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The Environmental Working Group (EWG) has released new data reaffirming the scandal that is federal farm policy. The government pumps out billions of dollars a year in subsidies to farm businesses, and the giveaways mainly benefit the richest farmers.

The EWG found that, “Between 1995 and 2016, the top 10 percent received 77 percent of all ‘covered commodity’ subsidies … The top 1 percent received 26 percent of all subsidies, or $1.7 million per recipient.”

The top subsidy recipient was Deline Farms Partnership, which received more than $4 million in 2016. EWG notes that the median household income in Charleston, Mo., where Deline Farms is based, is just $27,000.

Farm subsidies are not only reverse Robin Hood policies, they also always seem to cost more than Congress promises. EWG notes, “the projected cost to taxpayers of farm subsidy programs from 2016 to 2018 is roughly $7.5 billion more than the CBO predicted when the current farm bill was enacted in 2014.”

What’s the solution? Bipartisan spending cuts. EWG: “Sens. Jeff Flake, R-Ariz., and Jeanne Shaheen, D-N.H., and Reps. Jim Sensenbrenner, R-Wisc., and Ron Kind, D-Wisc., have proposed legislation to cap all farm subsidies, subject all farm subsidies to a means test, and require the USDA to disclose the names of all farm subsidy recipients.”

For a discussion of the history and economics of federal farm subsidies, see this DownsizingGovernment study.

In their tax plan released today, Republicans have abandoned their effort to cut the top individual income tax rate of 40 percent. That is unfortunate, because the highest tax rates do the most economic damage. Apparently, the GOP backtracked on that reform because of revenue concerns, and because of fear of “tax cuts for the rich” complaints from liberal critics. The critics will probably make similar complaints about the new plan.

Liberals always seem to want more taxes on the rich and more redistribution, no matter how much we already have. The United States already has the most “progressive” system of household taxes in the OECD. At least, that is what the OECD found in a 2008 study, Chapter 4. Among the 24 countries they examined, they found that “Taxation is most progressively distributed in the United States.” That is probably still true today.

The table below is a compressed version of one from the OECD report. The column on the left shows the percent of taxes paid by the highest-earning 10 percent of households. The OECD includes individual income taxes and employee social security taxes. At 45 percent, the top 10 percent in the United States pay the highest tax share of any OECD country.

Partly, that is because the top 10 percent of Americans earn a large share of the income, as shown in the second column. But, it is also because our government nails high earners with high rates, which is what the third column reveals. The third column is the ratio of the first and second columns, and is one measure of how “progressive” the tax system is. A ratio of “1.00” would be proportionality, where the top 10 percent of earners pay 10 percent of the taxes, which is the case in Sweden.

The U.S. has the highest third-column ratio at 1.35, which indicates substantially more progressivity than the OECD average of 1.11. “Progressivity” sounds like a nice thing, but it means a system than penalizes people more the harder they work, and it means a system that is unfair to the most productive people in the economy.

Note that the OECD data is a decade old, but the income tax share paid by the top 10 percent is as high as ever in the United States, as shown here. Further note that the top U.S. individual income tax rate is substantially higher than the average of a group of 80 countries, as shown here.

The Cato 2017 Free Speech and Tolerance Survey finds nearly two-thirds (61%) of Clinton voters agree that it’s “hard” to be friends with people who voted for Donald Trump, while 38% disagree. However, Trump voters don’t feel a similar animus toward Clinton voters. Instead, a majority (64%) of Trump voters do not think that it’s hard to be friends with Clinton voters while 34% believe it is difficult.

Full survey results and report found here.

 

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The Cato Institute 2017 Free Speech and Tolerance Survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online August 15-23, 2017 from a national sample of 2,300 Americans 18 years of age and older. The margin of error for the survey is +/- 3.00 percentage points at the 95% level of confidence. 

Last month, Secretary of Defense James Mattis urged Congress to allow the Pentagon to reduce its excess overhead. Mattis has requested this authority before – as have at least four of his predecessors (Carter, Panetta, Hagel and Gates) – but the latest request accompanies a new Pentagon report that assesses the military’s infrastructure needs based on a much larger force structure than the one it has today. Even if the military, and especially the Army, were to grow back to the levels seen when the United States was actively fighting wars in both Afghanistan and Iraq (2012), the DoD is carrying 19 percent excess capacity. Such waste clearly impacts military effectiveness. As Mattis explained in a letter accompanying the report, “every unnecessary facility we maintain requires us to cut capabilities elsewhere.”

Although the leading Democrat on the House Armed Services Committee, Adam Smith (D-WA), and a handful of other lawmakers, agree with Mattis’s assessment, and would allow the Pentagon to cut such obviously wasteful spending, many others in Congress remain opposed to a new round of base closures. Kay Granger (R-TX), chairwoman of the House Appropriations Subcommittee on Defense said in May that she had “never seen [BRAC] save much money.” Sen. Jim Inhofe (R-OK) called plans for base closure “disappointing” and “dangerous.” “Clearly, base closure rounds,” Inhofe wrote in September, “cost the American taxpayers an exorbitant amount of money upfront and take years to recoup the initial investment.”

This is incorrect. The closure of hundreds of unnecessary military bases in five successive BRAC rounds have saved American taxpayers billions of dollars. Even the much-maligned fifth and final BRAC round, initiated in 2005, is expected to deliver net savings in 2018. Secretary Mattis explained in testimony before the Senate Armed Services Committee in June that a “properly focused base closure effort” could generate $2 billion or more annually.

But we shouldn’t assess the benefits of base closures solely on the basis of possible savings to the Department of Defense; that amounts to looking through the wrong end of the telescope. Although BRAC does generate real savings, the greater economic benefits accrue to communities near affected bases when they put underutilized facilities to more productive uses. In that sense, military bases aren’t closed, they’re opened.

I visited such a place on Wednesday: the former Glenview Naval Air Station, about 20 miles northwest of Chicago. During World War II, the Navy trained pilots to land on aircraft carriers, in this case two converted passenger steamers on Lake Michigan. The Navy didn’t have actual aircraft carriers to spare. More than 17,000 naval aviators underwent training at Glenview, including George H.W. Bush.

But the naval air station was included in the 1993 BRAC list, and Glenview took charge of clearing some 1100 acres, funded infrastructure improvements, and subdivided and sold parcels to private developers. About 400 acres were preserved as open space and parkland.

To the untrained eye, few would realize that there was ever a naval base here. I’ve been aware of Glenview for years, even though I had never visited before. I knew what to look for. The street names betray the area’s storied past. Independence and Constitution Avenues are pretty common, and one even encounters the occasional Patriot Boulevard. But one doesn’t often find Nimitz Drive, Kitty Hawk Lane, or Admiral Court in a typical American subdivision. The beautiful homes, many with three-car garages, and backing to golf courses and open space, command top dollar on the real estate market. A review of a few of the listings for the houses with For Sale signs on their front lawns found asking prices between $760,000 and $875,000. Phoebe Co, a realtor with Berkshire Hathaway, explained that condos in the area go for as low as $300,000, but some of the newer townhomes sell for $800,000 or more. Single family homes selling for more than $1 million are not atypical.   

Glenview is a coveted location not merely for its pleasant neighborhoods, and ample green space with bike and walking paths. It is also in close proximity to the headquarters of a number of Fortune 500 companies (we drove past Allstate’s sprawling campus on the way back to O’Hare), and an easy commute to downtown Chicago – about 40 minutes by train during rush hour.

The centerpiece of Glenview’s redevelopment of the former base property is The Glen Town Center, which includes retail shops at street level, and apartments above them for rent. These properties are ringed by attractive brick rowhomes. Here one finds the most visible remaining remnant of the former base: the air station’s control tower is now home to a Dick’s Sporting Goods, a Carter’s children clothing store, and a Von Maur department store. Three statues – a pilot, a sailor, and a ground crewman – stand around a fountain across the street. Painted plaques by the store fronts celebrate the many units that served at the base.

Jeanne Fields, assistant property manager for the Aloft apartments, explained that renters value the convenience of living so close to shopping and dining.

The Glen is “very unique,” Fields said. “You don’t usually have urban style living in the suburbs.” People who want city living without the city can get it at The Glen. And they’re willing to pay: rentals start at $1600 for a 1 bedroom, and go as high as $5000 for the largest two-bedroom unit. Fields reported that more than 90 percent of the units are currently occupied.

I strolled around The Glen with my colleague Harrison Moar, stopped in at the ubiquitous Starbucks, and ate lunch at the Yard House (allegedly home of the “World’s Largest Selection of Draft Beers”). The sprawling restaurant can accommodate 250 diners, and seemed surprisingly busy for a Tuesday at Noon. The many families with young children probably weren’t there for the 100+ beers on tap, but Harrison and I might have tried one. Alex at the front told us that this was a pretty typical lunchtime crowd, and that the restaurant was even busier later in the week, and on weekends.

Those who believe that base closures will devastate a local economy need to be aware of cases like Glenview (and Philadelphia, and San Francisco, and San Antonio, and Brunswick). To be sure, some places will take longer to recover (e.g. Brooklyn), and a few might never see economic activity comparable to when the nearby bases boomed (e.g. Limestone, Maine).

But those who would keep unnecessary military bases open in order to shield local communities from the possible negative economic impacts are saying, in effect, that their parochial concerns should outweigh the needs of the nation. And elected officials who doubt that their base will ever be successfully converted betray a curious lack of faith in their own constituents’ ability to make productive use of valuable real estate.

Student protesters at the College of William and Mary recently shut down a campus speaker from the ACLU invited (ironically) to speak about “Students and the First Amendment.” Students explained their shut down was in retaliation for the ACLU’s defense of white nationalists’ free speech rights in Charlottesville, Virginia where a white nationalist rally recently took place. What motivated the students?

The Black Lives Matter of William and Mary student group wrote on their Facebook page, where they live-streamed their shut down of the event: “We want to reaffirm our position of zero tolerance for white supremacy no matter what form it decides to masquerade in.” From these students’ perspective, the ACLU supporting someone’s right to say racist things was as bad as being a racist organization.

The Cato 2017 Free Speech and Tolerance Survey helps shed light on these students’ reasoning. First, nearly half (49%) of current college and graduate students believe that “supporting someone’s right to say racist things is as bad as holding racist views yourself.” This share rises to nearly two-thirds among African Americans (65%) and Latinos (61%) who agree. Far fewer white Americans (34%) share this view.

Next, a majority (55%) of current students and nearly three-fourths of African Americans (75%) and Latinos (72%) believe that hate speech is an act of violence. Conversely, 53% of whites believe it is not.

In addition, 62% of current students and 7 in 10 African Americans and Latinos believe that “our society can prohibit hate speech and still protect free speech.” White Americans are evenly divided on this question.

Taking these results together, it becomes clearer why the William and Mary students reacted as they did. From the students’ perspective, society is capable of protecting our First Amendment rights and curbing hate speech. If that’s true, why protect hate speech? Next, they believe hate speech is itself a violent act. Why would one want to enable violence against others? Consequently, many may conclude that anyone who tries to protect another’s right to engage in hate speech has nefarious intentions or is at least as bad as those espousing the hate. According to this view, protecting hate speech seems unnecessary and damaging. Thus, such a defense of free speech does not appear to be grounded in principle but rather a lack of empathy or even malice.

Understanding the assumptions behind the students’ logic allows for a more productive conversation. For instance, one might ask these students: is it really true that society can simultaneously ban hate speech and protect free speech? If so, how does society decide what speech is hateful and thus should be banned? Additional results from the survey demonstrate that Americans cannot agree what speech is hateful and offensive, which would make it difficult to regulate. This raises the next question: if society can’t agree what speech should be off limits, who gets to decide what speech is hateful and should be banned?

Answers to these questions are complicated and demonstrate why efforts to censor and regulate speech and expression are significantly problematic.

Sign up here to receive forthcoming Cato Institute survey reports 

The Cato Institute 2017 Free Speech and Tolerance Survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online August 15–23, 2017 from a national sample of 2,300 Americans 18 years of age and older. The margin of error for the survey is +/- 3.00 percentage points at the 95% level of confidence.

