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In a November 27 Wall Street Journal article, “Raise Rates Today to Fight a Recession Tomorrow,” Martin Feldstein reminded us he has been repeatedly cheerleading since 2013 for the Fed to raise interest rates faster and higher “to prevent the overvaluation of assets” whose prices “will collapse when long-term interest rates rise.” I critiqued one of Feldstein’s similar articles in 2017.

November 27 was an odd time to be fretting about overvaluation. The day before Mr. Feldstein’s article appeared, a headline in the same newspaper – “Stocks, Bonds Face Year in Red” – observed that “stocks, bonds and commodities are staging a rare simultaneous retreat” 

Yet Feldstein urged the Fed to keep pushing short-term rates higher (3.4% “will not be high enough”) to somehow ease the pain of a supposedly inevitable increase in long-term interest rates (even if inflation stays near 2%), and to also make it easier to lower short-term rates in response to some future recession, a recession probably caused by the Fed raising rates too much (see graph).

Mr. Feldstein defined “overvalued assets” in terms of historical averages. “The price-earnings ratio is nearly 40% above its long-term average,” he warned. But that is because long-term interest rates are more than 50% below their long-term average. The yield on 10-year Treasury bonds averaged 6.5% since 1970, ranging from 1.8% in 2012 to 13.9% in 1981.  The p/e ratio almost always moves higher when long-term interest rates move lower.  

Why are long-term interest rates so low? Because inflation has remained persistently low, and because the Fed can’t push short-term rates much above inflation for long without provoking asset liquidation and recession.  The graph uses the GNP deflator (blue line) to gauge inflation because it covers the whole economy and is available over many decades. The fed funds rate clearly rises with higher inflation and falls with lower inflation, so the notion of raising the funds rate to reduce inflation is self-contradictory. Even before Irving Fisher (1896) economists such as Thornton and Mill understood that nominal interest rates rise and fall with inflation, with real interest rates being cyclical but relatively stable.   

When Feldstein predicted a stock market crash “when long-term interest rates rise” he explicitly did not predict a rise in inflation. His prediction relied instead on a key conceptual ambiguity: What does a “normal” interest rate mean, and why should we presume that global bond markets gravitate toward such a historical norm?

Former Senator Phil Gramm and Michael Solon, writing in the December 11 Wall Street Journal, redefine “normal” to mean arbitrarily excluding the high interest rates of 1977-82 and also the low interest rates of 2009-2018. After further subtracting inflation, this leaves them with a postwar trimmed average rate of 1.2% for real Treasury “borrowing costs” (presumably a weighted blend of short-term and long-term rates). “This suggests,” they conclude, “that if the Fed could meet its 2% inflation target during this recovery, Treasury borrowing costs might stay close to the 3.2% range.” 

The authors nevertheless raise concerns that if borrowing costs rose to 4.8% – which implies 3.6% inflation – it could become difficult to roll over the accumulated Obama-era debt without the Fed monetizing too many Treasury bills and bonds (paying for them by crediting bank reserves that currently pay interest). They conclude, convincingly, that firm spending caps and making peace on trade would make the future economy far more predictable and secure.

The day after Feldstein’s article, Fed Chairman Jerome Powell questioned the wisdom of continually raising short-term interest rates regardless of economic reality.  His comments greatly increased prices of stocks and bonds until “Tariff Man Tuesday” terrified world investors. Yet Chairman Powell’s changing conjectures about the fed funds rate being either near or far from to some unknowable “neutral rate” seem nearly as arbitrary and unsettling as Mr. Feldstein’s divinations about U.S. long-term rates reverting to an ancient average.

To sum this all up: 1. Stock prices have been high relative to earnings because bond yields have been low; 2. Bond yields have been low because the fed funds rate has been low; 3. The fed funds rate has been low because inflation has been low. 

Anyone predicting a sizable increase in long-term interest rates must also be predicting a sizable increase in inflation. Because inflation is largely a global phenomenon, however, it would be extremely challenging to persuasively predict higher inflation (and therefore higher bond yields) while much of the world economy is struggling to expand, the dollar has been rising and commodity prices falling.

President Trump told Democratic leaders Tuesday that he would be “proud” to shut the government down if Congress refuses him $5 billion for a border wall. A shutdown is virtually the only situation where Trump could back himself into such a corner that he would accept the wall-for-Dreamers trade that Democrats offered, but he rejected, earlier this year. Yet Democrats aren’t even bringing immigrants up. This is a tragedy for the immigrants who are counting on them.

After Democrats listened to Trump rant about “terrorists” coming across the border—who a Trump wall would supposedly keep out—all they could say is that they wanted more security and that they didn’t want to shut the government down. That’s not good enough. Democrats need a pro-immigrant exchange for wall funding—a deal where both sides can walk away with a win. If they don’t, Trump could win this fight, leaving immigrants with nothing to show for the wall.

Democrats have entirely dropped their demand from earlier this year that any wall funding be tied to the Dream Act—which would provide status to unauthorized immigrants brought to the country as children. Indeed, House Minority Leader Nancy Pelosi told the media that those are “two different subjects,” and she wouldn’t reup the offer. Democrats have even already given Trump a way to claim victory by agreeing to $1.6 billion border “fence” funding for this year.

So as it stands right now, Democrats are going into a shutdown fight over immigration where the worst case scenario for Trump is $1.6 billion in fences, and the best case scenario for Democrats is nothing. That’s a terrible negotiating stance. They should at least say, “We’re happy to give you more money if you give us one of our immigration priorities.” That gives Trump a landing spot where he can get his $5 billion, but Democrats and immigrants get something in return.

Perhaps the political calculation is that Trump will harm himself long term with a lengthy shutdown, but when Republicans shut down the government in 2013—while they took a short-term hit in the polls—it made no difference to their 2014 outcomes. Indeed, the GOP kept the House and took over the Senate that year. Trump remembers this, and even thinks that the shutdown could have worked for Republicans, so he may just hold for what he wants.

Democrats may think they won the House this year by ignoring immigration. But Trump won’t allow them to do that, so as a strategic manner, they should put up a pro-immigrant counteroffer, and leave it out there just in case Trump will take their life preserver during his shutdown. It’s still a very long shot, but without the offer, the shutdown brings them no upside and plenty of downside.

Congress and the White House are Republican. The latter proposed modest reforms to food stamps and farm subsidies in its budget. The House passed modest reforms to food stamps. Liberal and conservative analysts favor reforms to farm subsidies, which are actually subsidies to wealthy landowners.

Yet Congress is set to pass an $867 billion farm/food stamp bill with virtually no smaller-government reforms, and the president will probably sign it. The 800-page bill is backed by an 800-pound lobbying gorilla with two muscular arms—the farm lobby and the anti-poverty lobby.

Where does an 800-pound gorilla sit? Wherever it wants to, including on American taxpayers.

I said the bill is “appalling.” Heritage says it is a “nightmare.” NTU says it will “expand welfare to the wealthy.” R Street and AFP say it is “a huge jumble of subsidies.”

Politico says the farm bill is a “win for Democrats,” noting:  

Leaders of the House and Senate Agriculture committees rejected sweeping changes to the Supplemental Nutrition Assistance Program [i.e. food stamps] that House Republicans and President Donald Trump had sought, clearing a path for bipartisan support in both chambers. The final bill also sidesteps a Senate attempt to tighten limits on subsidies for wealthier farmers.

The bill, which has an estimated price tag of $867 billion over a decade, could have a floor vote in the House as soon as Wednesday. Quick passage in the House would allow the Senate to vote on the bill later this week.

… The deal is a win for Democrats, who unanimously opposed the House plan to impose stricter work requirements on millions of participants in SNAP, formerly known as food stamps. SNAP helps nearly 40 million low-income Americans buy groceries and accounts for more than 75 percent of the farm bill’s total price tag.

… Trump has repeatedly said he wanted the farm bill to include stricter SNAP work rules, but lawmakers told reporters the president is expected to sign the final deal even though it lacks those provisions.

… The final compromise doesn’t cut SNAP benefits or change eligibility criteria in any significant way.

… A controversial proposal from Sen. Chuck Grassley (R-Iowa) to curb how many farm managers can qualify for commodity subsidies also didn’t make the cut.

… Commodity subsidies, which can cost around $5 billion to $8 billion a year and are sent out when farmers’ average revenue or crop prices fall below certain levels, are expected to increase under the bill.

Dairy producers will get added protection, as well, because lawmakers decided to make it less expensive for them to enroll in support programs. House Agriculture ranking member Collin Peterson (D-Minn.), who is expected to take over the panel next year, has said the changes will make it nearly impossible for smaller dairy operations to lose money.

Federal crop insurance, which subsidizes about 60 percent of farmers’ premiums and shields producers from weather-related disasters or profit losses during any one year, will continue. The program is not means-tested.

The Cato 2018 Paid Leave Survey, a new national poll of 1,700 U.S. adults, finds that nearly three-fourths (74%) of Americans support a new federal government program to provide 12 weeks of paid leave to new parents or to people to deal with their own or a family member’s serious illness. A quarter (25%) oppose establishing a federal paid leave program. However, support slips and consensus fractures when costs are considered.

Read about the full survey results here.

The survey found 54% of Americans would be willing to pay $200 a year in higher taxes, a low-end estimate, in exchange for a 12-week federal paid leave program. If the program were to cost them $450 in taxes a year—the mid-range estimate—52% of Americans would oppose it, while 56% would oppose if it cost them the high range estimate of $1,200 in taxes. (Low, mid, and high range cost estimates are based off of potential costs of the Family and Medical Insurance Leave Act (FAMILY Act). See here for further explanation of cost estimates).

What Trade-Offs Would Americans Make for Federal Paid Leave?

The survey also investigated Americans’ willingness to deal with other potential or likely trade-offs that research finds could result from establishing a federal paid leave program. Americans would oppose establishing a federal paid leave program if it had the following effects:

  • If it required the government to cut funding for other programs such as Social Security, Medicare, and education: 76% oppose and 21% favor
  • If it reduced employer-provided benefits such as health care benefits and vacation days: 68% oppose and 29% favor
  • If people who don’t use the program still had to pay higher taxes to fund it: 62% oppose and 36% favor
  • If people would receive smaller pay raises in the future: 60% oppose and 38% support
  • If it caused the national deficit to rise: 57% oppose and 40% favor

Research from OECD countries suggests federal paid leave programs may slow the pace of women’s career advancement. Thus, the survey investigated if Americans feel this would be an acceptable trade-off for establishing a federal program. The survey finds 69% would oppose and 29% would favor a federal paid leave program if women became less likely to get promoted and become managers as a result.

