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The recent deaths of ten illegal immigrants in San Antonio, Texas are a gruesome example of the human costs of severe immigration restrictions. The immigrants wanted to be smuggled into the United States and, presumably, paid somebody for that service. They had no way to enter lawfully because the United States government allows in few temporary migrants to work in a handful of occupations and there is essentially no green card category for low skilled workers. Many of these people face the choice of continued poverty in their home countries or taking a risk at a better life working in the American black market. Attempting to work in the United States is risky and sometimes leads to deaths because of immigration enforcement and more enforcement will result in more deaths. 

These immigrants did make the choice to break American immigration laws but it does not follow that they are the ones to blame for their own deaths, despite what some restrictionists think. Immigration laws are primarily designed to stop Americans from voluntarily hiring, contracting, or selling to willing foreigners. If the immigration laws were concerned primarily with protecting the rights of Americans and those illegal immigrants who died in the Texas heat intended to do harm, had serious criminal records, or there was another excellent reason to think they would have hurt people here, then their deaths could be a defensible cost of a rational system that does more good than harm. At the very minimum, one could claim that the law that incentivized them to enter the black market at great risk was intended to protect people. But nobody familiar with our immigration laws or the net-positive effect of immigrants on Americans can make that argument with a straight face. These illegal immigrants died because of an international labor market regulation.    

Those who die from the heat in shipping containers are only a fraction of all deaths crossing the border. From 1998 through the end of 2016, 6,915 people died crossing the Southwest border. The number of deaths is somewhat up over that time even though the number of apprehensions is way down meaning that the inflow of illegal immigrants does not primarily drive the number of deaths (Figure 1). 

If the number of border crossers doesn’t determine the number of deaths, what does? We have a clue in the fact that the number of apprehensions per border death is way down from about one death for every 6,000 apprehensions in 1998 to about one death for every 1,000 apprehensions in 2016 (Figure 2). That means it is much more dangerous. A greater proportion of border crossers die as the number of Border Patrol agents increases which is evidence that more immigration enforcement leads to more deaths.

Figure 1

Border Deaths and Apprehensions on the Southwest Border

  

Source: Customs and Border Protection.

Figure 2

Apprehensions per Death and Border Patrol Agents

Source: Customs and Border Protection.

This is not surprising as research shows more border enforcement leads to more smuggling and higher smuggling prices – both of which increase the riskiness of crossing and, for instance, dying in a shipping container in the Texas summer. 

The government’s primary means of halting illegal immigration is through deterrence – creating so much fear in the minds of would-be illegal immigrants that they do not even try to enter. However, deterrence does not work on everybody. One effect of so much deterrence is that some people try different and riskier ways of entering the United States, such as in a shipping container in the Southwest in the heat of summer. The result is more danger and more death. 

Those extra deaths, tragic as they are, might be worth it if the immigration laws save more lives in the United States by preventing criminals or terrorists from entering – but they clearly do not, and few serious people are trying to make that case. The deaths of people who mean no harm to others is a predictable result of immigration laws intended to protect the American labor markets, culture, or the other justification de jour. It’s time that people start weighing human cost when considering legal reforms.

“Fed Up” is the name of a progressive initiative that describes itself as a coalition of “community-based organizations, labor unions, policy experts, and faith leaders…united in our call for a strong economy that works for everybody and a more transparent and democratic Federal Reserve.” Its main organizer is the Center for Popular Democracy, with support from the AFL-CIO, and the Economic Policy Institute, among others.

Fed Up has two main causes. First, it raises an important issue when it questions the current governance structure of the regional Federal Reserve Banks. Ironically, while it calls for greater diversity of backgrounds among FRB directors, Fed Up never seems to notice that FRB presidents are today the main source of diversity of thinking on the Federal Open Market Committee. Between 1995 and 2013, Dan Thornton and David Wheelock have found, “there were just two dissents by governors compared with 67 by presidents.” Since 2006 there have been zero dissents by members of the Board of Governors.

Fed Up secondly offers advice to the Federal Open Market Committee, the monetary policy body whose voting members consist of the Board of Governors plus a rotating subset of Reserve Bank presidents. It urges the FOMC to pursue a secularly more expansionary monetary policy, in the erroneous hope that this would bring greater prosperity to workers. In its wishful view “The Fed should target real wage growth that is higher than economy-wide productivity growth, in order to combat inequality and boost workers’ share of income.”

To say that “the Fed should” do x is to imply that the Fed can do x. Regrettably, however, the Fed has no policy tool with which to target real wage growth. Nor does any agency have a tool to raise real wage growth above productivity growth. The Fed can print money faster, which generates higher inflation, but this does not sustainably increase real wages or employment. The Fed cannot improve the productivity or demand for labor by generating 4% or 5% rather than 2% inflation in the long run. (Raising inflation even further to double digits would clearly harm workers by deranging economic coordination).

Nor does faster money growth sustainably lower the real interest rate. It is an elementary proposition of monetary theory that the real interest rate is independent of monetary policy in the long run. Faster money growth only raises inflation and thereby the nominal interest rate, which is determined by the real interest rate plus the expected inflation rate. For the Fed to secure lower nominal interest rates in the long run it must lower the inflation rate, and so must pursue a less expansionary monetary policy.

In June, Fed Up organized and published a letter calling on the Fed to commit explicitly to higher inflation by raising its official inflation target above the current 2% rate. Twenty-two professional economists signed the letter, including Nobel laureate Joseph Stiglitz; former Minneapolis Fed President Narayana Kocherlakota; and several former Obama administration economists. Prominent academic signers included Justin Wolfers, Laurence Ball, and Brad DeLong. The letter can be read in its entirety here.

The letter’s argument does not turn on the above-mentioned confusions between nominal and real variables, or confusions between short-run and long-run effects of monetary policy. On the contrary, it implicitly rejects them. Its argument is more sophisticated: two percentage points in higher secular inflation, by raising the secular nominal interest rate two percentage points farther above its zero lower bound, would allow the Federal Reserve temporarily to reduce the real interest rate (the nominal rate minus the given inflation rate) by two more percentage points when it lowers the nominal rate to zero in a recession. The Fed would thereby be able to deliver more stimulus.

Kocherlakota spelled out the logic in a blog post:

The inflation target helps define how much stimulus the Fed can deliver when it lowers interest rates to zero (a boundary below which the central bank has been unwilling to go). In a higher-inflation environment, a nominal fed funds rate of zero results in a lower real, net-of-anticipated-inflation rate — the rate that economists typically see as most relevant for consumer and business decisions. If, for example, people expect inflation to be 3 percent, then a zero nominal rate translates into a negative 3 percent real rate — a full percentage point lower than the Fed could achieve if expected inflation were 2 percent. Experience suggests that the Fed could use the added ammunition.

Or as David Beckworth and Ramesh Ponuru boiled down the argument: “During a recession, central banks usually cut interest rates in order to stimulate the economy. The higher the interest rate is at the start of the recession, the more they can cut it.”

Kocherlakota conceded that “there’s also a case against raising the inflation target,” although he didn’t spell it out. He concluded: “That’s why the more important part of the letter is its call for ‘a diverse and representative commission’ to re-examine the monetary policy framework.”

The argument has been around for years that a 4% or 5% inflation target would be better than a 2% or 0% target. Its lineage goes back at least to a 1996 paper by Akerlof, Dickens, and Perry, which emphasized wage stickiness rather than the zero lower bound. (George Akerlof, by the way, is the husband of Fed Chair Janet Yellen.) More recently Olivier Blanchard in 2010, while IMF Chief Economist, suggested with co-authors that central banks should consider raising their inflation targets and thus nominal interest rates to create more space above the zero lower bound (hereafter ZLB). Laurence M. Ball, a co-signer of the Fed Up letter, argued explicitly for raising the inflation target to 4% in a 2014 IMF working paper emphasizing the ZLB.