When it comes to individual taxes, key Republican legislators seem to think “reform” is mainly about limiting or eliminating certain itemized deductions, rather than about raising revenue in ways that do the least damage to the economy (by minimizing tax distortions and disincentives).

This emphasis on curbing itemized deductions is often compared with the Tax Reform Act of 1986 (TRA86), which supposedly “paid for” cutting the top tax rate from 50% to 28% by slashing several itemized deductions. In reality, however, most extra revenue from repealing itemized deductions after 1986 was devoted to raising the standard deduction, leaving total deductions unchanged. This is apparent in the graph below, which shows total deductions – both itemized and standard – as a percentage of Adjusted Gross Income. 

Deductions averaged 23.1% of AGI from 1976 to 1984, and deductions also averaged 23.1% of AGI from 1989 to 1995. In between, the reform merely shifted the timing of deductions. Deductions were pushed forward into 1985-86 to take advantage of those that were about to expire (e.g., the tax-deduction for credit card interest). Moving deductions forward held down deductions briefly in 1987–88 before they climbed back up again.

Note that total deductions were also unaffected by the fact that the maximum marginal benefit of itemized deductions (the amount saved per dollar) had fallen to 28–31% from 1988 to 1992. President Obama proposed to limit itemized deductions to 28% of the amount spent, but we already tried that in 1988–90, without success. Whatever the effect of the 1986 law eliminating several itemized deductions, plus the deep reduction in the marginal tax benefit, both were overwhelmed by the larger standard deduction.  

Standard deductions doubled – from $151 billion in 1986 to over $309 billion in 1989. The only reason that is called “reform” is that politicians only define itemized deductions as “loopholes,” although the standard deduction obviously has the same effect on taxable income. Tax exemption and tax credits are far more valuable than deductions, yet (like the standard deduction) are commonly not described as “loopholes” as a matter of semantic convention (or confusion).   

If the standard deduction soon rises to $24,000 per couple, as the GOP proposes, even couples with a $100,000 income would automatically have higher than average deductions.

The graph also shows that the ratio of deductions to income is clearly cyclical – rising in recessions like 1975 and 2009 because income fell more than deductions, then falling during the 1997–2000 stock boom as incomes (including capital gains and stock options) grew faster than deductions.  

Reynolds’ Law of Taxes says the individual income tax will always hover around 8% of GDP, give or take one percentage point, regardless whether the top tax rate is 28%, 39.6%, 70% or 92%. Now, let’s add Reynolds’ Law of Deductions: Deductions will always hover around 23% of AGI, give or take one percentage point, regardless of whether itemized deductions are expanded, limited, or repealed.

Laws to limit itemized deductions, unlike booms and busts, have never had a noticeable lasting impact, largely because of Congressional fondness for raising standard deductions (and refundable tax credits, a super-loophole not counted here).

The Bush 41 Pease limitation on deductions was an anti-affluence political stunt making little noticeable difference. Revived in 2013, the Pease limits reduce the value of a taxpayer’s itemized deductions by 3% for every dollar of taxable income above $313,800 on a joint return. This adds about a percentage point to the top two marginal rates (and so does the PEP phase-out of personal exemptions). The Pease limits first began to phase-out itemized deductions of “the rich” in 1991, yet total deductions rose to 23.4–23.6% of AGI in 1991–93. The Pease phase-out was reinstated in 2013, yet total deductions remained the same as in 2012. Itemized deductions went down by $50.1 billion in 2013 and standard deductions went up $51.2 billion.

Doubling the standard deduction to $24,000 per couple appeared to be the primary revenue-losing objective of the GOP Big Six plan (losing $890 billion over 10 years by one estimate).  Meanwhile, there have been reports of backpaddling on trial-balloons about ending property tax deductions and curbing contributions to 401(k) plans.  It is not difficult to imagine the end result being that any revenue gained from limiting deductions barely offsets revenue lost by expanding the standard deduction, leaving deductions still stuck around 22–23% of AGI.

That would be like 1986 but with one big difference. In 1986, the top tax rate was cut by 22 percentage points, leaving a nearly-flat 15–28% rate structure. This year, by contrast, high-income taxpayers are not giving up big deductions and personal exemptions for a lower-rate, since the top rate is apparently to stay at 39.6%. Itemized deductions go down, personal exemptions completely vanish, yet targeted tax credits get larger (e.g., for children under age 17) and the standard deduction goes up. Tax-deferred contributions to retirement savings plans may be deeply slashed.  

By rejiggering exemptions, deductions, and credits with essentially no change in the highest, most damaging tax rates, the individual side of the Republican “tax cut” is shaping up as a sizable tax increase for well-educated two-earner couples with college-age kids living in high-cost metropolitan areas, among others.

A study that examined the effects body worn cameras (BWCs) have on police officers in Washington, D.C. has been making the rounds recently. The study’s findings have reinvigorated discussions about BWCs, not least because of its counterintuitive finding that BWCs did not have a statistically significant effect on officers’ use of force or civilian complaints against the police. This finding is worth considering, but the study shouldn’t deter local officials from mandating police BWCs. Even if they don’t change police officers’ behavior, BWCs can, with the right policies in place, provide a much-needed increase in police accountability and transparency.

During the study, officers with the Metropolitan Police Department of the District of Columbia were randomly assigned BWCs. Researchers with The Lab @DC, a study team in the D.C. mayor’s office, and Yale University examined use of force incidents and complaints against police officers.

The study did not seek to measure the impact of BWCs’ other benefits such as accountability, transparency, and protection for officers, but rather narrowly measured their impact. In addition to examining how often police officers use force and are the subject of complaints, researchers also studied police discretion and the judicial outcomes related to police charges.

You might expect that officers improved their behavior when they were wearing BWCs. After all, if you know that you’re being filmed you have plenty of incentives to be on your best behavior, whether you’re an officer or a resident. And yet, the recent D.C. body camera study showed that BWCs had no statistically significant effect on officers’ behavior.

This may strike many as odd. But we shouldn’t forget the limitations that restrict researchers looking into the effects of BWCs. Researchers cannot, for instance, insist that when an officer wearing a BWC calls for backup that only officers also wearing BWCs respond. In a situation where two officers are interacting with a resident and only one of the officers is wearing a BWC there is a good chance that the BWC will influence the behavior of the officer not wearing the BWC.

The researchers do not think, however, that this spillover effect affected the results of the experiment. The study notes that there was no statistically significant difference between officer behavior pre- and post-BWC deployment, as the two graphs from the study below show:

If officers not wearing BWCs improved their behavior in the presence of other officers wearing BWCs, we’d expect to see a reduction in use of force and complaints filed after the study began. However, Figure 4 and Figure 5 above show no significant difference.

Thus, even given the limitations of the study design, it appears that BWCs do not at a mass scale reduce the amount of force police officers use or the number of complaints officers receive.

The Washington, D.C. study raises an obvious question: if BWCs have no statistically significant effect on officers’ use of force or complaints, should officers be wearing them?

The answer to that question is “yes.”

First, even if body cameras do not reduce the frequency with which police officers use force, they nonetheless help provide accountability for the minority of officers who engage in serious misconduct, such as the Baltimore police officers caught planting drugs and “re-creating” a crime scene.

Second, BWCs are a tool for increased transparency in American law enforcement. Residents deserve to know how police officers behave, whether their behavior is changed by BWCs or not. At a time when cell phones are ubiquitous and BWCs are a regular feature of police misconduct debates, residents will be increasingly skeptical when a contentious fatal police encounter is not filmed. Even if a bird’s eye view of a police department reveals that BWCs don’t have a statistically significantly effect on police officers’ use of force, that doesn’t mean that same department won’t one day hire a bad police officer who will engage in illegal and deadly misconduct.

Third, BWCs can also protect police officers by  minimizing time spent on baseless complaints against officers by providing clear exculpatory evidence, as was the case when a young woman falsely accused an Albuquerque Police Department officer of sexual assault during a 2014 DWI stop.  

All of these BWCs benefits can only be realized with the appropriate policies in place. Without policies that protect privacy and allow residents to view body camera footage of public interest, body cameras could be used as a surveillance tool.

The authors of the Washington, D.C. study state that their results “suggest that we should recalibrate our expectations of BWCs’ ability to induce large-scale behavioral changes in policing.” But even if BWCs don’t prompt significant changes in police officers’ behavior they are worth mandating anyway. A police department with BWCs governed by the right policies will increase transparency and accountability—a welcome result even if it’s not accompanied by better-behaved police officers.

Sayfullo Saipov, an Uzbek national, killed at least eight people with a truck in New York yesterday. Uzbekistan is a central Asian country north of Afghanistan of almost 30 million people88 percent of whom are Muslim. President Trump did not include Uzbeks in his travel ban released last month, but he is already sounding bellicose, writing that he will not allow ISIS to “enter our country” and that he “ordered Homeland Security to step up our already Extreme Vetting Program,” a phrase which he sometimes uses as shorthand for the travel ban.

But adding Uzbekistan to the travel ban would be unwise for a president whose administration has guided him toward adopting a very specific strategy to defend the ban: that the governments of the banned nationalities fail to meet certain criteria relating to identity management, information sharing, and terrorist activity in their country. As I explained in a post last month, the president did not apply the criteria in any objective way, banning some countries that meet the criteria while not banning many other countries that fail them. But adding yet another country that he himself said just a month ago meets the criteria would further expose the travel ban criteria as the sham that they are.

Uzbekistan does not fail the travel ban criteria that the Department of Homeland Security (DHS) created to justify the ban. Here are the nine travel ban criteria grouped into the three DHS categories:

Category 1: Identity management

1) Use of electronic passports embedded with data: Uzbekistan does use an electronic passport. But four travel ban countries—Venezuela, Somalia, Libya, and Iran—also use an e-passport. The president banned Somalia despite its meeting this requirement because some countries fail to recognize Somalia’s electronic data chip. But that’s not the case for Iran’s passport, which meets the International Civil Aviation Organization standards. Uzbekistan’s passport does as well, and it “plans to convert all [older] passports to the new biometric version by July 1, 2018.”

2) Reports lost and stolen passports: INTERPOL reports that only 174 of 190 countries share lost or stolen passport information with its database (on which the United States relies). Unfortunately, it doesn’t report country-by-country compliance. However, INTERPOL praised Uzbekistan this month for cooperating with it on identifying fraudulent and stolen passports. That said, INTERPOL has also called Iranian cooperation on passport theft and abuse “very strong,” and Iranians are banned.

3) Makes available upon request identity-related information: This criterion is vague, but Uzbekistan cooperates with INTERPOL on passport information. According to the U.S. Department of State, Uzbekistan “has actively participated in the C5+1 regional framework of cooperation between the United States and the Central Asian countries (Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan), which includes a program related to countering violent extremism (CVE).”

Category 2: National security information

4) Makes available terrorist and criminal information upon request: Uzbekistan does make available this information. The State Department reports: “Uzbek law enforcement maintains its own terrorist watchlist and contributed to INTERPOL databases.” Further, it reports, “Uzbekistan has worked with multilateral organizations such as the Organization for Security and Cooperation in Europe and the UN Office on Drugs and Crime on security issues.”

5) Provides identity document exemplars: There is no public information on this, but given the evidence on passport cooperation, it seems likely that Uzbekistan do provide documents.

6) Allows U.S. government’s receipt of information about passengers and crew traveling to the United States: Uzbekistan encourages this information sharing. The State Department writes, “state airline collects and disseminates advance passenger information. The U.S. Transportation Security Administration conducted several inspections of the Tashkent airport in 2016.” Compliance by other countries with sharing this information was in 2013 “close to 100 percent.”

Category 3: Risk indicators

7) Is a known or potential terrorist safe haven: According to the U.S. Department of State, Uzbekistan is neither a terrorist safe haven nor has it ever been a terrorist safe haven. Terrorist safe havens are defined by the inability or unwillingness of the country’s government to control its territory to prevent terrorist groups from having a safe space to form. This description does not apply to Uzbekistan, which goes to great lengths to prevent terrorist groups from having safe haven and does control its territory. Chad, North Korea, and Iran are not terrorist safe havens either, but are travel ban countries.

