. (And because Republicans chair the appropriations committees in both the House and Senate, they are currently the ones to watch.)

House members serving in 2005 had four chances to vote against the national ID law, and senators had two: First, when REAL ID passed the House on a test vote as H.R. 418. Second, when the rule governing debate in the House on H.R. 1268 passed by voice vote, attaching REAL ID to this spending bill. Third, when H.R. 1268 passed the House and Senate. And, fourth, when the conference report on H.R. 1268 passed the House and Senate.

Take a look at the pro-national-ID vote percentages for House Appropriations Committee members. All but one of the House Republican appropriators then serving voted in favor of the national ID law (or allowed it to go forward) every time. Mario Diaz-Balart went against REAL ID on one out of four occasions, voting against it on the test vote. (He was absent for the final vote on the appropriations bill to which REAL ID was attached. This analysis treats absence as “favoring” a bill because it allowed the outcome to occur. Representatives are obliged to vote on consequential matters.)

  • Harold Rogers (KY), Chairman 100% in favor of a national ID
  • Rodney P. Frelinghuysen (NJ) 100% in favor of a national ID
  • Robert B. Aderholt (AL) 100% in favor of a national ID
  • Kay Granger (TX) 100% in favor of a national ID
  • Michael K. Simpson (ID) 100% in favor of a national ID
  • John Abney Culberson (TX) 100% in favor of a national ID
  • Ander Crenshaw (FL) 100% in favor of a national ID
  • John R. Carter (TX) 100% in favor of a national ID
  • Ken Calvert (CA) 100% in favor of a national ID
  • Tom Cole (OK) 100% in favor of a national ID
  • Mario Diaz-Balart (FL) 75% in favor of a national ID
  • Charles W. Dent (PA) 100% in favor of a national ID
  • Tom Graves (GA) 100% in favor of a national ID
  • Jeff Fortenberry (NE) 100% in favor of a national ID

(Current Republican appropriators not serving in the House in 2005: Kevin Yoder, Kansas; Steve Womack, Arkansas; Tom Rooney, Florida; Chuck Fleischmann, Tennessee; Jaime Herrera Beutler, Washington; David Joyce, Ohio; David Valadao, California; Andy Harris, MD, Maryland; Martha Roby, Alabama; Mark Amodei, Nevada; Chris Stewart, Utah; Scott Rigell, Virginia; David Jolly, Florida; David Young, Iowa; Evan Jenkins, West Virginia; Steven Palazzo, Mississippi.)

House Democrats now serving on the appropriations committee had generally better records, typically voting against REAL ID as a freestanding bill, but getting rolled into a supportive position when it was attached to an appropriations bill. Some Democrats voted in favor every time, and a few voted to oppose a national ID because they opposed the spending bill to which it was attached. The only sin of this latter group was allowing the vote on the rule that attached REAL ID to the spending bill to go forward without a roll call vote.

  • Nita M. Lowey (NY), ranking member 75% in favor of a national ID
  • Marcy Kaptur (OH) 75% in favor of a national ID
  • Peter J. Visclosky (IN) 75% in favor of a national ID
  • José E. Serrano (NY) 25% in favor of a national ID
  • Rosa L. DeLauro (CT) 75% in favor of a national ID
  • David E. Price (NC) 75% in favor of a national ID
  • Lucille Roybal-Allard (CA) 75% in favor of a national ID
  • Sam Farr (CA) 25% in favor of a national ID
  • Chaka Fattah (PA) 75% in favor of a national ID
  • Sanford D. Bishop, Jr. (GA) 100% in favor of a national ID
  • Barbara Lee (CA) 25% in favor of a national ID
  • Michael M. Honda (CA) 75% in favor of a national ID
  • Betty McCollum (MN) 25% in favor of a national ID
  • Steve Israel (NY) 75% in favor of a national ID
  • Tim Ryan (OH) 100% in favor of a national ID
  • C.A. Dutch Ruppersberger (MD) 75% in favor of a national ID
  • Debbie Wasserman Schultz (FL) 75% in favor of a national ID
  • Henry Cuellar (TX) 100% in favor of a national ID

Three Democrats currently on the House Appropriations Committee weren’t in Congress when REAL ID passed: Chellie Pingree (ME), Mike Quigley (IL), and Derek Kilmer (WA).