The Fed Up letter argues that the ZLB has become a more frequent constraint on policy in light of a secular fall in the equilibrium real interest rate toward zero, citing an argument to this effect by San Francisco FRB president John Williams. In the words of the letter, although a 2% inflation target “seemed to give ample leverage with which the Fed could lower real interest rates” once upon a time, zero rates for seven years after the financial crisis failed at “sparking any large acceleration of aggregate demand growth.”

The most straightforward objection to raising the inflation target is that a higher secular inflation rate raises the well-known costs of inflation. It means a higher and more distortive tax on money-holding, reducing consumer welfare. It means greater “menu costs” of more frequently changing nominal prices. Higher inflation rates are associated with higher variability in relative prices, increasing noise in the price system. But these costs alone are not enough to counter the claim that the welfare costs of a more frequently binding ZLB are even greater. (The letter simply dismisses the costs of increasing the inflation rate by few percentage points, asserting a “lack of evidence that moderately higher inflation would harm Americans’ standard of living.”)

An effective challenge to the proposal for a higher inflation target requires a challenge to the underlying claim that the ZLB prevents an effective anti-recession monetary policy. The underlying claim rests on the New Keynesian or Taylor Rule conception that monetary policy is recession-fighting if and only if it lowers the nominal interest rate. But this is a mistake. The problem of recession, to the extent that monetary policy can relieve it, is an unsatisfied excess demand to hold money (the quantity demanded exceeds the quantity supplied at the current price level and nominal interest rate). Sales and employment are depressed because an excess demand for money corresponds to an excess supply of goods and services in general: consumers don’t buy when they are trying to build up their money balances. Monetary policy can in principle remedy the problem by expanding the quantity of money in the right amount at the right time.

But wait, you might say, didn’t quantitative easing fail to improve anything in the last recession? No. In the relevant sense – increasing the quantity of money in the hands of the public – quantitative easing wasn’t even tried. As I have emphasized in a previous article, in the face of a large 2009 increase in the holding of M2 balances relative to income (a large drop in the velocity of M2), the Fed did not raise the path of M2 growth. Its QE programs did raise the path of M0, the monetary base, but the Fed prevented that M0 growth from fueling faster M2 growth by paying banks to sequester the additional M0 (it paid them interest on excess reserves for the first time).

Absent offsetting higher interest on excess reserves, quantitative easing is capable in principle of providing all the monetary “looseness” needed. The ZLB is no obstacle to expanding M2. Consequently a higher secular inflation rate brings with it higher costs, but no offsetting benefit of enlarging the power of monetary policy to do the needful in a recession.

Finally, it should be noted that Chair Yellen, after having rejected the idea of raising the Fed’s inflation target on many previous occasions as a threat to the credibility of the FOMC, responded more positively to the idea after the Fed Up letter. At her June 14 press conference, she echoed the letter’s argument:

[A]ssessments of the level of the neutral likely level currently and going forward of the neutral Federal funds rate have changed, and are quite a bit lower than they stood in 2012 or earlier years. That means that the economy is, has the potential where policy could be constrained by the zero lower bound more frequently than at the time that we adopted our 2% objective. So it’s that recognition that causes people to think we might be better off with a higher inflation objective. That is an important set, this is one of our most critical decisions and one we are attentive to evidence and outside thinking. It’s one that we will be reconsidering at some future time. And it’s important for our decisions to be informed by a wide range of views and research, which is ongoing inside and outside the Fed.

The day after Yellen’s press conference, as the below chart shows, a leading market measure of the expected inflation rate stopped falling. It has since risen, and is now 12 basis points higher.

[Cross-posted from Alt-M.org]

The impact of global warming on temperature-induced human mortality has long been a concern, where it has been hypothesized that rising temperatures will lead to an increase in the number of deaths due to an increase in the frequency and intensity of heat waves. Others claim that rising temperatures will also reduce the number of deaths at the cold end of the temperature spectrum (fewer and less severe cold spells), resulting in possibly no net change or even fewer total temperature-related deaths in the future.

The largest study—by far—on temperature-related mortality was published by Gasparrini et al. in the journal Lancet in 2015. They examined over 74 million (!) deaths worldwide from 1985 to 2012 and found that the ratio of cold-related to heat-related deaths was a whopping 17 to 1. Moreover, the temperature percentile for minimum mortality was around the 60th in the tropics and “80–90th” in the temperate zones. Based upon real-world data, it is obvious that global warming is going to directly prevent a large number of deaths.

One of us (Michaels) co-authored a peer-reviewed literature article showing that as heat waves become more frequent, heat-related deaths decrease because of adaptation. Given that our cities are heating up on their own—without needing a push from greenhouse gases—under our hypothesis, heat-related mortality should be dropping, which it is.

But what about morbidity (sickness), as opposed to mortality? For that, we should be looking at emergency room visits, where people go because they are really feeling crummy or have a physical injury. Turns out everyone has been looking at death, but few at debilitation.

Now comes a new paper from Zhao et al. (2017). They examined the association between daily mean ambient temperature and emergency department visits in twelve Chinese cities over the period 2011–2014. Two were in the cool north, six from the central region and four in the hot and humid south.

As represented by the pooled national data as shown in the figure below, the relative risk of emergency department visits increases as temperatures become both warm and cold. However, the risk is far greater for cold temperatures, where the cumulative relative risk is 1.80 (nearly twice as likely compared to average temperatures) versus a much smaller 1.15 (a 15% increase in prevalence) that was associated with hot temperatures. Additionally, Zhao et al. determined that the effects of cold spells on emergency department visits were much more persistent, lasting a full 30 days compared to the more acute, but short lived, effects of warm spells that lasted a mere three days, or one-tenth of the time.

 

Figure 1. Pooled national level cumulative association between temperature and emergency department visits over a lag of 0–32 days during 2011–2014. Adapted from Zhao et al. (2017).

Other important findings included the observation that the temperature percentile associated with the least amount of emergency department visits was 64. Given that the average climate in China varies from tropical to pretty darned cold, it’s probably somewhat more tropical than temperate. Their optimum temperature is very consistent with what was found in the Gasparrini et al. study. At 14 percentage points higher than 50, this fact (along with Gasparrini et al.) suggests that humans are much better adapted to warmer temperatures than cold. Zhao et al. also found that the temperature effect on emergency department visits varied by latitude; the effect of extreme cold was higher in the southern cities and declined northward, whereas the effect of extreme heat was higher in the northern cities and declined southward, which suggests a form of regional adaptation to temperature, similar to what we (Michaels) found for U.S. cities in our work on urban heat-related mortality.

In stratifying their analysis by gender and age, the thirteen researchers report that the temperature/emergency department visit relationship was unaffected by gender but was attenuated with increasing age, which contradicts other, more speculative work on Chinese urban heat-related mortality. At the national level, the relative risk of emergency department visits due to cold declined from 2.27 for the youngest age group (0–14 years) to 2.17 for ages 15–34, 1.60 for ages 35–64 and 1.41 for the elderly aged 65 and older. Similarly, the risk of emergency department visits due to hot temperatures also declined from 1.51 for 0–14 years to 1.19 from ages 15–34, 1.14 for ages 35–64 and 1.08 for those over age 65. Children of ages 0–14 were the most vulnerable to cold spells and heat waves over the period of study.

In considering all of the above findings, plus those reported in numerous other studies of the subject, it is clear that the impact of cold weather on human health is much more severe and longer lasting than that caused by heat waves. The truth be told, as shown by real-world numbers, humanity has much more to gain in terms of physical heath from rising, as opposed to falling, temperatures.

 

References

Gasparrini, A., et al. (2015) “Mortality risk attributable to high and low ambient temperature: a multicountry observational study.” The Lancet 386 (9991): 369–375.

Davis, R.E., Knappenberger, P.C., Michaels, P.J. and W. Novicoff (2003) “Changing heat-related mortality in the United States.” Environmental Health Perspectives 111 (14): 1712–1718.

Zhao, Q., Zhang, Y., Zhang, W., Li, S., Chen, G., Wu, Y., Qui, C., Ying, K., Tang, H., Huang, J., Williams, G., Huxley, R. and Guo, Y. (2017) “Ambient temperature and emergency department visits: Time-series analysis in 12 Chinese cities.” Environmental Pollution 224: 310–316.