8) Is a participant in the Visa Waiver Program that meets all of its requirements: Uzbekistan is not a participant in the VWP, so this criterion likely does not apply to it. None of the other travel ban countries are participants in the VWP.

9) Regularly fails to receive its nationals subject to final orders of removal from the United States: As of May 2017, Uzbekistan did not regularly refuse to receive its nationals subject to final orders of removal, according to federal Immigration and Customs Enforcement. In September, the U.S. government sanctioned four countries for failure to receive its deportees, but Uzbekistan was not on that list either. Of course, of the travel ban countries, only Iran was on the list from May.

The president could always add additional criteria to try to justify including Uzbeks in the travel ban, but any additional criteria would result in the failure of even more countries—many of whom meet the DHS criteria and are allies of the United States. For example, if President Trump added a requirement that no nationals of the country in question have killed anyone in the United States in a terrorist attack, then at least a dozen other countries would have to be added to the travel ban list. Of course, none of the current travel ban countries have nationals that have committed deadly terrorist attacks in the United States since 1975.

Uzbekistan fails none of the requirements outlined by the Department of Homeland Security. If President Trump chooses to add them to the list, it would further expose the travel ban as an arbitrary exercise of the executive whim, not an objective list.

Early in his presidential tenure, Donald Trump tweeted that the national news media is “fake news” and that it is an enemy of the American people. Nearly two-thirds (64%) of Americans do not agree with President Trump that journalists today are an “enemy of the American people,” finds the Cato 2017 Free Speech and Tolerance Survey. Thirty-five percent (35%) side with the president.

However, nearly two-thirds (63%) of Republicans agree that journalists are an enemy of the American people. Such a charge is highly polarizing: 89% of Democrats and 61% of independents do not think journalists are the enemy.

52% of Democrats Say Media Is Doing a Good Job Holding Government Accountable

While Republicans stand out with their negative view of the media, Democrats have uniquely positive evaluations of it. A slim majority (52%) of Democrats say the national news media is doing a good or even an excellent job “holding government accountable.” In contrast, only 24% of independents and 16% of Republicans agree.

Full survey results and report found here.

 

Among all Americans, only a third (33%) agree the news media is doing its job holding government accountable. More than two-thirds (67%) say it is not.

The more a person identifies as liberal, the more likely they are to say the media is doing a good job. Among strong liberals, 59% say the national news media is doing a good or excellent job holding government accountable. In contrast, 87% of strong conservatives say it’s doing a poor or fair job.

Most Americans Perceive Media Bias

Why do Republicans lack confidence in the national news media while Democrats view it positively? Perhaps because most Americans perceive a liberal bias among most major news organizations.[1]

 

Fifty-two percent (52%) of respondents say that the New York Times allows a liberal bias to color its reporting. Fifty percent (50%) feel CNN also succumbs to a liberal media bias. Fifty-nine percent (59%) say that MSNBC also has a liberal bias. Of all the top news organizations included on the survey, only Fox News was perceived to have a conservative bias (56%).

Americans feel their local news stations and broadcast news channels do a better job than cable news in providing balanced reporting. A majority (54%) say their local news station is balanced, without a liberal or a conservative bias. A plurality (42%) also believe that CBS is balanced. Nevertheless, respondents were four times as likely to say CBS has a liberal bias than a conservative bias (40% vs. 10%), and almost twice as likely to say their local station has a liberal bias (23% vs. 14%).

Democrats Believe Media Is Balanced; Republicans See Liberal Bias

Majorities of Democrats believe most major news organizations are balanced in their reporting, including CBS (72%), CNN (55%), the New York Times (55%), as well as their local news station (67%). A plurality (44%) also believe the Wall Street Journal is balanced. The two exceptions are that a plurality (47%) believe MSNBC has a liberal bias (37% believe it’s unbiased) and a strong majority (71%) say Fox has a conservative bias.

Republicans, on the other hand, see things differently. Overwhelming majorities believe liberal bias colors reporting at the New York Times (80%), CNN (81%), CBS (73%), and MSNBC (80%). A plurality also feel the Wall Street Journal (48%) has a liberal tilt. Only when evaluating their local TV news station do most Republicans—but not a majority—perceive balanced reporting (42%). Similar to Democrats’ perceptions of MSNBC, a plurality of Republicans (44%) believe Fox News has a conservative bias; 41% believe it provides unbiased reporting.

The news outlets that Republicans find most objective are their local news station (42%), Fox (41%), and the Wall Street Journal (28%). The media organizations Democrats find most objective include CBS (72%), their local news station (67%), CNN (55%), and the New York Times (55%).

70% Say Government Should Not Be Able to Shut Down News Stories

Despite Democrats and Republicans’ different perceptions of news media, they agree that government should not shut down news stories—even if biased or inaccurate.

Strong majorities of Republicans (63%), independents (71%), and Democrats (76%) agree that “government should not be able to stop a news media outlet from publishing a story that government officials say is biased or inaccurate.”

Among all Americans, 70% say government should not shut down news stories regardless of whether officials think the story is inaccurate. A little more than a quarter (29%) think government should have the authority to stifle stories authorities say are inaccurate or biased.

Full survey results and report found here.

Sign up here to receive forthcoming Cato Institute survey reports

The Cato Institute 2017 Free Speech and Tolerance Survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online August 15–23, 2017 from a national sample of 2,300 Americans 18 years of age and older. The margin of error for the survey is +/- 3.00 percentage points at the 95% level of confidence.

[1] Percentages in this section have been calculated among Americans with an opinion of the news source. The following were not familiar with each of these news sources: CNN: 16%, Fox: 13%, MSNBC: 22%, CBS: 19%, Local TV News Station: 18%, New York Times: 24%, Wall Street Journal: 29%.

As Republicans press ahead with major tax reforms, politicians and pundits are debating the effects of tax cuts on economic growth. This 2012 study by the former Tax Foundation chief economist took a detailed look at the academic literature on the issue.

Here is what Will McBride found:

So what does the academic literature say about the empirical relationship between taxes and economic growth? While there are a variety of methods and data sources, the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions, and monetary policy.

In this review of the literature, I find twenty-six such studies going back to 1983, and all but three of those studies, and every study in the last fifteen years, find a negative effect of taxes on growth. Of those studies that distinguish between types of taxes, corporate income taxes are found to be most harmful, followed by personal income taxes, consumption taxes and property taxes.”

These results support the neo-classical view that income and wealth must first be produced and then consumed, meaning that taxes on the factors of production, i.e., capital and labor, are particularly disruptive of wealth creation. Corporate and shareholder taxes reduce the incentive to invest and to build capital. Less investment means fewer productive workers and correspondingly lower wages. Taxes on income and wages reduce the incentive to work. Progressive income taxes, where higher income is taxed at higher rates, reduce the returns to education, since high incomes are associated with high levels of education, and so reduce the incentive to build human capital. Progressive taxation also reduces investment, risk taking, and entrepreneurial activity since a disproportionately large share of these activities is done by high income earners.”

This review of empirical studies also establishes some standards by which a tax system may be judged. If we apply these standards to our national tax system, the U.S. has probably the most inefficient tax mix in the developed world. We have the highest corporate tax rate in the industrialized world. If it came down 10 points—still higher than most of our trading partners—it would add 1 to 2 points to GDP growth and likely not lose tax revenue, because the tax base would expand from in-flows of foreign capital as well increased domestic investment, hiring, and work effort.

McBride’s study, with a nice summary table, is here.

On Halloween, Uzbek-born Sayfullo Habibullaevic Saipov allegedly murdered eight people and injured 12 with a rented truck in New York City.  The details of the attack, the number of victims, and Saipov’s personal information could change over the next few days.  However, based on the information that we have so far, Saipov entered the United States in 2010 as a lawful permanent resident with a green card.  He obtained his green card through the Diversity Immigrant Visa Program, which awards 50,000 green cards annually to those who enter the running from select countries. 

Uzbekistan has not been a major source of terrorists.  From 1975 through the end of 2016, three terrorists born in Uzbekistan attempted attacks on U.S. soil.  They killed or injured zero people in their attempted or threatened attacks.  Ulugbek Kodirov was convicted in 2012 of threatening to assassinate President Obama after entering on a student visa.  Abdurasul Hasanovich Juraboev entered on a green card that he won in a diversity lottery and also threatened to kill President Obama.  Fazliddin Kurbanov entered as a refugee and was convicted of possessing an unregistered explosive device.  Threats to assassinate the president are farfetched, but we count assassinations of politicians as terrorism just as the Global Terrorism Database does. 

If the death toll from the New York attack doesn’t rise, a total of 3,037 people have been murdered on U.S. soil by 182 foreign-born terrorists from 1975 through October 31, 2017.  Of those 182 foreign-born terrorists, 63 initially entered with green cards.  Including Tuesday’s attack, those who entered on a green card killed 16 people, or about 0.53 percent of all people murdered in terror attacks on U.S. soil committed by a foreigner.  If the number of injuries stays at 12, terrorists who entered on green cards have injured about 203 people during this period in attacks.  

The annual chance of being murdered in a terror attack on U.S. soil committed by a foreign-born person stands at 1 in 3,808,094 per year from 1975 through October 31, 2017. 

Saipov’s alleged attack stands apart from other Uzbek terrorists in terms of its brutal effectiveness and the tragedy of so many innocent lives murdered.  The 50 foreign-born terrorists who murdered somebody in a terrorist attack on U.S. soil from 1975 through October 31, 2017, including the 9/11 attackers, killed an average of 61 people each.  Excluding the 9/11 hijackers and their victims, 54 people were murdered in attacks for an average of about 1.7 murders per attacker.  Tuesday’s vehicular attack killed more people than the 1993 World Trade Center bombing that used a 1,336 pound bomb

Vehicle attacks are not the norm in the United States where firearms are more readily available, but they are rising in frequency, as we saw in Charlottesville earlier this year.  ISIS recently encouraged its followers to use trucks in lone wolf terrorist attacks and Saipov allegedly left a note declaring allegiance to that wannabe-Caliphate. 

RAND Corporation terrorism expert Brian Michael Jenkins remarked that airplane hijackings were the norm for 1970s terrorist attacks while suicide bombers were the norm for the 1980s.  Today, vehicle attacks are increasingly common around the world.  Jenkins identified approximately 40 vehicle attacks around the world from 2000 through 2016 that resulted in 167 deaths, approximately four per attack.  That total also includes the terrorists who died carrying them out. 

Automobiles are ubiquitous in a modern society and our lives would be unrecognizable without them.  Vehicle barriers can defend against vehicular attacks in crowded areas, but they’d more commonly be used to prevent accidents.  Simply put, there are too many roads, sidewalks, pedestrians, and automobiles to make defenses against these types of terror attacks feasible or cost effective.  Furthermore, the foreign-born terrorist threat is difficult to predict, largely because there are so few of them who successfully attack U.S. soil. 

More details will unfold surrounding this terrible attack in coming days.    

 

If you have followed the tax debate, you know that the United States has one of the highest corporate tax rates in the world. Most other nations have slashed their rates to attract investment, while U.S. policymakers have been in denial about global tax competition until recently.

You may be less familiar with the cuts to top individual income tax rates around the world since the 1980s. Those reforms have been driven by international competition for skilled workers, and by growing recognition of the damage caused by penalizing the highly productive people who are top earners.

How much have top individual tax rates been cut? The Economic Freedom of the World report publishes tax rate data for more than 100 countries as far back as the 1970s, but with numerous data points missing. I found 80 countries that had data back to 1985, and below I chart the average top individual income tax rate for that group. For countries with subnational income taxation, the EFW report includes a range of rates reflecting the varying taxes in states and provinces. For the chart, I chose the highest subnational rates for those countries. For the United States, the U.S. rate for 2015 is the federal rate plus California.

The average top individual tax rate for 80 nations plunged from 60 percent in 1985 to 35 percent by 2010, and then edged up to 36 percent in 2015. The U.S. federal-state rate was slashed sharply in the 1980s, falling from 59 percent in 1985 to 42 percent in 1990.

