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On Twitter last week Stephen Williamson wrote that he was “puzzled by the infatuation with NGDP targeting. We have good reasons to care about the path for the price level and the path for real GDP. Idea seems to be that if you smooth Py that you get optimal paths for P and y. That’s hardly obvious, and doesn’t fall out of any serious theory I’m aware of.”

I’m not exactly sure what Stephen means by a “serious theory.” But if he means coherent and thoughtful theoretical arguments by well-respected (and presumably “serious”) economists, then there are all sorts of “serious theories” out there to which he might refer, with roots tracing back to the heyday of classical economics. Indeed, until the advent of the Keynesian revolution, a stable nominal GDP ideal, or something close to it, was at least as popular among highly-regarded economists as that of a stable output price level, its chief rival.

If one of today’s outstanding monetary economists isn’t familiar with these writings, it’s a good bet that many other economists don’t know about them either. So I thought it worthwhile to list here some important theoretical works favoring nominal GDP targeting over inflation or price-level targeting, in chronological order, with brief remarks concerning each, and links to those that can be read online. Those interested in a more complete survey of the relevant literature, albeit one written not quite a quarter-century ago, are encouraged to have a look at my 1995 History of Political Economy article, “The ‘Productivity Norm’ versus Zero Inflation in the History of Economic Thought.”

Astute readers will note that the works I list are ones that compare the fundamental welfare effects of stable aggregate spending to those of other monetary policy objectives. They do more, in other words, than merely suggest that nominal GDP may be a useful intermediate policy target than, say, some monetary aggregate. The articles also reject absolute stability of the price level, real output, or both as “given” policy ideals. In contrast, some other writings favoring nominal GDP targeting  (e.g. McCallum 1987Hall and Mankiw 1994, or Frankel and Chinn 1995) do so because it does a reasonably good job at stabilizing P or y or some weighted average of the two. These writings seem to me to miss the crucial point that output and price level fluctuations are themselves sometimes optimal, and that NGDP targeting is in turn desirable precisely because it allows such optimal fluctuations in y and P to occur. Those critics of NGDP targeting (e.g., George Kahn and Andrew Levin) who fault it for failing to stabilize P and y, as well as some alternative policies, likewise miss the mark. To all of these writers I especially commend the works listed here.

Finally, I leave out works by Scott Sumner, David Beckworth, and other well-known Market Monetarists, because part of my aim is to show my fellow monetary economists that Market Monetarism is but one particular, recent manifestation of a perspective that has had many distinguished adherents, representing numerous different schools of thought, throughout the long history of our discipline.


1837: Samuel Bailey, Money and Its Vicissitudes in Value

A splendid, early tour de force. Bailey may have been the first economist to distinguish between changes in the value of money (and, hence, the general level of prices) “originating on the side of money” and ones “originating on the side of goods” — where by the latter he means changes reflecting innovations to the “facility of supplying” goods, including “the discovery of shorter and more economical processes in the arts, and invention of machinery, [and] the abolition of monopolies and taxes.” Today’s economies make essentially the same distinction when they trace price-level changes to either “aggregate demand” or “aggregate supply” innovations. Using this distinction, Bailey goes on to show that, unlike price level changes originating on the “money” side, those originating on the “goods” side neither distort nominal (“pecuniary”) contracts nor (in the case of downward price movements) discourage industry as a whole.

1918-1933: Debate in the Ekonomisk Tidskrift

In a series of articles in the Ekonomisk Tidskrift, Stockholm School economist David Davidson took his compatriot, the great Knut Wicksell, to task for identifying a neutral (hence ideal) monetary policy with one that achieved a perfectly stable general price level. Davidson instead insisted that a neutral policy would allow the price level to vary with aggregate supply (and, particularly, productivity) innovations. Among other prominent Stockholm-School economists, Eric Lindahl and Gunnar Myrdal (see below), sided with Davidson in this debate, while Gustave Cassel sided with Wicksell. Regrettably, Davidson’s works haven’t been translated into English. But those who don’t read Swedish may consult excellent reviews of the debate by Brinley Thomas and Claes-Henric Siven. According to Thomas, “There can be little doubt that the honours in this contest went to Davidson.” A recent paper by Gunner Örn, also (alas) in Swedish, points out the practical equivalence between Davidson’s norm and recent proposals for targeting nominal GDP. “These two Swedish economists,” he writes (referring to Davidson and Lindahl), “were very early — perhaps even the world’s very first — advocates of what in today’s economics debate is called ‘nominal GDP targeting’.”

1930: Ralph G. Hawtrey, “Money and Index-Numbers

If this essay were all Hawtrey ever wrote on monetary theory, Scott Sumner might still have had reason for wanting his chair at Mercatus to be called “The Ralph  G. Hawtrey Chair of Monetary Policy.” For no-one has ever made the case for preferring a stable level of nominal income (or what Hawtrey refers to as “consumers’ income and outlay”) to a stable price level more clearly and painstakingly than Hawtrey makes it here. The only disturbances to prices that monetary policy should seek to avoid, Hawtrey concludes, are those “affecting the amount of the consumers’ income and outlay otherwise than in proportion to the factors of production.” Spot on, Ralphie boy!

1935: F.A. Hayek, Prices and Production, 2nd. ed.

Let’s be clear: my concern here is with writers who made compelling theoretical arguments for NGDP targeting, or something very close to it, regardless of whether they believed the theory could be put into practice. By this criterion, Hayek must be judged one of the more important historical precursors of Market Monetarism. Although Hayek had been critical of arguments and schemes for stabilizing the general price level for some years before he wrote Prices and Production, it was only in that work, and particularly in it’s 2nd edition, and in several subsequent writings, that he acknowledged the desirability of such money-stock changes as would serve to insulate the price level from velocity (but not real output) shocks. For further details, and a comparison of Hayek’s views on this issue with Keynes’s, see my 1999 HOPE article. Regular Alt-M contributor Larry White has written a good, sympathetic review of Hayek’s monetary thought. Rather less sympathetic is a blog post by “Lord Keynes” pointing out differences between Hayek’s stable MV ideal and his practical policy recommendations during the Great Depression.

1937: Allen G. B. Fisher, “Does an Increase in Volume of Production Call for a Corresponding Increase in Volume of Money?

Unlike his better-known American namesake, this notable New Zealand economist denied that a stable price level was always desirable. Instead he insisted that, “Apart from increases in population and from changes in the desire of individuals to hold money, economic development which takes the form of increased production per head…does not require any increase in money supply.” In other words, he favored an NGDP target with the target growth rate of NGDP set equal to the population growth rate. It is not falling prices per se but generally falling money incomes, Fisher argued, that “have a depressing effect upon business enterprise” because they disappoint “expectations of normal profit.” A decline in prices reflecting increased productive efficiency is, on the other hand, not only not harmful, but desirable, because attempts to prevent them is likely temporarily to distort profit signals, delaying desirable transfers of scarce resources among different efficient industries. Highly recommended.

1939: Gunnar Myrdal, Monetary Equilibrium

Many people know that Hayek and Myrdal shared the 1974 “Nobel” prize “for their pioneering work in the theory of money and economic fluctuations” (among other things). But relatively few have read Myrdal’s main work on monetary theory, and even fewer realize that it was originally published, in German, for a 1933 volume that Hayek edited. Least well known of all is the fact that Hayek didn’t think much of Myrdal’s analysis at the time, and that he accepted it only as a last-minute substitute for one that Eric Lindahl was supposed to prepare. For that and other (mainly ideological) reasons there was no shortage of bad blood between the two men when they crossed paths again in Stockholm. Still, nothing could excuse Myrdal’s boorish behavior both during and after the event.

Having gotten all that off my chest, the fact remains that, whatever its flaws, Myrdal’s essay is well worth reading. Among other points, Myrdal argues — convincingly, I think — that “If one desires the greatest possible diminution of the business cycle, but at the same time wants a guarantee against too great, and especially unidirectional, price movements, which naturally affect distribution most severely, then one must try to stabilize an index of those prices which are sticky in themselves. This would often lead in practice to a stabilization of wages.” In this regard Myrdal’s argument anticipates some more recent New Keynesian arguments favoring a stable NGDP growth trend over a stable price level or inflation rate.

1963: Dennis Robertson. A Memorandum Submitted to the Canadian Royal Commission on Banking and Finance

For better or worse (the last, if you ask me), Keynes’s General Theory made a clean sweep of the field of monetary economics, brushing aside competing works, including the insightful contributions of Keynes’ s Cambridge colleague. Robertson’s popularity thereafter was largely sustained by his splendid little handbook on Money, first published in 1922 and revised and reprinted many times thereafter. That’s a shame, because Robertson’s less popular works on the same subject are full of brilliant insights, including some exposing fundamental errors in Keynes’s, if not in Keynesian, monetary theory.

Robertson’s “Memorandum,” which he completed in 1962 but which was not published until a month after his death in 1963, was his last important work on monetary economics. In it he asks “how a Monetary Authority should behave in a country which was isolated from the rest of the world, and in which it was desired so far as possible to leave the pace of capital formation to be determined by the unfettered interplay of the decisions of private enterprisers and savers.” His answer is that the authority’s aim should be to stabilize, not the general price level, but the economy’s “money flow,” meaning “the flow of monetary demand for final output.” Doing so, he argues, would better “enable the participants in the growth process — enterprisers, savers and hired workers — to realize their intentions with a minimum of friction and of distortion of the true significance of the monetary contracts which they are making with one another.”

1983: Charles Bean,  Targeting Nominal Income: An Appraisal

The monetarist counterrevolution, with its emphasis on targeting monetary aggregates, ultimately helped to inspire a new round of arguments for targeting nominal income, with contributions by James Meade (in his 1977 Nobel address), James Tobin, and Sam Brittan. Bean’s assessment of them is highly analytical, and in that respect at least especially “serious.” He concludes

that a policy of targeting nominal income is an optimal response to demand shocks and to productivity shocks if labour supply is inelastic. Even if labour supply is elastic nominal income targets will still produce a better response to productivity shocks than monetary targets if the price elasticity of aggregate demand is less than unity. Growth rules are less attractive than targets for the level of nominal income.

Given the quality of this early performance, it’s a shame that Bean chose to follow it up more recently with a far less compelling speech pooh-poohing recent arguments for targeting nominal GDP as so much “old wine in a new bottle,”  and otherwise attempting to suggest that, had it been pursued during the crisis, such targeting would not really have improved much on the U.K.’s inflation targeting regime. Why “less compelling”? Here’s an example: Bean at one point argues that, because “the financial crisis has led to a fall, possibly temporarily, in the underlying rate of growth of supply,” a given or “fixed” nominal income target would have gone “hand-in-hand with a higher inflation rate, whereas a fixed inflation target would [have been] associated with lower nominal income growth.” Quite correct; and had Bean stopped there he’d surely have been compelled to conclude, as he had in 1983, that NGDP targeting would have been the better option. But instead of doing so he continues: “But this hardly provides an argument in favour of a nominal income growth target. Indeed, in this case one would surely want to set the target growth rate for nominal income lower to reflect the lower rate of growth of supply, though by how much might be hard to judge.”