Police militarization and excessive force have become increasingly pressing issues in American society. Fortunately, the Denver-based U.S. Court of Appeals for the Tenth Circuit – Justice Neil Gorsuch’s old stomping ground – held yesterday that innocent victims of improper police procedures during dynamic drug raids have some protections. Even if the court didn’t fully address the issues Cato raised in our brief, the ruling in Harte v. Board of Commissioners of Johnson County, Kansas is a step forward.

In 2011, Robert Harte and his two children visited a garden store to buy tomatoes for his 13-year old son’s school project. Little did they know that Sergeant James Wingo of the Missouri State Highway Patrol was watching the store and recording the license plate numbers of the visitors, assuming that they were there to buy marijuana despite little evidence for that assumption. The Johnson County Sheriff’s Office then examined the Hartes’ trash on two occasions, finding about an ounce of “saturated plant material.” Because they evidently couldn’t tell the difference between tea and marijuana, they field-tested the substance, which tested positive for marijuana.

In an inspiring display, the police launched a military-style raid the Hartes’ home. At 7:30 in the morning, they pounded on the Hartes’ door, forced Mr. Harte to the ground when he answered, and searched their home for three hours. As it became increasingly clear that there was no marijuana in the house, the police started to search for “any kind of criminal activity,” a far greater sweep than what a warrant to search for “marijuana” and “drug paraphernalia” allows. Heaping further indignities on the family, the officers also left canine units in the house longer than necessary to give them extra training. The police apparently wanted to turn lemons into lemonade by retroactively turning an early-morning drug raid – that didn’t find any drugs, lest we forget – into a training exercise.

After the district court granted summary judgment for the police, the Hartes appealed and Cato filed an amicus brief. We argued that the police violated an important Fourth Amendment rule that goes back to the roots of English common law by failing to knock and announce their presence in anything but a literal sense. They also exceeded the scope of their warrant to look for “any criminal activity” instead of just drugs. We urged the Tenth Circuit to reverse the district court, clarify the Fourth Amendment standard for assessing police raids, and remand for further proceedings.

The Tenth Circuit mostly agreed with Cato on the Fourth Amendment issue. Two judges on the three-judge panel found that the district court had been wrong to grant summary judgment to the police on the search and seizure issue, with Judge Carlos Lucero alluding briefly to the knock-and-announce requirement. It was a convoluted opinion that took a long time to produce because of each judge writing separately and different sets of judges coming together on different parts of the ruling. Most importantly, Judge Gregory Phillips, joined by Judge Lucero, found that “what the deputies learned early on in the search dissipated any probable cause to continue searching.” 

Ultimately, the judges only discussed in passing the police-militarization and general-warrant concerns raised by Cato and sided with the police on the excessive-force claims. Nevertheless, the court held that what the Hartes experienced qualified as unreasonable search and seizure – and also let them continue with their state-law claims – so Harte v. Board of Commissioners represents a positive development in the jurisprudence surrounding dynamic police raids.

Is the Trump-run Pentagon a hostile workplace for Defense Department whistleblowers? Or is there simply an anti-whistleblower organizational tradition at the Pentagon that stretches back decades? An examination of recent events and the historical record suggests it’s both, and the implications for taxpayers and American national security are serious. I’ll start with the latest developments.

As the Project on Government Oversight (POGO) first reported in December 2016, a three-member interagency Inspector General External Review Panel concluded in May 2016 that the then-Inspector General of the National Security Agency (NSA), George Ellard, had, according to POGO, “previously retaliated against an NSA whistleblower”—apparently during the very same period that Ellard had claimed that “Snowden could have come to me.” The panel that reviewed Ellard’s case recommended he be fired, a decision affirmed by NSA Director Mike Rogers. But there was a catch: the Secretary of Defense had the final word on Ellard’s fate. Outgoing Obama administration Defense Secretary Ash Carter, apparently indifferent to the magnitude of the Ellard case, left office without making a decision.

In the months after Donald Trump’s assumption of the presidency, rumors swirled inside Washington that Ellard had, in fact, escaped termination. One source, who requested anonymity, reported that Ellard had been seen recently on the NSA campus at Ft. Meade, Maryland. That report, it turns out, was accurate.

On July 21, in response to the author’s inquiry, the Pentagon public affairs office provided the following statement:

NSA followed the appropriate procedures following a whistleblower retaliation claim against former NSA Inspector General George Ellard. Following thorough adjudication procedures, Mr. Ellard continues to be employed by NSA.

In a separate email to the author today, Terrence O’Donnell of the firm Williams and Connolly—Ellard’s counsel in the case—released a lengthy statement on behalf of his client:

The Office of the Assistant Secretary of Defense (ASD) examined and rejected an allegation that former NSA Inspector General, George Ellard, had retaliated against an NSA employee by not selecting that employee to fill a vacancy in the OIG’s Office of Investigations.

In a lengthy, detailed, and well-reasoned memorandum, the ASD concluded that Dr. Ellard had not played a role in that personnel decision or, in the terms of the applicable laws and regulations the ASD cited, Dr. Ellard “did not take, fail to take, or threaten to take or fail to take any action” associated with the personnel decision.

This judgment echoes the conclusion reached by the Department of Defense’s Office of the Inspector General.  An External Review Panel (ERP) later came to the opposite conclusion, leading to the ASD review.  The ASD concluded that “the evidence cited in the ERP report as reflective of [Dr. Ellard’s] alleged retaliatory animus toward Complainant … is of a character so circumstantial and speculative that it lacks probity.”

In assessing Dr. Ellard’s credibility and in rendering its decision, the ASD also considered Dr. Ellard’s “distinguished career of public service, spanning more than 21 years of service across the executive, legislative, and judicial branches, culminating in almost 10 years of service as the NSA IG.”  Dr. Ellard, the ASD noted, has been “entrusted to address some of our nation’s most challenging national security issues”; successive NSA Directors have consistently rated Dr. Ellard’s performance as “Exceptional Results” and “Outstanding”; and he has been “commended by well-respected senior officials with whom [he has] worked closely over the years for [his] ability and integrity.”

Dr. Ellard is serving as the NSA Chair on the faculty of the National War College, a position he held prior to the ERP review.

The Pentagon itself offered no explanation as to why a senior DoD official chose to overrule the IG External Review Panel and NSA’s current director in Ellard’s favor, but the message is abundantly clear: if you work in Pentagon management and are charged credibly with whistleblower retaliation, there’s a good chance you’ll keep your government job. And if you are a prospective whistleblower, the message is equally clear: you blow the whistle at your own risk.

Unfortunately, the Ellard case is not unique within the Pentagon. And as a series of these cases demonstrate, when the internal watchdog function breaks down at the Defense Department, not only are taxpayers ripped off, but intelligence failures costing the lives of thousands of Americans can result.

Thanks to help from the law firm of Loevy & Loevy, as well as the Government Accountability Project, an ongoing lawsuit I filed earlier this year is shedding new and disturbing light on these problems at NSA and elsewhere in the national security establishment. The events that eventually motivated the lawsuit are straightforward.

In the late 1990s, a small team of NSA employees—Bill Binney, Kirk Wiebe, Ed Loomis, and senior manager Tom Drake—came up with a revolutionary digital intelligence collection and analytical system called THINTHREAD. The system would’ve allowed NSA to, in real time, sift through the trillions of digital communications passing over the airwaves and the internet, find any bad actors in communication with Americans, segregate and encrypt that traffic for further analysis (and where necessary additional collection or legal action), and discard the remaining digital junk.

The system was cheap—the prototype cost around $3 million, made possible by then-GOP House Intelligence Committee staffer Diane Roark—and could be deployed NSA-wide quickly. Preliminary testing showed that THINTHREAD was developing actionable intelligence not discovered by any other NSA systems.

The THINTHREAD team was convinced that their system could spot threats far enough in advance to allow the U.S. to thwart attacks at home or abroad. There was just one huge problem: then-NSA Director Michael Hayden vehemently opposed the system.