Our top rate went back up in the 1990s, then down in the 2000s, then up again in recent years reaching 51 percent by 2015, as both the federal and California rates increased. Meanwhile, rates continued to fall around the world in the 1990s and 2000s until the tax-cutting trend tapered off in recent years.      

 

 

Note: The EFW dataset has 159 countries with individual income tax data for 2015. The overall average top rate was just 30 percent for those countries. For the subset of 80 countries, I took out countries with zero rates, such as Bahamas, and countries that did not have data for 1985.

There is no more powerful person in the federal legal system than the federal prosecutor. Charging decisions and plea bargains effectively remove judges and juries from decisionmaking in most cases, and electing to fight a prosecutor rather than take the plea bargain most often results in dramatically longer sentences. This is how our system operates, and even if all the prosecutors are acting lawfully, defendants are at a massive disadvantage.

But what if the prosecutor cheats a system that’s already rigged in his favor?

This is not a hypothetical question. The U.S. Department of Justice (DOJ) has proven itself incapable of holding prosecutors accountable for misconduct. Regardless of which party is in power, the DOJ has let prosecutors get away with inexcusable behavior that costs people their livelihoods, their reputations, and their freedom. Next week, we’re holding an event to look at several high-profile cases in which the DOJ ran roughshod over individual rights, violated legal obligations and ethical norms, and ultimately held no one to account for their misdeeds.

Join us Tuesday, November 7 at 4 p.m. for Prosecutor Fallibility and Accountability, featuring Rob Cary, author of Not Guilty: The Unlawful Prosecution of U.S. Senator Ted Stevens; Howard Root, author of Cardiac Arrest: Five Heart-Stopping Years as a CEO on the Feds’ Hit-List; and Michael J. Daugherty, author of The Devil Inside the Beltway: The Shocking Exposé of the U.S. Government’s Surveillance and Overreach into Cybersecurity, Medicine and Small Business. The event will be hosted by my colleague Clark Neily.

You can sign up for the event here. You can also stream it online at cato.org/live and join the conversation on Twitter with #CatoCJ

Last week, President Trump issued a new executive order (EO) that restarts the refugee system with new “enhanced” vetting procedures.  The new procedures will subject the follow-on family members of refugees to about the same level of vetting as the original refugee sponsors who have already been settled in the United States.  This extension of the current refugee vetting system will cover about 2,500 additional follow-on refugees per year.  The EO also forward-deploys specially trained Fraud Detection and National Security officers at refugee processing locations to help identify potential fraud, national security, and public safety issues earlier in the screening process.  Additional actions of the EO are enhanced questions to identify fraud and other inadmissible characteristics as well as upgrades to databases to detect potential fraud or changes in refugee information at different interview stages.  The EO also directs the Secretary of the Department of Homeland Security, in consultation with the Secretary of State and the Director of National Intelligence, to review and reform refugee vetting procedures on an annual basis. 

The EO justifies these new measures by stating that, “It is the policy of the United States to protect its people from terrorist attacks and other public-safety threats … Those procedures enhance our ability to detect foreign nationals who might commit, aid, or support acts of terrorism, or otherwise pose a threat to the national security or public safety of the United States, and they bolster our efforts to prevent such individuals from entering the country.”  

All in all, these new vetting procedures are modest additions to the already intensive refugee screening that occurs.  If these new enhanced screening procedures are supposed to be the “extreme vetting” that President Trump proposed then they show just how extreme and secure the refugee program already was.  Furthermore, they are unnecessary.

Terrorists by Refugee-Restricted Countries

The EO also places additional scrutiny on refugees from Egypt, Iran, Iraq, Libya, Mali, North Korea, Somalia, South Sudan, Sudan, Syria, and Yemen.  Those eleven nations represent supposed security threats identified on the Security Advisory Opinion (SAO) – a government list of nations established in the 1990s whose nationals are supposed to be more closely scrutinized for particular national security threats.  The government has updated and expanded the SAO criteria as well as the nations on the list multiple times since 9/11.    

The government may have an excellent rationale for designating nationals from these eleven countries as serious threats that require more refugee vetting but those reasons and the evidence supporting them are not available for the public to examine.  Publicly available information points to a small refugee threat from refugees from these nations that does not justify additional screening.  Since 1975, zero Americans have been murdered on U.S. soil in a terror attack committed by refugees from any of the eleven countries.    

In a departure from previous EOs, nationals from one of these countries have killed people on U.S. soil in terrorist attacks but none of the attackers have been refugees.  Four terrorists from Egypt did manage to kill a total of 162 people in attacks on U.S. soil (Table 1).  They were Mohammad Atta who participated in the 9/11 attacks, Hesham Mohamed Hadayet who murdered two in a shooting at LAX in 2002, and El Sayyid Nosair and Mahmud Abouhalima who both were involved in the 1993 World Trade Center bombing.  All four Egyptians entered on tourist visas.  Only six Iranians (four of them in the 1970s), six Sudanese (all six in 1993 or before), two Iraqis, two Somalis, and one Yemeni carried out attacks on U.S. soil or were convicted of doing so (Table 1).  The two Iraqis did enter as refugees although one might not be a terrorist and the other was arrested in a sting operation.  The rest entered on student visas, tourist visas, green cards, or under the visa waiver program as they had dual Canadian-Iranian citizenship.

Table 1

Murders and Number of Terrorists by Country of Origin, 1975-2015

Country Terrorists Murders Percent of All Terrorists Percent of All Murders in Terror Attacks Egypt

11

162

7.1%

5.4%

Iran

6

0

3.9%

0.0%

Iraq

2

0

1.3%

0.0%

Libya

0

0

0.0%

0.0%

Mali

0

0

0.0%

0.0%

North Korea

0

0

0.0%

0.0%

Somalia

2

0

1.3%

0.0%

South Sudan

0

0

0.0%

0.0%

Sudan

6

0

3.9%

0.0%

Syria

0

0

0.0%

0.0%

Yemen

1

0

0.6%

0.0%

All

28

162

18.2%

5.4%

John Mueller, ed., Terrorism Since 9/11: The American Cases; RAND Database of Worldwide Terrorism Incidents; National Consortium for the Study of Terrorism and Responses to Terrorism Global Terrorism Database; Center on National Security; Charles Kurzman, “Spreadsheet of Muslim-American Terrorism Cases from 9/11 through the End of 2015,” University of North Carolina–Chapel Hill; Department of Justice; Federal Bureau of Investigation; New America Foundation; Mother Jones; Senator Jeff Sessions; Various news sources; Court documents.

De Facto Restrictions on Muslim Refugees

From January 1, 2002 through October 20, 2017, a total of 921,760 refugees entered the United States.  A total of 338,831 of them, or 37 percent, came from the 11 countries that are the subject of the new restrictions.  However, 76 percent of all Muslim refugees who entered the United States during that time came from those 11 countries that will have new restrictions placed on them.  President Trump said on at least a dozen occasions that his proposed travel bans and restrictions were Muslim bans but his defenders always correctly pointed out that not all Muslim-majority countries made the list.  It looks like those nations that sent more than three-quarters of all Muslim refugees did make the list for extra scrutiny though.   

Crime by Country of Origin

The administration has broadened its justification for these EOs from just terrorist attacks to include “other public-safety threats.”  As far as we can tell, that specifically refers to crime rates.  One common way to measure the criminality of a particular population is that population’s incarceration rates relative to other groups.  Although not perfect, this is one of a handful of measures available given the low-quality of American crime data.  The incarceration rates for immigrants from the eleven countries on the new list are all below that of native-born Americans except for Somalis who are within the statistical margin of error (which means that Somalis and natives have about the same incarceration rate).  Syrian-born immigrants, the most feared in this debate over immigrant vetting, have the lowest incarceration rate of any national group (Figure 1).  The rate for all 11 countries is 0.37 percent, about one-fourth that of the native-born rate of 1.54 percent. 

 

Figure 1

Incarceration Rates by Country of Birth, Ages 18-54

 

Source: Author’s analysis of the 2015 1-year American Community Survey data. Special thanks to Michelangelo Landgrave for assembling these numbers.

Note: The numbers are too small to show for Libya, Mali, and North Korea.  South Sudan is not separated in the American Community Survey data.

 

The national security justifications for the choice of countries in the first, second, and third EOs rang hollow.  Those countries initially selected had not sent any deadly terrorists to the United States since 1975.  The government supposedly selected them based on a complex review of security and vetting vulnerabilities but the selection still makes no sense and is likely basic on executive whim.  Now, the government has widened its justification from terrorism and national security to the nebulous “public safety of the United States” – a justification that can only mean crime.  Just as the national security justification for additional vetting rang hollow, so does the “public-safety threat” justification. 

Conclusion

The enhanced vetting procedures for refugees are modest extensions of current vetting procedures.  Before President Trump took office, refugee vetting was already extreme and difficult to further enhance.  The eleven countries singled out for intensive new refugee scrutiny make little sense from a national security perspective and even less sense if the goal is to secure the public safety of Americans.  No refugee from any of those nations has murdered an American in a terrorist attack on U.S. soil and their incarceration rates, except for Somalis, are all well below those of native-born Americans. 

Two years ago at Yale, a controversy erupted over a series of emails about offensive Halloween costumes. A resident advisor and Yale lecturer pushed back against an email from college administrators advising students not to wear offensive Halloween costumes. The advisor emailed her students and expressed confidence in students’ capacity to discuss offensive Halloween costumes among themselves without administrators getting involved. Many students interpreted her email as an endorsement of offensive costumes, rather than of freedom of expression and the ability of people to discuss and resolve offense without oversight. What do Americans think?

The newly released Cato 2017 Free Speech and Tolerance Survey finds that nearly two-thirds (65%) of Americans agree that “college students should discuss offensive costumes among themselves without administrators getting involved.” A third (33%) say “college administrators have a responsibility to advise college students not to wear Halloween costumes that stereotype certain racial or ethnic groups at off-campus parties.”

Full survey results and report found here.

A significant racial divide emerges about how to handle offensive Halloween costumes. A majority (56%) of African Americans feel college administrators should intervene and advise students against offensive costumes. Conversely, a strong majority (71%) of white Americans and a majority of Latinos (56%) believe that college students should discuss offensive Halloween costumes among themselves without administrator intervention.

A majority (54%) of college and graduate students agree that students should discuss offensive costumes without intervention from school authorities. However, students (45%) are 12 points more supportive than Americans overall (33%) of administrators advising about offensive costumes.

You can learn more about public attitudes about free speech, campus speech, and tolerance of political expression from the full survey report found here.

Sign up here to receive forthcoming Cato Institute survey reports

The Cato Institute 2017 Free Speech and Tolerance Survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online August 15-23, 2017 from a national sample of 2,300 Americans 18 years of age and older. The margin of error for the survey is +/- 3.00 percentage points at the 95% level of confidence.

 

This primer is supposed to introduce readers to the workings of the present U.S. monetary system. So it’s only natural that it should take established monetary arrangements for granted, including an official, “fiat” dollar currency managed by the Federal Reserve System.

And while I haven’t hesitated to point out shortcomings in the Fed’s management of the dollar, and have even dared to suggest some ways in which that management might be improved upon, I haven’t questioned the fact that, whether it does so competently or not, the Fed is indeed ultimately “in charge” of the U.S. monetary system. That is, I’ve assumed, that the U.S. dollar is the only important domestic currency unit, and that the total quantity of dollar-denominated exchange media, the behavior of the general level of prices, U.S. dollar exchange rates, and the periodic flow of domestic dollar-denominated payments, remain under the discretionary control of the FOMC.

Monetary Policy, Broadly Understood

But while a monetary policy primer must generally deal with existing monetary arrangements, it doesn’t follow that it should overlook others altogether. “Policy,” according to Webster, is “a high-level overall plan embracing the general goals and acceptable procedures especially of a governmental body.” And though, within the set of possible plans, the most readily-implemented ones take existing institutional arrangements for granted, there are always other, more radical options that involve either replacing established arrangements or confronting them with rival ones with which they must compete.

Radical policy alternatives are, inevitably, controversial ones as well; so a primer is hardly the place for any detailed consideration, let alone a defense, of any of them. Instead, we must settle for a quick glance at several especially prominent or intriguing possibilities, all of which involve moving away from the present, discretionary system and towards a more-or-less “automatic” alternative.