Huh? What? Here we see the dangers lurking in any comparison of alternative monetary policy norms that assumes (as Bean’s does here) that deviations from some target inflation rate belong in the monetary authority’s “loss function.” The whole point of NGDP targeting is that it allows supply-side developments, and adverse ones especially, to be reflected in higher prices or (in the case of a drop in the growth rate of productivity) a higher inflation rate. A central bank that sets a target for NGDP growth only to revise it in response to supply innovations so as to maintain a constant inflation rate is targeting inflation, not NGDP.

1989: Michael Bradley and Dennis Jansen, “Understanding Nominal GNP Targeting

Short, simple, and sweet: the framework is good old aggregate supply and demand, with diagrams and all. For a bonus, there’s a nice discussion of Ben McCallum’s NGDP Rule. Read this before you try to work your way through either Bean’s 1983 article or the New Keynesian works listed further on.

1992: William Niskanen, “Political Guidance on Monetary Policy

Although he’s mainly known for his contributions to the theory of bureaucracy, and to public choice theory more generally, Bill Niskanen, Cato’s long-time chairman, was an all-round original thinker. Nor did he neglect monetary economics, where his thinking led him straight into the nominal-spending stability fold. Like Robert Gordon before him, Niskanen differed from today’s Market Monetarists mainly in preferring a nominal “final sales to domestic purchasers” target to a nominal GDP target. (On the pros and cons of these alternatives, see this excellent Bill Woolsey post.)

2005: Jinill Kim and Dale Henderson, “Inflation Targeting and Nominal-Income-Growth Targeting: When and Why Are They Suboptimal?

Using “a model of a closed economy with optimizing firms and households, monopolistic competition in both product and labor markets, and one-period nominal contracts,” Kim and Henderson “derive optimal monetary stabilization rules and compare them to simple rules under both full and partial information.” Importantly, by “optimal rules” they mean, not simply ones that minimize an ad-hoc central bank “loss function,” but ones that “maximize the unconditional expected utility of the representative agent.” They find that, while none of the simple rules quite match up to the optimal rule, among them “nominal-income-growth targeting dominates inflation targeting for plausible parameter values.” They also find, not surprisingly, that “the more important are productivity shocks…the greater the advantage of nominal-income-growth targeting over inflation targeting.” There’s nothing new in these particular conclusions, which (as we’ve seen) many previous economists arrived at with relatively little algebra, or with no algebra at all. Still, formal models like this one may prove essential to winning  over those NGDP targeting doubting Thomas’s who believe nothing until they see it drop out of a fully-articulated macro model.[1]

2010: Evan Koenig, “The Case for Nominal Income Targeting

As Senior Vice President and Principal Policy Advisor at the Dallas Fed, Koenig is among a small number of Fed insiders who have added their voices to others drawing attention to the possible advantages of targeting nominal GDP. He starts this article by listing three “desiderata” of a monetary policy rule. These are (1) that the rule should avoid waste that might otherwise result from “sluggish” prices or wage rates and other “frictions”; (2) that it should maintain low and stable long-term inflation expectations; and (3) that it should promote financial stability.  He then proceeds to explain how a nominal GDP rule might achieve them all.

Concerning price and wage rigidities, Koenig’s argument is reminiscent of Myrdal’s: “If it is primarily money wages that are sticky, not product prices,” he observes, “then it will be optimal for monetary policymakers to try to avoid surprise changes in the market-clearing money wage and let product prices move up or down as needed to clear the labor and product markets.” Furthermore, “In an economy in which the principal real disturbances are shocks to productivity,” and “the income and substitution effects that productivity shocks have on employment are offsetting — a reasonable rough approximation — then the optimal wage policy is equivalent to targeting the level of nominal spending.” Koenig shows as well that “a nominal-income target for monetary policy distributes risk more efficiently across debtors and creditors than does a price-level target.” His overall conclusion is that “A level target for nominal spending…offers enough potential advantages relative to a simple price-level target that it deserves careful study.”

2014: Kevin Sheedy, “Debt and Incomplete Financial Markets: A Case for Nominal GDP Targeting

Sheedy’s very thorough and carefully-reasoned study is concerned exclusively with the task of identifying a monetary regime best suited to an economy that relies on fixed (“non-contingent”) nominal debt contracts. As such it takes up a theme first addressed in depth by Samuel Bailey 80 years earlier. Notwithstanding the passage of so much time, and Sheedy’s far more formal framework, his conclusion is essentially the same, namely, “that when debt contracts are written in terms of money, a monetary policy of nominal GDP targeting improves the functioning of financial markets.” Commenting on Sheedy’s work, James Bullard writes that it “has considerable potential to sharpen the ongoing debate on nominal GDP targeting, an idea that has not often had an explicit modern macroeconomic model behind it.”

2016: Julio Garin, Robert Lester, and Eric Sims, “On the Desirability of Nominal GDP Targeting

It’s nice to be able to conclude my survey with a paper written by my former colleague, Julio Garin, and two co-authors. As I observed in reviewing the paper by Kim and Henderson, theirs is only one of a number of papers that use sophisticated macro models to conclude that nominal GDP targeting beats most other simple monetary rules. Garin et al. “compare nominal GDP targeting to inflation and output gap targeting as well as to a conventional Taylor rule…on the basis of welfare losses relative to a hypothetical equilibrium with flexible prices and wages.” In other words, like Kim and Henderson, they don’t simple ask how NGDP targeting stacks up when it comes to stabilizing P or y or both — which isn’t the same thing.

Their findings? Although output gap targeting is generally ideal, nominal GDP targeting performs almost as well, and better than a Taylor rule. NGDP targeting is also a lot better than inflation targeting. Furthermore, it can even outperform output gap targeting if the output gap is observed with noise. Finally, the advantages of NGDP targeting over rival strategies increase as supply shocks become more pronounced, and in situations where wages are stickier than prices. If all this is starting to sound familiar, that’s called robustness.


That last remark compels me to conclude by answering a question that’s bound to  occur to many who have read this survey, to wit: if the theoretical case for nominal GDP targeting is so strong, why do so many monetary economists favor price-level or inflation targeting?

There are, I believe, two reasons. One is that these economists have tended to assume, implicitly or otherwise, a world in which (1) aggregate supply innovations, and innovations to total factor productivity in particular, are either non-existent or unimportant; and (2) factor prices are perfectly flexible or, at very least, more flexible than output prices. In such a world, nominal GDP targeting may not have any decisive advantage over price-level or inflation targeting, though it’s also unlikely to be any worse than either.

The other reason is that many monetary and macroeconomists treat fluctuations in the price level or inflation rate as bad per se, most commonly by treating them as arguments in central bankers’ “loss functions.” To say that this procedure lacks solid microfoundations is putting things mildly. A less temperate reply might be something like, “Who cares what central bankers like or don’t like? It’s peoples’ utility or welfare that matters.”

In short, if there’s a shortage of “serious” theorizing about what central banks ought to stabilize, it exists, not among proponents of nominal GDP targeting, but among those who continue to favor price-level or inflation targeting.


[1]  For all their intricacies, there’s at least one respect in which such fully-articulated macro models still fail to provide an adequate framework for assessing the advantages of inflation or price-level targeting relative to those of targeting nominal GDP. So far as I’m aware, no one as yet has constructed a version of such a model in which the responsiveness of actual nominal prices to shocks that alter those prices general equilibrium levels depends on the nature of the shocks in question. In contrast, numerous less formal writings allow, for example, that money prices are much more responsive to supply (unit cost) innovations than they are to changes in demand. This last fact tends to further strengthen the case in favor of a stable NGDP rule.

[Cross-posted from]

Now that some of the dust has settled from President Trump’s summit with North Korean leader Kim Jong Un, it’s worth taking stock of the politics surrounding it. As The Atlantic’s Peter Beinart points out, many Democrats and progressives have oddly decided to be staunch critics of the summit, harping on its limited achievements, the vague aspirations of denuclearization without concrete steps to get there, Trump’s bizarre obsequiousness in courting Kim, and this administration’s clear lack of preparation for such high-stakes diplomatic negotiations. These are all legitimate criticisms, by the way, but given how dangerously close the Trump administration came to potentially catastropic escalation only a few months ago (admittedly, a crisis of Trump’s own making), diplomacy, no matter how maladroit, is clearly preferable and should not be dismissed out of hand by those on the left.

However, the abject hypocrisy of the right is even more appalling. Republican Senate Majority Leader Mitch McConnell praised the summit as “an historic first step in negotiations.” House Speaker Paul Ryan articulated his “hope that the president has put us on a path to lasting peace in the Korean Peninsula.” Fox News host Laura Ingraham hailed  the summit as “like Gorbachev and Reagan,” to which Senator Lindsey Graham, who has argued for war and against diplomacy more often than most of his colleagues, approvingly replied, “Trump has done something no other president has done, he’s doing everything he knows how to avoid a war.” Graham went on to applaud Trump’s pledge to discontinue U.S.-South Korean military exercises: “this may be the last best chance in our lifetime for peace, and this is a bold move by the president.”

Those who follow politics in Washington, DC can see right off the bat how radical a departure all of this is from typical GOP talking points. It’s not hard to imagine the hysteria that would erupt if President Obama shook the hand of Kim Jong Un, praised the dictator’s leadership qualities, and sympathized with Pyongyang’s unease over U.S. military activities in Northeast Asia.

But to really get a flavor for it, behold this mashup of Fox News personality Sean Hannity, whose power to shape conservative views across the country should not be underestimated, railing against Obama’s nuclear diplomacy with Iran in 2013 while praising Trump’s summit with North Korea. Trump, Hannity says, “deserves a lot of credit for being willing to talk to somebody that everybody thought would be a bad idea,” adding that he sees “a lot of parallels between President Trump and Ronald Reagan.” But in 2013, he pilloried Obama’s diplomacy with Iran as “showing a lot of weakness” by “catering to the world’s dictators,” labeling Obama “literally, the Neville Chamberlain of our time.” 

Republicans and conservatives opposed diplomacy with Iran because, they said, America shouldn’t negotiate with enemies, we should batter them into submission. Now, they have apparently abandoned that principle. They also opposed the Iran nuclear deal on grounds that it was too narrow and failed to include non-nuclear issues, such as Iran’s regional behavior and its human rights violations. Now, with North Korea, they are singing a different tune. 

So far, North Korea has done little more than offer token concessions while keeping their nuclear and ballistic missile capabilities intact. By contrast, Iran forfeited 98 percent of its stockpile of enriched uranium, gave up thousands of operating centrifuges, acquiesced to severe technical restrictions on various aspects of their program for 10-25 years, and submitted to the most intrusive inspections regime in the world. And that was before they enjoyed a single day of sanctions relief.