Senate appropriators generally have had only two chances to oppose a national ID. On the vote passing the spending bill that contained REAL ID and on the conference report for that bill. Long-term appropriators from both parties signed on to REAL ID without exception—every single one of them. Senate appropriators who previously served in the House (indicated by an “H” below) have a more diverse record, including Tammy Baldwin, who voted against all but the rule allowing REAL ID to be attached to the bill that carried it into law.

Senate Republicans

  • Thad Cochran (MS), Chairman 100% in favor of a national ID
  • Mitch McConnell (KY) 100% in favor of a national ID
  • Richard C. Shelby (AL) 100% in favor of a national ID
  • Lamar Alexander (TN) 100% in favor of a national ID
  • Susan Collins (ME) 100% in favor of a national ID
  • Lindsey Graham (SC) 100% in favor of a national ID
  • Mark Kirk (IL) - H  100% in favor of a national ID
  • Roy Blunt (MO) - H 100% in favor of a national ID
  • Jerry Moran (KS) - H 100% in favor of a national ID
  • John Boozman (AR) - H 100% in favor of a national ID
  • Shelley Moore Capito (WV) - H 100% in favor of a national ID

Lisa Murkowski (AK), John Hoeven (ND), Bill Cassidy (LA), James Lankford (OK), and Steve Daines (MT) did not serve in the Senate or House during passage of REAL ID.

Senate Democrats

  • Barbara Mikulski (MD), ranking member 100% in favor of a national ID
  • Patrick J. Leahy (VT) 100% in favor of a national ID
  • Patty Murray (WA) 100% in favor of a national ID
  • Dianne Feinstein (CA) 100% in favor of a national ID
  • Richard J. Durbin (IL) 100% in favor of a national ID
  • Jack Reed (RI) 100% in favor of a national ID
  • Tom Udall (NM) - H 75% in favor of a national ID
  • Tammy Baldwin (WI) - H 25% in favor of a national ID

Jon Tester (MT), Jeanne Shaheen (NH), Jeff Merkley (OR), Chris Coons (DE), Brian Schatz (HI), and Christopher Murphy (CT) did not serve in the House during passage of REAL ID.

In 2008, Senator Tester came to Cato to denounce the REAL ID law, but he hasn’t done anything that we know of to defund the national ID program using his share of power over the purse.

Fair-minded people may object that it’s unfair to count a vote on a bulky appropriations bill as pro-national-ID, or to do the same with standing by as a voice vote happens on a rule for debate in the House. But do you know what principled fighters for our liberties do? They vote against big, “important” bills because liberty is the most important thing. They buck the leadership and their colleagues’ precious deals to take down a bad rule.

There’s more to learn about the behavior of some of the shorter-serving members of the appropriations committees. They may have records that show where they are on national ID funding. If they’ve been going along with Department of Homeland Security spending bills that happen to include funding for REAL ID, that’s a pro-national-ID position that you just might be reading about here in the near future.

Earlier today in Vienna, international negotiators reached a deal with Iran over its nuclear program. The New York Times reports that the agreement will eventually lift oil and financial sanctions, “in return for limits on Iran’s nuclear production capability and fuel stockpile over the next 15 years.” The international restrictions on Iranian arms exports will remain in place for up to 5 years, and the ban on ballistic missile exports could remain for up to 8 years. 

In a televised statement this morning, President Obama defended his decision to engage in the negotiations “from a position of strength” and assured the American people that, under the deal, “Iran will not be able to achieve a nuclear weapon.” His opponents are sure to challenge both assertions. 

The deal, Obama said, “is not built on trust, it is built on verification.” Those verification provisions appeared to have been one of the final sticking points in the negotiations. According to the Associated Press, the Iranians agreed to allow inspection of Iranian military sites, “something the country’s supreme leader, Ayatollah Ali Khamenei, had long vowed to oppose,” but such inspections are not the surprise, snap inspections that some had pushed for. 

The focus now turns to the Senate, which has 60 days to review the agreement. Senators could vote to block it, but Obama has already pledged that he would veto any legislation that prohibits the deal’s implementation. He has a reasonably strong hand to play. Even if all Senate Republicans vote to kill the deal, opponents would need at least a dozen Senate Democrats to vote with them in order to override the president. 

Expect the details of the nearly 100-page document to come under close scrutiny, even though many opponents don’t appear to believe that the specifics matter that much. For them, nearly any deal is a bad deal. 