Back to Gold?

Among various proposals for reforming the present U.S. dollar, none are more controversial than those for re-instating an official gold standard, meaning an arrangements in which official paper U.S. dollars are once again made fully convertible into a fixed quantity of gold, as they had been until 1933. The proposal is controversial in no small part because, so far as many economists are concerned, the historic gold standard was itself a disastrous failure, the passing of which calls, not for tears of regret, but for cries of “good riddance!”

How to account, then, for the gold standard’s enduring appeal, especially among conservatives and libertarians? Part of the answer is that, whatever its shortcomings, a gold standard has the indisputable merit of serving to automatically stabilize the long-run purchasing power of any money tied to it. That property, far from being mysterious, stems from the simple fact that under a gold standard the profitability of gold prospecting and mining increases, other things equal, as prices generally fall, and declines as prices generally rise. Consequently although the general level of prices can fluctuate, it tends to revert over time to a fixed mean.

Another part of the answer is that the gold standard’s critics often exaggerate its shortcomings, especially relative to those of actual (as opposed to idealized) fiat standards. On a blackboard, of course, a fiat standard can readily be shown to outperform a gold standard in the long-run perhaps, but certainly in the short-run. But that’s true only because, on a blackboard, a fiat standard can be made to do whatever the chalk-wielder likes. In practice, on the other hand, fiat standards can and often do behave very badly indeed. What self-respecting economist, right now, would relish the opportunity to lecture a roomful of Venezuelans on the theoretical advantages of irredeemable paper money?

Moreover, while the international gold “exchange” standard that was cobbled together after World War I was a  disaster waiting to happen, the prewar “classical” gold standard’s commerce-invigorating combination of generally fixed exchange rates and reasonable (if less than perfect) price-level stability has never been matched since.

But the most important reason why gold still commands such a following is, if you ask me, more prosaic: it’s simply that, for those who distrust bureaucratic control, whether of money alone or of economic activity more generally, the gold standard is simply the most salient alternative. Gold was the last, the most universally embraced, and the most successful of all commodity standards, as well as the one that coincided with a period of remarkable economic progress concerning which even John Maynard Keynes — that arch critic of the “barbarous” gold standard — waxed eloquent:

What an extraordinary episode in the economic progress of man that age was which came to an end in August, 1914! The greater part of the population, it is true, worked hard and lived at a low standard of comfort…  But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages. The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages… He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could dispatch his servant to the neighboring office of a bank or such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable.

Nostalgia versus Expediency

But however much one may regret the passing of the classical gold standard, it doesn’t follow that we can do no better than to try and restore it. “In commerce,” the great William Stanley Jevons famously said, “bygones are forever bygones”; and what Jevons says of commerce goes for money as well. Gold may have served as a relatively successful monetary standard in the past. But it doesn’t follow that there’s anything sacrosanct about gold today, or that a gold standard is still the best of all possible options for fundamental monetary reform.

On the contrary: an official attempt to once again make paper dollars convertible into gold today would be a step no less arbitrary or “constructivist” (in F.A. Hayek’s sense of the term), than an attempt to make them convertible into silver, palladium, or Japanese yen. To be sure, gold has a nostalgic appeal lacking in the rest. But allowing that consideration to be decisive would be like deciding to replace an aging fleet of jet aircraft, not with newer jets, but with as many propeller-driven biplanes. Don’t get me wrong: I’m not saying that gold convertibility couldn’t possibly be a good idea. I’m just saying that it wouldn’t qualify as a great idea simply by virtue of its historical preeminence. The only real test ought to be whether a revived gold standard would deliver better results than any equally practical (and not merely theoretical) alternative.

Finally, even if no new system could beat a restored classical gold standard, it doesn’t follow that such a restoration is possible. If getting one nation alone to return to gold is bound to be extremely difficult, getting a large number of advanced nations to do so simultaneously, so as to have a truly “classical” set-up like the one that existed before 1914, would be a truly Herculean challenge.

Furthermore, official gold standards can survive only if citizens trust their governments and central banks to generally keep promises to trade gold for paper. Such trust, having been dealt a severe blow by World War I, died a slow and painful death in the decades that followed it. A new gold standard commitment by the Fed, or by any other central bank, today, is bound to run afoul of this reality, especially by becoming the object of attacks by skeptical speculators. If history is any guide, sooner or later those attacks would force even the most well-meaning central bankers to break their gold-standard promises all over again, though perhaps not on time to avoid leaving their economies in shambles.

Self-Regulating Fiat Money

If trying to revive the classical gold standard, or something close to it, is like trying to piece Humpty-Dumpty back together, that doesn’t mean that we have no choice but to settle for a paper dollar managed by a committee of fallible (and occasionally fumbling) bureaucrats. In particular, the difficulties inherent in trying to tame the dollar by once again making it convertible into a scarce commodity can be avoided by relying instead on a quantity-based monetary rule. Because such a rule provides for automatic adjustments in the quantity of standard money without allowing people to convert that money into something else, it can’t fall victim to a speculative attack, and is that much more likely to endure.

As we’ve already reviewed some general arguments in favor of having a monetary rule, there’s no need to review those arguments again here. Instead, I’d like to consider a radical variation on the old theme, consisting of a quantity rule that’s enforced, not by a committee, either voluntarily or with the help of sanctions imposed whenever the rule is breached, but by means of some sort of automatic, fail-safe mechanism.

The general idea is one Milton Friedman entertained for many years. “We don’t need the Fed,” he said (in one of many similar interviews he gave in the 1990s). “I have, for many years, been in favor of replacing the Fed with a computer” programmed to “print out a specified number of paper dollars…month after month, week after week, year after year.”

Although the constant (“k-percent”) money growth rate rule that Friedman once favored has itself fallen out of fashion, his idea for a computer-driven money supply couldn’t be more à la mode. Computers are, for one thing, capable of doing a lot more than they were back in the 90s. And even in the 90s they might have been capable of managing the money supply so as to maintain, not a stable growth rate for B or M1 or M2 or some other monetary aggregate, but a stable level of nominal spending. The smooth growth of spending would in turn supply, for reasons we’ve considered previously, robust protection against severe economic fluctuations.

Indeed, while it’s easy to imagine a circumstance in which a constant money growth rule could turn out to be a recipe for macroeconomic chaos, it’s darn difficult to imagine a situation in which there’d be much to gain, and little to lose, by sacrificing a stable and customary overall growth rate of spending growth for some other monetary policy objective. A bout of exceptionally rapid spending? A fine way to boost asset prices, no doubt, until one considers the inevitable denouement!  Slower spending than usual? Tell it to your average businessman, or employee! Those (mainly Fed insiders) who rail against what they like to characterize as “inflexible” rules (as if a “rule” could be anything but inflexible!) forget — or pretend not to know — that while some rules would indeed prevent the Fed from having the flexibility to do the right thing, others would mainly serve to deny it the flexibility to do wrong things. A stable spending rule, including one that’s “rigidly” enforced by a computer, though it would rule out many bad monetary policy options, would also “rule in” the good ones.

NGDP Futures

Scott Sumner has come up with an alternative plan for targeting nominal spending, which relies not on a computer but on trading in futures to keep spending on target. The plan, called “NGDP Futures Targeting ,” starts with the Fed settling on an NGDP growth-rate target — say, 4 percent — and then offering to enter into NGDP futures contracts, with payoffs depending on the future level of NGDP, to anyone who expects it to either exceed or fall short of target. Traders who expect NGDP to come in above target will go long on the futures, while those expecting it to fall short will go short.

How, then, does the Fed manage to actually achieve its target? The answer becomes evident when one considers the link between the futures contracts it enters into for its monetary policy operations. When the Fed sells futures to investors who are betting on excessive NGDP growth, it is withdrawing base dollars from the economy, just as it might by engaging in open-market asset sales. In contrast, when it buys contracts from short sellers, it expands the monetary base. In other words, the very persons who are betting that the Fed will miss its target are also driving it to adjust its policy in a direction calculated to make them lose their bets! As a means for further reinforcing this built-in feedback mechanism, Sumner would also have the Fed engage in “parallel” open-market operations for each NGDP contract purchase or sale. In short, by offering to “peg” the price of its futures by engaging in as many contracts as it takes to keep the price on target, the Fed essentially stands ready to expand or contract the monetary base by whatever it takes to keep expected NGDP on target.

That, at least, must suffice for the barest of summaries of a plan that has since appeared in several, subtly-distinct versions, each of which has spawned its share of subtle (and not-so-subtle) controversy, with some critics claiming that Sumner’s scheme, or some versions of it, unworkable. Do those critics have a point? Perhaps they do, but that’s not our concern. We’re here neither to praise nor to bury, but only to have a gander at, this and other intriguing future possibilities for monetary policy.

Bitcoin and All That

Of these possibilities none are more intriguing than those held out by so-called cryptocurrencies, including Bitcoin and its various “altcoin” offshoots. As I observed some years ago (and as Tim Sablik explains in this Richmond Fed piece), when it was just starting to gain economists’ attention, Bitcoin has properties in common with both gold and other commodity monies on the one hand and deliberately managed fiat monies on the other. Like gold, Bitcoin is unalterably scarce: just as there is only so much gold on the planet, whether mined or as-yet unmined, there are only so many bitcoins to be had — 21 million, to be precise — of which not quite 17 million have been mined as of this writing. And like gold mining, bitcoin “mining,” which involves the use of computer-power to solve a mathematical puzzle, is costly. Since bitcoin “miners” compete for the privilege of being responsible for some share of any periods’ bitcoin output, the marginal resource costs of mining a batch (or “block”) of bitcoin tends to equal the market value of the coins produced.

Yet unlike gold, and like a fiat money, both the maximum possible output of bitcoin and the number of coins mined in any given period is controlled, not by mother nature, but by a protocol programmed into Bitcoin’s open-source software. The protocol adjusts the difficulty of the puzzle bitcoin miners must solve so as to keep total bitcoin output on a predetermined schedule, according to which bitcoin output gradually tapers off, asymptotically approaching, but never quite reaching, its 21 million coin limit. The decentralized nature of Bitcoin’s software means that no one is either “in charge” of the protocol or capable of altering it. A majority of miners can, however, agree to form themselves into a new branch network or “fork” that uses a modified copy of Bitcoin’s original protocol, as happened on August 1, 2017, when “Bitcoin Cash” split-off from what became known thereafter as “Bitcoin Core.” Although the fork created as many new “Bitcoin Cash” coins as there had been Bitcoin Core coins beforehand, it left the Bitcoin Core protocol itself unchanged.

Bitcoin’s odd blend of commodity- and fiat-money properties led me to dub it a “synthetic commodity money” some years ago. But the exciting thing about Bitcoin and its various spinoffs and rivals isn’t merely that they comprise a distinct sort of basic money, but that their combination of commodity- and fiat-money features is capable, in principle at least, of combining the best properties, while avoiding the worst, of each of those more traditional alternatives.

One of the more common complaints against a commodity standard is that it exposes the value of money to shocks stemming from either new commodity discoveries or from changes in the non-monetary demand for the standard commodity. Bitcoin and other such “synthetic” commodity monies are, on the other hand, not subject to similar shocks, because the amount miners can extract is strictly pre-programmed, and because they have no non-monetary (e.g. ornamental or industrial) value.

The big beef against fiat money, on the other hand, is that its quantity can be altered by the authorities placed in charge of it, not only for the sake of promoting economic stability, but for other reasons, if not arbitrarily.

It doesn’t follow, of course, that any old  cryptocurrency would be a hands-down winner in a race against any established fiat money. Despite its ultimate limit of 21 million coins and skyrocketing transactions fees, Bitcoin might still seem a safer gamble than, say, the Venezuelan Bolivar. But would it really supply a better or more durable monetary standard than the present U.S. dollar?