Hayden preferred to go with a completely unproven, outsourced, contractor-produced and run system called TRAILBLAZER, spearheaded by defense contractor behemoth SAIC. But throughout its existence, TRAILBLAZER was plagued by repeated delays and huge cost overruns, producing zero actionable intelligence. The internal battle over the programs led Hayden to retaliate against the THINTHREAD team for briefing Roark and other House Intelligence Committee staffers on their success, even as TRAILBLAZER foundered.

Hayden’s subordinate, Maureen Baginski, officially killed THINTHREAD development just three weeks before the 9/11 attacks. By the end of October 2001, the original THINTHREAD development team had left NSA, motivated to leave upon learning that key THINTHREAD technology—minus the Constitutional safeguards built into it—was being misused to conduct warrantless mass surveillance against the American people.

Furious at TRAILBLAZER’S waste of taxpayer money and Hayden’s refusal to field THINTHREAD—which the developers believed could have prevented the 9/11 attacks—in September 2002 Binney, Wiebe, Loomis, and Roark filed a whistleblower complaint with the Pentagon Inspector General (DoD IG). Drake remained at NSA to support the complaint, providing IG investigators with key documents and reports showing clear malfeasance by senior NSA officials.

And according to Drake, as revealed in the new documentary on this episode, A Good American, post-9/11 application of the existing THINTHREAD system against NSA databases not only discovered evidence of Al Qaeda’s attack plans that other NSA systems and analysts had missed, but other parts of the plot that had been attempted but failed. The implication was clear: THINTHREAD could’ve prevented the September 11, 2001 attacks on America. Drake said NSA management ordered that study to be buried.

Indeed, being right and raising a stink over the lethal intelligence failure backfired on Drake and his former colleagues.

Ten years ago today, on July 26, 2007, the FBI raided the homes of the former THINTHREAD team members, along with that of Diane Roark. All were alleged to be suspects in an ongoing leak investigation that had exposed the largest acquisition and intelligence failure in the history of NSA. But the allegations that led to those FBI raids were bogus, as subsequent legal proceedings would demonstrate over the next several years.

Drake initially faced multiple charges under the draconian Espionage Act, but as the illegitimate nature of the case became clear, all those charges were dropped. Drake, in an effort to end the case and avoid total poverty, pled to a single count of misuse of a government computer. But none of the NSA managers or SAIC contractors responsible for the TRAILBLAZER fiasco, or those responsible for Drake’s vindictive and bogus prosecution, were ever charged with a crime.

While working as a House staffer for then-Rep. Rush Holt (D-NJ) in 2013, I had the chance to review that classified DoD IG report and became determined to get it out. It completely validated all the core allegations of the THINTHREAD team and Roark. In my view, NSA was misusing the classification system, especially an obscure 1959 law, to prevent the public from learning the truth about the episode.

This past week, the Pentagon provided to me a less redacted version of the DoD IG report that was originally released in 2011. While well over half of the report given to me remains redacted (and the subject of ongoing litigation), enough of it has been released to show beyond all doubt that the IG validated the whistleblowers’ allegations—and that fear of NSA management retaliation for exposing the fraud was pervasive among the many NSA employees interviewed by the DoD IG.

The report found that THINTHREAD, “…a less costly and more capable solution…” than TRAILBLAZER, “was already operationally available and ready for deployment. As a result, the National Security Agency is inefficiently using resources to develop a digital network exploitation system that is not capable of fully exploiting the digital network intelligence available to analysts from the Global Information Network” (p. ii).

The IG report also noted that Hayden had ignored multiple internal reviews that showed THINTHREAD superior to his moribund TRAILBLAZER, and that he delayed deployment of THINTHREAD to multiple NSA collection sites, in violation of Congressional direction to do so (p. 4). Hayden’s mismanagement of NSA and insubordination with Congress cost taxpayers hundreds of millions of dollars and arguably the lives of nearly 3,000 Americans on 9/11.

Sadly, the misconduct of Pentagon officials didn’t end with the publication of that DoD IG report over a decade ago.

After his trial was over, Drake filed a whistleblower reprisal complaint with the Office of Special Counsel (OSC), the federal watchdog responsible for investigating whistleblower reprisal cases. In 2016, OSC concluded that DoD IG officials engaged in evidence destruction during Drake’s trial, and referred the matter to the DoJ IG for action. Those revelations came to light through yet another whistleblower, former DoD IG Assistant Inspector General John Crane, who has filed his own whistleblower retaliation claim with OSC. Drake confirmed to the author in June 2017 that DoJ IG investigators had interviewed him last summer but that he’s heard nothing since.

As the foregoing post-9/11 history of the Pentagon demonstrates, Ellard’s case is just the latest example of the anti-whistleblower culture at NSA and the DoD IG that Ellard’s nominated replacement, Robert Storch, will have to end if NSA employees are to believe that fraud or criminal complaints can be reported without fear of retaliation.

At Storch’s all-too-brief confirmation hearing last week before the Senate Intelligence Committee, he was not asked about the status of the Drake or Crane cases, or the reported misconduct of Ellard—amazing omissions by one of NSA’s chief Congressional oversight bodies. Unless Congress invests the time to thoroughly investigate, in open session, these past episodes of whistleblower retaliation and programmatic misconduct, we risk still more of the same—more taxpayer money squandered, and more Americans needlessly killed in avoidable intelligence failures.

In a series of cases of which Dotterweich v. U.S. (1943) is emblematic, the U.S. Supreme Court has upheld the idea that a business executive can be criminally convicted over underlings’ violation of public welfare regulations, with no need to show that an executive facing charges knew of the violation, participated in it, intended it, or was negligent in failing to prevent it. This idea of vicarious criminal liability without a showing of mens rea (guilty intent) was controversial at the time, and the “responsible corporate officer” doctrine, as it is called, continues to be controversial today. Yet despite requests (as in this Cato amicus brief) that they consider scaling the doctrine back, the courts have generally declined to do so. 

Now Craig Lerner of George Mason/Scalia Law School has written an important working paper analyzing the origins of the doctrine in the trial of Joseph Dotterweich, general manager of a pharmaceutical company whose employees had allegedly shipped drugs that were misbranded and adulterated under FDA definition. From the abstract:

…with respect to Dotterweich as the corporation’s general manager, the government argued that he was strictly liable because he stood in “responsible relation” to the company’s acts. The government never tried to prove that the company, Buffalo Pharmacal, was negligent, nor did it try to prove that Dotterweich was negligent in his supervision of the employees of Buffalo Phamacal. The prosecutor and judge were candid about this theory throughout the trial, although the judge conceded that it seemed bizarre and unfair. The defense lawyer repeatedly sought to inject what became known throughout the trial as “the question of good faith,” but was circumvented at almost every turn. What would thus seem to be the crux of any criminal trial — the personal fault of the defendant — was carefully shorn from the jury’s consideration. …

The article argues that the “responsible corporate officer” doctrine can never enjoy a secure place in our legal system. First, the doctrine is at a minimum in tension with, and often in direct opposition to, basic principles of the criminal law; and second, the doctrine fails, when followed to its logical conclusions, to accord with basic notions of fair play. The article concludes that the responsible corporate officer doctrine is either unnecessary, in cases in which the evidence establishes personal fault, or unjust, in cases in which it creates liability in the absence of personal fault through the unspecified notion of “responsibility.” …

I call the responsible corporate officer doctrine “ripe with potential for injustice,” and discuss its relation to criminal laws that are ambiguous or not ascertainable by persons at risk of criminal liability, in my (newly written) chapter on white-collar prosecution in this year’s Cato Handbook for Policymakers.

A couple of news stories about Rep. Cedric L. Richmond (D-La.):

In a historic act of protest, Democratic members of the U.S. House of Representatives refused to observe the regular order of the House, staging a sit-in protest over the lack of legislation on gun control….

In sharp comments pointed directly at House Republicans, Reps. Maxine Waters (D-Calif.) and Cedric Richmond (D-La.) directed blame at the National Rifle Association and the cowardice of GOP members….