It’s not just the GOP and conservative media that is shamelessly flip-flopping like a fish out of water. The Trump administration itself has had to engage in these contortions. Trump withdrew from the Iran nuclear deal on the basis that it was a weak giveaway to Tehran, though the likelihood of getting a more stringent agreement on North Korea is extremely remote. Secretary of State Mike Pompeo and National Security Advisor John Bolton each have a long pedigree of opposing negotiations with rogue states in favor of an uncompromising hardline approach. Now, apparently, not so much. Last year, the Trump administration obstinately rejected perfectly reasonable Chinese proposals for a “freeze-for-freeze” option with North Korea, in which, as a first-step to build confidence for negotiations, Washington would agree to suspend provocative military exercises with South Korea in exchange for Pyongyang halting its nuclear and missile tests. Now, that is roughly administration policy. 

Duplicity has always been a part of American politics. And, these days, we seem to be experiencing a truly unprecedented level of it under a president that tells outright lies as a matter of routine. The intensity of this particular moment in U.S. history can make the partisanship presented above seem mild and downright ordinary by comparison. But this kind of base dishonesty regarding core questions of war and peace makes it close to impossible to carry out foreign policy in a strategic way. I appreciate Republicans’ newfound support for diplomacy, but it is rather obviously a feature of their servile kowtowing to President Trump, not a considered position that can reliably outlast this brief moment.

The United States is remarkably insulated from foreign threats and has enormous leverage to engage in any negotiations with adversaries. Wherever and whenever diplomacy can reduce the risk of conflict, it should be pursued with confidence and vigor. Both parties must recognize the successes that peaceful engagement has yielded over the past half century of U.S. foreign policy, and the comparatively ruinous failures wrought by hardline militarism.

In unanimous decisions this morning, the Supreme Court turned away both partisan gerrymandering cases on grounds other than their ultimate merits – Gill v. Whitford (Wisconsin) by declaring the individual complainant to lack Article V standing arising from injury in his own district and sending the case back for him to establish that, and Benisek v. Lamone (Maryland) by finding it not an abuse of discretion for the lower court to deny a preliminary injunction, which does not mean the case will not be back at the regular injunction stage.

Neither decision reaches or resolves the main constitutional issues raised by the two cases, which both remain alive. As I mentioned in February, the Court had already signaled that it was not in a rush to resolve the issue right away (the calendaring was leisurely) and that Justice Anthony Kennedy was not going to prove an easy recruit for the four liberals. (He joined the conservatives in staying the Wisconsin decision below.) 

In the Wisconsin case, the majority held that the complainant needs to go back and demonstrate that his own district, and not merely others in the state, has been subject to “packing” or “cracking.” (The Maryland complainants had already made this kind of showing; they were suing over the lines of their own district, not the whole state map.) Justices Thomas and Gorsuch went further, saying the Wisconsin complainant’s failure to establish individual standing should have ended his case, rather than resulting in a do-over. 

In a concurrence on behalf of the four liberals, Justice Elena Kagan agreed on the need to send the case back for a showing of individual-district standing but emphasized that, in her view, once the complainant established that he could then introduce statewide evidence and seek statewide remedies. This would preserve more or less the full scope of what liberal litigation groups have been hoping to achieve with the Wisconsin case. Significantly, Justice Anthony Kennedy did not join the liberals on these points – although of course he could view the case as having been resolved without needing to reach such issues. Nor did the majority opinion, written by Chief Justice Roberts, concede Kagan’s assertion that courts “have a critical role to play in curbing partisan gerrymandering.”   

Whatever happens in the Court – and a North Carolina case could bring the issues back next term – there are good reasons for states to act on their own to curb the evils of partisan gerrymandering without waiting for marching orders from the nine Justices. Measures to take line-drawing out of the hands of self-interested incumbents, to prescribe strong standards of compactness and congruence with counties and other political subdivisions, to provide for transparency, open data access, and public map submission, and to ensure strong judicial review, make sense in themselves and do not require waiting on a Court that has shown a reluctance to decide. 

The Court has kicked the issue of partisan gerrymandering down the road. States shouldn’t. 

There is lots of talk from the Trump administration these days about how the U.S. is getting cheated on trade. In this context, they have done some cherry-picking of the data to emphasize high foreign tariffs, while conveniently ignoring high U.S. tariffs. For example, Trump will mention a 270% Canadian tariff on dairy products, without mentioning U.S. tariffs of up to 187% on sour cream. Or White House trade adviser Peter Navarro will mention EU auto tariffs of 10% and argue that those are much higher than the 2.5% tariffs for car imports to the U.S, but he won’t mention the 25% U.S. tariff on truck imports

So what’s the reality of tariff levels? The cherry-picking approach emphasizes particular products where tariffs are high, and as can be seen in the examples above there are still a few of these “tariff peaks,” including some imposed by the U.S.  But with so much variation on tariffs by product, an average tariff level is more informative. Unfortunately, it can be difficult to get an accurate picture of this (as discussed here). Here’s a sampling of a few countries and the EU (explanations to follow): 

  Simple Average (2016)
Trade Weighted Average (2016)
(World Bank)
Trade Weighted Average (2015)
New Zealand








































As you can see, the table has three categories of average tariffs. That’s because measuring tariff levels is not that easy and there are several different methodologies. The “simple average” in the first column takes all of the tariff levels set out in a country’s tariff schedules and averages them. But that figure can be misleading. For example, with some products, there might not be much trade even without a tariff in place, so counting a high tariff in the average is misleading.

The second and third columns – the first from the World Bank, and the second from the WTO and two other organizations, using different methodologies – look at tariffs applied on actually traded goods. But that can be misleading too, because a 100% tariff might eliminate all trade, and therefore a high, trade-retricting tariff would not show up in the figures.

The best approach I can see here is to provide both kinds of figures, which is what I’ve done in the table. Taking all of these tariff figures into account, it can be hard to come up with a precise ranking, but you can see that New Zealand and Australia are the low tariff leaders. The U.S., EU, Canada, Japan, and Switzerland come next, clustered closely together. Mexico has tariffs that are a bit higher. Then come China and Brazil with even higher tariffs.

One important point to note is that these are the generally applied tariffs, but some of these countries have FTAs with each other, under which special lower tariffs apply (the World Bank averages are the only ones that take into account lower FTA tariffs). For the U.S., that means NAFTA, under which almost all tariffs (dairy and peanuts, among others, excepted) are zero; the U.S. - Australia FTA; and various other FTAs.

The lower FTA tariffs lead to an important point. If you are on the Trump administration trade team, and you think foreign tariffs are too high, the solution is to negotiate trade agreements that lower them (in both directions). So far, unfortunately, that has not been their focus.

This week’s good news is that the East Antarctic Ice Sheet (EAIS), by far the world’s biggest ice mass, was largely intact during the entire Pliocene epoch.  The Pliocene was slightly less than three million years in length, and preceded the Pleistocene, the epoch of the ice ages.

The implications for human-caused warming from enhanced carbon dioxide are enormous.  The good news was published in the same issue of Nature that carried an article about the loss of slightly less than three trillion metric tons of Antarctic ice since 1992.

These things are best viewed in a larger perspective.  By itself, that ice loss would raise sea level by about a third of an inch, something probably impossible to detect with land-based tidal gauges.  But it was also likely somewhat balanced by the probability of enhanced snowfall over the continent thanks to a (very) slightly warmed surrounding ocean. But the melting of the EAIS would be apocalyptic, itself raising sea level by 175 feet.

Even though this seemed like a very remote possibility, we can now confidently say that human-induced climate change cannot make it happen.

Here’s why.

Global temperatures during the Pliocene averaged around 2-3⁰C higher than the 20th century average.  But the massive thermal inertia of Antarctica means it probably wasn’t that much warmer there.  Let’s be very conservative and say it was about one degree warmer.

The Pliocene heat load over the EAIS then becomes:

3,000,000 years X 1⁰ = 3,000,000 degree-years.

Now let’s also be conservative about how long human-induced climate change might last, say, 1000 years.  But again, climate change is attenuated over the vast ice-covered continent, so let’s posit we induce a global warming of 5⁰ (which is probably too large), and Antarctica warms half as much.

The maximum heat load over Antarctica then is:

1,000 years X2.5⁰ = 2,500 degree-years.

The Pliocene heat load was 1,200 times what humans could possibly exert on the EAIS, and it still remained largely intact.  Because of that, fears about the ultimate climate catastrophe can no longer even be entertained.

Former White House economist Gary Cohn expressed concerns yesterday that Trump’s tariffs would erode the benefits from tax reform. Since the on-again-off-again 25 percent tariffs on imports from China are—as of 3:23pm, Friday, June 15, 2018—“on again,” let me share this back-of-the-envelope analysis that shows why Cohn’s concerns are justified.

Certainly, the additional profits expected from the reduction in corporate rates from 35 to 21 percent could be entirely wiped out for the manufacturing sector. In 2017, according to Census Bureau data, the pre-tax profits of the U.S. manufacturing sector were $691 billion.  At 35 percent, the taxes on paper would be $242 billion.  At 21 percent, the average tax bill is $145 billion.  So, roughly speaking, the reduction in rates is estimated to be worth about $97 billion in terms of 2017 profits.

Well, in 2017, the value of U.S. goods imports was $2.33 trillion. Commerce Department data show that half of that value was comprised of intermediate goods (raw materials, production inputs, capital equipment)—the purchases of producers, not households. In other words, approximately $1.17 trillion of imports are U.S. costs of production.

If a tariff of, say, 10 percent were imposed on these imports, the cost of production for manufacturers would rise, roughly speaking, by $117 billion. That’s a $117 billion reduction in profits. Meanwhile, assuming foreign governments responded in kind and hit U.S. exports with 10 percent tariffs, manufacturing revenues also would take a hit.  U.S. exports of manufactured goods in 2017 amounted to $1.24 trillion.  Again, roughly speaking, that 10 percent tariff would reduce U.S. manufacturing revenues by $124 billion.  That, too, reduces profits.

The combined effect of the increased costs and reduced revenues comes to a $241 billion reduction in profits (a 35 percent reduction in manufacturing’s 2017 pre-tax profits). So, ceteris paribus, a 10 percent across-the-board tariff would reduce the U.S. manufacturing sector’s profits by about 35 percent.  With that kind of “downturn” in profitability, from where would the resources come to make capital investments, build new production facilities and R&D centers, and to offer new employment opportunities?

Let’s apply this ball park estimate to the actual situation on the ground. The tariffs Trump has already imposed or announced (steel and China tech products—leaving out aluminum, washers, and solar panels) subject $100 billion of imports to tariffs of 25 percent. The retaliation so far announced (by China, Canada, Mexico, and the EU) is commensurate—it will be approximately 25 percent on $100 billion of U.S. exports.  So, at the moment, $200 billion of U.S. trade is in the crosshairs.