Partisan Consensus on Paid Leave Breaks Down When Costs Considered

At first, majorities of Democrats (88%), Republicans (60%), and independents (71%) all support establishing a new government program to provide 12 weeks of paid family or parental leave. However, consensus breaks down once the costs and trade-offs of the program are considered. 

Democrats turn against a federal paid leave program for the following reasons: if it meant they’d receive smaller pay raises in the future with 49% in favor and 49% opposed; if the program caused fewer women to get promoted and become managers (63% opposed); if it meant employers would reduce benefits workers receive like health care benefits and vacation days (63% opposed); or if government spending on Social Security, Medicare, or other programs had to be cut (74% opposed). However, Democrats say they’d be willing to pay higher taxes, as high as $1,200 per year to establish the program, with 60% in favor. In contrast, Republicans turn against federal paid leave if it costs them $200 a year or more, with 63% opposed. Independents are split on raising their taxes $200 a year but turn against the program if it cost them $450 or more a year, with 56% opposed.

Americans Are Cautious of 6-Month Federal Paid Leave Program

Americans are more cautious of establishing a 6-month federal paid leave program. Even before considering costs, 48% of Americans support and 50% oppose creating a 6-month federal paid leave program. Support drops to about a third if a 6-month program cost the average employee $525 a year (66% oppose, 32% in favor), or $750 a year (68% oppose, 31% in favor), or $2,100 a year (69% opposed, 28% in favor) in higher taxes.

New Parents: Childcare Costs and Flexible Work Arrangements More Important than Paid Leave 

Nearly two-thirds (63%) of new mothers say that more affordable daycare (24%), more flexible work schedules (22%), and the ability to work remotely (17%) are more important than more paid parental leave (12%) to help them balance work and family. New mothers also report that the ability to work part-time hours (10%) and have extended afterhours childcare (10%) would best help them balance work and family obligations. The survey included an oversample of mothers of children under the age of 3 to enhance precision of these results. Parents of children under 18 also prioritize more flexible work schedules (26%), ability to work remotely (23%), and more affordable childcare (20%) ahead of more paid parental leave (10%). 

Americans Support Parental Leave Savings Accounts

More than three-fourths (78%) of Americans support cultivating a culture of saving for parental and family leave through establishing a new tax-advantaged saving account for family and medical leave. Twenty percent (20%) oppose this proposal. Establishing family and medical leave savings accounts enjoys rare bipartisan support with majorities of Democrats (82%), Republicans (80%), and independents (69%) in support of offering tax advantages to people who set aside money for this purpose.

Estimating Costs of a Federal Paid Leave Program

The survey also measured how many Americans might use a federal paid leave program and how many weeks they might use, if it were available to them. The survey found that 24.8% of current workers said they wanted or needed to take leave in the past 1 year, after the birth or adoption of a child, to care for an ill family member, or to deal with their own serious medical condition. If Americans were offered 66% of their current pay, but not more than $1000 per week, they say they would have taken the following:

  • Those taking parental leave would have taken an average of 9 (median) or 13 (mean) weeks
  • Those taking leave to care for a family member would have taken an average of 9 (median) or 12 (mean) weeks
  • Those taking leave to deal with their own serious medical condition would have taken an average of 9 (median) or 14 (mean) weeks of leave

These data show that while people overwhelmingly support the general idea of more paid leave, they aren’t willing to accept most of the costs necessary with establishing a new federal government program for this purpose. You can learn more about how women and men think differently about federal paid leave and its costs along with other findings from the survey here.

Read about the full survey results and analysis here.

For public opinion analysis sign up here to receive Cato’s upcoming digest of Public Opinion Insights and public opinion studies.

Methodology

The Cato Institute 2018 Paid Leave survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online during October 1-4, 2018 from a national sample of 1,700 Americans 18 years of age and older. Restrictions are put in place to ensure that only the people selected and contacted by YouGov are allowed to participate. The margin of error for the survey is +/- 2.4 percentage points at the 95% level of confidence. 

Government subsidies cause much avoidable damage. Politicians say they just want to “help” people. But giving people hand-outs invariably changes their behavior and often induces them to make harmful decisions. The negative side effects of subsidies ripple outwards in every direction leading to calls for more help, more regulations, and more government. The politicians never accept any blame, and their impulse is to layer more subsidy Band-Aids on top.

In environmental policy, I’ve written about how subsidies, including federal flood insurance and infrastructure spending, have induced people to live in dangerous flood zones along rivers and seacoasts. Since 1970, the number of Americans living in Special Flood Hazard Areas has increased from 10 million to more than 16 million. Government policies drew them in.

Stanford’s Jeffrey Ball writes in the Wall Street Journal that a parallel set of insurance and infrastructure subsidies has induced Californians to live in dangerous fire zones, greatly exacerbating the damage caused by recent wildfires:

The historically deadly wildfires that have roared through California this fall, and a string of similarly destructive ones over the past two years, are boosting calls to do more to slow climate change. But another underlying problem has contributed to the fires’ tragic damage: For decades, California, supposedly the greenest of states, has artificially lowered the cost of encroaching on nature by living in the woods.

Permissive building codes, low insurance rates and soaring taxpayer spending on firefighting and other services have provided an economic framework that has encouraged people to flee the state’s increasingly expensive cities for their leafy fringes. 

… For years, Cal Fire, the state wildfire-fighting agency, has been spending increasing sums to put out wildfires, as has the U.S. Forest Service. Already by 2006, according to an audit, most of the money the forest service was spending to put out large fires was “directly linked to protecting private property” in the wildland-urban interface. Meanwhile, at public cost, government has been encouraging more development by pushing infrastructure—roads, utilities, rescue services—ever farther into the forest.

… Once a house is built in California’s [wildland-urban interface areas], the state’s unusually low insurance rates have the effect of shifting much of the real cost. The average California homeowner pays about $1,000 a year in homeowner’s insurance—about half the level in Florida or Texas, two other states with markedly rising incidences of natural disasters believed linked to climate change.

That is a result of state policy, not an accident. California has an elected state insurance commissioner, one of 11 in the country who are elected, who caps the rates private insurance companies may charge.

… Other government payments further tilt the economics. Taxpayer-funded state grants commonly pay for brush-removal and other fire-prevention efforts in high-risk areas. When fires happen, taxpayers foot the bill to put them out. In 2011, the state began charging a fee to WUI homeowners to fund firefighting and prevention, causing an outcry; in 2017, it was rescinded as part of a larger piece of environmental legislation.

For more on government failure, see here.

 

 

 

The late President G.H.W. Bush famously reneged on his “no new taxes” pledge and signed the “Bush tax increase” on November 5, 1990, to take effect the following January.   The new law was intended to raise more revenue from high-income households and unincorporated businesses.  It was supposed to raise revenue partly by raising the top tax rate from 28% to 31% but more importantly by phasing-out deductions and personal exemptions as income on a joint return climbed above $150,00  (the phase-outs were called the PEP and Pease provisions).  

Treasury estimates expected revenues after the 1990 budget deal to be higher by a half-percent of GDP.  What happened instead is that revenues fell from 17.8% of GDP in 1989 to 17.3% in 1991, and then to 17% in 1992 and 1993.  Instead of rising from 17.8% of GDP to 18.3% as initial estimates assumed, revenues fell to 17%.  In fact, revenues did not climb back to the 1989 level of 17.8% of GDP until 1995, despite much higher excise taxes since 1991.

Another way to gauge the 1990 and 1993 tax increase is to measure the revenue gains in real 2009 dollars, adjusted for inflation.  According to Table 1.3 of the Historical Statistics in the U.S. Budget, real revenues (in 2009 dollars) soared from $1,308.8 billion in 1980 to $1,654.6 billion in 1990 (26.4%), as the top tax rate fell from 70% to 28%.  After the Bush tax increases in 1991 and retroactive Clinton tax increases in 1993, by contrast, revenues were virtually no higher in 1993 than they had been before – $1,655.7 billion.  GDP in 1993 was a bit larger than in 1990 but revenues fell as a percent of GDP despite higher excise taxes.

A recession began in October 1990, just as the intended tax increase was being acted.  To blame the weak revenues of 1991-93 entirely on that brief recession begs the obvious question: To what extent was a recession that began with a tax increase caused or at least worsened by that tax increase?   

Some describe the Bush tax increase of 1990 act of great political courage and bipartisan cooperation which supposedly helped shrink the budget deficit “by $492 billion … over just five years.”   But that figure too was (1) just an estimate, (2) only 30% of it was ostensibly to come from higher taxes, and (3) most of the hoped-for added revenue was not from higher income tax on couples earning over $150,000 but from higher excise taxes on gasoline, alcohol, tobacco, telephones, etc.  The gas tax went up a nickel; the beer tax was doubled.  Nearly 10% of the revenue windfall was expected from a new luxury tax on cars, yachts, airplanes, furs, and jewelry which devastated those businesses (contributing to the recession) before being repealed in less than a year.

Journalists who look back at what happened to tax revenues after tax rates were raised or lowered, such as Washington Post fact checker Glenn Kessler, commonly rely on an updated version of a 1998 working paper by Treasury economist Jerry Tempalski.  However, Tempalski only presented estimated effects on revenues, not actual effects.   “Treasury estimates a bill when it is enacted… and sometimes reestimates a bill for several subsequent January budgets,” Tempalski explained, but some of “the first post-enactment estimates proved not very accurate.”  Tax changes were often phased-in or phased-out, yet “the estimates… include no adjustment to capture the long-run, fully-phased-in effect of the tax bills.”  Early estimates looked ahead only two years, later ones covered four.

These antiquated revenue estimates tell us nothing about what actually happened after tax laws were changed.  They only tell us what notoriously erroneous revenue estimators expected.  Yet the Tempalski estimates have been repeatedly cited as evidence that lower tax rates never even come close to “paying for themselves”  by such leading journalists as Washington Post fact-checker Glenn Kessler and Lori Robertson of FactCheck.org, and even by the chief economist for Tax AnalystsMartin A. Sullivan

In the same vein, estimated revenue effects of the 1990 “tax increase” are still being cited as if they are facts rather than discredited old estimates.   When discussing tax increases (or tax cuts), journalists and economists must take care to distinguish between intended effects on revenue and actual effects.  Fact checkers can’t fact check the old estimates because they’re not facts. Estimates are just estimates.  

 

Let’s start with some counterfactual history. 

You may find it a waste of time, I think, however, it’s relevant to ask how broad and robust the protection of free speech would be in the US if it hadn’t been for civil rights organizations like the American Civil Liberties Union, and later Jewish organizations and the NAACP? 

Would a First Amendment doctrine based on viewpoint neutrality and the emergency principle have developed in the US? Or would the country have seen a development similar to Europe where hate speech – however it is defined - is criminalized and evil words to a far higher degree are seen as evil actions and therefore, cannot count on constitutional protection?   