“You are doing what you are doing because you don’t have the guts to stand up to the gun lobby,” said Richmond in a speech at the start of the House-floor sit-in, with comments addressing what he viewed as GOP obstruction.

If you shoot a police officer, you’re going to make the 5, 6 and 10 o’clock news. But if you shoot a congressperson you’re going to make the world news,” said Rep. Cedric L. Richmond (D-La.)….

Some lawmakers are carrying firearms or installing security systems at their homes and offices. Some have decided not to hold town hall meetings at all — restricting voters from meeting their elected leaders. Some are demanding that the government pay for a security detail for every member of Congress….

It’s another reason to continue protecting themselves, several said.

“I definitely know where my firearm is at all times,” Richmond said.

So I’m curious: Does Rep. Richmond have a firearm in the District of Columbia? Does he have a valid permit for it, which is extremely difficult to get despite the Supreme Court’s Heller decision? Does he support the proposal by Rep. Barry Loudermilk (R-Ga.) to give members of Congress a special exemption from the strict D.C. rules? Does he believe that members of Congress should obey the same laws that apply to everyone else?

There is likely to be confusion over many issues in the upcoming NAFTA renegotiation, but one particular area where I already see some misunderstandings is the NAFTA dispute process. To illustrate this, here’s a recent statement by Canadian Prime Minister Justin Trudeau:

as our ambassador said just last week to the Americans, a fair dispute resolution system is essential for any trade deal that Canada signs on to and we expect that to continue to be the case in any renegotiated NAFTA.

In context, it is clear he was talking about a particular type of NAFTA dispute, rather than the more general proposition that there must be a dispute system in place.  But there are actually several dispute provisions in NAFTA, and I’ve seen a number of people get them mixed up.  As a result, I thought it was worth explaining the key distinctions in a blog post, which I can then link to whenever the issue comes up in the future.

There are three main types of NAFTA disputes, set out in separate chapters: Chapter 11 (litigation over the treatment of foreign investment), Chapter 19 (appeals of anti-dumping/countervailing duty decisions), and Chapter 20 (government complaints about compliance with NAFTA obligations).

Chapter 11 is part of the investor state dispute settlement (ISDS) debate. Under Chapter 11, a foreign investor of one NAFTA party can sue the government of another party (e.g., a Canadian company who has invested in the U.S. can sue the U.S. government) on the basis that it has been treated worse than its American competitors, or that it has been treated badly in general (e.g., it did not receive treatment that was “fair and equitable”). I have questioned the value of such procedures, but they are strongly supported by business groups. As far as I know, the Canadian and Mexican governments favor their inclusion in NAFTA, and the Trump administration’s NAFTA negotiating objectives seem to envision including them (although I can imagine some members of the Trump administration who worry about sovereignty will be pushing to take them out).

Next up is Chapter 19, which sets out a special appeals process related to the imposition of anti-dumping and countervailing duties. This is the dispute procedure Trudeau had in mind. Anti-dumping and countervailing duties are imposed on the basis of decisions by domestic agencies (in the U.S., it is the Department of Commerce and the International Trade Commission), and the decisions of these agencies can be appealed to domestic courts (in the U.S., appeals go to the Court of International Trade, then the Court of Appeals for the Federal Circuit, and then the Supreme Court). NAFTA Chapter 19, however, sets up a special appeals process which allows Canadian and Mexican respondents in U.S. proceedings to appeal the agency decision to an ad hoc NAFTA panel (i.e., private lawyers who act as judges in a particular case) instead of to domestic courts.  (The process is also available in relation to Mexican and Canadian anti-dumping and countervailing duty cases, taking appeals out of their domestic courts).  When reviewing U.S. agency decisions, a NAFTA Chapter 19 panel acts like the Court of International Trade, in the sense of reviewing the agency’s interpretation and application of U.S. law, and remanding to the agency if necessary. Unlike the Court of International Trade, NAFTA Chapter 19 panel rulings cannot be appealed.

It’s not clear to me that this process is constitutional (a law review article discussing the predecessor provision in the Canada-U.S. FTA is here), and I’m not sure at this point how different the results are as between U.S. courts and the NAFTA process (this is something I plan to look into further). The Canadians insist they want to keep Chapter 19, while the Trump administration says it wants to take it out, which means this could be a major hurdle in the negotiations.

Finally, there is NAFTA Chapter 20. This is the core state-to-state NAFTA dispute process, where one government can allege that another is not complying with its obligations. Chapter 20 has not worked that well in practice, in part due to problems with getting panelists in place. I am working on an article that proposes some fixes.

My hope is that these basic explanations can cut through some of the confusion. All of these provisions set out NAFTA dispute procedures, but the policy implications and the politics of each are very different.

Private school choice is the work of racists. That message, it seems increasingly clear, is going to be a major weapon wielded by opponents of educational freedom for the foreseeable future. It is the explicit contention of a new Center for American Progress report, The Racist Origins of Private School Vouchers, and of Randi Weingarten, President of the American Federation of Teachers, who has been proclaiming that modern choice programs are “only slightly more polite cousins of segregation.”

As I and others have written, the assertion that school choice originated in racism, or somehow has a more repellant history than public schooling, would be laughable if the implications of the charge were not so serious. Remember, Brown v. Board of Education was about massive, mandated segregation in public schools, the schools that defenders love to tell us serve the vast majority of students. Segregation in them meant—and means—segregation for huge swaths of people. Perhaps that is why a response to my critique of the CAP report from the Century Foundation’s Kimberly Quick focused not on history, but my pointing out that private school choice is popular with African Americans.

According to Quick this is not so, and by the way, on what grounds does someone at Cato speak “on behalf of the black community”? Cato has no African American policy scholars.

I never wrote that I speak on behalf of African Americans. I do not presume to speak for anyone other than myself. But the survey literature—African Americans speaking for themselves—is overwhelmingly on my side.

To demonstrate what polls do not show majority African American support for private school choice, Quick cites the oft-used question from the annual Phi Delta Kappa poll, which employs wording notoriously loaded against choice: “Do you favor allowing students and parents to choose a private school to attend at public expense.” “At public expense” sounds like freeloading, and “choose a private school” rather than to choose among schools minimizes the empowerment of families. Not surprisingly, this wording garners only 33 percent African-American support, though that outpaces the general public.

What is much more telling is that the polling reveals when the question is more neutral, which excludes surveys that get both high negative and positive numbers. What follows is not an exhaustive list, and there are other ways to game survey outcomes such as question order, but there have been many, more neutrally worded surveys that have shown that African Americans want private school choice.

The journal Education Next has for several years asked questions both neutral and not so neutral to gauge school choice support. As I noted in my initial response to the CAP paper, the 2016 survey found “a whopping 64 percent of African Americans supported ‘a tax credit for individual and corporate donations that pay for scholarships to help low-income parents send their children to private schools.’” The 2015 survey revealed that 58 percent of African Americans favored a program “that would give all families with children in public schools a wider choice, by allowing them to enroll their children in private schools instead, with the government helping to pay the tuition.” 66 percent supported a similar program just for low-income families, and even when using wording closer to PDK’s, pluralities of African Americans supported it. In 2016 EdChoice asked three forms of a question about vouchers, and the composite average was 61 percent of African Americans favoring them.

The Black Alliance for Educational Options has also conducted polling, with very straightforward wording, such as “do you support or oppose parent choice,” and “do you support school vouchers/scholarships?” Asking African Americans in New Jersey, Tennessee, Alabama, and Louisiana these questions, in 2015 BAEO reported support ranging from 61 percent to 65 percent, depending on the state.

Of course, EdChoice and BAEO advocate for school choice, and Education Next features many choice proponents. But some of the longest running evidence of African-American support for choice comes from the Joint Center for Political and Economic Studies, “a non-partisan, non-profit public policy organization that supports elected officials and policy experts who serve communities of color across the country.” Over many years it has consistently found plurality to significant majority African-American support for choice. Its most recent poll of which I am aware, conducted in 2008, reported that 63 percent of respondents said “yes” when asked if they “support vouchers.” At least in 2000, the exact question asked was, “Would you support a voucher system where parents would get money from the government to send their children to the public, private, or parochial school of their choice?” (I haven’t been able to confirm the question for other years.)