But a new Trump investigation into the national security implications of auto and auto parts imports could add another $600 billion of trade to the mix—$300 billion of imports hit with 25 percent duties and $300 billion of retaliation. The president wants to get the investigation completed before the election in November, so we could be up to $800 billion of U.S. trade by year’s end.  (That’s 20 percent of all U.S. goods trade, by the way.)  

So, 25 percent duties assessed on $800 billion of trade, approximately half of which would be U.S. manufacturing inputs and U.S. manufactured exports comes out to a combined $100 billion hit on the sector’s profits (25 percent of $400 billion).  That eclipses the $97 billion gain from the corporate rate reduction.

While this is all bad news for the economy, I wonder whether the tax-reform advocates who held their noses and excused Trump’s trade transgressions because tax reform would make everything right will start to speak out. Paging Larry Kudlow, Steve Moore, and Art Laffer.






Would hate speech laws reduce discrimination, violence, and psychic injuries to vulnerable groups? Nadine Strossen says they would not in her new book, Hate Speech: Why We Should Resist It with Free Speech, Not Censorship. She believes we have insufficient evidence to conclude that “hate speech” in general harms others, and even less evidence that constitutionally protected “hate speech” does so.  

Naturally, proponents of “hate speech” laws blame expression for anti-social attitudes and conduct. Strossen maintains that we should refrain from censorship on the basis of expected effect, “simply because it might have bad effects.”  The perceived harmfulness of any given utterance is context contingent, depending largely on variables like location, tone of voice, relationship between speaker and listener, and personality characteristics.

Strossen draws attention to a study conducted by Laura Leets of Stanford University. Leets recruited Jewish and LGBT college students to read several anti-Semitic and homophobic slurs all drawn from real situations. The subjects then answered questions about how they would have responded if they themselves had been the targets of these messages. Interestingly, a common response by the students was that the “hate speech” would have had “no effect” upon them in either the short run or the long run. Many of the participants also expressed the belief that the speaker was motivated by ignorance, “and therefore should be the object of pity, not anger” (124).

A national survey of incoming first-year college students conducted by the UCLA Higher Education Research Institute found that “the entering freshman class of 2015 ranks among the most ambitious” in the areas of student activism, political and civic engagement. The study notes that this particular class of incoming first-years had witnessed “protests and outcries on college campuses and in communities” in response to “local incidents of bias and discrimination.” These students did not respond to “hate speech” and bias crimes with withdrawal and depression, but rather with engagement and dialogue. Such speech seems to foster political engagement within the larger community, a necessary component of a healthy democracy.

Although these studies focus on college students, Strossen notes that resources for developing one’s ability to resist the potentially negative effects of hateful speech are available to all. These tools include cognitive-behavioral therapy techniques for reducing anxiety or other negative reactions that might result from stressful situations (including exposure to “hate speech”), education about utilizing social media to respond to “hate speech,” and providing access to supportive organizations and other resources. Education and other responses may turn a negative experience into a hard-won moment in personal growth.

Strossen also addresses the question of whether “hate speech” fosters hateful and discriminatory attitudes and actions among those who hear it. She notes that “a comprehensive review of social science research about the potential links between media messages and audience behavior concluded that the effects on audience behavior are ‘weak and affect only a small percentage of audience members’” (127).

We should keep in mind that speech does not force people to act badly. Those who hear extreme utterances are responsible for their subsequent actions. British writer Kenan Malik remarks:

Racists are, of course, influenced by racist talk. It is they, however, who bear responsibility for translating racist talk into racist action. Ironically, for all the talk of using free speech responsibly, the real consequence of the demand for censorship is to moderate the responsibility of individuals for their actions.

If creators were held responsible for the anti-social acts that some individuals committed after viewing the material, “certainly neither the Bible nor the Qu’ran” would be safe, as “both have been accused of instigating countless individual and mass crimes” (128).

In summary, we should not outlaw speech because it might have bad effects. This approach would allow government to punish speech because it disfavors the speaker or the message without directly acknowledging this motive. Moreover, “given the endless array of speech about public concerns that could have such an impact, any other rule would largely muzzle democratic discourse” (127).


This the third post in series on Nadine Strossen’s new book, Hate Speech. The first and second posts may be found here and here.

In his Election Day tweet attacking Rep. Mark Sanford, President Trump declared that Sanford’s opponent, Katie Arrington, “is tough on crime and will continue our fight to lower taxes.” Well, maybe. She doesn’t mention either issue on her campaign website. (In fact, she has nothing but bland buzzwords about any issue.)

This tweet is typical. It seems like very time Trump tweets an endorsement or a criticism of a candidate, he calls the candidate “strong (or weak) on crime.” I count 60 Trump tweets since his inauguration that use the word “crime.” Some complain that he is being investigated for a “made up, phony crime” or charge Hillary Clinton with “many crimes.” But most seem to relate to a candidate: Dan Donovan is “strong on Borders & Crime.” Kevin Cramer of North Dakota is “strong on Crime & Borders.” Doug Jones is “WEAK on Crime.” Adam Laxalt is “tough on crime!” “Chuck and Nancy…are weak on Crime.” Ralph Northam is “weak on crime.” Also “VERY weak on crime!” “Keep our country out of the hands of High Tax, High Crime Nancy Pelosi.” And so on.

It’s not obvious that this makes political sense. Candidates aren’t talking much about crime, perhaps because they recognize the substantial decline in crime rates. In numerous Gallup polls over the past year, only 2 to 4 percent of Americans have identified crime as the country’s most important problem. Though about 50 percent of people say they worry a great deal about crime when asked that question directly.

But here’s the thing. Crime in the United States is in fact way down

Here’s a long-term look at the most visible crime, homicide:


Here’s a picture of broader crime rates:

And yet, as the same source illustrated, at the very time when crime rates had fallen steadily and substantially for 20 years, 68 percent of Americans said the national crime rate was getting worse. (Crime rates continued to fall after 2011, though there was an uptick in murders in 2015 and 2016. The rate appears to have fallen in 2017.)

Of course, the president is better informed than average Americans. Surely White House staff have explained the crime statistics to President Trump. So why does he talk about “this American carnage” and pound away at the “crime” issue when endorsing candidates who never talk about it? Perhaps it’s part of his continuing use of racially charged language. Perhaps “crime and borders” is just shorthand for the kinds of social change he thinks his voters fear. Or maybe it reflects the fact that he grew up in New York City during a time of sharply rising crime. We all get ideas in our youth (“American cars aren’t well made”) that may stick with us even us as the facts change.

Whatever the reason, it seems curious that he so often cites “strong and crime” as the reason to support political candidates who haven’t talked about crime.


Many of you are probably suffering from tariff fatigue right now. Every day, there is a new tariff in the news. Tariffs on Canada, tariffs on the EU, tariffs on China; tariffs on industrial products, tariffs on agricultural products; retaliatory tariffs by Canada, the EU and China; tariffs in effect today, tariffs going into effect soon. It’s hard to keep track of it all.

The latest is the announcement from USTR today of U.S. tariffs to be imposed on $34 billion of Chinese imports on July 6:

The Office of the United States Trade Representative (USTR) today released a list of products imported from China that will be subject to additional tariffs as part of the U.S. response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property.   

On May 29, 2018, President Trump stated that USTR shall announce by June 15 the imposition of an additional duty of 25 percent on approximately $50 billion worth of Chinese imports containing industrially significant technologies, including those related to China’s “Made in China 2025” industrial policy.  Today’s action comes after an exhaustive Section 301 investigation in which USTR found that China’s acts, policies and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory, and burden U.S. commerce. 

The list of products issued today covers 1,102 separate U.S. tariff lines valued at approximately $50 billion in 2018 trade values.  This list was compiled based on extensive interagency analysis and a thorough examination of comments and testimony from interested parties.  It generally focuses on products from industrial sectors that contribute to or benefit from the “Made in China 2025” industrial policy, which include industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles.  The list does not include goods commonly purchased by American consumers such as cellular telephones or televisions.

This list of products consists of two sets of U.S tariff lines.  The first set contains 818 lines of the original 1,333 lines that were included on the proposed list published on April 6.  These lines cover approximately $34 billion worth of imports from China.  USTR has determined to impose an additional duty of 25 percent on these 818 product lines after having sought and received views from the public and advice from the appropriate trade advisory committees.  Customs and Border Protection will begin to collect the additional duties on July 6, 2018.

The second set contains 284 proposed tariff lines identified by the interagency Section 301 Committee as benefiting from Chinese industrial policies, including the “Made in China 2025” industrial policy.  These 284 lines, which cover approximately $16 billion worth of imports from China, will undergo further review in a public notice and comment process, including a public hearing.  After completion of this process, USTR will issue a final determination on the products from this list that would be subject to the additional duties.

Trying to divine the Trump administration’s true intent with regard to all of its various tariffs is a challenge. One view is that the administration is just negotiating, and it believes it can get the best deal by threatening tariffs, as this will cause our trading partners to offer more in the negotiations. In this view, a threat of duties to be imposed on July 6 is supposed to induce China to make more significant concessions in the ongoing negotiations that have been taking place on the various trade practices noted by USTR above.

There’s not much evidence that negotiating trade agreements in this way is effective, especially with a larger economy like China. In fact, it may make a successful negotiation more difficult. Other countries have their own politics to deal with, and no foreign leader wants to look weak by caving it to American pressure.

Another possibility is that the administration thinks it is good policy for the U.S. to impose tariffs, and while they may talk about negotiations, their real objective is to have higher tariffs. They know others will retaliate, but they think the U.S. wins on balance, maybe in part because they think manufacturing is more important than anything else, and the U.S. tariffs tend to be on manufactured products and related inputs, whereas the foreign tariffs are often on agricultural products.

If this is the adminstration’s intent, the economy may be in for a bumpy ride. The quantity of the imports subject to all of the Trump administration’s various tariffs is getting large (and may get much larger soon if they impose tariffs on auto imports), and the negative impact on the economy may, as Gary Cohn has acknowledged, become apparent once all the tariffs are in effect (the tariffs could even erase the gains from tax reform).

Things are looking pretty bleak right now for U.S. trade policy. Congress could and should step in here, but that does not look likely at the moment. Retaliation by U.S. trading partners might get the administration’s intention, but as noted, the administration may see all the additional tariffs as a win. In the end, the costs of all this to the U.S. economy will become apparent. In the meantime, all Americans will pay a price for whatever it is the administration thinks it is doing.

House Republicans may have worked out a compromise bill between House GOP leadership, some conservatives, and some moderate Republicans that will come up for a vote next week. The compromise dooms an effort by moderates to force a vote on bipartisan legislation that had the most likely chance of passing the House and Senate (though only a slim chance of a presidential signature). The draft bill has leaked, and like any compromise, it is a real mixed 293-page bag. But on net, the bill would make the immigration system worse than it is right now.