Without holding Samuel Walker, professor emeritus of criminal justice at the University of Nebraska, responsible for my interpretation, I think it’s fair to conclude after having read his prolific and still extremely topical book Hate Speech: The History of an American Controversy (1994) that the American courts’ libertarian interpretation of the First Amendment and the widespread support for an uninhibited, robust and wide-open public space in the US would not have materialized without advocacy groups committed to free speech. 

At a time when the support for free speech is sliding and people on the left and on the right are more than willing to shut down their opponents it’s worth revisiting professor Walker’s story of why hate speech is protected in the US and why the current First Amendment doctrine has played a crucial and positive role in creating the necessary environment for tolerance and inclusion of groups that for decades if not centuries were not seen as belonging to American society. There was nothing inevitable about this development. American law and policy could have gone in a very different direction. 

A banal though fundamental point is that good ideas do not defeat bad ideas in and by themselves. They only prevail if there are groups and individuals willing to explain and defend them. That’s basically the reason why the US free speech tradition is different from the European one in spite of the commitment to democracy on both sides of the Atlantic. Ideas have no force in the world without advocates. In twentieth-century Europe there were no civil rights organizations with a position similar to the ACLU’s on free speech. 

It’s a common fallacy to think that the US from the very beginning was exceptional when it comes to the protection of free speech; that the First Amendment from the foundation of the republic meant that Americans enjoyed more or less the same legal right to freedom of expression as they do today. 

As a matter of fact, for the first 150 years the US wasn’t that different from the rest of the world. A few years after the adoption of the Bill of Rights (1791) Congress passed the Alien and Sedition Acts that among other things criminalized making false statements that were critical of the government. President Adams used the law to imprison his political adversaries. In general, the US federal and local governments introduced the same arguments and the same kind of legal instruments as other states around the world to silence challenges to the status quo, i.e. national security, blasphemy, obscenity, offensiveness, protection of the public order and morals and safeguarding the social peace. 

As late as 1928, a man was convicted for blasphemy in Little Rock, Arkansas. He put up a poster in a shop window with the words: ”Evolution is true”, ”the Bible is a lie”, ”God is a ghost”. During World War I Socialists received long prison terms for protesting the draft. Attacks from the right on the ACLU in the 1920s denounced free speech as ”un-American” because of the organization’s defense of unions and left-wing groups. In fact, anything that might have the tendency to cause social harm could be restricted including criticism of the government during times of war, discussion of birth control, and any literature with a sexual content. Government officials were allowed to ban speakers and groups they did not like. They issued injunctions against picket lines, Communists, Socialists, union meetings, and shut down debates about strikes and unions.     

The reality of American history is that meaningful protection of free speech and other individual rights has emerged only since the 1940s. The legal climate only began to change in 1931 when the Supreme Court upheld First Amendment rights of a Communist and of the publisher of an anti-Semitic newspaper – the first cases when speech deemed dangerous and offensive by the majority received constitutional protection and a vindication of the ACLU’s line. Until the 1960s free speech was considered a radical and dangerous idea. As Walker puts it: ”What millions of Americans think of as ancients and hallowed rights are of very recent origin.” 

The hate speech issue first arose in the 1920s with political and legal debates over whether to restrict offensive racial and religious speech. The same two arguments for restricting speech were repeated over and over again: First, that a particular group like the KKK or the Nazis represent a special case and a limited exception to free speech protection should be made for it, and second, that a free and democratic society has an obligation to restrict the activities of anti-democratic groups. In most European countries these arguments carried the day. Laws restricting hate speech and anti-democratic groups were adopted. 

The ACLU refuted both arguments, and their line of defense for hate speech as free speech was adopted by the courts and today serves as the foundation of American public policy and the First Amendment doctrine. The Supreme Court’s decisions were shaped by the advocacy groups that brought cases before it. The ACLU filed briefs in all the major cases through which the Supreme Court created the body of the current First Amendment law.   

The ACLU’s arguments against hate speech provisions were summed up in the 1934 statement Shall We Defend the Nazis in America? It began by challenging the argument that the Nazis with a reference to the suppression of civil liberties in Germany after Hitler’s power grab in 1933 represented a special case and should be exempted from First Amendment protection. The ACLU insisted that the rights of everybody have to be protected and defended independent of the content of their beliefs. Once you accept exemptions to free speech you cannot be sure when they will be used against yourself. In fact, the public order act that was adopted in the UK in 1936 to target Fascists was used to imprison more anti-Fascists than Fascists. Therefore, according to the ACLU, the right of Communists and Socialists are inextricably bound up with the rights of Nazis. 

This is in essence of viewpoint neutrality, the first principle on which the modern First Amendment doctrine is built. The other, the emergency principle, implies that speech has to entail a clear and present danger if it is to be exempted from First Amendment protection. The ACLU made the case for the clear and present danger test by making the point, that nobody can say for sure what speech will lead to violence. 

The ACLU and its allies knew from experience that one has to be very careful calling for banning offensive speech. First, if you are in the business of fighting for social change then most defenders of the status quo will perceive your speech as offensive. Second, terms like offensive speech are very elastic and can easily be used to target yourself the moment your opponents will have the power to move against you. 

Finally, it’s worth pointing out that the libertarian idea of individual rights has been driving the modern First Amendment doctrine. The ACLU early on came to the conclusion that the advancement of the rights of a minority or any other group were best achieved through the expansion of individual rights. That’s the reason why civil rights groups in the US abandoned group libel litigation to defend minorities against racism. They saw it as a threat to their larger goal of achieving equal rights. 

This libertarian idea lies at the heart of the conceptual difference on free speech between the US and Europe. The same can be said of the concept of tolerance. In America, tolerance is of the individual rather than the group, and it is more radical than what is practiced in the European nation states. In the immigrant American society, as Michael Walzer notes, the state is not committed to one group over another; it’s neutral. Government is not an arbiter of taste, and citizens must learn to tolerate one another as individuals, even within the group. This concept of tolerance is the consequence of the First Amendment doctrine’s focus on individual rights. 

Professor Walker concludes that “protection of free speech has helped to ensure the participation of different groups in American society, particularly the powerless.” He insists that free speech has promoted inclusion in contemporary society. Today, this point of view is not shared by those on college campuses who argue that hate speech must be prohibited in order to achieve the inclusion of the historical victims of discrimination. But the history of the hate speech issue, as presented in Walker’s book, supports just the opposite argument. “The inclusion of the powerless and the historical victims of discrimination has been aided (not fully achieved, of course) by the broadest content-neutral protection of offensive speech.”  

This blog post is part of a larger series on “Stock-Market Short-Termism” (see also my entry on share-buybacks). I will be assessing one proposed cure, corporate governance reforms, and will argue that it is likely to be iatrogenic.

 

I.

On August 15, 2018, Senator Elizabeth Warren formally introduced her “Accountable Capitalism Act”, that would, inter alia, require of all firms generating $1 billion or more in revenue that “no fewer than 40% of its directors are selected by the corporation’s employees.” In mandating that corporations include employees qua stakeholders in the firm’s major decisions, government would be putting its thumb on the scale in shifting the balance of power away from the corporate governance outcome that has emerged in the free-market: shareholders today exclusively determine the composition of the board of directors. Moreover, progressive politicians and academics would be putting a thumb in the eye of their long-standing bete-noir, the “shareholder value paradigm”.

Employee representation on the board is known as “co-determination”, part of a larger constellation of corporate governance institutions that comprise the “Rhenish model” of capitalism. Its primary exemplar, Germany, is trumpeted as the prepossessing poster child of this alternative to shareholder über alles “Anglo-capitalism”. In her press release, Senator Warren makes this inspiration explicit, claiming that she is “borrowing from the successful approach in Germany and other developed economies”. Germany’s co-determination is praised by its progressive proponents not just for its greater “economic justice”, but because it has “held back the forces of short-termism”. In a policy brief for the Roosevelt Institute titled “Fighting Short-Termism with Worker Power”, economist Susan Holmberg argues that co-determination will create “resilience against the pressures of short-termism”. Senator Warren penned an op-ed in the Wall St. Journal to accompany her formal press release, in which she argued that her bill would be a corrective against corporate executives being overly focused on “producing short-term share-price increases”.  

How, exactly, would greater employee influence over corporate governance combat short-termism? Proponents argue that employee representatives would prevent both exorbitant CEO pay and excessive share buybacks. Because the typical employee has a longer tenure at the firm than the typical shareholder, employees are therefore better custodians of the firm’s revenues, with an eye toward long-term viability, not the maximization of the next earnings report.

 

II.

The first of many red flags that appears as we proceed along this train of reasoning is that the Germanic model did not evolve organically as the result of firms realizing that increasing employee representation was in their own self-interest. As Holmberg herself notes, the 1976 Employee Co-Determination Act and related legislation impose this corporate governance paradigm on German firms, requiring that 50% of the supervisory board represent employees rather than shareholders. Conversely, in the United States, it remains perfectly legal for a firm to so structure its charter. The fact that few firms avail themselves of this eminently superior option should give one pause. The fact that German capitalism is so-characterized speaks less to the economic merits of co-determination and more to the political adroitness of its advocates.  

When considering the likely effects Warren’s plan would have on U.S. firms, the lessons of the U.S. experience with unions will be instructive. In fact, it’s hard not to view mandatory employee board representation as a rearguard action by a labor movement that has seen private sector union membership decline from a post-war high of 34% in 1954 to just under 7% today.[1] In many respects, employee board quotas are the functional analogue of a union granted a legal monopoly to represent the employees of a given firm. While board quotas may be more efficient than unions insofar as they avoid the bargaining costs associated with bilateral monopoly, they nonetheless serve to tilt the balance-of-power over major firm decisions toward employee interests.

The first devil lurking in the details of Warren’s plan is: who counts as an employee for the purposes of allocating director votes? All employees, including management below the C-suite? Or only non-managerial employees? However the definition is generated (and gerrymandered), an insuperable problem arises, one that similarly confronted unions. A firm’s employees do not have homogeneous preferences. More senior employees on the brink of retirement have a different time-horizon than do younger employees. Employees who intend to snag a few years of experience before moving to another firm or another industry differ from employees who are dreaming of a company watch on their 20th anniversary. These varying constituencies will have starkly different preferences as to how the firm’s free cash flow is allocated: higher wages now, more long-term capital investment that will pay off in decades, or shoring up the solvency of the employee pension plan? Similarly, skilled employees will be far less averse to R&D that leads to technology - complementary to their human capital - than will the unskilled employees with whom it competes. Thus, the category error baked into co-determination is the conceptualization of “employees” as an undifferentiated bloc. Whoever the median employee voter places on the board will inevitably take actions that result in intra­-employee redistribution.