Perhaps all of this is why Quick’s colleague Richard Kahlenberg recently said in answer to a question I asked about black support for school choice, his understanding of the polling was the same as mine: African Americans want choice. (Or so I recall—I’m not sure if event video will be up to confirm this.) Indeed, Quick herself concedes that “it makes sense that black and brown families, too often lacking options beyond segregated, under resourced, and underperforming schools, would want alternative options for their children.”

Now, about Cato for a moment. Again, I claim no insight based on personal experience into what African Americans individually or collectively want, and I certainly wish there were more black libertarians. But when I first started working at Cato, a major player in the fight for choice in Washington, DC, was Casey Lartigue, an African American Cato scholar. Similarly, Jonathan Blanks, a Cato researcher, who is African American and recently wrote that libertarians must not downplay racism or think it will be overcome just by free markets, but school choice is nonetheless important for the black community. Of course, none of this makes choice right or wrong, nor does it make Cato any more or less a spokes-tank for African Americans.

I’ll let the evidence, and individual African Americans, speak and act for themselves. Indeed, empowering the formerly powerless to act for themselves is exactly what school choice is about.

The District of Columbia has suffered another defeat in its decades-long effort to restrict gun rights.

Today the D.C. Circuit Court of Appeals struck down the District’s “good reason” requirement, which obliges individuals to demonstrate a special need before being allowed to carry a gun.

Some background: the District banned all handgun possession, including in the home, in 1976.  That policy was ruled unconstitutional in the Heller I decision in 2008, which held that the 2nd Amendment protects an individual right to have a handgun in the home for self-defense. The District responded to Heller I by banning the public carrying of handguns.  That ban was ruled unconstitutional in Palmer v. District of Columbia in 2014 (Cato’s own Tom Palmer was the named plaintiff in that case). The District was undeterred, and responded to the Palmer ruling by requiring permit applicants to provide a “good reason” why they should be allowed to carry.

The “good reason,” as defined by the D.C. government, is incredibly narrow. Simply being concerned about crime, or living/working in a crime-ridden area of the city does not suffice. Effectively the only people capable of meeting the D.C. test are those working in extraordinarily high-risk occupations or people who have received substantive, specific threats against them.

Two different District Court judges ruled against the “good reason” requirement (one ruling was set aside due to a bit of a procedural morass), and those two cases were combined on appeal to the D.C. Circuit. In a 2-1 decision, a panel of the Court of Appeals struck the “good reason” rule down as unconstitutional.

Judge Griffith of the D.C. Circuit writes:

At the Second Amendment’s core lies the right of responsible citizens to carry firearms for personal self-defense beyond the home, subject to longstanding restrictions. These traditional limits include, for instance, licensing requirements, but not bans on carrying in urban areas like D.C. or bans on carrying absent a special need for self-defense. In fact, the Amendment’s core at a minimum shields the typically situated citizen’s ability to carry common arms generally. The District’s good-reason law is necessarily a total ban on exercises of that constitutional right for most D.C. residents. That’s enough to sink this law under Heller I.

 […]

We are bound to leave the District as much space to regulate as the Constitution allows - but no more. Just so, our opinion does little more than trace the boundaries laid in 1791 and flagged in Heller I. And the resulting decision rests on a rule so narrow that good-reason laws seem almost uniquely designed to defy it: that the law-abiding citizen’s right to bear common arms must enable the typical citizen to carry a gun.

 

It’s important to note that this case is not over.

The District can appeal this ruling back to the D.C. Circuit in order to have it reheard en banc. The case could also ultimately end up in front of the United States Supreme Court which, since its rulings in Heller (2008) and McDonald (2010), hasn’t seen fit to offer further guidance to lower courts on whether the 2nd Amendment applies outside the home. With various federal courts coming to different conclusions on that question, this case represents a great opportunity to finally get a definitive answer from the high court.

If you haven’t seen much of me on these pages lately, that’s because I’ve spent most of the last few weeks feeding and grooming my favorite hobby horse: that’s right, the Fed’s policy of encouraging banks to hoard reserves by paying above-market rates on their Fed reserve balances.

Well, last Thursday morning I rode the old gal to Capitol Hill, where I put her through the paces before the House Financial Services Subcommittee on Monetary Policy and Trade, at its hearing on “Monetary Policy v. Fiscal Policy: Risks to Price Stability and the Economy.” Mickey Levy of Berenberg Capital Markets, Eric Leeper of Indiana University at Bloomington, and Jared Bernstein of the Center on Budget and Policy Priorities, also took part.

Below I reproduce my five-minute spoken testimony, in which I attempt to summarize the twenty-two thousand word written testimony I submitted beforehand.  All four written testimonies, including my screed, can be read here.  Those who wish to see the entire show, including my and the other participants’ replies to members’ questions, will find a video embedded further below.

***

Chairman Barr; Ranking member Moore; distinguished committee members: In October, 2008, the Federal Reserve began paying interest on banks’ reserve balances with it. My testimony today concerns the economic consequences of that step.

The Fed was originally supposed to start paying interest on reserves in 2011, to reduce the implicit tax burden reserve requirements placed on banks. But as the 2008 crisis worsened, the Fed received Congress’s permission to start paying interest on reserves immediately. Its goal then was, not to relieve banks of a required reserve burden, but to get them to hoard reserves it was creating by its emergency lending, so that that lending wouldn’t result in increased bank lending and inflation.

To make interest on reserves serve this role, the Fed set the rate on reserves above comparable market rates, where it has kept it ever since. It thereby ignored the laws’ stipulation that the rate was “not to exceed the general level of short-term rates.”

As an anti-stimulus measure, interest on reserves worked very well: so well that within weeks the Fed did an about-face. Now it hoped to stimulate the economy by purposefully creating large quantities of fresh bank reserves.  All told, the subsequent three-rounds of “Quantitative Easing” created another $2 trillion of additional bank reserves. Yet because reserves still paid an above-market rate of interest, banks just kept on accumulating them, as they had done — and as the Fed had wanted them to do — before QE, when it was worried about inflation.

If  “insanity is doing the same thing over and over again but expecting different results,” then I fear it must be said that at least some Fed officials were not quite in their right minds.

Although the QE stimulus was disappointingly small, the Fed’s actions had other, big consequences. By acquiring trillions of dollars worth of Treasury and mortgage-backed securities, and borrowing from banks to pay for them, the Fed dramatically increased its footprint on the U.S. credit system. Before IOR and QE, bank reserves were less than 1% of bank deposits; bank loans, in contrast, were almost 100% of bank deposits. Today bank reserves are 20% of deposits, and loans are just 80% of deposits. Before IOR and QE, the Fed’s assets were  7% of commercial bank assets. Today the figure is 27%.

Commercial banks are expected to invest the public’s deposits productively, subject to certain regulatory guidelines. Central banks aren’t. They’re tasked instead with regulating the scale of commercial bank lending and deposit creation. According to the Fed’s own guidelines, as set forth in a pre-crisis publication, it is supposed to “structure its portfolio and … activities so as to minimize their effect on… credit allocation within the private sector.” The reason for this, the same guidelines state, is that hard-earned experience shows that “in general…market-directed resource allocation fosters long-run economic growth.”

In fact there’s a vast economics literature on what’s known as “financial repression.” The term refers to the harmful consequences of policies — mainly in less-developed countries — that divert savings from commercial banks to central banks, and thus from more to less productive uses. That literature blames such policies for much of the world’s poverty.

The Fed’s current operating system, with its above-market interest rate on reserves and bloated balance sheet, is very financially repressive. That is one reason for the continuing post-crisis “productivity slowdown.” Yet the same system, far from at least improving basic monetary control, has prevented the Fed for 5 years running from meeting the 2% inflation target it set in 2012.

Distinguished committee members, Chairman Barr, a central bank that cannot control inflation, and especially one that cannot make inflation go up, is a central bank that is unable to perform its most fundamental duty.