For example, the latest entrant into the 2016 Republican presidential contest, Wisconsin Governor Scott Walker, yesterday pledged to “terminate the bad deal with Iran on Day One” – before the terms were even finalized. And he predicted that any other Republican president would do the same. Arkansas’s freshman Senator Tom Cotton has publicly stated that his object has been to blow up any deal. For Walker, Cotton, and others you don’t negotiate with a regime like Iran’s – you destroy it. 

But counter proliferation by means of regime change has a bad odor today, thanks chiefly to the Iraq war that, coincidentally, many of the most outspoken Iran deal opponents had a hand in pushing on the American people beginning in the late 1990s. 

They have learned nothing, it appears, but most Americans have: refusing to engage diplomatically with an odious regime, or waging war to separate said regime from its weapons – by removing the regime from power – is a costly proposition, and there is no guarantee that the government that emerges in its place will be better than that which came before. George W. Bush came around to this view by the middle of his second term in office: the man who in 2002 cast Iran as a charter member of the Axis of Evil – along with Iraq and North Korea – supported the P5 + 1 negotiating process that eventually led to today’s deal. 

So keep all this in mind in the coming weeks as the details of the Iran deal are debated in Washington and around the country. Deal opponents have an obligation to describe their preferred alternative, not merely what they are against.

Today the French celebrate the 226th anniversary of the storming of the Bastille on July 14, 1789, the date usually recognized as the beginning of the French Revolution. What should libertarians (or classical liberals) think of the French Revolution?

The Chinese premier Zhou Enlai is famously (but apparently inaccurately) quoted as saying, “It is too soon to tell.” I like to draw on the wisdom of another mid-20th-century thinker, Henny Youngman, who when asked “How’s your wife?” answered, “Compared to what?” Compared to the American Revolution, the French Revolution is very disappointing to libertarians. Compared to the Russian Revolution, it looks pretty good. And it also looks good, at least in the long view, compared to the ancien regime that preceded it.

Conservatives typically follow Edmund Burke’s critical view in his Reflections on the Revolution in France. They may even quote John Adams: “Helvetius and Rousseau preached to the French nation liberty, till they made them the most mechanical slaves; equality, till they destroyed all equity; humanity, till they became weasels and African panthers; and fraternity, till they cut one another’s throats like Roman gladiators.”

But there’s another view. And visitors to Mount Vernon, the home of George Washington, get a glimpse of it when they see a key hanging in a place of honor. It’s one of the keys to the Bastille, sent to Washington by Lafayette by way of Thomas Paine. They understood, as the great historian A.V. Dicey put it, that “The Bastille was the outward visible sign of lawless power.” And thus keys to the Bastille were symbols of liberation from tyranny.

Traditionalist conservatives sometimes long for “the world we have lost” before liberalism and capitalism upended the natural order of the world. The diplomat Talleyrand said, “Those who haven’t lived in the eighteenth century before the Revolution do not know the sweetness of living.” But not everyone found it so sweet. Lord Acton wrote that for decades before the revolution “the Church was oppressed, the Protestants persecuted or exiled, … the people exhausted by taxes and wars.” The rise of absolutism had centralized power and led to the growth of administrative bureaucracies on top of the feudal land monopolies and restrictive guilds.

The economic causes of the French Revolution are sometimes insufficiently appreciated. In his book The French Revolution: An Economic Interpretation, Florin Aftalion outlines some of those causes. The French state engaged in wars throughout the 17th and 18th centuries. To pay for the wars, it employed complex and burdensome taxation, tax farming, borrowing, debt repudiation and forced “disgorgement” from the financiers, and debasement of the currency. Lord Acton wrote that people had been anticipating revolution in France for a century. And revolution came.

Liberals and libertarians admired the fundamental values it represented. Ludwig von Mises and F. A. Hayek both hailed “the ideas of 1789” and contrasted them with “the ideas of 1914” — that is, liberty versus state-directed organization.

The Declaration of the Rights of Man, issued a month after the fall of the Bastille, enunciated libertarian principles similar to those of the Declaration of Independence:

1. Men are born and remain free and equal in rights… .

2. The aim of all political association is the preservation of the natural and imprescriptible rights of man. These rights are liberty, property, security, and resistance to oppression… .

4. Liberty consists in the freedom to do everything which injures no one else; hence the exercise of the natural rights of each man has no limits except those which assure to the other members of the society the enjoyment of the same rights… .

17. [P]roperty is an inviolable and sacred right.

But it also contained some dissonant notes, notably:

3. The principle of all sovereignty resides essentially in the nation. No body nor individual may exercise any authority which does not proceed directly from the nation… .