Some Very Positive Elements

Indefinitely renewable status: On the positive side, the bill provides a legal status for DACA-eligible people that is indefinitely renewable under the same criteria as DACA itself (i.e. school attendance or high school graduation). This is actually more inclusive than the Dream Act in a way, which offers only a temporary status that imposes additional requirements to be met in order to receive permanent residency. That said, as explained below, this bill restricts the application pool in other ways to result in fewer applicants than other bills including the Dream Act.   

Pathway to citizenship for DACA population & legal immigrant Dreamers: Even better, the new legislation would provide a pathway to citizenship for some DACA recipients and some legal immigrant Dreamers who meet additional education and skill qualifications on top of DACA’s requirements (i.e. high school degree). No other piece of legislation so far has provided a pathway to citizenship that doesn’t discriminate against some legal immigrants. For some time, we have been nearly alone in advocating allowing legal immigrants in temporary status, such as children of H-1Bs, to apply for any pathway to permanent residency and citizenship. The fiscal and economic benefits of keeping these young immigrants—almost entirely highly skilled—in the United States are enormous. Unfortunately, as noted below, this pathway will help very few legal immigrant Dreamers.

Repeal of per-country limits: The draft would include provisions that would repeal the discriminatory per-country limits on employer-sponsored immigrants, while raising the limits for family-sponsored immigrants. The per-country limits prevent any single nationality from receiving more than 7 percent of the total number of green cards in any given year. The result is massive wait times for more populous countries, and no wait times for others. On the employer side, for example, Indian immigrants with advanced degrees who apply right now may never see their green cards in this lifetime. We have again led the way in championing this reform.

More employer-sponsored immigration: Employer-sponsored immigration will eventually get a boost of approximately 88,400 green cards. There would be an immediate increase of 65,000 with a subsequent increase of 23,400 in 2039. Increasing high skilled immigration is unequivocally positive for the U.S. economy and labor force. My colleague Alex Nowrasteh and I have advocated this reform for many years because it has massive fiscal benefits and will promote innovation and economic growth.

Many Bad Elements

Legal immigration cuts: The biggest problem with the GOP compromise is that it would slash legal immigration significantly. It would repeal provisions of immigration law that annually provide green cards to siblings (65,000) and married children of U.S. citizens (23,400). The cut would be partially offset by an annual increase of 65,000 on the employer-sponsored side, but the 23,400 green cards for married children would disappear. In addition, it would end the diversity visa lottery entirely, which makes 55,000 green cards available to nationals of countries that send few immigrants to the United States if they have at least high school degree.

The bill rebrands this banning of legal immigrants as a way to provide permanent status for Dreamers, reallocating the diversity visas (55,000) and the married children visas (23,400) to that purpose (as if God created only a finite number of green cards). But if the Dreamers don’t use the 1.6 million reallocated green cards over 20 years, the draft legislation would just delete the extras, which gives the lie to the claim that the reallocation is necessary to keep green cards at the same sacred level that we’ve had for almost three decades. While the 23,400 visas for married children would go to the employer-sponsored side in the 21st year and after, the 55,000 diversity visas would just be flushed forever.

The bill would make it much more difficult to receive asylum in the United States (below), likely halving the number of asylum seekers (from about 26,000 to about 13,000). All told, the GOP compromise would reduce legal immigration by about 1.8 million over two decades. Even if you count the Dreamers, it would still be a net reduction of likely about a million. This is about 9.1 percent cut to legal immigration. If you count the Dreamers, it would be about a 5 percent cut relative to what 2019 will be.

It makes no sense to cut legal immigration at a time when U.S. population growth is at the lowest level since the Great Depression, and the fertility rate has plunged to its lowest level ever recorded. GDP growth depends heavily on a growing population, and shrinking the labor force would shrink the economy proportionately. Family-sponsored and diversity immigrants are better educated than Americans, compounding the economic damage. Moreover, unlike employer-sponsored immigrants who are almost always in the United States working already when they receive permanent residency, family and diversity immigrants are new arrivals from abroad, meaning that there are much more severe implications for population growth as a result of keeping them out. Family-sponsored immigrants receiving permanent residency add to the existing population, while employer-sponsored immigrants receiving permanent residency are already part of it.

The United States is already one of the least generous countries in the world on legal immigration, and this bill would make America even less competitive than it already is.

Canceling legal immigrant applications: The reductions in legal immigration are even more perverse because they come at the expense of legal immigrants who have waited in line up to two decades for the ability to immigrate legally. The bill would terminate more than 3 million applications for family-sponsored visas. Implicit in the GOP compromise is that it would cancel these people’s applications in order to legalize legal and illegal immigrant Dreamers. The party that has routinely rejected “amnesty” on the grounds that it would be “unfair” to legal immigrants is planning to take away their ability to immigrate in order to give amnesty to illegal immigrants. This outcome is massively unjust, and it will inevitably result in more illegal immigration. Not only would those who now have no way to enter legally likely consider alternative avenues, but why would anyone else wait in the lines that remain if the U.S. government could simply throw up a “Closed” sign at any time years later?

Making asylum impossible for border crossers: Under a 1996 law, asylum seekers who come to the border must first prove that they have a “credible” fear of persecution in order to then apply for asylum. Asylum officers must assess where there is a “significant possibility” that an immigration judge will approve their claim. Rather than simply presenting a claim that is internally consistent, meets the requirements for asylum, and is otherwise credible, the compromise bill will now require them to prove their statements are “more probable than not” to be true.

The standard will effectively require asylum seekers to come with proof to the border, yet as I note in this longer article on the topic, we “simply cannot expect that asylum seekers who may have had to sneak out of their country of origin in the dead of night or swim across rivers to escape persecution will have sufficient evidence the moment they arrive in the United States to meet this burden.” As the Tahiri Justice Center, which serves women fleeing violence, has stated, the “heightened screening standard will, as intended, wrongfully prevent women and girls fleeing horrific violence from even presenting their cases in court.” Any provision that would have sent Jews—who often lacked documents—back to the Holocaust simply cannot be used as the standard for America today.

Very narrow pathway to citizenship: The pathway to permanent residency would apply to a very small share of immigrant Dreamers. In order to get the initial temporary status valid for six years, it would require applicants to be under the age of 37, and to have been physically present in the country 11 years ago (12 years by the time the plan is implemented). It would restrict the DACA population to those who have an income of at least 125 percent of the poverty line unless they were in school or taking care of a young child. It would exclude Dreamers who have ignored removal orders or skipped court hearings, even if they have lived in the United States for more than a decade. It would also require the payment of a fine of $1,000 for use in border security (which would not come close to covering the cost of the $23.4 billion in border security and wall funding provided in the bill).

In order to obtain permanent residency (a green card), Dreamers would have to meet a points threshold based on English language ability, education, work, and military service. In all likelihood, this bill would grant permanent residency to at most the same number of people who received DACA (700,000), excluding roughly 80 percent of all unauthorized immigrant Dreamers who entered the United States as children before 2017 (based on Migration Policy Institute’s estimate of that population).

The Wasteful Border Wall: The bill would spend $23.4 billion on border security, including $16.6 billion on a pointless border wall. For comparison, Border Patrol has spent just $65 billion in the last five decades combined. As I have written before, the border wall is not effective at reducing illegal immigration, and even if it was, it’s construction would result in the seizure of miles of private land without reasonable due process protections.

Bottom Line

There are so many other problems with this bill that they are impossible to list in one post. There is the unnecessary and costly biometric exit system, the fast-track deportations of unaccompanied children at the border back to violence in Central America, and much else. The pathway to citizenship is simply too narrow to make up for the dramatic restrictions that this bill would impose on legal immigrants and asylum seekers. The cancellation of applications by legal immigrants who have been waiting is massively unfair and undermines the integrity of the entire legal immigration system.

The Trump administration announced it will argue in federal court that ObamaCare’s preexisting-conditions provisions are unconstitutional. Supporters of the law, including many reporters, are beside themselves with glee. Republican fools! Everyone knows ObamaCare’s preexisting-conditions provisions are the most popular part of the law! (Democrats, crush them!!)

ObamaCare’s supporters have this one exactly backward. The law’s preexisting-conditions provisions are not popular. They are wildly unpopular. Supporters of the law believe they are popular – and have fooled even Republicans into believing the same – because they have been drinking a strong brew of economic ignorance, shoddy polling, and bad journalism.

In response to the Trump administration’s announcement, Kaiser Family Foundation president Drew Altman wrote:

Protections for people with pre-existing conditions are hugely popular, and the administration may have handed Democrats their strongest health care weapon yet — because now they can make the case that the administration has gone to court to take away protections for people with pre-existing medical conditions.

The case is also likely to drag on, so it could be the political gift that keeps on giving through 2020, even if it is eventually thrown out.

The Washington Post’s Paige Winfield Cunningham wrote:

The Trump administration has given Democrats a generous political gift
Preexisting conditions health coverage is very popular.

President Trump has given Democrats the political gift that Capitol Hill Republicans were too smart to grant them last year. And Republicans know all too well it could be disastrous…

Dismayed, top Republicans have been moving quickly to put space between themselves and the administration on the matter, anxious to distance themselves from such popular consumer protections…

Politicians and policymakers are well aware that preexisting protections [sic] poll extremely well with Americans. Seventy percent of respondents to a Kaiser Family Foundation poll last year — including 59 percent of Republicans — said the federal government should continue prohibiting insurers from charging these folks more for coverage.

Less smart than Capitol Hill Republicans? Them’s fightin’ words.

The reason Altman, Cunningham, and almost everyone else in Washington believe ObamaCare’s preexisting-conditions provisions are popular is because they conduct (in the case of Altman) and rely on (in the case of Cunningham) poll questions that ask only about the presumed benefits of those provisions–as if those provisions have only benefits, and no costs. Here is the Kaiser Family Foundation poll question both of them cite.

Bad Polling

The question basically asks whether respondents want the federal government to guarantee that sick people will pay no more for health insurance than healthy people pay. It asks only about the intended benefits of ObamaCare’s preexisting-conditions provisions: lower premiums for the sick.

Kaiser Family Foundation scholars from Altman all the way down to the lowliest research assistant, as well as seasoned health-policy journalists like Cunningham, know full well that requiring insurers to charge healthy and sick enrollees the same entails significant costs as well as benefits. And they know what those costs are. But while I have seen Kaiser Family Foundation polls ask respondents to offer opinions informed by both the benefits and the costs of a certain policy, I have never seen them do so with regard to ObamaCare’s preexisting-conditions provisions.

Fortunately, we at the Cato Institute have done so. The results may shock you! 

In 2012 and again in 2017, Cato scholars fielded surveys that sought to get a more accurate picture of public attitudes toward these provisions. On both occasions, we learned that when pollsters as voters about both the benefits and the costs of ObamaCare’s preexisting-conditions provisions, voters really don’t like them.  

Take our most recent series of poll questions, conducted last year. When we asked voters essentially the same benefits-only question the Kaiser Family Foundation asked, we got essentially the same response: 2-1 support for ObamaCare’s preexisting-conditions provisions. But when we asked whether voters would still support those provisions if they increased premiums or taxes, support flipped to opposition.