But the question isn’t whether Bitcoin can beat the present fiat dollar. It’s whether the basic technology pioneered by Bitcoin might allow some other self-regulating cryptocurrency to do so. Besides giving rise to its own “Cash” spinoff, Bitcoin has already spawned dozens of “altcoin” rivals, with others yet to come. It’s at least conceivable some one or more of these might harbor such properties as would make it a worthy opponent to the present dollar, if not something clearly superior. Consider, if you will, the immense variety of ordinary commodities that either have served as money in the past, or that might have done so, from cowrie shells and tobacco to silver, gold, and even (as more than one prominent economist once proposed) common bricks. Each had its merits and its drawbacks; and every one of them was imperfect. But now consider that the cryptocurrency revolution presents us with a whole new universe of new, albeit synthetic, options to draw upon, each of which has been deliberately endowed with properties calculated to make it an attractive medium of exchange. Call me an optimist, but it seems to me only natural to suppose that one of these innovative products might someday prove just the thing to give even the best discretion-wielding central bankers a run for their (that is, our) money.

Choice in Currencies

For an upstart currency to make inroads on an established fiat money requires, at very least, that established and would-be monies compete on a reasonably level playing field. That means having rules and regulations that make it relatively easy for persons to either partly or entirely “opt out” of an official currency network, and to “opt in” to one or more alternative networks. I say “relatively easy” because it’s inevitably costly to switch from one currency network to another, and especially so when the switch is from a bigger network to a smaller one. A level playing field therefore means, not one where rivals are necessarily well-matched, but one where the game isn’t rigged in the home team’s favor. In other words, the laws should not themselves favor official money over other alternatives.

It was with that intent in mind that F.A. Hayek, in making his now-famous 1976 case for “Choice in Currency,” called upon

all the members of the European Economic Community, or, better still, all the governments of the Atlantic Community, to bind themselves mutually not to place any restrictions on the free use within their territories of one another’s — or any other — currencies, including their purchase and sale at any price the parties decide upon, or on their use as accounting units in which to keep books.

“There is no reason whatever,” Hayek went on to argue,

why people should not be free to make contracts, including ordinary purchases and sales, in any kind of money they choose, or why they should be obliged to sell against any particular kind of money. There could be no more effective check against the abuse of money by the government than if people were free to refuse any money they distrusted and to prefer money in which they had confidence. Nor could there be a stronger inducement to governments to ensure the stability of their money than the knowledge that, so long as they kept the supply below the demand for it, that demand would tend to grow. Therefore, let us deprive governments (or their monetary authorities) of all power to protect their money against competition: if they can no longer conceal that their money is becoming bad, they will have to restrict the issue.

Although Hayek’s advice seems perfectly reasonable, putting it into practice turns out to be a lot harder than he seemed to think, and not just because governments’ would rather keep currency playing fields slanted their way. Consider the case of Bitcoin. In March 2014, the IRS classified it and other cryptocurrencies as capital assets (“intangible property”) rather than as currency, making any trade involving them the basis for either a short- or a long-term capital gains tax, depending on how long the coins were held before being disposed of. As the folks in the Coin Center (a non-profit cryptocurrency advocacy group) explain, this tax treatment puts cryptocurrencies at a disadvantage, not just relative to the U.S. dollar, but relative to official foreign currencies, which enjoy an exemption when it comes to relatively small transactions:

Say you buy 100 euros for 100 dollars because you’re spending the week in France. Before you get to France, the exchange rate of the Euro rises so that the €100 you bought are now worth $105. When you buy a baguette with your euros, you experience a gain, but the tax code has a de minimis exemption for personal foreign currency transactions, so you don’t have to report this gain on your taxes. As long as your gains per transaction are $200 or less, you’re good to go.

Such an exemption does not exist for non-currency property transactions. This means that every time you buy a cup of coffee, or an MP3 download, or anything else with bitcoin, it counts as a taxable event. If you’ve experienced a gain because the price of Bitcoin has appreciated between the time you acquired the bitcoin and the time you used it, you have to report it to the IRS at the end of the year, no matter how small the gain. Obviously this creates a lot of friction and discourages the use of Bitcoin or any cryptocurrency as an everyday payment method.

The obvious solution, the Coin Center goes on to suggest, is “to simply create a de minimis exemption for cryptocurrency the way it exists for foreign currency.” But hold on: to really achieve Hayek’s ideal, it won’t do to level the capital gains tax portion of the currency playing field for cryptocurrencies only, rather than for all potential, unofficial dollar substitutes. But then, just what shouldn’t count as such a potential substitute? Surely gold qualifies. But why not silver, or cigarettes, or… the point, as we know from experience, is that all sorts of things are “potential” exchange media, and therefore potential currencies. So, to really allow them all to compete on equal terms, one would at very least have to exempt all of them — from taxes to which official dollar trades aren’t subject.

In short, Hayek’s ideal is just that: something to have governments strive for, rather than something they can be expected to fully achieve in practice.

What’s more, Hayek was far too optimistic regarding the likely consequence of making it easier for people to choose among rival currencies. “Make it merely legal” for them to switch to something else, he wrote, “and people will be very quick indeed to refuse to use the national currency once it depreciates noticeably.” But would they? Unlike, say, shoes or soda water, money is a “network” good, meaning that one of the most important, if not the most important, determinant of the attractiveness of any particular money is the size of the network of persons prepared to accept it. You might think gold an ideal monetary commodity, and I might hold that Bitcoin is to the dollar what sliced bread is to bread of the old-fashioned sort. Yet when it comes to going shopping, what either of us must first consider is, not what sort of money we like, but what the shopkeepers are prepared to take in exchange for their goods.

It follows that, even if official and unofficial currencies really could have a level playing field to compete on, that field would still be one on which official money would generally enjoy a huge “home team” advantage. For this reason, the mere fact that an official currency is depreciating “noticeably” isn’t enough to incite people to abandon it in droves. Instead, it might take a very substantial rate of depreciation, or some like cataclysm, to bring about rapid change. Cataclysms aside, upstart currencies are more likely to have to start by clawing their way into established currency markets one painful inch at a time, though with each becoming easier than the last as their own, initially tiny networks begin to blossom.

Free Banking

The alternatives I’ve considered so far have all consisted either of potential replacements for the U.S. dollar or of novel means for regulating the stock of official (that is, Fed-created) U.S. dollars themselves. Emphasizing such alternatives makes sense, after all, in a primer concerned with “monetary policy,” where the most fundamental choices are those concerning what type or types of basic money to employ, and how best to regulate the supply of basic money, assuming that it doesn’t adequately regulate itself.

But what about alternatives consisting  of banks’ readily convertible IOUs, like most bank deposits today that, by virtue of their instant convertibility into official dollars, are very close substitutes for them? Because such bank-created substitutes necessarily “piggy back” on the basic monies into which they can be converted, their presence can’t generally make up for misbehavior or mismanagement of the quantity of basic money itself, and might even aggravate that misbehavior. A fiat money stock that’s allowed to grow so rapidly that it would result in a 20 percent annual rate of inflation in a pure fiat money system will, for example, produce the exact same rate of inflation in an economy in which payments are made exclusively by means of bank IOUs backed by a fixed fractional reserve of the same basic money.

Moreover there’s nothing at all radical about having banks supply such alternatives, at least to a limited extent. Today and for some time past bank deposits of various kinds have served, with the aid of checks and, more recently, debit cards, as close substitutes for official monies, to the point of being far more extensively employed in exchange than official monies themselves.

It would, nevertheless, be wrong to suppose that there’s no scope for a potential beneficial radical reform involving bank-supplied alternatives to basic money. On the contrary: plenty of scope exists for expanding the role of such alternatives, particularly by doing away with long-standing restrictions on commercial banks’ ability to challenge central banks’ monopoly of circulating (or hand-to-hand) payments media.

Once upon a time commercial banks routinely issued their own circulating paper notes; indeed, until the latter half of the 19th century bank notes were the most important liability on banks’ balance sheets, which were far more commonly employed in making payments than either checks or coins. Nor did central bank notes, which themselves started out as mere IOUs redeemable in gold or silver, only to be transformed into inconvertible fiat money later on, come to generally displace notes of commercial banks until the last decades of the 19th century, and the opening ones of the 20th, when the proliferation of central banks typically went hand-in-hand with laws forcing commercial banks out of the paper currency business.

Received opinion has it that commercial bank notes had to go because central bank currency was better. But now and then received opinion is nothing but hokum, and this happens to be one of those instances. Had central bank notes been better than their commercial counterparts, it shouldn’t have been necessary for governments to suppress the latter. Instead, the mere availability of official alternatives should have sounded the death knell of the commercial stuff. Yet instead of that having been the case, in every instance the commercial bank notes had to be snuffed-out, leaving people no choice but to employ official paper money. Nor did the commercial bank currency go down without a fight, in which prominent economists often took part, with many of the most prominent (and most better ones, if I may say so) challenging governments’ efforts to establish official currency monopolies, and championing the alternative of free trade in banking, or “free banking,” for short.

Strictly speaking, “free banking” means more than just allowing ordinary banks to issue paper currency. It also means leaving them free of other restrictions, including restrictions upon their ability to establish branch networks, lend to whomever they wish, charge whatever rates they wish, and hold whatever levels of cash reserves and capital they wish to. Freedom of note issue is only the most controversial of these many aspects of freedom in banking, in part because allowing it would make it possible for the public to rely exclusively on privately-supplied exchange media, with official dollars playing their part only behind the scenes, as bank reserves. Furthermore, in times past, when official money consisted, not of any central bank’s inconvertible “liabilities,” but of gold or silver coin, not having to rely on a central bank as a source of paper money meant not having to have a central bank at all !

Could a monetary system lacking a central bank possibly have been any good? Darn tootin’!

Of all relatively modern monetary systems, none have earned more kudos than the two that most closely approximated the free-banking ideal, namely, the systems of Scotland between the latter 18th century and 1845 and Canada from 1870 and 1914. In both of these, bank-supplied notes and deposits commanded such a high degree of confidence that gold and silver coin hardly circulated. The public’s disdain for precious metal money in turn allowed Scottish and Canadian banks to operate on reserve cushions that were slim even by today’s standards. That in turn made Scottish and Canadian banks highly efficient intermediaries, with almost all of their clients’ savings going to fund relatively productive bank loans and investments. Yet despite this high degree of efficiency, bank runs were extremely rare in both systems, while banking crises, involving simultaneous problems at many banks at once, were almost unheard of.

Why, in that case, does free banking, and especially the idea of letting banks issue their own currency, seem so far-fetched today?

Partly it’s because the Fed and other central banks, upon which we’re now all too inclined to turn to for information about monetary history, have underplayed such success stories as those of Scotland and Canada whilst sugarcoating their own records. But in the U.S. case it’s also due to confusion about the meaning of “free banking.” Whereas that phrase can refer to genuinely free banking systems like those of Scotland and Canada, it can also refer to any of the systems established through so-called “Free Banking” laws passed by eighteen states between 1837 and 1860. Despite their names the later laws didn’t come close to allowing genuine freedom in banking. Instead, they all imposed important restrictions upon the banks established under them, including the requirements that those banks refrain from establishing branches, and that they back their notes entirely with specific securities — usually consisting of state government bonds. In several instances such restrictions, far from guaranteeing the soundness of the banks that were forced to abide by them, led to notorious abuses and failures, including episodes of “wildcat” banking. All in all, the misnamed “Free Banking” era proved to be one of the most unfortunate chapters in U.S. monetary history, because of the direct damage done by bank failures, of course, but also because those failures gave freedom in banking a bad name it didn’t deserve.

But what relevance has free (that is, genuinely free) banking today? It’s relevant, first of all, because an understanding of its workings suggests that freedom in banking isn’t necessarily inimical to soundness in banking, and that the wrong sort of regulations can in fact be worse than no regulations at all. It also suggests that, even if we are determined to rely on a fiat-money issuing Fed as our ultimate source of monetary control, we need not rely upon them to supply hand-to-hand currency. Instead, we might let commercial banks back into that business, while limiting the Fed’s ordinary involvement in the market for money to the “wholesale” part of that market — that is, to supplying banks with reserves. Commercial banks that could issue their own notes would presumably also be free to experiment with other forms of non-deposit money, including “smart” stored value cards, that might eventually replace paper money altogether, except on rare occasions when people lost confidence in the private stuff. I dare say, indeed, that had commercial banks been left in charge of supplying currency all along, paper money would some time ago have gone the way of horses, buggies, spittoons, and slide-rules. What else save a bunch of government monopolists could have managed to keep such low-tech stuff as paper currency in play for so long?