6. Law is the expression of the general will.

A liberal interpretation of those clauses would stress that sovereignty is now rested in the people (like “Governments are instituted among Men, deriving their just powers from the consent of the governed”), not in any individual, family, or class. But those phrases are also subject to illiberal interpretation and indeed can be traced to an illiberal provenance. The liberal Benjamin Constant blamed many of France’s ensuing problems on Jean-Jacques Rousseau, often very wrongly thought to be a liberal: “By transposing into our modern age an extent of social power, of collective sovereignty, which belonged to other centuries, this sublime genius, animated by the purest love of liberty, has nevertheless furnished deadly pretexts for more than one kind of tyranny.” That is, Rousseau and too many other Frenchmen thought that liberty consisted in being part of a self-governing community rather than the individual right to worship, trade, speak, and “come and go as we please.”

The results of that philosophical error—that the state is the embodiment of the “general will,” which is sovereign and thus unconstrained—have often been disastrous, and conservatives point to the Reign of Terror in 1793-94 as the precursor of similar terrors in totalitarian countries from the Soviet Union to Pol Pot’s Cambodia.

In Europe, the results of creating democratic but essentially unconstrained governments have been far different but still disappointing to liberals. As Hayek wrote in The Constitution of Liberty:

The decisive factor which made the efforts of the Revolution toward the enhancement of individual liberty so abortive was that it created the belief that, since at last all power had been placed in the hands of the people, all safeguards against the abuse of this power had become unnecessary.

Governments could become vast, expensive, debt-ridden, intrusive, and burdensome, even though they remained subject to periodic elections and largely respectful of civil and personal liberties. A century after the French Revolution, Herbert Spencer worried that the divine right of kings had been replaced by “the divine right of parliaments.”

Still, as Constant celebrated in 1816, in England, France, and the United States, liberty

is the right to be subjected only to the laws, and to be neither arrested, detained, put to death or maltreated in any way by the arbitrary will of one or more individuals. It is the right of everyone to express their opinion, choose a profession and practice it, to dispose of property, and even to abuse it; to come and go without permission, and without having to account for their motives or undertakings. It is everyone’s right to associate with other individuals, either to discuss their interests, or to profess the religion which they and their associates prefer, or even simply to occupy their days or hours in a way which is most compatible with their inclinations or whims.

Compared to the ancien regime of monarchy, aristocracy, class, monopoly, mercantilism, religious uniformity, and arbitrary power, that’s the triumph of liberalism.

Today President Obama announced that 46 non-violent drug offenders will have their sentences commuted and be released this year.  The announcement comes ahead of President Obama’s speech on sentencing reform later this week from a prison in Oklahoma.

The vast majority of the offenders were convicted of cocaine offenses, along with a handful of marijuana cases and some general “controlled substance” violations.  The lowest initial sentence among the 46 was 15 years, while several received life sentences.  In issuing the commutations the White House noted that, due to recent sentencing reforms, these sentences are out of step with the sentences the offenders would receive for the same violations today:

These unduly harsh sentences are one of the reasons the President is committed to using all the tools at his disposal to remedy unfairness in our criminal justice system. Today, he is continuing this effort by granting clemency to 46 men and women, nearly all of whom would have already served their time and returned to society if they were convicted of the exact same crime today.

The list of recipients, along with their offenses, can be found here.  

It should go without saying that sentences ranging from 15 years to life in prison for non-violent drug offenses are beyond the pale, and these commutations are certainly welcome.  But without substantial front-end criminal justice reforms, injustices like this will continue to happen.  Tens of thousands of non-violent drug offenders remain in federal prison.  Nearly half of federal prisoners were convicted of drug offenses.  The United States has the world’s highest incarceration rate, the largest prison population, and the most expensive penal system, and the needless incarceration of non-violent offenders is a primary reason for those dubious honors.

Pardons and commutations are often the very last gasp for an inmate after years or decades of incarceration, and for practical and political reasons only a small fraction of offenders can ever hope to receive one.  Substantive front-end reforms to our criminal laws will spare thousands of non-violent people from ever having to hope for a pardon or commutation.

Libertarians have been fighting for front-end criminal justice reforms for decades, and it’s high time for the rest of the country to catch up.  These commutations are a step in the right direction, but the federal government’s draconian policies toward non-violent offenders remain.

Click the links for more of Cato’s work on overcriminalization, the drug war, and mandatory minimum sentencing.

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

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