To close, the Fed’s new operating system, based on above market interest on reserves, has had disastrous consequences. Yet despite these consequences, the Fed’s current plan for “normalization” would keep much of the current arrangement in place. I hope, for the general public’s sake, that Congress will not let that happen.

[Cross-posted from Alt-M.org]

James Madison once wrote: “Government is instituted to protect property of every sort … . This being the end of government, that alone is a just government, which impartially secures to every man, whatever is his own.” Because the power of eminent domain so readily runs the risk of violating private property rights, you would think that those individuals subjected to it would be afforded every procedural protection the Constitution has to offer, including the right to a trial by jury. But according to the federal government, you would be wrong.

When a group of 20 Michigan landowners contested the feds’ use of eminent domain, they asked for a jury trial. By doing so, they challenged a provision of the Tucker Act that says suits against the government for over $10,000 must be brought in the Court of Federal Claims (a legislative tribunal rather than an Article III court). This goes against the Seventh Amendment’s guarantee of a right to trial by jury, argued the landowners. The district court in Michigan sided with the government, however, and dismissed the case for lack of jurisdiction, holding that Congress is within its powers to override the Seventh Amendment’s guarantee of the right to jury trial when the federal government is the defendant (because of “sovereign immunity”).

The district court effectively shielded the government from constitutional checks and balances that protect individuals’ property rights, which is why Cato joined the National Federation of Independent Business on an amicus brief in the next stage of the case, before the U.S. Court of Appeals for the Sixth Circuit. Unfortunately, a three-judge Sixth Circuit panel agreed with the district court that the Seventh Amendment has no force against the United States, and the court is now weighing whether to rehear the case en banc, which means all the judges on the court will hear the case rather than just a three-judge panel. Cato, joined by the National Federation of Independent Business and the Southeastern Legal Foundation, is supporting the en banc petition

We argue that the Seventh Amendment’s guarantee of a trial by jury is one of the oldest rights recognized in Anglo-American law. In City of Monterey v. Del Monte Dunes (1999), the Supreme Court held that, because the claimants in takings cases are seeking compensation, such claims would have been heard by a court of law (rather than, say, an admiralty court or other specialized tribunal) at the time the Seventh Amendment was passed. Accordingly, whenever plaintiffs ask for a determination of just compensation, the right to a jury trial always attaches. Indeed, takings cases are exactly the sort of cases that should be resolved by a jury trial, because they involve factual determinations with which members of the local community are likely best acquainted.

The panel’s opinion was based on dicta in a case that said there was no right to a trial by jury in a suit brought under a federal statue. Suits under statutes are very different than suits that seek to vindicate a constitutional right. The Supreme Court has not once held that the federal government can hide behind the doctrine of sovereign immunity in this manner, picking and choosing when it wants to exempt itself from the Seventh Amendment when citizens are seeking to enforce another constitutional right. Historically, not even the king of England could exempt the crown from private-property suits—and the U.S. government does not have greater powers to deprive individuals of their private property without the just compensation that a jury determines is due. The Sixth Circuit should rehear the case to correct this error. 

A recent study from the Center for a New American Security (CNAS) looks at how China’s military capabilities in Asia make forward-deployed U.S. bases there vulnerable. The report warns, “the growing capability of China to threaten U.S. bases in the region” may represent “the greatest military threat to U.S. vital interests in Asia.”

“In the event of an unforeseen U.S.-China crisis,” the report explains, “a preemptive missile strike against the forward bases that underpin U.S. military power in the Western Pacific could be a real possibility…particularly if China perceives that its attempts at deterrence of a major U.S. intervention—say in a cross-strait Taiwan crisis or in a brewing dispute over the Senkaku Islands—have failed.”

Two important points need to be made in response to this assessment. First, it explores a scenario—an outbreak of war between the U.S. and China—that is extremely improbable. While it is true that Chinese strategic planners have discussed striking U.S. bases in the unlikely scenario that inadvertent escalation results in an outbreak of conflict, deterrence remains robust in Asia. China in particular has little interest in getting into a shooting war with the United States. Not only do both countries have conventional capabilities devastating enough to make any war too costly to contemplate, but nuclear deterrence and economic interdependence make a military clash not even close to being worth the fight.

Furthermore, the Defense Department describes China’s posture as “strategically defensive” and “rooted in a commitment not to attack, but to respond aggressively once an adversary decides to attack.” Indeed, China has been far less assertive than often depicted. As MIT’s M. Taylor Fravel puts it, Beijing “has compromised more frequently than it has used force,” and “has been less belligerent than leading theories of international relations might have predicted for a state with its characteristics.”

Second, even with the understanding that an all-out Chinese attack on U.S. bases in Asia is a very low probability event, it seems to me, as I argue in a recent Cato Policy Analysis, that this is a good reason to withdraw from U.S. bases in Asia, thereby making American military assets and troops less vulnerable. Granted, this would mark a truly dramatic change in U.S. foreign policy, but it wouldn’t undermine the core economic and security interests of the United States.

The authors of the CNAS report have a very different view. They recommend spending billions of dollars on missile defense systems to better protect U.S. bases. Notably, they concede this would be an extremely expensive way to not even solve the problem: this “admittedly expensive investment in several billion dollars of missile defense forces” would only marginally reduce the damage done to U.S. bases and troops. These new missile defense systems, they admit further, would still be “overwhelmed by sheer numbers” of Chinese ballistic missiles.

A far wiser, and cheaper, solution would be to withdraw U.S. bases from the region and encourage allies to build up some of the same surveillance, targeting, and missile defense technology China possesses. Another Pentagon boondoggle to inappreciably shore up America’s outdated strategic force posture in Asia is not the way to go.

If you’re looking for an upside to the Trump presidency, there’s this at least: it promises to be endless fun for executive-power geeks. That “this is not normal” means there’s plenty of opportunity to consider constitutional questions that rarely come up in periods of relative normalcy.

Case in point: the current debate over whether the president has the power to pardon himself, sparked by Friday’s Washington Post report that President Trump “has asked his advisers about his power to pardon aides, family members and even himself” in connection with the special prosecutor’s Russia investigation. Trump himself chimed in over Twitter Saturday:

 

 

On ABC’s “This Week” Sunday, Trump attorney Jay Sekulow denied that any such discussion had taken place, but told George Stephanopolous that “with regard to the issue of a president pardoning himself…. from a constitutional, legal perspective you can’t dismiss it one way or the other.” 

It’s true that the president’s power to self-pardon isn’t clear. What is clear, however, is that if he misuses the pardon power, he can be impeached for it. 

The case for a self-pardoning power rests on constitutional silence. Article II, section 2, clause 1 doesn’t specifically foreclose the possibility; it provides that the president “shall have Power to grant Reprieves and Pardons for Offenses against the United States, except in Cases of Impeachment.” That power, the Supreme Court has held, “is unlimited, with the exception stated.” The president can, for example, issue broad prospective pardons for federal offenses before charges have been filed. There’s little question, then, that he could at least pardon Don Jr., Jared Kushner, Paul Manafort, Mike Flynn, and anyone else who might end up in the special counsel’s crosshairs. 

But could he pardon himself? The argument that he couldn’t likewise starts with the constitutional text. Brian Kalt, the author of the definitive case against presidential self-pardons, suggests that the power “is limited by the meaning of the word ‘pardon’ itself.” A pardon is inherently bilateral: it implies a donor and a recipient. “It makes no sense to talk of donating a kidney or $100 to yourself.” What’s more, “the self-pardon was nowhere mentioned in the debates [over the Constitution] or in the English history that informed them.” Why read that silence to indicate a power fundamentally at odds with the Constitution’s general “disfavor for self-dealing” and the design of a limited, law-governed presidency, Kalt asks. 

In any event, no president has ever attempted a self-pardon, though Richard Nixon apparently considered it. After researching the issue, J. Fred Buzhardt, White House counsel for Watergate, concluded that the president had the power, and advised Nixon in July 1974 that the scandal could be “mooted” if the president pardoned everyone involved in Watergate, including himself. In August, just before he resigned, Nixon blustered about “put[ting] the special prosecutor out of business by leaving nothing unpardoned.” 