When considering the preferences that employees broadly do share, it is naïve to think that they will always redound to the long-term benefit of the firm. First, employees of all shapes and sizes uniformly prefer that less cash flow be allocated to share buybacks and dividends. Indeed, champions of co-determination celebrate the extent to which it will serve as a brake on such equity outlays. But, again, we must keep in mind the fallacy of composition: when all firms reduce outlays, the cost of capital for firms with profitable investment opportunities rises and these firms are then unable to grow (read: hire new workers) as quickly.

Moreover, employees won’t necessarily want to reinvest earnings into long-term investments like CAPEX and R&D. And forget returning this surplus to the consumer in the form of lower prices. Instead, they will be inclined to leverage their legislatively-conferred bargaining power to divert profits into wages and benefits in excess of the marginal product of their labor. Despite the romance and sloganeering, this is as much an instance of rent-seeking as corporate Ferraris and “excessive” stock buybacks. On top of higher compensation in the present, employee representatives will attempt to commit a greater percentage of the firm’s future cashflow into retirement and pension plans, rather than R&D projects with an uncertain future payoff that will anyhow make half of them redundant.

 

III.

Employee representatives will have an interest in other measures that similarly reduce the long-term flexibility of the firm. Other than pre-committing future cashflows to non-productive investments such as pension plans, employees will also prefer greater job security. In raising the costs of replacing an unproductive worker, they are thereby raising the ex-ante costs of hiring generally. Greater employee protections mean that the firm faces higher costs when restructuring the skillset and human capital composition of its workforce to meet the always-evolving market landscape. The relative prices of the highly heterogeneous labor pool are constantly in flux, and firms must be able to nimbly rebalance their personnel to adapt and stay competitive. Moreover, overly rigid job protection reduces a firm’s ability to temporarily downsize its workforce in response to exigent circumstances. Co-determination advocates might claim that buybacks, dividends, and executive bonuses should be jettisoned before employees when times get tough. But the fact of the matter remains: reducing the degrees of freedom by which a firm might respond to a given short-term adversity compromises its long-term viability. Employee representatives on the board are trading economic efficiency and adaptability for the sake of incumbent employees today. But who can blame them? They are merely responding to their constituency.      

These ossifying effects are not armchair speculation. Far from sagely stewarding tax revenues for the benefit of posterity, public sector unions have managed to rack up $4.4 trillion in unfunded liabilities, darkening the long-run fiscal outlook for many states and municipalities. The much-lamented decline in manufacturing employment in the U.S. is a story first of firms escaping the unionized Midwest to the South, and then the radical restructuring and downsizing of a less protected workforce to a small coterie of highly skilled employees intensively utilizing technology. This explains why U.S. manufacturing output has risen over the past several decades despite the precipitous drop-off in employment: to the immense benefit of U.S consumers. This process would have been seriously stymied if employees were dealt an artificially strong hand at the table via legislative fiat.

Building on a considerable theoretical literature that predicts greater employee bargaining power will reduce research into R&D and other productivity-enhancing investments,[2] subsequent meta-analyses of the empirical effects of unions confirm that they are associated with lower productivity growth, lower profits, and lower stock market valuations.[3] It’s worth noting that, particularly since 1980, Western European total factor productivity (TFP) growth has dramatically lagged behind that of the United States.[4] Insofar as unions do correlate with productivity increases, the mechanism appears to be via increased communication between workers and management. This is a goal that any half-competent management will attempt voluntarily, but that is impeded by Section 8(a)(2) of the National Labor Relation Act’s prohibition on employer-sponsored unions.

 

[1] Bureau of Labor Statistics, Union Members Summary

[2] Baldwin (1983); Grout (1984); Connollay, Hirsch, and Hirschey (1986)

[3] Doucouliagos and Laroche (2003, 2005)

[4] Fernandez-Villaverde and Ohanian (2018))

Today, on Human Rights Day, we are pleased to release the Human Freedom Index 2018. The report—copublished by the Cato Institute, the Fraser Institute in Canada, and the Liberales Institut at the Friedrich Naumann Foundation for Freedom in Germany—measures a broad array of personal, civil and economic freedoms around the world and the extent to which basic rights are protected or violated.

New Zealand and Switzerland are the two freest countries on this year’s index, while Venezuela and Syria rank last. The United States ranks 17. In 2008, it ranked 11, then fell notably until 2013, after which it rose through 2016, the latest year for which the index gathers sufficient data that is comparable globally.

My coauthor Tanja Porčnik and I unfortunately find that, compared to 2008 or to last year’s report, more countries than not have seen their level of freedom decline. Over that longer period, notable deteriorations occurred in Russia, Hungary, Argentina, and, in more recent years, Turkey. Some of the largest drops in freedom in the world occurred in Greece and Egypt, further reflecting a strengthening of populism and authoritarianism that have afflicted countries on every continent in the past decade.

Egypt
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The good news is that over the long term, freedom has spread to a diversity of countries too, including numerous ex-socialist countries, Latin American nations, one sub-Saharan African country (Mauritius) and several Asian countries that all belong to the top quartile of the freest countries in the index. Many are on the rise, and some, like Taiwan, have seen notable increases in freedom in recent years.

Taiwan
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See what broad areas of freedom have seen the biggest gains or declines in the world, where women are least free, the strong relationship between freedom and prosperity, and many more findings in this year’s report.

With the takeover of the New York state senate by liberal-leaning Democrats, prospects are improving for such measures as S2857A, sponsored by Sen. Kevin S. Parker (D-Brooklyn), which would require owners of firearms to carry $1 million in liability insurance. There are a number of problems with that idea, one of which turns out to be distinctive to New York. 

The general problems with gun insurance mandates were aired when the idea began to circulate widely a few years ago. Perhaps the biggest is that courts would and should strike down mandates aimed at burdening or doing away with the exercise of a constitutional right. As David Rifkin and Andrew Grossman wrote in 2013:  

Insurance policies cover accidents, not intentional crimes, and criminals with illegal guns will just evade the requirement. The real purpose is to make guns less affordable for law-abiding citizens and thereby reduce private gun ownership. Identical constitutionally suspect logic explains proposals to tax the sale of bullets at excessive rates.

The courts, however, are no more likely to allow government to undermine the Second Amendment than to undermine the First. A state cannot circumvent the right to a free press by requiring that an unfriendly newspaper carry millions in libel insurance or pay a thousand-dollar tax on barrels of ink—the real motive, in either case, would be transparent and the regulation struck down. How could the result be any different for the right to keep and bear arms?

And there’s a special problem with trying to pull this kind of thing in New York, as our friend R.J. Lehmann, insurance expert at the R Street Institute, observes in a Twitter thread today: “New York now wants to require people to hold a kind of insurance that it sanctioned the NRA and an insurance broker earlier this year for selling at all.” In that case, Gov. Andrew Cuomo claimed that private companies Lockton and Chubb conspired with the National Rifle Association to insure liability “against the public interest.”  Lehmann goes on to say (Twitter breaks omitted): 

In its complaint against Lockton, [New York’s regulator] said the Carry Guard program “provided insurance coverage that may not be offered in the New York State excess line market, specifically: (a) defense coverage in a criminal proceeding that is not permitted by law; (b) liability coverage for bodily injury or property damage expected or intended from the insured’s standpoint in an insurance policy limited to use of firearms and that was beyond the use of reasonable force to protect persons or property; and (c) coverage for expenses incurred by the insured for psychological counseling support.” If such coverages are contrary to New York state law, clearly one cannot require New York citizens to purchase them. 

Section 1 of Sen. Parker’s S2857A requires a gun owner to maintain a liability insurance policy of at least a million dollars “specifically covering any damages resulting from any negligent or willful [emphasis added] acts involving the use of such firearm while it is owned by such person.” Gun control advocates commonly draft insurance mandates to cover willful rather than merely negligent acts as part of their goal to drive up the cost of insurance, in part by pinning on gun owners legal responsibility for the purposeful acts of others. 

Judge Jon S. Tigar of the U.S. District Court for the Northern District of California recently struck down a Trump administration policy barring asylum for those who do not enter through a legal port of entry.  Tigar’s major point is that Trump’s order conflicts with a statute that specifically says that those who entered illegally are eligible for asylum.  Despite this temporary ruling against the administration’s asylum order, a higher court will probably approve Trump’s action by invoking I.N.A. 212(f) that, according to the Supreme Court decision in the Travel Ban case, seems to give the president nearly unlimited power to ban whomever he wants from coming here no matter what the rest of the law says.  I hope I’m wrong, but I wouldn’t bet against that outcome.

Some commentators are outraged by the court order blocking president Trump’s change to asylum because they think it violates the national sovereignty of the U.S. government to determine who can enter without limitation.  Outside of the fringes, debates about national sovereignty are rare in the context of immigration policy because the Supreme Court has frequently affirmed Congress’s plenary (read unlimited) power to pass any immigration law it wants because of inherent power vested in the national sovereignty of the United States.  Despite some arguments that seek to limit that power or that it was invented almost a century after the Constitution was enacted, this inherent power is not seriously challenged and almost nobody would consider it illegitimate.

Those Supreme Court cases cited foundational scholars in the field of international law to support the majority’s opinion that Congress had plenary power over immigration.  In this context, international law refers to the customs, behaviors, and evolving rules that regulated the intercourse between governments and foreign individuals.  The two most cited international law scholars in the above Supreme Court decisions, supporting Congress’s unlimited power to restrict the movement of people across borders, are Emer de Vattel and Samuel von Pufendorf.  A recent article in the European Journal of International Law by Vincent Chetail shows just how selectively the Supreme Court cited those two scholars.

Before summarizing Chetail’s research on Vattel and Pufendorf, one must understand that they inherited and altered an international legal tradition that preceded them by centuries. 

Chetail’s paper begins with the work of Francisco de Vitoria (1480-1546), who is frequently portrayed as the founder of international law (also known as the law of nations).  He argued that the free movement of persons is a cardinal feature of international law through the right of communication, meaning that the right of humans to communicate with each other implies that they also have the right to move in order to communicate.  He used this to argue that when the Spaniards sailed to the Americas, they had no right of conquest or to occupy the Americas.  However, he went on to argue that Spaniards did “have the right to travel and dwell in those countries so long as they do no harm to the barbarians.”  This right supposedly comes from the law of nations, which derives from natural law and is not abridged by the division of the world into nations.  Vitoria argued that the right of free movement is mandatory so long as it does not cause harm to the host society, meaning crime.  He even argued, quite radically, that nations that refuse admission to non-criminals are committing an act of war.  Vitoria applied his argument to Europeans, arguing that “[I]t would not be lawful for the French to prohibit Spaniards from traveling or even living in France, or vice versa, so long as it caused no sort of harm to themselves; therefore it is not lawful for the barbarians either.”  Vitoria argued that these principles also support universal free trade, free navigation, and birthright citizenship. 