But those are not the only costs of those provisions. In this blog post at Health Affairs, I discuss research showing that ObamaCare’s preexisting-conditions provisions are reducing the quality of coverage for patients with many expensive conditions. Believe it or not, and even ObamaCare’s architects know this to be true, ObamaCare’s preexisting-conditions provisions provisions literally punish insurers who offer high-quality coverage for the sick.

When we asked voters if they would still support ObamaCare’s preexisting-conditions provisions if those provisions reduced quality, voters opposed those provisions by a 2-1 margin. That’s right: the impact ObamaCare’s preexisting-conditions provisions have on quality caused initial 2-1 support for those provisions to flip all the way to 2-1 opposition.

Good Polling

This huge swing occurs because the impact that ObamaCare’s preexisting-conditions provisions have on quality causes even Democrats to turn against them.

Have a look at the below chart. Unlike Republicans and independents, Democrats are willing to endure the higher taxes and health-insurance premiums associated with those provisions – but not reductions in quality, which cause 41 percent of Democrats to flip from supporting those provisions to opposing them.

More Good Polling

The polling that Altman conducts and Cunningham cites on ObamaCare’s preexisting-conditions provisions has almost no connection to the reality of how those provisions operate, and therefore paints a misleading picture of public attitudes toward those provisions.

More responsible polling suggests not only that these provisions are unpopular, but that Republicans could turn opposition to those provisions to their political advantage–if they learn how to talk about how those provisions affect quality.

In fact, I’m so confident that ObamaCare’s preexisting-conditions provisions are unpopular, I will bet Drew Altman $100 that if the Kaiser Family Foundation polls both the benefits and costs of those provisions, their poll will show those provisions are unpopular too. What do you say, Drew?

Every once in a while, something truly bizarre gets published in the climate business. The latest iteration would  be “Higher CO2 Concentrations Increase Extreme Event Risk in a 1.5°C World”, published online on June 12th in the prestigious Nature Climate Change by Baker et al.

The extreme events under consideration include

1) days hotter (less cold) in the summer (winter) than the 90th percentile of current temperatures at a given location,

2) a measure of atmospheric stickiness called the “wet bulb globe temperature”, expressed as  its 95th percentile for the amount of moisture in near-surface air at a given location, and

3) the 95th percentile rainfall on days when it rains.

The paper claims that carbon dioxide itself will “have a significant direct impact on Northern Hemisphere summer temperatures, heat stress, and tropical precipitation extremes”. That’s what it claims, but it is really not what it shows.

The problem is, as readers of these posts know, that the climate models are making horrific errors with regard to warming rates in the tropical upper troposphere. The difference between near-surface and upper temperatures determines whether and/or how much it rains.  When the difference is large, the surface air is more buoyant, and thunderstorms explode.  When it’s small, the atmosphere is more stable and dry.

So how could the authors find a “significant” impact on heavy tropical precipitation?  Simple, just sweep the error under the rug.  They took a model with the CO2 of the current era and subtracted its calculated precipitation  from other models with ranges of carbon dioxide changes consistent with a total warming of 1.5°C.

Yes. The modeled precipitation for the present, with all of its upper tropospheric errors (shown yet again below), was subtracted from the modeled precipitation for the more-CO2 models, with all of their upper tropospheric errors.

Hint:  subtracting two wrongs does not make a scientific right.

Figure 1. Predicted warming rates with height, expressed on the y-axis as atmospheric pressure. The colored spaghetti is the average of each model family listed on the right, the solid black line is the average of all the models and the actual (observed) values are within the ovals on the left. Models used in the recent paper include MIROC5 and a version of HadGEM2, both of which are far too warm at elevation in the tropics.

Let’s zero in on that “significant direct impact on…tropical precipitation regimes”.  Figure 2 e-f gives the change in the number of wet days above the 95th percentile.  A close squint reveals that the range of change is from about two more wet days per season to about two less.

As for the significance, the figure caption in Nature Climate Change, says there’s stippling on the maps when the change is significant at the 10% level (a very lax criterion by science standards).  There’s no stippling on the precipitation maps, meaning none of the forecast changes are significantly different than the present, despite what the paper says.

Figure 2. Top: change in number of hot days per season; Middle:  change in the “stickiness” temperature; Bottom:  change in number of wet days per season.  None of the precipitation changes (“e” and “f”) are significant, despite what the text says, and there is only limited significance in the other four maps, depicted by the stippling. Notice that the precipitation changes in the negative (orange)  direction (fewer heavy rain days) are about the same as those in the opposite (blue) direction. From Baker et al., 2018.

There are some stipples—but not many—on the maps for relatively warm days, and on the maps for sticky days. They concentrate in June-August over the Sahara Desert (which will have the profound effect of turning it into a desert) and Siberia, where warmth might be somewhat welcome there, both by the residents and the black flies.

You can scratch your head as to how the peer-reviewers of this manuscript would allow the abstract of the paper to boldly claim “significant” changes in wet days in the tropics when there were none.

The ubiquitous nature of these types of shenanigans—and it’s not just in climate science—is what prompted me, along with Cato Scholar Terence Kealey, to write and edit Scientocracy:The Tangled Web between Science and Public Policy, currently under editorial review.

In a 7-2 decision today, the Supreme Court struck down Minnesota’s blanket ban on wearing anything with a political insignia at a polling place. Chief Justice Roberts’s opinion agreed with many parts of Cato’s brief, particularly regarding the inherent unworkability of such a broad ban on political speech. The decision is a small but important victory for free speech.

In highlighting the unpredictability of the what counts as “political,” Chief Justice Roberts’s opinion cites one moment from oral argument that Supreme Court observers found particularly telling. When asked by Justice Alito whether the law would ban a shirt with the text of the Second Amendment, Daniel Rogan, counsel for Minnesota, said “I think that that could be viewed as political.” Alito then immediately asked whether the same would be true of a shirt with the text of the First Amendment. Observers in the courtroom laughed, and Rogan said “no your honor, I don’t think the First Amendment,” only to be interrupted by the Chief Justice, “No what, that it would be covered or wouldn’t be allowed?,” Roberts asked. “It would be allowed,” replied Rogan, but the Chief Justice seemed surprised, “it would be?,” he asked.

There’s a saying in Supreme Court practice that a case can’t be won at oral argument, but it can be lost. While Minnesota had a tough law to defend, but that exchange underscored the arbitrariness of the law. At a Cato forum in February, before the case was argued, I had a similar exchange with Ginger Anders of Munger, Tolles, and Olson, LLC when I asked her whether a Gerald Ford or a Ronald Reagan shirt would be banned. No to Ford, she said, but yes to Reagan.

So did Minnesota lose the case at oral argument? Roberts’s opinion goes almost out of its way to explain that bans on political expression in polling places are often valid, if not desirable:

Casting a vote is a weighty civic act, akin to a jury’s return of a verdict, or a representative’s vote on a piece of legislation. It is a time for choosing, not campaigning. The State may reasonably decide that the interior of the polling place should reflect that distinction.

From this language, it would seem that Roberts is writing to uphold the law. But “the State must draw a reasonable line,” he goes on to write, and “the unmoored use of the term ‘political’ in the Minnesota law, combined with haphazard interpretations the State has provided in official guidance and representations to this Court” mean the law should be struck down.

Every state and the District of Columbia have laws that prohibit certain types of speech around polling places on election day. If a state’s law provides specific enough standards for prohibited speech, then today’s decision won’t affect it. Those that let election judges make arbitrary distinctions, however, will likely be struck down.

This morning, the Supreme Court ruled 7-2 that a Minnesota law banning “political” apparel at polling places violates the First Amendment. This was ultimately an easy case, as it should have been all along, and this decision was predictable after oral argument.

Obviously voters shouldn’t be allowed to harass, intimidate, misdirect, or otherwise interfere with other voters – and politicking or electioneering can be disruptive, so there’s nothing wrong with restricting that. But merely wearing a “political” hat or T-shirt doesn’t do any of those things, which are covered by other laws anyway. As Cato argued in our amicus brief, a complete ban on political expression should be met with the most searching judicial inquiry, regardless of the setting.

In this time when the freedom of speech is becoming an increasingly controversial idea, the Supreme Court did well to remind us that the First Amendment protects expression even and especially when Americans go to vote.

To the surprise of no one, yesterday the Federal Reserve voted to raise interest rates.  Chair Powell, conducting his second FOMC press conference, was true to his reputation in giving direct, plainspoken answers to most questions. He described the economy as doing “very well”; and, when asked about the Fed’s natural rate of unemployment (known as the NAIRU in economics jargon), he replied the Fed “can’t be too attached to these unobservable variables,” rather than offer a long, technical explanation. Many of Powell’s answers affirmed his commitment to seeing to it that having the FOMC’s policy rate settings are data-driven.

One notable development was Powell’s announcement that, starting in January, all eight FOMC meetings will be followed by a press conference. Currently, the Fed Chair takes questions from the press only once per quarter, or after every other meeting.  Powell was quick to add that this change offered “no signal [for] policy rates,” and that it was being made only to improve communications.  However, those comments do not ring true. Since first lifting rates off their zero lower bound in December 2015, the FOMC has only raised rates during meetings that were followed by a press conference, also known as “live” meetings; and it’s now generally assumed that the FOMC will only adjust policy rates at a live meeting.  Internal pressure for adjusting this expectation was building. For example, new Atlanta Fed President and current FOMC voter Rafael Bostic considered the live meeting public expectation to be “a sign that what [the Fed is] doing right now isn’t working.” There were two options available that could convince the public and markets that policy rates could change at any meeting: one, the Fed could adjust rates at a meeting without a press conference or two, every FOMC meeting could be followed by a press conference. Chair Powell chose the second option.

A possible change that got only brief attention is that of having the Fed change its nominal policy target, which is currently a 2% inflation target. Although the FOMC discussed alternative targets late last year, Powell said that an actual change is neither on the calendar nor something he is looking at seriously right now.  Powell did nevertheless refer in his statement to “price level targeting and that sort of thing” as potential alternatives to the Fed’s current inflation target. (It’s not clear whether Powell sounded flippant because he didn’t think much of such alternatives or simply because he wanted to move onto the next question.) In my view a nominal GDP level target would be better than either the current inflation target or a price level target.

On Wednesday June 13 the Saudi-led military coalition launched an assault to seize Hodeidah, the site of Yemen’s main port. The port, currently held by Houthi fighters, is the primary channel through which humanitarian aid reaches millions of at-risk Yemenis, who have suffered from four long years of civil war.

The war has already taken a huge toll on Yemen. If the vital humanitarian aid delivered through Hodeidah is disrupted by a coalition assault, many more civilians could die.