Should We, Can We, “End the Fed”?

While in times past free banking was an alternative to central banking, that’s no longer so. Today’s commercial bank deposits are claims, not to gold or silver coin, but to central bank issued fiat money; and were commercial banks able to supply their own notes or stored value cards to take the place of central bank notes in payments that don’t involve drawing upon bank deposits, those notes and cards would also represent claims to central bank money.

In short, so long as we stick to the present fiat dollar standard, instead of replacing it with either a natural or a synthetic commodity standard, no amount of freedom in commercial banking will suffice to render the Fed entirely otiose. No wonder that, when former U.S. Representative Ron Paul and his many devotees campaign to “End the Fed,” they have in mind, not just letting bulldozers loose on the Eccles Building, but once again making official dollars claims to some fixed quantity of gold.

Whether one is a hard-core libertarian or not, it’s interesting to ponder the extent to which the Fed’s role might be reduced, with the help of various more-or-less radical reforms, without either abandoning the present, inconvertible U.S. dollar or sacrificing its integrity.

We’ve already considered how a carefully-programmed computer, or having the Fed peg the price of NGDP futures, could render the FOMC redundant — in so far at least as that body’s challenge can be boiled down to one of maintaining a stable level of overall spending. We’ve also seen how letting commercial banks issue circulating currency would make it unnecessary for the Fed to be in the currency business, though it would still require keeping plenty of Federal Reserve notes on hand in case a banking panic should break out. Finally, in an earlier chapter we’ve seen how allowing “flexible” open-market operations could make it unnecessary for the Fed to ever make any direct loans to troubled financial institutions.

Yet these are far from being the only possibilities for having a leaner, if not a meaner, Fed. The Fed’s reduced involvement in currency provision and last-resort lending would mean a corresponding decline in the importance of the regional Fed banks, apart from the New York Fed, which handles the system’s open-market operations. The Fed’s involvement in check clearing could also be reduced, by returning that activity to the private sector, which handled it perfectly well until the Fed muscled its way in after 1913. Finally, most of the vast army of economists and other staff personnel presently employed at the Fed, who even now are mainly busy performing tasks that have nothing much to do with fulfilling the Fed’s mandate, could be made to seek more productive employment elsewhere.

In short, sticking to a fiat dollar doesn’t rule out reforms that would dramatically reduce the Fed’s role in the monetary system. Instead of the present, Leviathan Fed, one might have what might be called a “Nightwatchman” Fed, capable of doing those things that any responsible fiat money issuing central bank ought to do, but incapable of doing many of the things that irresponsible central banks do all too often.

A Concluding Plea for Open-Mindedness

By surveying some more radical options for monetary reform, I don’t pretend to have made a compelling case for any of them. My only goal has been to suggest that all sorts of alternatives exist, and that each of them has its merits. Will any of them really help? Is one better than the rest? Are there others not mentioned that deserve our consideration? The correct answer to all these questions, and others like them, is “Maybe.” In other words, such alternatives are, or ought to be, worth thinking about, even if some might ultimately be judged unattractive. Allowing ourselves to think outside the established monetary policy box can never do us any harm. Nothing could be more dangerous, on the other hand, than for all of us to assume that, despite its obvious faults, ours happens to be the best of all possible monetary systems.

[Cross-posted from Alt-M.org]

The Cato 2017 Free Speech and Tolerance Survey, a new national poll of 2,300 U.S. adults, finds that 71% Americans believe that political correctness has silenced important discussions our society needs to have. The consequences are personal—58% of Americans believe the political climate prevents them from sharing their own political beliefs.

Democrats are unique, however, in that a slim majority (53%) do not feel the need to self-censor. Conversely, strong majorities of Republicans (73%) and independents (58%) say they keep some political beliefs to themselves.

Full survey results and report found here.

It follows that a solid majority (59%) of Americans think people should be allowed to express unpopular opinions in public, even those deeply offensive to others. On the other hand, 40% think government should prevent hate speech. Despite this, the survey also found Americans willing to censor, regulate, or punish a wide variety of speech and expression they personally find offensive:

  • 51% of staunch liberals say it’s “morally acceptable” to punch Nazis.
  • 53% of Republicans favor stripping U.S. citizenship from people who burn the American flag.
  • 51% of Democrats support a law that requires Americans use transgender people’s preferred gender pronouns.
  • 65% of Republicans say NFL players should be fired if they refuse to stand for the anthem.
  • 58% of Democrats say employers should punish employees for offensive Facebook posts.
  • 47% of Republicans favor bans on building new mosques.

Americans also can’t agree what speech is hateful, offensive, or simply a political opinion:

  • 59% of liberals say it’s hate speech to say transgender people have a mental disorder; only 17% of conservatives agree.
  • 39% of conservatives believe it’s hate speech to say the police are racist; only 17% of liberals agree.
  • 80% of liberals say it’s hateful or offensive to say illegal immigrants should be deported; only 36% of conservatives agree.
  • 87% of liberals say it’s hateful or offensive to say women shouldn’t fight in military combat roles, while 47% of conservatives agree.
  • 90% of liberals say it’s hateful or offensive to say homosexuality is a sin, while 47% of conservatives agree. 

Americans Oppose Hate Speech Bans, But Say Hate Speech is Morally Unacceptable

Although Americans oppose (59%) outright bans on public hate speech, that doesn’t mean they think hate speech is acceptable. An overwhelming majority (79%) say it’s “morally unacceptable” to say offensive things about racial or religious groups. 

Black, Hispanic, and White Americans Disagree about How Free Speech Operates

African Americans and Hispanics are more likely than white Americans to believe:

  • Free speech does more to protect majority opinions, not minority viewpoints (59%, 49%, 34%).
  • Supporting someone’s right to say racist things is as bad as holding racist views yourself (65%, 61%, 34%).
  • People who don’t respect others don’t deserve the right of free speech (59%, 62%, 36%).
  • Hate speech is an act of violence (75%, 72%, 46%).
  • Our society can prohibit hate speech and still protect free speech (69%, 71%, 49%).
  • People usually have bad intentions when they express offensive opinions (70%, 75%, 52%).

However, black, Hispanic, and white Americans agree that free speech ensures the truth will ultimately prevail (68%, 70%, 66%). Majorities also agree that it would be difficult to ban hate speech since people can’t agree what hate speech is (59%, 77%, 87%).

Two-Thirds Say Colleges Aren’t Doing Enough to Teach the Value of Free Speech

Two-thirds of Americans (66%) say colleges and universities aren’t doing enough to teach young Americans today about the value of free speech. When asked which is more important, 65% say colleges should expose students to “all types of viewpoints even if they are offensive or biased against certain groups.” About a third (34%) say colleges should “prohibit offensive speech that is biased against certain groups.” 

But Americans are conflicted. Despite their desire for viewpoint diversity, a slim majority (53%) also agree that “colleges have an obligation to protect students from offensive speech and ideas that could create a difficult learning environment.” This share rises to 66% among Democrats; 57% of Republicans disagree.

76% Say Students Shutting Down Offensive Speakers Reveals “Broader Pattern” of How Students Cope

More than three-fourths (76%) of Americans say that recent campus protests and cancellations of controversial speakers are part of a “broader pattern” of how college students deal with offensive ideas. About a quarter (22%) think these protests and shutdowns are simply isolated incidents.

However, when asked about specific speakers, about half of Americans with college experience think a wide variety should not be allowed to speak at their college:

  • A speaker who says that all white people are racist (51%)
  • A speaker who says Muslims shouldn’t be allowed to come to the U.S. (50%)
  • A speaker who says that transgender people have a mental disorder (50%)
  • A speaker who publicly criticizes and disrespects the police (49%)
  • A speaker who says all Christians are backwards and brainwashed (49%)
  • A speaker who says the average IQ of whites and Asians is higher than African Americans and Hispanics (48%)
  • A speaker who says the police are justified in stopping African Americans at higher rates than other groups (48%)
  • A speaker who says all illegal immigrants should be deported (41%)
  • A speaker who says men on average are better at math than women (40%)

Nevertheless, few endorse shutting down speakers by shouting loudly (4%) or forcing the speaker off the stage (3%). Current college and graduate students aren’t much different; only about 7% support forcibly shutting down offensive speakers.

65% Say Colleges Should Discipline Students Who Shut Down Invited Campus Speakers

Two-thirds (65%) say colleges need to discipline students who disrupt invited speakers and prevent them from speaking. However, the public is divided about how: 46% want to give students a warning, 31% want the incident noted on the student’s academic record, 22% want them to pay a fine, 20% want to suspend them, 19% favor arresting the students, 13% want to fully expel the students. Three-fourths (75%) of Republicans support some form of punishment for these students, compared to 42% of Democrats.

People of Color Don’t Find Most Microaggressions Offensive

The survey finds that many microaggressions colleges and universities advise faculty and students to avoid aren’t considered offensive by most people of color. The percentage of African Americans and Latinos who say these microaggressions are not offensive are as follows:

  • Telling a recent immigrant: “You speak good English” Black: 67% Latino: 77%
  • Telling a racial minority: “You are so articulate” Black: 56% Latino: 63%
  • Saying “I don’t notice people’s race” Black: 71% Latino: 80%
  • Saying “America is a melting pot” Black: 77% Latino: 70%
  • Saying “Everyone can succeed in this society if they work hard enough.” Black: 77% Latino: 89%
  • Saying “America is the land of opportunity” Black: 93% Latino: 89%

The one microaggression that African Americans (68%) agree is offensive is telling a racial minority “you are a credit to your race.”

Americans Don’t Think Colleges Need to Advise Students on Halloween Costumes

Nearly two-thirds (65%) say colleges shouldn’t advise students about offensive Halloween costumes and should instead let students work it out on their own. A third (33%) think it is the responsibility of the university to remind students not to wear costumes that stereotype racial or ethnic groups at off-campus parties.

20% of Current Students Say College Faculty Has Balanced Mix of Political Views

Only 20% of current college and graduate students believe their college or university faculty has a balanced mix of political views. A plurality (39%) say most college and university professors are liberal, 27% believe most are politically moderate, and 12% believe most are conservative.

Democratic and Republican students see their college campuses differently. A majority (59%) of Republican college students believe that most faculty members are liberal. In contrast, only 35% of Democratic college students agree most professors are liberal.

What Beliefs Should Get People Fired?

Americans tend to oppose firing people for their beliefs. Nevertheless, Democrats are more likely than Republicans to say a business executive should be fired if she or he believes transgender people have a mental disorder (44% vs 14%), that homosexuality is a sin (32% vs 10%), and that psychological differences help explain why there are more male than female engineers (34% vs. 14%). Conversely, Republicans are more likely than Democrats to say a business executive should be fired if they burned the American flag at a weekend political protest (54% vs. 38%).

Republicans Say Journalists Are an Enemy of the American People

A majority (63%) of Republicans agree with President Trump that journalists today are an “enemy of the American people.” Conversely, most Americans (64%), as well as 89% of Democrats and 61% of independents, do not view journalists as the enemy.

These results aren’t surprising given that most Americans believe many major news outlets have a liberal bias, including The New York Times (52%), CNN (50%), and MSNBC (59%).  Fox is the one news station in which a majority (56%) believe it has a conservative bias.

Democrats, however, believe most major news organizations are balanced in their reporting including The New York Times (55%), CNN (55%), and CBS (72%). A plurality (44%) also believe the Wall Street Journal is balanced. The two exceptions are that a plurality (47%) believe MSNBC has a liberal tilt and a strong majority (71%) say Fox has a conservative bias.

Republicans, on the other hand, see things differently. Overwhelming majorities believe liberal bias colors reporting at The New York Times (80%), CNN (81%), CBS (73%), and MSNBC (80%). A plurality also feel the Wall Street Journal (48%) has a liberal bias. One exception is that a plurality (44%) believe Fox News has a conservative bias, while 41% believe it provides unbiased reporting.