Chetail then moves on to discuss the work of Hugo Grotius (1583-1645), who endorsed Vitoria’s description of international law and refined it further by arguing that individuals have a right to leave their own country and to enter and remain in another.  In essence, Grotius argued that in order for there to be a right to emigrate, there must also be a right to immigrate.  He even argued, like Vitoria, that the right of movement can be taken by force if it is unjustly denied by the government.  Those who are criminals, would harm society, or skirt essential duties like repaying loans can be barred from immigrating or emigrating under Grotius’s theory.  He applies the same limitations on emigrating as he does on immigrating. 

Next, Chetail looks at the work of Samuel von Pufendorf (1632-1694).  He was the first international law scholar who argued that state sovereignty and the state’s power to choose whom to admit dominated any natural right of movement.  Pufendorf argued that individuals have the right to emigrate, but not to immigrate.  He did not elaborate on why his opinion differed from that of Grotius and Vitoria on this matter.  However, Pufendorf did write about two exceptions: shipwrecked sailors and some asylum seekers.  He wrote:

[I]t is left in the power of all states, to take such measures about the admission of strangers, as they think convenient; those being ever excepted, who are driven on the coasts by necessity, or by any cause that deserves pity and compassion. Not but that it is barbarous to treat, in the same cruel manner, those who visit us as friends, and those who assault us as enemies [emphasis added].

Those exceptions aren’t as broad as they first seem.  Although he argued that states should accept foreigners because “we see many states to have risen to a great and flourishing height, chiefly by granting license to foreigners to come and settle amongst them; whereas others have been reduced to a low condition, by refusing this method of improvement,” Pufendorf ultimately argued that those humanitarian concerns of admitting asylum-seekers should only occur when the host state decides to so do. 

Pufendorf reversed the reasoning of Grotius and Vitoria.  They argued that free movement was the general rule with some specific exceptions, but Pufendorf argued that no movement was the general rule with some specific general exceptions and total state control otherwise. 

Christian von Wolff (1679-1754) is the next philosopher of international law in the tradition of total state control over migration.  Wolff’s main contribution was to argue that the sovereign owns the nation, and he exercises this power as an individual property holder does regarding entry of people onto his land.  

Wolff does grant several exceptions to this general state power.  Foreigners have a right to enter a country if they do not harm the state.  This right of harmless use means that foreigners can travel through a nation’s territory on their way elsewhere, that asylum seekers or refugees have the right to enter and remain, and that “foreigners must be allowed to stay with us for the purpose of recovering health, … study, … [or] for the sake of commerce.”  Wolff went on to write that “permanent residence in [a nation’s] territory cannot be denied to exiles by a nation, unless special reasons stand in the way [emphasis added].”         

Those exceptions seem like strong limitations on the power of states to deny entry, but Wolff pulls a lawyer’s trick to argue that foreigners have the right to enter if those above conditions are met but also that there is no enforcement mechanism.  Thus, Wolff argues that states have total control over entry and no private actor can commit violence to enforce the right of admission.  Foreigners have a right to ask for admission under Wolff’s system and the state is morally bound to accept many of them, but the state is legally free to refuse them. 

The last international law scholar that Chetail writes about is Swiss author Emer de Vattel (1714-1767), who is also the most important, as he is cited extensively in the Supreme Court cases discussed above.  Vattel synthesized the work by the earlier scholars.  He argued that there is a qualified power of state sovereignty to control immigration with the two substantial caveats of innocent passage and necessity.  Innocent passage and necessity can only be denied using excellent reasons regarding the security of the admitting state.  He wrote:

[T]he introduction of property cannot be supposed to have deprived nations of the general right of traversing the earth for the purposes of mutual intercourse, of carrying on commerce with each other, and for other just reasons. It is only on particular occasions when the owner of a country thinks it would be prejudicial or dangerous to allow a passage through it, that he ought to refuse permission to pass. He is therefore bound to grant a passage for lawful purposes, whenever he can do it without inconvenience to himself. And he cannot lawfully annex burdensome conditions to a permission which he is obliged to grant, and which he cannot refuse if he wishes to discharge his duty, and not abuse his right of property [emphasis added].

The fact that Vattel argues for exceptions is important because the Supreme Court didn’t recognize these exceptions when it quoted him in the 1892 case Nishimura Ekiu v. United States:

It is an accepted maxim of international law, that every sovereign nation has the power, as inherent in sovereignty, and essential to its self-preservation, to forbid the entrance of foreigners within its dominions, or to admit them only in such cases and upon such conditions as it may see fit to prescribe. Vattel, lib. 2, §§ 94, 100.

Chetail doesn’t pull any punches when criticizing the judges who wrote the Nishimura Ekiu decision:

At the time of this judgment, the authority of Vattel proved to be instrumental in justifying a radical breakdown from the time-honoured tradition of free movement … the famous dictum of the US Supreme Court was based on a biased and selective reading of Vattel. In fact, the two earlier-quoted passages from the Swiss author were taken out of their context, with the overall result of providing a partial account of his views on the admission of foreigners. This misreading of Vattel has prevailed until now among US judges.

Most relevant to the ongoing chaotic situation on the Mexican border where many migrants stormed it and were repelled by tear gas, is that Vattel seems to endorse a right to illegal entry if legitimate entry is unjustly blocked by the government.  Recall that asylum-seekers, which includes those fleeing dire poverty under Vattel’s definition, fall under the necessity exception:

When a real necessity obliges you to enter into the territory of others – for instance, if you cannot otherwise escape from imminent danger, or if you have no other passage for procuring the means of subsistence, or those of satisfying some other indispensable obligation – you may force a passage when it is unjustly refused.

Vattel, one of the two intellectual heavyweights whom the Supreme Court cites to justify Congress’s plenary power over immigration, argued that the government cannot bar asylum-seekers and many other migrants from entering the United States and that those unjustly refused entry can do so illegally – a very radical position.  According to Vattel, that right is not restricted and can be enforced against the will of any sovereign so long as illegal entry is the only way to safeguard an essential interest of the foreigner.        

This post is not an argument for one or another of the views held by the above-mentioned writers, but instead a summary of fascinating recent work by a professor of international law on an important subject.  The most shocking thing is how selectively the Supreme Court cited Vattel over a century ago to grant Congress a vast and unrestricted power that Vattel did not recognize.  

On December 7, 2015, President Trump called for a Muslim ban. This ban later turned into “extreme vetting” policies, which—according to Trump—had the same goal. Now nearing the 2-year mark of his administration, an accurate assessment of these policies is now possible. All the major categories of entries to the United States—refugees, immigrants, and visitors—are significantly down under the Trump administration for Muslims or applicants from Muslim majority countries.

91% fewer Muslim refugees

President Trump has dramatically reduced the number of Muslim refugees. According to data from the U.S. Department of State—which records the religions of refugees—Muslim refugees peaked at 38,555 in fiscal year (FY) 2016, fell to 22,629 in FY 2017, and reached just 3,312 in FY 2018—a 91 percent decline from 2016 to 2018. Refugees of other faiths have also seen their numbers cut, though not to the same extent as Muslims. The share of refugees who were Muslims dropped from 45 percent in FY 2016 to 44 percent in FY 2017, and then again to 15 percent in FY 2018. President Trump has reversed the earlier trend under President Obama, where Muslim refugee admissions increased.

Figure 1: Muslim Refugee Admission
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30% fewer immigrants from majority Muslim countries

Approvals for immigrant visas—that is, for permanent residents—for nationals of the 48 majority Muslim countries have fallen from 117,444 in FY 2016 to 104,228 in FY 2017 to 82,260 in FY 2018—a 30 percent drop overall. The share of new immigrants entering from abroad from majority Muslim countries has fallen as well, from 19 percent in FY 2016 to 18 percent in FY 2017 to 15 percent in FY 2018. This also reflects a change in the prior trend. From 2009 to 2016, immigrants from Muslim majority countries increased from 80,435 to 117,444.

Figure 2: Immigrant Visa Issuances for Nationals of Majority Muslim Countries
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The decline in immigrant visas occurred primarily in the family reunification categories, which President Trump refers to as “chain migrants.” From FY 2016 to FY 2018, the number of family-sponsored immigrants declined by 29,607—a 36 percent decline. Special immigrants—interpreters and other partners of the U.S. military mainly from Iraq and Afghanistan—accounted for the rest of the reduction. In FY 2018, there were 45 percent fewer immigrant visas for special immigrants than in FY 2016.

Figure 3: Immigrant Visa Issuances for Nationals of Majority Muslim Countries by Type
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18% fewer visitors from majority Muslim countries

Though they were already relatively low to begin with, nonimmigrant visa approvals—temporary visas for workers, students, and tourists—from Muslim majority have also declined 18 percent from 2016 to 2018. In 2016, the Obama administration issued 856,886 nonimmigrant visas to nationals of Muslim majority countries. In 2017, this number fell to 718,535. By 2018, it had dropped to 702,375—154,511 fewer than 2016. The declines occurred among both tourist visas and other visa categories.

Figure 4: Nonimmigrant Visa Issuances for Nationals of Majority Muslim Countries
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Explanations for the Decline in Visas and Refugees

Since President Trump establishes the refugee quotas for each region of the world and for each fiscal year, his decision to cut the quota and distribute the cap away from the Muslim world explains the drop in Muslim refugee issuances. For FY 2017, President Trump established the lowest refugee quota in the history of the refugee program. 

The primary cause of the decline in the immigrant visa approvals is the travel ban that has singled out for exclusion eight majority Muslim countries since January 2017: Chad, Iran, Iraq, Libya, Syria, Somalia, Sudan, and Yemen. Chad and Sudan have been completely removed from the list, and while Iraq is not officially designated, the latest proclamation from September 2017 singles Iraqis out for additional scrutiny.

The eight travel ban countries explain 65 percent of the decline in immigrant visa issuances for Muslim majority countries. Immigrant visa issuances for these countries have fallen 72 percent from FY 2016 to FY 2018. The travel ban explains only 28 percent of the decline in nonimmigrant visa issuances from Muslim majority countries. Nationals of the travel ban countries received 62 percent fewer nonimmigrant visas in 2018 than in 2016.

Figure 5: Immigrant and Nonimmigrant Visa Issuances for Travel Ban Countries
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Beyond the travel ban, President Trump has imposed “extreme vetting” policies that make immigrating more bureaucratic and costly for everyone. He has massively increased the length of immigration forms, adding new subjective “security” questions. According to the American Immigration Lawyers Association, more applications for Muslims are disappearing into an “administrative processing” hole, where applications are held up for security screening. Undoubtedly, some Muslims simply want to avoid the United States where stories of profiling and discrimination abound.