The coalition had sought direct military assistance from the United States, which has provided weapons, intelligence, and logistical support throughout the war. The Trump administration declined, however, and encouraged the coalition to give the United Nations time for diplomacy. This remains the right approach. As tragic as the situation in Yemen is today, continued American support for military intervention is the wrong answer. Not only does the United States lack a compelling national security interest in Yemen, but by supporting the Saudi-led coalition the United States has contributed materially to the one of the worst humanitarian disasters of the 21st century. Further military support won’t improve American security, but it risks making things worse for Yemen.

American support of the Saudi-led war in Yemen has been spurred by two ultimately misguided arguments. First, Yemen is home to an Al Qaeda affiliate—Al Qaeda in the Arabian Peninsula—most famous for sponsoring the attacks on the office of the French magazine Charlie Hebdo and two failed attempts on U.S. soil by lone attackers in 2009 and 2010. But although the group certainly maintains an anti-Western ideology, like most terrorist groups its overwhelming focus is fighting for control of its own neighborhood. In addition, like most terrorist groups it is relatively small and has little ability to project power across long distances. It does not represent a big enough threat to justify a full-scale invasion of Yemen.

The second argument for supporting the war in Yemen is that both the Saudis and the United States view the Houthi rebels as Iranian proxies. Helping Saudi Arabia “manage” Yemen is thus seen as part of the broader campaign to limit Iranian influence. Yet it is Saudi Arabia, not Iran, that dominates the Middle East when it comes to defense spending. According to Jane’s Defense Budgets Report Saudi Arabia will spend roughly $50 billion in 2018 on defense compared to Iran’s $16 billion. Simply put, as a major player in the Middle East Iran may enjoy the ability to frustrate Saudi and American interests in Yemen and elsewhere, but it is no threat to become a regional hegemon anytime soon.

The reality is that neither the threat of terrorism nor the threat from Iran are significant enough to warrant the Saudi coalition’s intervention in the first place, much less the United States continuing to support the coalition.

Nor is there any assurance that a coalition military “victory” would put an end to conflict in Yemen. Conventional military campaigns are good for killing people, destroying infrastructure, and taking territory, but the United States has learned through painful experience in Iraq and Afghanistan that even America’s awesome firepower cannot create peace. Even worse, the destruction and chaos caused by military conflicts are often the crucible of new terrorist groups, as the emergence of the Islamic State after the invasion of Iraq showed. In short, neither the underlying causes of the civil war nor the sources of terrorism would be eradicated if the Saudis were to take control of Yemen tomorrow.

Last, but most fundamentally, American support for the Saudi-led intervention in Yemen puts the United States on the wrong side of international law and moral duty. Saudi airstrikes, carried out with American targeting and refueling support, have killed as many as 5,000 civiliansdisplaced millions, put millions more at risk of starvation, and led to history’s worst cholera outbreak, which itself has already caused thousands of deaths. The coalition air campaign’s lack of targeting discrimination led the United Nations to send war crimes investigators to Yemen. As long as the United States continues to support Saudi Arabia and the UAE, the United States must bear some responsibility for any war crimes being committed by the coalition and it must share in the blame for the tragic consequences. 

It is past time for the United States to stop supporting the war in Yemen. The Trump administration should tell the Saudi-led coalition not to launch an assault on Hodaideh. Further, the United States should make it clear to the Saudis that the coalition needs a plan to wind down the war. The U.S. and coalition emphasis moving forward should be on supporting the United Nations-led negotiations to convince the Houthis to cede control of the port to the United Nations and from there to brokering an end to the conflict. Given the tragic consequences of the war to date, diplomacy is the best next step.



I’ve blogged several times now about Cato’s ongoing campaign to challenge the doctrine of qualified immunity. This judge-made doctrine – invented out of whole cloth, at odds with the text of Section 1983, and unsupported by the common-law history against which that statute was passed – shields public officials from liability for unlawful misconduct, unless the plaintiff can show that the misconduct violated “clearly established law.” This standard is incredibly difficult for civil rights plaintiffs to overcome, because courts generally require not just a clear legal rule, but a prior case on the books with functionally identical facts. Not only does this doctrine deny relief to victims whose rights have been violated, but at a structural level, it also erodes accountability for government agents (especially law enforcement).

I’m thrilled to report, however, that in the last 36 hours, we’ve had three promising developments in this front:

First, in a Section 1983 case in the Eastern District of New York, Judge Jack Weinstein denied qualified immunity to police officers alleged to have beaten up a man after he refused to allow them to enter his home without a warrant. His comprehensive opinion not only denied immunity in this case, but also discussed recent criticisms of the doctrine, both on legal and policy grounds, and suggested that the law “must return to a state where some effective remedy is available for serious infringement of constitutional rights.” Judge Weinstein thus joins other lower court judges, like Lynn Adelman of the Eastern District of Wisconsin and Jon O. Newman of the Second Circuit, who have criticized the Supreme Court’s qualified immunity jurisprudence. Lower court judges are, of course, obliged to follow Supreme Court precedent with direct application, but this is exactly the kind of criticism and commentary that can help explain to the Court why that precedent should be reconsidered.

Second, Joanna Schwartz, a law professor at UCLA, has just put up on SSRN a forthcoming article in the Notre Dame Law Review, titled The Case Against Qualified Immunity. Professor Schwartz previously published an influential article in the Yale Law Journal called How Qualified Immunity Fails, which empirically demonstrates how the doctrine of qualified immunity is failing to achieve its professed purposes. But her latest piece weaves together the legal, historical, and prudential arguments against the doctrine, and argues that the Supreme Court can and should reconsider it. We know that the Supreme Court pays attention to scholarship in this area, as both Justice Thomas and Justice Sotomayor have recently cited Will Baude’s article Is Qualified Immunity Unlawful?, so I have every expectation that Professor Schwartz’s comprehensive broadside will likewise be taken seriously by the courts. (Professor Schwartz is also blogging about her new article at the Volokh Conspiracy this week.)

Third, this morning the Supreme Court ordered a response to the cert petition in Allah v. Milling, which explicitly asks the Court to reconsider the doctrine of qualified immunity. This is the case I recently blogged about, and in which Cato filed an amicus brief, where a pretrial detainee was kept in extreme solitary confinement for nearly seven months, for no legitimate reason. Although every single judge in his case agreed that Mr. Allah’s constitutional rights were violated, a split panel of the Second Circuit granted qualified immunity to the prison officials, simply because there was no prior case holding that the “particular practice” used by this prison was unlawful. The case is an ideal vehicle for the Court to reconsider the doctrine of qualified immunity, because there are no disputed facts, and Mr. Allah has already won a judgment at trial, so the outcome turns solely on the legal question of whether the defendants should get immunity for their unlawful misconduct.

“Calling for a response” doesn’t necessarily mean that the Court is going to hear the case, but it’s a sign that they’re looking at it closely. The defendants in this case tried to waive their right to respond to the cert petition (a common practice, because respondents want to avoid signaling that the case is important), but the Court basically said “no, this is important enough that we want to hear your argument about why we shouldn’t take the case.” The defendants will therefore be required to put forward actual legal justifications for qualified immunity – so we’ll see what they come up with. The response is due July 11th, and Mr. Allah will then get the chance to file a reply, so I’ll be sure to cover those briefs when they come in.

Overall then, the fight continues, but we’ve got some promising signs of real progress.

The Departments of Justice and Homeland Security (DOJ/DHS) will be publishing a quarterly report on immigrant incarceration in federal prisons because of an Executive Order issued by President Trump last year.  The most recent report found that 20 percent of all inmates in federal prison are foreign-born and about 93 percent of them are likely illegal immigrants.  Since immigrants are only about 13.5 percent of the population and illegal immigrants are only about a quarter of all immigrants, many are misreading it and coming away with the impression that foreign-born people are more crime-prone than natives. 

That is simply not true.

This new DOJ/DHS report only includes those incarcerated in federal prisons, which is not a representative sample of all incarcerated persons in the United States.  Federal prisons include a higher percentage of foreign-born prisoners than state and local correctional facilities because violations of immigration and smuggling laws are federal offenses and violators of those laws are incarcerated in federal prisons.        

The report itself almost admits as much with this important disclaimer: 

This report does not include data on the alien populations in state prisons and local jails because state and local facilities do not routinely provide DHS or DOJ with comprehensive information about their inmates and detainees—which account for approximately 90 percent of the total U.S. incarcerated population.

There is much better information on immigrant incarcerations in other formats.  My co-author Michelangelo Landgrave and I recently released a Cato brief that estimates incarceration rates by immigration status in federal, state, and local correctional facilities.  We used a standard statistical technique known as the residual method to identify illegal immigrants in the incarcerated population in the American Community Survey in 2016.  We found that if illegal immigrants are 47 percent less likely to be incarcerated than native-born Americans and legal immigrants are 78 percent less likely to be incarcerated than natives.  The results reported in our recent brief are similar to our other research into immigrant incarceration and conviction rates as well as the peer-reviewed academic research.

The evidence that legal and illegal immigrants are less likely to be incarcerated, convicted, or even arrested for crimes is so overwhelming that even immigration restrictionists like Mark Krikorian at the Center for Immigration Studies admit that, “A lot of data does suggest immigrants are less likely to be involved in crime.”

Crime data in the United States is poor, especially how it relates to details about the immigration status of the offenders.  There is no good reason for a dearth of data on this topic.  Thus, improving the quality of crime and immigration data is important so that we can better understand the relationship between immigration and criminality.  Unfortunately, the new DOJ/DHS report does not help because the information it presents is of a non-representative subsample of the entire incarcerated population, the title of the report strongly suggests that it reports all incarcerations rather than just those in federal correctional facilities, and this information is already available.    

Moderate House Republicans may force a vote on immigration this month. The resolution that could do so would require House leadership to bring to the floor the Securing America’s Future (SAF) Act with the opportunity to provide four amendments “in the nature of a substitute,” meaning that the amendments would effectively be replacement bills. The resolution specifies that the four amendments will be offered by:

  1. SAF Act (H.R.4760) sponsor Rep. Bob Goodlatte (R-VA);
  2. Dream Act sponsor (H.R. 3440) Rep. Lucille Roybal-Allard (D-CA);
  3. House Speaker Paul Ryan (R-WI) who has not sponsored or cosponsored any legislation on the issue but could use the Recognizing America’s Children (RAC) Act (H.R. 1468) that has proven most popular among moderate Republicans; and
  4. USA Act (H.R. 4797) cosponsor Rep. Jeff Denham (R-CA).

The table below compares these proposals.

Table: Pathways to Status & Citizenship Under House Bills and DACA

Summary of Pathways

Securing America’s Future Act (H.R. 4760)

The SAF Act is the dominant choice among House Republicans on the right with 97 Republican cosponsors and no Democrats. It is also the stingiest of the pathways, legalizing the fewest people and providing the worst status at the highest cost. It maintains the same basic criteria as DACA, which was created six years ago by an act of prosecutorial discretion and never intended as a blueprint for permanent legislative reform. In addition, it requires that the immigrants already be enrolled in DACA, meaning that anyone who was too young to apply, couldn’t afford to apply, or was otherwise unable to apply or renew would be excluded. Like DACA, the bill caps the age of applicants at 37 and requires more than 11 years of residency, and the status in the bill is temporary (3 years) and must be renewed. It will not lead to permanent residency and citizenship, and it prohibits them from applying for permanent residency if they crossed the border illegally.