Despite perceptions of bias, only 29% of the public want the government to prevent media outlets from publishing a story that government officials say is biased or inaccurate. Instead, a strong majority (70%) say government should not have the power to stop such news stories.

Americans Say Wedding Businesses Should Be Required to Serve LGBT People, Not Weddings

The public distinguishes between a business serving people and servicing weddings:

  • A plurality (50%) of Americans say that businesses should be required to “provide services to gay and lesbian people,” even if doing so violates the business owners’ religious beliefs.
  • But, 68% say a baker should not be required to provide a special-order wedding cake for a same-sex wedding if doing so violates their religious convictions.

Few support punishing wedding businesses who refuse service to same-sex weddings. Two-thirds (66%) say nothing should happen to a bakery which refuses to bake a cake for a same-sex wedding. A fifth (20%) would boycott the bakery, another 22% think government should sanction the bakery in some way, such as fining the bakery (12%), requiring an apology (10%), issuing a warning (8%), taking away their business license (6%), or sending the baker to jail (1%).

Clinton Voters Can’t Be Friends with Trump Voters

Nearly two-thirds (61%) of Hillary Clinton’s voters agree that it’s “hard” to be friends with Donald Trump’s voters. However, only 34% of Trump’s voters feel the same way about Clinton’s. Instead, nearly two-thirds (64%) of Trump voters don’t think it’s hard to be friends with Clinton voters.

Sign up here to receive forthcoming Cato Institute survey reports

The Cato Institute 2017 Free Speech and Tolerance Survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online August 15-23, 2017 from a national sample of 2,300 Americans 18 years of age and older. The margin of error for the survey is +/- 3.00 percentage points at the 95% level of confidence.

Many Americans want immigrants to “get in line.” But they cannot do so on their own. They need to get a sponsor, either a U.S. citizen family member or a U.S. employer, to petition the government to grant them permanent residency (a “green card”). Even if immigrants do obtain sponsors, there isn’t just one line to get into. Rather, immigrants have separate lines based on the type of sponsorship and their country of origin, and these lines all move at different speeds. Even two immigrants working in essentially the same position whose employer petitions for them on the same day can end up receiving their green cards decades apart if they were born different places.

How America still discriminates based on nationality

This bizarre fact is a consequence of the racist history of U.S. immigration law. In 1921, Congress created the first quota on legal immigration (the “worldwide limit” ). Three years later, it created limits for individual nationalities (the “per-country limits”). The per-country limits give each nationality a share of the worldwide limit. If nationals of a certain country use up their share of the green cards, they have to wait, and immigrants from other countries get to skip ahead of them in line. (And no, Congress made sure that immigrants can’t evade the per-country quotas by getting citizenship somewhere else. Birthplace is all that matters.)

Initially, the per-country limits openly discriminated against “undesirable” immigrants, defined as Asians, Africans, and Eastern Europeans (mostly Jews). But in 1965, Congress made the per-country limits uniform across countries. Today, no country can receive more than 7 percent of the worldwide limit in any green card category. But this reform just shifted the discrimination toward nationalities with the highest demand for green cards. The goal here was not any less racist. The debates over the law abounded with “liberals” reassuring conservatives that America wouldn’t be flooded with Asians.

In order to apply for a green card, green cards must be available under both the worldwide limit and the per-country limit for the relevant category. After their sponsors petition for them to receive a green card, immigrants wait in line to apply for the green card themselves. The State Department releases a green card bulletin every month to inform immigrants of which ones can apply that month. Immigrants whose sponsor petitioned for them before a certain date—called the “priority date”—can apply. Everyone else must continue to wait.

Right now, for example, Filipinos can apply for a green card this month if their U.S. citizen siblings petitioned for them before June 8, 1994—23 years ago. But here’s the critical point: this “priority date” tells Filipinos nothing about how long they will have to wait if their sibling petitioned for them today. If a lot fewer U.S. citizens applied for Filipino siblings after June 8, 1994, they might be able to receive their green cards a decade or more sooner than those receiving them today. However, if the number of petitions increased, then the wait could be even longer—maybe decades longer.

For example, the priority date for Filipino siblings of U.S. citizens in June 1994—when those who are today receiving their green cards started the process—was June 1977. In other words, Filipino siblings filing green card applications in June 1994 had waited from 1977 to 1994. The U.S. citizen who filed an immigrant petition on June 8, 1994 may have looked at the green card bulletin and thought his Filipino sibling would have to wait “only” 17 years. In fact, he had to wait 23.

How green card time moves backwards

To know when an immigrant entering the process today will receive a visa, the government would need to know the number of petitions filed in each year under each green card category, the nationality of the beneficiary of each petition, and the nationalities of any spouses and children of the petition beneficiary.

A precise estimate is impossible because some applicants abandon their petitions, apply sometime after their priority date comes up, have additional children, get married, become ineligible, etc. But one would think that the government would attempt to track the basic information carefully, so it could give at least a decent estimate of the future wait times. But being the government, it naturally doesn’t, so whenever the State Department moves up the “priority date,” it essentially guesses how many people more will apply. If the State Department guesses wrong, it realizes its mistake and moves the priority date back in time. In other words, green card waiting time doesn’t move linearly like real time does. It stops, starts, and even runs in reverse. The government calls movement backward a “retrogression.” 

Figure 1 below highlights how priority dates move in the green card backlog for Indian college graduates sponsored by U.S. employers under the employment-based third preference category. When priority dates move ahead in time, the orange line goes up. When they move back in time, it goes down. When the priority date is the same as the current date for multiple months, it goes in a straight line at about a 45-degree angle, progressing steadily upward with each month. As Figure 1 shows, from October 2002 through December 2004, priority dates were current.

Immigrants who were the beneficiary of a green card in December 2004 would have thought, if they had looked only at the priority date, that they would receive their visa almost immediately. In fact, they had to wait more than a decade—until September 2015 to apply. Then, when they finally did apply, the priority immediately retrogressed again. When this happens, the government sets their applications aside until the date becomes current again. Since December 2004, there have been seven significant retrogressions and several other smaller ones.

Figure 1
Priority Dates for Employment-Based (EB-3) Immigrants from India, October 2002 to November 2017

Source: U.S. Department of State

The big retrogression in 2005—when the priority date moved back to 1998—isn’t quite as meaningful as it appears. The State Department moved the dates back that far just to prevent anyone from applying. It’s not that the wait really grew quite that much. (If you want to know why the big jump happened, skip to this endnote.[1]) In any case, starting from March 2006—right after the big dip where Figure 1 shows “1-Jan-01”—green card time moved about half as fast as actual time. Priority dates have advanced five years and ten months, while actual time moved forward 11 years in eight months. Figure 2 shows the wait for Indian immigrants to apply more than doubled from 5 years to 11 years, while waits for all other immigrants (excluding China, Philippines, and Mexico) have disappeared.

Figure 2
How Long Applicants Had to Wait to Apply for Green Cards from India and Elsewhere*, October 2002 to November 2017

Source: U.S. Department of State
*Excluding China, Philippines, and Mexico

Wait times are actually longer than Figure 2 shows. Figure 2 only shows the wait to apply, not to receive an approval. As I mentioned before, when the State Department moves the dates forward, and more applicants apply than there are slots available, their applications are held in abeyance until numbers are available again. This post-application waiting period still happens today. In fact, nearly 140,000 immigrants are waiting at this stage in the employment-based categories, and more than a third of them are Indians. It will take several years to clear just these cases from the backlog.

So how long will Indian immigrant workers have to wait going forward? Again, no one really knows for certain. In 2012, Stuart Anderson of the National Foundation for American Policy estimated 70 years. In 2014, the government estimated that 234,000 high skilled workers were waiting to apply for green cards. The family of the workers, however, use up a little more than half of the green card quotas, so there are probably now roughly half a million green card holders in line.

For the two employment-based categories with the longest waits, Indians can only receive 5,600 green cards (out of 80,000). We would need to know what share of those in line are Indian and what share are waiting in which of the employment-based categories to provide a good estimate of the wait for immigrants applying today. This information isn’t available. But if even half of these workers are Indians in the EB-3 category—which seems very likely given how much longer Indians in this category have already been waiting than other nationalities—then their wait would be about a century.

In other words, it’s possible that almost all of the Indian workers applying today will die before they receive permanent residency, while other immigrant workers will receive their green cards almost right away. This is the system that Congress refuses to reform.

[1] Two factors apparently combined to slam the breaks on Indian workers—and everyone else in the EB-3 green card category—in 2005. First, Congress passed a law at the start of FY 2001 that eliminated the backlog temporarily in 2003 and 2004. The law waived the per-country limits in situations where the worldwide limit for the category otherwise would not be filled, and it temporarily increased the number of green cards by recapturing visas that went unused in 1999 and 2000 (unused visas are a crazy topic for another post).

At the very same time, Congress created a new agency—U.S. Citizenship and Immigration Services (USCIS)—to adjudicate green card applications from temporary workers in the United States, and it was developing new procedures to adjudicate applications. Even though the State Department kept telling immigrants that they could apply, USCIS wasn’t processing them quickly enough. This led to a growing backlog in green card applications. Once USCIS instituted measures to catch up, the State Department realized that it let far too many applicants apply and slammed on the breaks. These applications are then held in abeyance.

“The FCC said in a notice it was removing ‘outmoded regulations’ on telegraphs effective in November.” And none too soon: “The last Western Union telegram in the United States was sent in 2006” and the “last major telegram service worldwide ended in India in 2013.” Reuters reports:

AT&T Inc, originally known as the American Telephone and Telegraph Company, in 2013 lamented the FCC’s failure to formally stop enforcing some telegraph rules.

“Regulations have a tendency to persist long after they outlived any usefulness and it takes real focus and effort to ultimately remove them from the books even when everyone agrees that it is the common sense thing to do,” the company said.

In 2011, I observed that Connecticut had yet to get around to repealing old state laws like those regulating the working conditions of telegraph messengers (cross-posted and adapted from Overlawyered).

Does the federal government enjoy plenary power to regulate every aspect of corporeal existence, down to the rodents living in your backyard? People for the Ethical Treatment of Property Owners (PETPO), an organization of concerned citizens from Utah, say no, and want the Supreme Court to hear them out.

Article I of the Constitution lists the federal legislative powers: Congress may only act pursuant to one of these enumerated powers. One of these powers is the regulation of commerce “among the several states.” Starting with the New Deal, however, Congress has increasingly looked upon that power as a license to do whatever it likes. And for decades, the courts rubber-stamped these increasingly expansive federal intrusions into areas traditionally reserved to the states.

But in a series of cases, starting with 1995’s United States v. Lopez, the Supreme Court began to push back, reaffirming that federal regulation under the Commerce Clause must be, well, commercial. Recall that while Chief Justice John Roberts ultimately saved Obamacare by transmogrifying the individual mandate into a tax, he and the Court majority rejected the government’s arguments regarding the Commerce and Necessary and Proper Clauses.

That brings us to the current case. The Utah prairie dog, which resides only within a small corner of southwest Utah, has no commercial value: there is no market for it—they make terrible pets—or any product made from it. Moreover, the current population is large and expanding. Yet it is listed as “threatened” under the federal Endangered Species Act.

Its legal status derives from the distribution of its population: the government deems the 70% residing on private land a nullity, counting only the federal-land population, on the theory that the citizens of Utah would declare open-hunting on privately domiciled prairie dogs if the species were delisted. And, according to the U.S. Court of Appeals for the 10th Circuit, it doesn’t matter that the varmint is commercially worthless; other unrelated animals have commercial value, so the federal government can stick its nose into whichever animal it likes. Under this theory, of course, all organic life in the United States is subject to congressional whim, because some conjectural private party might impose some vaguely defined harm at some hypothetical future date.

PETPO has filed a petition asking the Supreme Court to review the case. Cato, joined by the Reason Foundation and the Individual Rights Foundation, has filed an amicus brief urging the Court to review PETPO v. U.S. Fish & Wildlife Service. At stake is not simply the beleaguered citizenry of Utah who wish to live their lives unmolested by pests—neither those living underground nor in the District of Columbia—but also the very system of enumerated powers that has protected the liberty of all Americans since the Founding.

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