Conclusion

The bottom line is that the Trump administration is leading a major overhaul in the types of travelers, immigrants, and visitors who are coming to the United States. His administration reduced Muslim refugees by 91 percent and has overseen a 30 percent cut to immigrant visas for majority Muslim countries and an 18 percent cut to temporary visas. These policies lack a valid national security justification, but they are nonetheless having a significant effect. President Trump is certainly following through on his promise to limit Muslim immigration, even if a “total and complete shutdown” has not happened.

Table 1: Refugee Admissions by Religion
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Table 2: Immigrant Visa Issuances for Nationals of Majority Muslim Countries
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Table 3: Nonimmigrant Visa Issuances for Nationals of Majority Muslim Countries
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Dangerous tensions between Russia and Ukraine are spiking again.  The latest catalyst was a November 25 clash between Russian and Ukrainian warships in the Kerch Strait, which connects the Black Sea to the Sea of Azov.  That narrow strait separates Russia’s Taman Peninsula from Crimea.  Despite Moscow’s annexation of the latter in 2014, Kiev still considers Crimea to be Ukrainian territory, a position that the United States and its allies back emphatically.  Moreover, passage through the strait is the only maritime link between Ukraine’s Black Sea ports and those on the Azov.  Kiev views the strait as international waters and relies on a 2003 bilateral navigation treaty to vindicate its position.  

With the annexation of Crimea, however, Russia now regards the waterway as its territorial waters.  When three Ukrainian ships violated Moscow’s demand for 48 hours-notice and official permission for transit (a procedure Kiev had followed a few months earlier). Russian security forces intervened, ramming one ship and firing on the others, wounding several Ukrainian sailors, and then seizing the offending vessels. 

The United States and the other NATO members reacted with fury to this incident.  In an address to the UN Security Council, U.S. Ambassador Nikki Haley blasted Moscow for “outlaw actions” and stated that the “outrageous violation of sovereign Ukrainian territory is part of a pattern of Russian behavior.”  NATO held an emergency meeting with the Ukrainian government, and NATO Secretary General Jens Stoltenberg expressed the Alliance’s “full support for Ukraine’s territorial integrity and sovereignty, including its full navigational rights in its territorial waters under international law.”   

Ukraine’s leaders want far more than NATO’s moral support, however.  In addition to a boost in U.S. arms sales, Kiev is seeking a show of military force by the Alliance.  Indeed, President Petro Poroshenko expressed the hope that NATO members “are now ready to relocate naval ships to the Sea of Azov in order to assist Ukraine and provide security.”

Leaving aside the problem than much of the Sea of Azov is too shallow (in some portions no more than 6 meters in depth) to accommodate most NATO warships, attempting to use the Kerch Strait without Moscow’s permission would create a horrifically dangerous crisis.  Even moving NATO ships to the eastern waters of the Black Sea adjacent to the Strait would constitute a perilous provocation.  Unfortunately, some political leaders, media figures, and policy experts are pushing for such a deployment.  Sen. Sen. Robert Menendez (D-NJ), for example, called for tougher sanctions against Russia, additional NATO exercises on the Black Sea and more U.S. security aid to Ukraine, “including lethal maritime equipment and weapons.”

As I discuss in a new article in the American Conservative, going down the path of increasing U.S. and NATO support for Ukraine is unwise on both strategic and moral grounds.  Contrary to the narrative that Western journalists and politicians push, the quarrel between Russia and Ukraine is not a stark struggle between an aggressive, dictatorial Goliath and an innocent, beleaguered, democratic David.  Ukraine is, at best, a quasi-democratic country with a worrisome overlay of ultra-nationalism and even neo-fascism.  The relative merits of the territorial claims between Moscow and Kiev are complex and murky.  In any case, that dispute is a parochial matter that warrants a studiously neutral stance on the part of the United States.   

U.S. officials need to disregard reckless calls for a show of force or a demonstration of “resolve” in response to the Kerch Strait incident. There is nothing at stake in that dispute, or even the larger controversy over the status of Crimea, which impinges on the vital interests of the American people.  Instead of increasing its security connections to Kiev, as hawks are recommending, the United States would be wise to reduce its entanglement.  

 

 

The Center for Immigration Studies (CIS) just released a new report that purports to show that 63 percent of non-citizen households are on welfare compared to 35 percent of native-born households in 2014.  The purpose of this report was to justify the president’s new public charge rule.  For years, CIS and I have debated this topic and this blog is yet another installment.  Please follow these links to read the previous installments.

There are a few issues with the CIS report and an unsound methodological choice that they made that results in inflating the welfare use rates for immigrants and natives.  I’m just going to make two points below.

First, the welfare use rate reported by CIS is much higher than the welfare use rates estimated by the Department of Homeland Security (DHS) even though they both relied on the Survey of Income and Program Participation (SIPP).  DHS did look at 2013 and CIS looked at 2014, but one year shouldn’t make much of a difference as no new big welfare laws were passed then.  The biggest difference between the DHS and CIS analysis is that CIS used households as a unit of analysis and DHS used individuals (more on this below).  Table 1 shows the differences.  CIS reports much higher welfare use for natives, the foreign-born, and non-citizens for every program.  Table 2 shows just how much higher CIS’ estimates are for every welfare program relative to DHS’ estimates.  Relative to DHS’ estimates, CIS estimates that native-born welfare use rates are an average of 95 percent higher, foreign-born use rates are an average of 173 percent higher, and non-citizen use rates are an average of 208 percent higher. 

 

Table 1

Estimated Welfare Use Rates by the Organization that Conducted the Analysis

 

Department of Homeland Security (2013)

Center for Immigration Studies (2014)

Benefit Program

Natives

Foreign Born

Non-Citizens

Natives

Foreign Born

Non-Citizens

Cash or non-cash

20.9

20.9

22.6

30.4

49.5

57.7

Cash benefits

3.4

3.7

1.8

7.7

9.6

6.3

SSI

2.4

3.2

1.3

6.3

8.2

4.5

TANF

0.8

0.3

0.4

1.3

1.1

1.4

GA

0.3

0.2

0.2

NA

NA

NA

Non-cash benefits

20.4

20.4

22.3

NA

NA

NA

Medicaid

16.1

15.1

15.5

23.3

41.9

49.9

SNAP

11.6

8.7

9.1

15.2

18.4

23

Housing Vouchers

1.6

1.7

1.4

4.7

5.1

3.9

Rent subsidy

3.9

4.8

4.3

NA

NA

NA

Sources: Center for Immigration Studies, Table 1; Department of Homeland Security, Table 11.

 

Table 2

Percentage Difference Between CIS and DHS Welfare Use Rate Estimates

Benefit Program

Natives

Foreign Born

Non-Citizens

Cash or non-cash

45%

137%

155%

Cash benefits

126%

159%

250%

SSI

163%

156%

246%

TANF

63%

267%

250%

GA

NA

NA

NA

Non-cash benefits

NA

NA

NA

Medicaid

45%

177%

222%

SNAP

31%

111%

153%

Housing Vouchers

194%

200%

179%

Rent subsidy

NA

NA

NA

 Sources: Center for Immigration Studies, Table 1; Department of Homeland Security, Table 11; author’s calculations.

 

Second, CIS chose to use a head of household unit of analysis rather than an individual unit of analysis.  This means that they designated some households as headed by non-citizens and others as headed by natives based on SIPP responses.  Thus, CIS’ analysis counts many native-born American children, American citizen spouses in immigrant households, and doesn’t control for the size of the households.  CIS does show welfare household use rates without non-citizens in them, but the entire household unit of analysis is a flawed way to look at welfare use rates.  The DHS sided with Cato on this long-standing issue as it measured individual welfare use rates and didn’t bother with an antiquated head of household measure.  The only close approximations to a household or family-level analysis that DHS conducted were in Tables 16 and 17 of its report, but it only compared citizens to non-citizens.  Tables 16 and 17 unsurprisingly find that people with more children have higher welfare use rates.

DHS isn’t the only organization to agree that the individual is the proper unit of analysis.  According to the massive report on the economic and fiscal consequences of immigration published National Academy of Sciences (NAS), the individual is the proper unit of analysis for fiscal cost analysis.  Since welfare use rates are a subset of fiscal cost analyses, it makes sense to use the individual rather than the household.  The NAS authors wrote:

 

households are not stable over time and because the costs and benefits originating in mixed households often need to be divided between native-born and foreign-born members—as opposed to having to ascribe them exclusively to one group or the other—the individual unit of analysis is more flexible and empirically feasible for dynamic analyses (338).

 

Even in static analyses, the NAS argues that the problem of how “to define an immigrant household (339)” breaks in favor of an individual unit of analysis to at least maintain consistency between the dynamic and static methods.  This is a big change from the NAS’ previous study in 1997 that argued for households as the unit of analysis.

The DHS and NAS both agree with Cato scholars that the individual is the proper unit of analysis in a welfare cost analysis by nativity.  CIS is on the other side of that issue.  I am not making an appeal to authority, but CIS should have to make a better case for why it persists in using the household level of analysis.

CIS’ analysis is not compelling.  A competing analysis of the same data by DHS, using the individual unit of analysis that Cato scholars have recommended, found that all immigrants have a welfare use rate identical to natives and that non-citizens only have a slightly higher usage rate. 

Cato scholars are very concerned with immigrant welfare use, which is why we’ve authored a study on how to eliminate non-citizen welfare use that is now in the form of legislation introduced by Representative Grothman (R-WI).  His bill would do more to save taxpayer dollars and reduce welfare use among immigrants than any refined public charge rule.  Although CIS and I do not agree on many of the facts regarding immigrant welfare use, we should be able to agree that approaches like those of Representative Grothman are better than a revised public charge rule. 

 

Welcome to the Defense Download! This new round-up is intended to highlight what we at the Cato Institute are keeping tabs on in the world of defense politics every week. The three-to-five trending stories will vary depending on the news cycle, what policymakers are talking about, and will pull from all sides of the political spectrum. If you would like to recieve more frequent updates on what I’m reading, writing, and listening to—you can follow me on Twitter via @CDDorminey.  