In addition, it adds many new obstacles to legal status, including a minimum income requirement and other bars to status. If they violate any conditions of status such as school enrollment or work, the bill provides that they can be criminally prosecuted. By requiring an in-person interview, the repayment of certain lawfully obtained tax credits, and the payment of a $1,000 fine to go to border security, the cost of obtaining and maintaining status in the bill would be much higher than DACA. Cost has already prevented many Dreamers from applying for DACA, and this bill would give them just one year to apply (the other bills don’t limit the time to apply). This pathway is likely to exclude many DACA recipients. Because the status is temporary, these costs would escalate over time.

It is important to note that the rest of the bill reduces the number of green cards—permanent legal immigration—by almost 40 percent, making it more difficult for Dreamers to receive legal permanent residency from the normal immigration channels, and it would spend more on border security in 5 years than in Border Patrol’s history.

The Dream Act (H.R. 3440)

The Dream Act is the dominant choice among Democrats with 197 Democrats and just six Republicans as cosponsors. This bill is the most expansive pathway, legalizing the most people and providing the best status at the lowest cost. It expands the criteria for DACA to anyone who arrived at age 18 or under (compared to 16) who arrived more than 4 years ago (rather than 11 years). It would remove DACA’s maximum age limit, allowing those older than 37 to apply. The Dream Act also allows immigrants in Temporary Protective Status to apply. It would waive state or local criminal offenses related to one’s immigration status (such as driving without a license). 

In addition, the Dream Act provides for a pathway to permanent residency and citizenship for Dreamers. In order to receive permanent residency, Dreamers would have to have worked for 3 years, attended college for 2 years, or worked for the military for 2 years. They would also have to pass the naturalization exam, showing that they have a knowledge of U.S. history and are literate in English. Dreamers would have eight years to complete these requirements. It contains no changes to legal immigration or border security.

Recognizing America’s Children Act (H.R. 1468)

The RAC Act is the dominant choice among moderate Republicans with 34 Republicans and one Democrat as cosponsors. RAC is more restrictive than the Dream Act, but much more open than the SAF Act. It would reduce DACA’s minimum presence requirement to 6 years and 6 months of residency (before January 1, 2012) from 11 years under DACA, and it opens enrollment up to Dreamers older than 37. It would also allow those too young to be in high school to apply, which is better than the Dream Act, and it would let some legal immigrant Dreamers in E-2 nonimmigrant status to apply—also an improvement on the Dream Act.

RAC would also provide a pathway to permanent residency and citizenship, but to a smaller segment of the Dreamer population than the Dream Act. It would require that Dreamers graduate college, work for 48 months, or work for the military for 3 years in a five-year period to extend their conditional status for another 5 years. They would then have 5 more years to complete the requirements for naturalization in order to receive permanent residency: demonstrate proficiency in English and knowledge of U.S. history.

The USA Act (H.R. 4797)

The USA Act is the only bipartisan legislation with 30 Republicans and 30 Democrats as cosponsors. The USA Act maintains similar criteria to the Dream Act, but would require 4 years and at least 6 months of residency (before December 31, 2013) compared to 4 years for the Dream Act. Like the Dream Act, it would allow anyone who arrived before age 18 to legalize (compared to 16 for the other bills). It would also allow some TPS recipients to benefit from its provisions.

Also like the Dream Act, the USA Act has a generous pathway to legal permanent residency and citizenship on the same terms: 2 years in college, 3 years working, or 2 years in the military. Like the SAF Act, it does attach some border security measures, but unlike that bill, the measures are modest and relatively inexpensive. It also makes no changes to the legal immigration system.

Potential Beneficiaries

The Migration Policy Institute (MPI) has produced  estimates of the potentially eligible populations for the permanent residency under the Dream Act (1.7 million), the RAC Act (1.4 million), and the American Hope Act (3.6 million). The American Hope Act would provide a pathway to citizenship for all noncriminal immigrants who entered as minors before 2017, regardless of education level, so this estimate effectively provides the total Dreamer population in the United States. MPI has not analyzed the SAF Act or the USA Act, but the USA Act is almost exactly the same as the Dream Act (just requiring a few more months of residency). The SAF Act would cover only those with current DACA permits, about 700,000. But it adds a minimum income requirement and a large number of other restrictions that would reduce this number considerably.

Thus, no plan currently under consideration for debate under the discharge petition would, even in theory, provide a pathway to citizenship for a majority of Dreamers. In practice, as I’ve noted before, some portion of the potentially eligible populations will not apply due to financial limitations or other reasons. 

The Federal Reserve plans to review its inflation growth rate target and potentially select a new monetary policy target. Many Fed officials are in favor of the idea, including Chair Powell. And the latest FOMC minutes show that the Fed’s policy setting committee has discussed new targets.

This is good news, because inflation rate targeting suffers from serious shortcomings. With a growth rate target, a central bank writes off past errors. Instead of deliberately correcting those errors, it “lets bygones be bygones,” allowing its mistakes to permanently alter the value of its policy target. For example, the Fed has persistently undershot its 2% inflation target since adopting it in January 2012. Because it does not plan to atone for this prolonged period of undershooting the price level will forever remain below its original target path, at least so far as deliberate Fed actions are concerned.

Successful price level targeting requires, on the other hand, that the central bank make up for past mistakes. Monetary policy is successful if the price level returns to the trend line it was growing along before the undershooting occurred. This makes the future course of the price level easier to predict. Inflation growth rate targeting cannot match this degree of predictability because its policy errors permanently change the long run price level, making the future path of the price level more like a random walk.

Improved price level predictability is one of the reasons that several Fed officials have discussed the benefits of adopting a price level target. For example, John Williams, who will take over as President of the New York Fed and become Vice Chair of the FOMC next Monday, argues that a price level target would offer an increased level of predictability over inflation rate targeting by better indicating where prices will be 5, 10, even 30 years into the future. Williams also believes, rightly, that this predictability would make future Fed policy more transparent to the public.

Richard Clarida, Vice Chair-elect at the Federal Reserve Board, has also suggested implementing a price level target. He made the suggestion back in 2014 because he was concerned that the Fed lacked the ability to credibly communicate the future path of policy absent a level target. At the time, the Fed was following the Evans Rule, a promise to leave interest rates at the zero lower bound until either inflation was above 2.5% or the unemployment rate was below 6.5%. Clarida saw that these thresholds were not enough to anchor the public’s expectations going forward. He feared that so long as the public’s expectations remained insufficiently anchored, the Fed would continue to struggle to meet its policy target.

In his most recent speech, the Atlanta Fed’s new President, Rafael Bostic, also endorsed a price level target as an alternative to the Fed’s current inflation rate target. Like Williams and Clarida, Bostic believes that price level targeting would have performed just as well as inflation rate targeting throughout the Great Moderation, and that it would have been superior to it since the Fed adopted an explicit inflation target in 2012.

While Fed officials are right to believe that price level targeting can improve upon inflation rate targeting, they fail to consider the shortcomings of either alternative in the presence of supply shocks. A price level target (to refer only to the better of these two options) may be optimal in the absence of such shocks, but in their presence it makes monetary policy procyclical.

Consider the case of a negative supply shock. A sudden fall in the global production of oil would likely push up domestic gas prices, which would in turn raise the price level. Such a rise would be a signal to the Fed to tighten monetary policy. Yet, tighter monetary policy would provide no relief to the economy in such a circumstance. Tighter policy would put further downward pressure on an economy whose consumers already feel constrained by higher prices because of the oil shock. Only if the rise in gas prices was the result of excess aggregate demand, something likely caused by over-easing by the Fed, would tighter monetary policy be appropriate.

Positive supply shocks can likewise have procyclical consequences. Were the United States to see a (welcome) improvement in productivity the inflation rate would tend to fall. After a short period with the lower inflation rate the price level would still be rising but be below its target path. Under a price level target, the Fed would respond with easier monetary policy in an effort to raise the inflation rate and bring the price level back up to its path. But prices falling because products are made more efficiently is a gain for consumers, who ought to enjoy lower prices on those products. Trying to raise the overall price level in an effort to “combat” these productivity gains should hardly be part of a central bank’s policy and could risk overheating the economy.

In short, the tendency of a price level targeting central bank to respond to positive supply shocks in the same way as it responds to negative demand shocks, and to respond to adverse supply shocks in the same way as it responds to positive demand shocks, is a recipe for trouble. To their credit, both Bostic and Williams discuss implementing a “flexible” price level target, one that could be adjusted to changing economic circumstances. Such flexibility would allow the Fed, at least in theory, to avoid procyclical monetary policy during supply shocks by allowing the price level to change.

But flexible price level targeting is really just a more ad-hoc, and therefore less robust, version of a nominal GDP level target. Nominal GDP is the overall size of the economy uncorrected for inflation, so nominal GDP growth is essentially the sum of the real growth rate and the inflation rate. Under a nominal GDP level target the central bank would be stabilizing overall spending, thereby automatically and systematically doing what flexible price level targeting is supposed to accomplish with less risk of implementing procyclical monetary policy.

Reconsider the previous example when the inflation rate tends to fall during periods of improved productivity, except now the central bank has a nominal GDP level target. With the inflation rate falling the price level would fall below its previous trend, but that decline would not elicit any procyclical response from the central bank.  Under a nominal GDP level target the central bank only responds velocity shocks.  The central bank would adjust the money supply to offset velocity shocks, in an effort to stabilize overall spending and keep nominal GDP growing on its trend.

Because it focuses the central bank’s response function on one variable, changes in velocity, a nominal GDP level target is the best target for monetary policy.  On the other hand, a price level target, and its advocates fail to fully account for this, obligates the central bank to react to changes in velocity and changes in aggregate supply.  A nominal GDP level target offers the same degree of predictability as a price level target, but has the additional advantage of being robust to supply shocks, precisely because it allows the price level to change. Under a nominal GDP level target, the chances of the Fed being procyclical during a downturn and amplifying the contraction would be greatly reduced.

Price level targeting proponents are right to believe that it is superior to inflation rate targeting because it corrects the bygones problem, improving the Fed’s performance by making the price level more predictable. However, a price level target is the ideal only in a world without supply shocks. With supply shocks, a central bank with a price level target would too often act in a procyclical manner. A “flexible” price level target is certainly a better option than a strict price level target. But it would only be the best available option if it were so “flexible” that it amounted to nothing other than a nominal GDP level target.

Fed officials are making the right decision to rethink the current inflation rate target. For that review to be successful, they should thoroughly consider, but ultimately reject a price level target. Instead, they should listen to a growing number of economists discussing the best option: a nominal GDP level target.

[Cross-posted from]