  1. This first suggestion actually comes in two parts: The Texas National Security Review hosted two policy roundtables. “The Future of Conservative Foreign Policy” includes essays from Elliott Abrams, my colleague Emma Ashford, John Fonte, Henry R. Nau, Nadia Schadlow, Kelley Beaucar Vlahos, and Dov S. Zakheim. “The Future of Progressive Foreign Policy” includes essays from Heather Hurlburt, Adam Mount, Loren DeJonge Schulman, and Thomas Wright. If you’re looking to hit the highlights, I really recommend Emma Ashford’s contribution (of course), as well as Adam Mount’s and Heather Hurlburt’s. 
  2. If you’re interested in the conflict and Yemen, check out this interactive website, “Visualizing Yemen’s Invisible War,” that provides both narrative and data on the war. 
  3. Trump’s Push to Boost Lethal Drone Exports Reaps Few Rewards,” Lara Seligman. It turns out the Department of Defense and the U.S. Air Force aren’t completely sold on President Trump’s idea to sell advanced drone technology worldwide. Fascinating.

Writing in National Review, Charles C.W. Cooke decries the pharaonic spectacle of the modern presidential funeral. “Whether he was a great man or a poor one, George H. W. Bush was a public employee.” In order to honor his passing, Cooke asks, do we really need to shut down the stock market, postal service, and much of the nation’s capital for a national day of mourning? The whole business marks “another step toward the fetishization of an executive branch whose role is supposed to be more bureaucratic than spiritual.” I’m glad he said it first, but he’s absolutely right.

Our first president, ever conscious of the precedents he could set, didn’t want an elaborate state funeral. “It is my express desire that my Corpse may be Interred in a private manner, without parade, or funeral Oration,” Washington declared in his will. 

You’ve got to respect that—but, of course, we didn’t. Instead, “there was a massive public funeral at Mount Vernon,” Brady Carlson recounts in his 2016 book Dead Presidents, with a parade organized by Washington’s Masonic lodge, including “musicians, clergy, troops, and a riderless horse, a military tradition reportedly dating back to the age of Genghis Khan”—along with funeral orations by four ministers, topped off with “three general discharges of infantry, the cavalry, and eleven pieces of artillery, which lined the banks of the Potomac.”

The passing of the ninth U.S. president, William Henry Harrison, the first to die in office, set more precedents still. The interminable inaugural address that supposedly killed him featured Whiggish professions of deference to the legislature and the people–the president as a modest “accountable agent, not the principal; the servant, not the master.” Yet, according to the White House Historical Association, ‘the 30-day ceremonials surrounding the death of Harrison were modeled after royal funerals.” “There were bells, cannons, and funeral dirges,” Carlson writes, the White House was draped in black as “the late president and his casket rode in a black and white carriage pulled by six white horses, escorted by a pallbearer for each of the country’s twenty-six states and held up on a raised dais so the ten thousand people who turned up could see.” 

We fought a revolution to rid ourselves of kings, but, ironically enough, in the mother country, the sendoff for a former head of government tends to be decidedly less regal. The last British Prime Minister to get a state funeral was Winston Churchill. The pomp surrounding Margaret Thatcher’s 2013 funeral blurred the lines, a development the Telegraph’s Peter Oborne condemned as a “constitutional innovation… foolish and wrong”: 

Our constitution is defined by a rigorous separation between the head of state (the monarch) and the head of government (the prime minister). This marks us out from other countries, such as the United States of America, where the head of state and chief executive are merged in one person. As Anthony Sampson wrote in the Anatomy of Britain, the advantage of the British system is that “the head of state could represent the nation with all its traditional pomp and splendour, while the head of government appeared in a more workaday role”

Still, the funerals of other recent prime ministers have tended to respect that distinction, typically featuring no more pageantry than might be accorded any prominent private citizen.  

In America, by contrast, presidents are legally entitled to state funerals, whose details are meticulously prescribed in the 133-page Army Pamphlet 1-1. “Regulations say up to four thousand military and civilian support personnel can take part in state funeral services …. And typically the sitting president announces government offices will close for the day of the funeral.” 

The president described in the Federalist was to have “no particle of spiritual jurisdiction.” Yet there’s an unsettling, quasi-mystical orientation toward government at work in much of the ritual. While lying in state in the Capitol Rotunda, the president’s body is placed atop the Lincoln Catafalque: the funeral bier constructed for our 16th president–one of the holy relics of the American civil religion. Above him hangs the cathedral-like ceiling, which features the fresco “The Apotheosis of Washington,” painted by Constantino Brumidi in 1865. It depicts the first president “sitting amongst the heavens in an exalted manner, or in literal terms, ascending and becoming a god.” I generally find the so-called “New Atheists” insufferable, but we could use a little of their militant impiety when it comes to our presidential cult.  

George H.W. Bush’s funeral arrangements have been comparatively modest as these things go. So were Gerald Ford’s back in 2007. The man who proclaimed himself “a Ford, not a Lincoln” and toasted his own English muffins was praised once again for his humility because he skipped the horse-drawn processional. Instead, his 587-page funeral plan included a motorcade tour of Alexandria with stops at the World War II and Lincoln memorials and a military “missing man” flyover by 21 F-15E Strike Eagles at the burial in Grand Rapids.

The modern presidency, Cooke observes, smacks more of Caesar than of Coolidge. Here, as elsewhere, we could profit from Silent Cal’s example. “Coolidge’s will,” Carlson notes, “was just twenty-three words long, and his funeral ceremony lasted a mere five minutes.” In death, as in life, he was not a nuisance. 

The most popular piece of legislation in the House of Representatives—with 329 cosponsors—would phase out and eliminate the per-country limits for employment-based green cards, while doubling the limits for family-based immigrants. These per-country limits discriminate against nationals of countries with high demand for green cards. For employment-based immigrants, immigrants from India receiving green cards in 2018 waited a decade, Chinese immigrants waited 3 years, while everyone else waited less than a year.

It is fundamentally unfair to make equally qualified employees of U.S. businesses wait ten times as long based on their birthplace. Rather than selecting employees solely on who has the best resume, employers now also have to consider who has the right home country. Moreover, the wait times distort the market and keep immigrants with more experience and higher wage offers from receiving green cards. My analysis earlier this year showed that the per-country limits artificially suppress the average wage offer for most employer-sponsored immigrants by $11,592.

In August, however, Director of U.S. Citizenship and Immigration Services Francis Cissna who runs the legal immigration bureaucracy for the Trump administration appeared to criticize the change for undermining the “diversity” of immigrants. “It would indeed ameliorate the situation of Indian nationals,” he said. “But it would also have other effects on the diversity or flow more generally – and national representation amongst the employment-based immigration pool.”

“Diversity” is, indeed, the main argument for the country limits. But even assuming that the government has a legitimate interest in promoting diversity, is the argument even valid? Of course, the per-country limits result in diversity of, as Cissna put it, “national representation.” But using “nations” is a poor proxy for individual diversity. Compare immigrants from the European Union and Indians in the EB-2 green card lines for employees of U.S. businesses with master’s degrees, the line where nearly 70 percent of the employer-sponsored Indians are waiting.

Table: Comparison of India and European EB-2 Immigration

  India European Union Nations

1

28

Population

1,324,171,354

509,678,144

EB-2 Country Cap(s)

2,802

78,456

EB-2 Actual Issuances

2,879

5,239

Percent of Cap Used

100%

7%

Wait for a Green Card

10 Years

0 Years

Backlog of Applicants

433,368

0

Sources: Annual Report of the Visa Office; Visa Bulletin

The European Union has a collective country EB-2 quota 28 times higher than the quota for India because it is made up of 28 individual nations. It ends up using just 7 percent of that quota, but this is still almost twice as many green cards as all of India in the EB-2 category. This disparity exists even though the European Union has only 40 percent as many people as India. This seems unfair, but we’re told that this is alright because the EU—composed of 28 countries—is much more diverse than India.

Yet India has virtually the same number of official languages as the EU (22 v. 24). It has at least six major religions—Hinduism, Islam, Christianity, Sikhism, Buddhism, and Jainism—while the EU only has three—Christianity, Judaism, and Islam. Indian immigrants in America reflect this religious diversity as well: only half are Hindu, while the rest are Muslims, Sikhs, Jains, Christians, or others. The number of ethnic groups in each location is difficult to pin down, but India and the EU appear to have similar levels of ethnic diversity. Wikipedia lists 22 Indo-Aryan peoples, rivalling the roughly 28 nationalities in the EU. India is, of course, a geographically diverse area as well.

The fact is that nationality is not a very good approximation of individual diversity. On this point, Director Cissna’s statements were not strictly false, but they are misleading. Even if we grant that the EU is more diverse, is it so much more so that it justifies giving Indians 4 percent as many green cards? The only important legal difference is that India is considered a single state, while the EU, though it has a governing body, is still considered 28 different states, so it receives 28 times as many potential green card slots.

Of course, I find the entire idea that the government should attempt to micromanage the religious, linguistic, ethnic, or racial diversity of the United States ridiculous. The government has no legitimate interest in trying to keep out immigrants on these grounds or making them wait longer because of them. If it were proposed to discriminate directly on these grounds, that would be clear to anyone, but only because we disguise the discrimination as diversity in “national representation,” people excuse it.

Diversity should occur naturally as Americans—acting as family members, employers, or consumers—freely interact with people around the world. The government should not tip the scales to make the country more diverse or less diverse than it would otherwise be. In any case, employer-sponsored green cards are supposed to serve economic goals, not social engineering.

We know that the country caps, which started in 1924, did grow out of the Chinese Exclusion Act of 1882 and the Asiatic Bar Zone of 1917, which were explicitly efforts at racial engineering. Even when Congress reformed the country limits in 1965 to make them equal across countries, supporters of the legislation reassured  skeptics that America would not be flooded “hordes of Africans and Asians.” The reason Congress didn’t simply get rid of the caps was explicitly to keep down Asian and African immigration. The arguments have changed, but the end result is the same, and this type of government intervention is as inappropriate now as it was then.

In his comments, Director Cissna also recognized some of the problems that long waits can create, as employees are stuck with their employers and can be taken advantage of, and that the wait times are unfair toward Indians. But he’s wrong to emphasize the loss in diversity. Indians are a very diverse group themselves, and even if they weren’t, it is none of the government’s business anyway.

Ryan Bourne and I proposed that America adopt a Canadian-British innovation to encourage more personal savings. Those nations created accounts that are like supercharged Roth IRAs, and which have revolutionized savings for families at all income levels.

Republicans in Congress adopted the idea and included USAs in their Tax Reform 2.0 package, which passed the House in September. Individuals would deposit after-tax funds in the accounts, and then the earnings would grow tax-free and could be withdrawn at any time for any reason with no taxes or penalties. USAs would allow Americans to save without the restrictions and complexity of other vehicles.

The Heritage Foundation has released an excellent new analysis of USAs by Adam Michel. Michel discusses how USAs would boost personal savings, simplify taxes, and help lower-income families. He discusses the success of USA-style accounts in Canada and Britain, and he also notes that South Africa has introduced the accounts.   

Michel concludes that USAs would “help families build their own financial security through a single, simple, and flexible account.” Family financial security should be a bipartisan goal, and so USAs could be something that the parties work on together next year in a split Congress.

More reading on USAs:

https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb-77-update-2.pdf

https://www.cato.org/blog/universal-savings-accounts-can-fix-401k-leakage

https://www.cato.org/blog/universal-savings-accounts-usas-introduced

http://thefederalist.com/2015/05/11/a-tax-reform-we-can-all-support/

https://www.cato.org/blog/universal-savings-accounts-usas

Ilya Somin offers a typically thoughtful case for why a second Brexit referendum would not be a betrayal of the 2016 result. His argument, as I read it, is this: Theresa May’s likely defeat on her dreadful proposed Withdrawal Agreement grants an opportunity to reassess the wisdom of leaving the EU. Given a referendum was the means of making the decision to leave, a referendum is a perfectly legitimate mechanism to test whether the public still wants to. Ergo, deciding to ultimately Remain in a second referendum would not betray the result of the first vote.

I disagree.

A second referendum so soon would violate the U.K.’s convention of having one-off constitutional referendums, the results of which are respected for a generation. The U.K. has had major referendums in the past on remaining within the European Economic Community (1975), changing the general election voting system (2011), deciding whether Northern Ireland should join the Republic of Ireland (1973), and Scottish Independence (2014). The results of all these constitutional decisions have been implemented without discussion of the need to check again whether people really meant to vote as they did. In the case of the EU, the gap between the EEC vote and 2016 was 41 years.

That is why, in the government leaflet that was sent to all households during the referendum campaign urging people to vote remain, the government promised to implement the result. It told the public “This is your decision. The Government will implement what you decide.” The implication was clear: the vote would be respected and delivered upon. And the result was clear: people wanted to leave the EU. Reassessing now would be an explicit breach of that promise.

For Brexit has not been delivered. We are still in the Article 50 process, and, as it stands, the U.K. will indeed leave on March 29th 2019, with or without a deal (unless Parliament intervenes). One cannot possible say “we tried Brexit and decided it wasn’t for us” when you haven’t even left. So if the second referendum did end up with a vote to Remain, and that was upheld, it would send a clear message to the public: only results that go a certain way are respected. Such a situation would fundamentally and irrevocably undermine faith in Britain’s democratic processes.

There’s another point. Referenda are relatively rare in Britain, but they usually arise because of an overwhelming public appetite or mandate for them, being rubber-stamped in some local or national election manifesto. No such offerings were made by either major party at the last election.

Polling furthermore suggests the public opposes a second referendum too, as do the leaders of both major political parties. Far from a so-called “People’s Vote” (as if the last vote was for llamas or something) it is the unreconciled Remainer MPs in Parliament who are pushing for a re-run. A likely reaction to a ballot forced on an unwilling public would therefore be mass boycotts and questionable legitimacy.

Indeed, it is difficult to think of what more the British public could do to show they really mean business on leaving the EU. UKIP and an increasingly Eurosceptic Conservative party won over 50 percent of the vote in a proportional system in the 2014 European elections. A Conservative party promising a referendum won an outright majority in 2015. Both the Conservative and Labour parties promised to respect the result and leave the EU’s institutions in their 2017 manifesto. The one party that pushed to reverse the result, the Liberal Democrats, did pathetically in the 2017 election.

I understand that these results were not what many wanted - especially those who see Brexit as a blow to liberty. It is peculiar to me having lived in the EU to hear it talked about as if it some pinnacle of libertarianism that no sovereign state could better. But in judging Brexit by the near-term loss of free movement or the problems associated in the short-term with no deal, some libertarians make a fundamental category error: confusing a constitutional decision with a policy bundle.

The referendum question did not ask what the trade relationship with the EU should be, or what immigration policy might be after Brexit, or whether the UK wanted a withdrawal deal or not. It was a constitutional instruction that the U.K. wanted to leave the EU’s institutions. All that other stuff is ordinary policy decision-making within the domain of a sovereign polity, and Britain will as pro- or anti-liberty as its people and politicians decide. 

But the referendum was about self-determination, and which government entities create the laws by which people are governed. To reject it or run it again would be like requesting whether the U.S. should rejoin the British empire every time a President adopts a set of policies those in Congress do not like.

Of course, at some stage the UK might want to revisit its constitutional decision. Its Parliamentarians may even agree with Ilya on the desirability of another vote before Brexit has happened. But that does not negate the fact that ignoring the first vote through not delivering on it (rowing back on a promise to do so), while defying conventions on the frequency and process by which referendums are delivered, would itself represent a betrayal of the democratic mandate.ᐧ

We learned last week that the 2017 drug overdose numbers reported by the US Centers for Disease Control and Prevention clearly show most opioid-related deaths are due to illicit fentanyl and heroin, while deaths due to prescription opioids have stabilized, continuing a steady trend for the past several years. I’ve encouraged using the term “Fentanyl Crisis” rather than “Opioid Crisis” to describe the situation, because it more accurately points to its cause—nonmedical users accessing drugs in the dangerous black market fueled by drug prohibition—hoping this will redirect attention and lead to reforms that are more likely to succeed. But the media and policymakers remain unshakably committed to the idea that the overdose crisis is the product of greedy pharmaceutical companies manipulating gullible and poorly-trained doctors into over-prescribing opioids for patients in pain and ensnaring them in the nightmare of addiction.

As a result, most of the focus has been on pressing health care practitioners to decrease their prescribing, imposing guidelines and ceilings on daily dosages that may be prescribed, and creating surveillance boards to enforce these parameters. These guidelines are not evidence-based, as Food and Drug Administration Commissioner Scott Gottlieb seems to realize, and have led to the abrupt tapering of chronic pain patients off of their medication, making many suffer desperately. An open letter by distinguished pain management experts appeared last week in the journal Pain Medicine criticizing current policies for lacking a basis in scientific evidence and generating a “large-scale humanitarian issue.” 

Current policy has brought high-dose prescriptions down 41 percent between 2010 and 2016, another 16.1 percent in 2017, and another 12 percent this year. Yet overdose deaths continue to mount year after year, up another 9.6 percent in 2017.

One might expect the obvious prevalence of heroin and illicit fentanyl among overdose deaths would make policymakers reconsider the relationship between opioid prescribing, nonmedical use, and overdose deaths. The data certainly support viewing the overdose crisis as an unintended consequence of drug prohibition: nonmedical users preferred to use diverted prescription opioids and, as supplies became tougher to come by in recent years, the efficient black market responded by filling the void with cheaper and more dangerous heroin and fentanyl.

Yet many defenders of the status quo believe the population of nonmedical users mostly derives from patients who were inappropriately prescribed opioids for a painful condition, e.g., a high school athlete prescribed opioids for a broken leg who becomes transformed into a drug addict. If that is the case, then reducing opioid prescribing in conjunction with better drug interdiction and expansion of drug rehab facilities should gradually eradicate the problem.  But the data do not support this. Undoubtedly, some patients, once exposed to an opioid for the treatment of a painful condition, enjoy the euphoria and “buzz,” and long to have that experience again. When presented with an opportunity to re-experience that drug nonmedically say, at a party, they happily indulge. But that is an exception, not the typical case.

The National Survey on Drug Use and Health has repeatedly found that less that 25 percent of nonmedical users of prescription opioids obtain their opioids from a doctor. Three-quarters get them from a friend, a relative, or a dealer. And a study of more than 27,000 OxyContin addicts entering rehab between 2004 and 2008 found 78 percent said the drug was never prescribed for them for any medical reason, 86 percent took the pills to get “high” or get a “buzz”, and 78 percent had a history of prior treatment for substance abuse disorder. 

But if that isn’t enough to create doubt among those who still adhere to the theory that the population of nonmedical users is largely made up of former patients, then let’s return to the National Survey on Drug Use and Health. Page 7 of the report examines “past month nonmedical use of pain relievers among adults aged 12 or older” and finds that rate essentially flat from the years 2002 to 2014. Page 26 of the same survey reports on “pain reliever use disorder in the past year among adults aged 12 or older” from 2002 to 2014 and shows that rate to be flat as well over that time period. (For reasons that are unclear, the NSDUH stops reporting on those data points in subsequent years.) Meanwhile, the volume of opioids prescribed between 1999 and 2015 tripled. Tripling the number of opioids prescribed did not appear to affect the rate of nonmedical use or prescription opioid abuse disorder.

So why have drug overdose deaths shot up so much in recent years?

As a study from the University of Pittsburgh Medical Center examining CDC data going back to the 1970s recently revealed, “Death rates from drug overdoses in the U.S. have been on an exponential growth curve that began at least 15 years before the mid-1990s surge in opioid prescribing, suggesting that overdose death rates may continue along this same historical growth trajectory for years to come.” The study’s senior author went on to say:

The current epidemic of overdose deaths due to prescription opioids, heroin and fentanyl appears to be the most recent manifestation of a more fundamental, longer-term process…understanding the forces holding these multiple individual drug epidemics together in a tight upward exponential trajectory will be important in revealing the root causes of the epidemic, and this understanding could be crucial to prevention and intervention strategies.

The study’s lead author, Hawre Jalal, MD, Ph.D said:

There is no regular or predictable pattern to the overdose rates for any of these drugs. Cocaine overdose death rates curved down and up and down and back up over the past 20 years. Methadone deaths have been on a downturn since the mid-2000s. Prescription opioids have been on a fairly steady, steep climb. Heroin deaths shot up in 2010, followed in 2013 by synthetic opioids, such as fentanyl. Methamphetamine appears to be on the verge of its own dramatic climb. Nonetheless, when we plot the annual sum of all drug overdoses, we get a remarkably smooth, inexorable exponential curve.

An NBC News reporter summed up the study by stating: “It [the overdose crisis] started before the availability of synthetic opioids, and may have only a little to do with the prescribing habits of doctors or the pushy habits of drugmakers the team at the University of Pittsburgh found.”

And a 2017 Washington University study found that 33.3 percent of heroin addicts entering rehab in 2015 initiated nonmedical drug use with heroin, as opposed to 8.7 percent in 2005.

More and more people have been using licit and illicit drugs nonmedically since the late 1970s. Some may be self-medicating in response to anxiety, depression, alienation, despair. And people are taking greater risks with their drug choices. 

Policymakers and the media like simple explanations and solutions for complex problems, and the opioid overprescribing narrative fits the bill. But as H.L. Mencken said, “For every complex problem there is an answer that is clear, simple, and wrong.”

The root causes of the present-day overdose crisis are decades-long psychosocial/cultural trends intersecting with the lucrative opportunities offered by drug prohibition. Ending drug prohibition will not curb the growing tendency for people to use drugs nonmedically. But it will reduce much of the harm that results.

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