Nixon wasn’t entirely in his right mind during this period: frequently drunk, incoherent, and raving against his enemies. His son-in-law Edward Cox had seen him pacing the halls at night, “talking to pictures of former presidents—giving speeches and talking to the pictures on the wall.” Cox thought suicide was a serious enough possibility to raise the issue of the Secret Service staying in the family quarters, to protect the president from himself. Nixon’s chief of staff, Gen. Alexander Haig, also worried the president might commit suicide, according to Woodward and Bernstein’s The Final Days. Haig recounted a disturbing conversation in which Nixon had said, “you fellows, in your business,” i.e., the military, “have a way of handling problems like this. Somebody leaves a pistol in the drawer.” “‘I don’t have a pistol,’ the President said sadly, as if it were one more deprivation in a long history of underprivilege.” Haig called Nixon’s doctors to warn them not to issue the president any more sleeping pills or tranquilizers. 

Of course, Nixon eventually backed off the idea of pardoning his way out of Watergate and simply resigned. It says something that even in extremis, Nixon had enough of his wits about him to recognize that, legalities aside, a self-pardon was a crazy idea.

It would be nice to think that Donald Trump won’t turn out to be crazier than late-period Richard Nixon, but, just six months in, we’re learning to expect the unexpected. Luckily, if Donald Trump gets too ambitious with what he views as his “complete power to pardon,” there’s a constitutional remedy for that. 

Many features of the 21st century presidency were beyond the Framers’ imaginations, but abuse of the pardon power was something they specifically considered. It was the subject of an interesting exchange between George Mason and James Madison at the Virginia ratifying convention in 1788. When the delegates turned to the first clause of Article II, section 2, Mason objected to the breadth of the president’s pardon power: “he may frequently pardon crimes which were advised by himself…. If he has the power of granting pardons before indictment, or conviction, may he not stop inquiry and prevent detection?” Madison’s rejoinder:

“There is one security in this case to which gentlemen may not have adverted: if the President be connected, in any suspicious manner, with any person, and there be grounds to believe he will shelter him, the House of Representatives can impeach him; [and] they can remove him if found guilty.”

Calls for Trump’s impeachment started even before his inauguration, and some of the grounds proposed have been pretty frivolous. This one wouldn’t be. 

A Wall Street Journal report, “Colleges Pull Back Tuition’s Long Rise,” includes a graph showing the cumulative increases in consumer price indexes (CPI) since 1990 for College Tuition, Medical Care, and All Consumer Prices.

Adding up nearly three decades of increases looks dramatic, but doesn’t show when various prices changes accelerated or slowed. More important, prices for college tuition and medical care are dominated by skilled human services, so they should be properly compared with service prices in general rather than with all items. 

All Consumer Prices (shown as an erratic black line in the graph) includes falling quality-adjusted prices for such tech products as computers and televisions, for example, and cyclically-volatile prices of internationally traded commodities such as oil, steel, and grain.

Service prices largely reflect wages and benefits for skilled labor, which (unlike commodity prices) almost never fall. If service prices did not increase faster than the CPI in general, then real compensation in service sectors could never rise.

This graph omits college tuition because that CPI item is particularly problematic due to averaging large differences in quality and “financial aid” (selective discounts from sticker prices). The Bureau of Labor Statistics explains some of the difficulties:

“The inclusion of financial aid has added to the complexity of pricing college tuition. Many selected students may have full scholarships (such as athletic), and therefore their tuition and fixed fees are fully covered by scholarships. Since these students pay no tuition and fees, they are not eligible for pricing. In addition, there are other students who pay a very small fee to the college since the majority of their tuition and fixed fees are covered by scholarships. When these situations are priced by BLS Field Staff, normal increases in tuition/fees and minor declines in scholarship awards can provide extremely large changes for entry in the CPI index. For some of these same quotes, minor tuition declines or minor scholarship award increases can actually result in negative prices, which make the quotes ineligible for use in the CPI.”

The graph compares two decades of year-to-year price increases for Medical Care and Services in general. The CPI for medical services alone (not shown in the graph) has actually increased somewhat less than the CPI for all Medical Care, which suggests prices of drugs and medical devices increased faster than physician and hospital fees. There have been major improvements in the quality of drugs and medical devices, however, and economists doubt the CPI adequately adjusts for quality improvement. As a BEA report notes, “If there are unobserved attributes that change over time (e.g. perceived efficacy or experience with the drug), these indexes will count any price increases associated with these changes as increases in price, not quality.”

Have Medical Care prices risen faster than Services prices in general? Yes, but the difference in annualized price increases was typically smaller than one percentage point except in 2002 and 2010, when recession’s aftermath depressed other services prices more than (heavily-subsidized) medical care prices. 

Recessions’ impact on commodity prices pushed the year-to-year overall CPI below zero at times, which underscores the inaptness of comparing prices of medical or educational services to any price index such as the CPI which is heavily weighted by goods.

As I reported over the weekend, today the House will take up the FY 2018 Intelligence Authorization Act (HR 3180) under an expedited consideration mechanism known as suspension of the rules. The announcement was made Friday, but late on Sunday, House Democratic Leader Nancy Pelosi complained about the fast-tracking of the bill. POLITICO quoted a letter from Pelosi to House Democrats:

“The Republican move to place this intelligence bill on Monday’s suspension calendar would deprive Democrats of the ability to have a full and open debate on critical intelligence issues at this sensitive time in our nation’s history…This is unacceptable when critical intelligence decisions are being made that impact America’s national security, and while the House and Senate Intelligence Committees are leading investigations into Russia’s continued efforts to undermine our democracy.”

Pelosi then when on to say that the substance of the bill itself is “not problematic.” 

The lead Democrat on the House Intelligence Committee, Adam Schiff of California, is the co-sponsor of the bill. Schiff issued no statement of protest on Friday when the voting schedule for the week of July 24 was announced. And in her own comments to POLITICO, Pelosi offered no list of potential Democratic amendments to the bill. Indeed, Pelosi made no mention at all of the fact that key bipartisan surveillance reform amendments to the National Defense Authorization Act were disallowed earlier this month—amendments that would absolutely be germane to the Intelligence Authorization bill.

It appears that for Pelosi, substance-free procedural sniping is more important than actually making a case for protecting the constitutional rights of Americans to be free from unwarranted surveillance by NSA and other intelligence agencies.

On Monday, July 24, the House will consider the Fiscal Year 2018 Intelligence Authorization Act under suspension of the rules in an attempt to fast-track the legislation, which contains some significant “Russiagate”-related provisions. 

Section 501 calls for a new Intelligence Community assessment “of the most significant Russian influence campaigns, if any, conducted during the 3-year period preceding the date of the enactment of this Act, as well as the most significant current or planned such Russian influence campaigns, if any.” Significantly, the classified report, which is due 60 days after enactment, is to also have an unclassified summary, meaning the public may learn still more about exactly when alleged Russian efforts to influence the 2016 presidential election began.

What may be lacking, as was the case with the IC assessment published in January 2016, is any new or meaningful, specific declassified intelligence that actually validates IC claims that the Russians were, in fact, responsible for the interference. Ironically, it has been yet another IC leaker—Reality Winner—who has provided us with the most interesting technical assessment of alleged Russian election-related activities. 

Section 502 of the bill mandates interagency reports on potential future threats:

(1) IN GENERAL.—As provided in paragraph (2), for each Federal election, the Director of National Intelligence, in coordination with the Under Secretary of Homeland Security for Intelligence and Analysis and the Director of the Federal Bureau of Investigation, shall make publicly available on an internet website an advisory report on foreign counterintelligence and cybersecurity threats to election campaigns for Federal offices. Each such report shall include, consistent with the protection of sources and methods, each of the following:

(A) A description of foreign counterintelligence and cybersecurity threats to election campaigns for Federal offices.

(B) A summary of best practices that election campaigns for Federal offices can employ, in seeking to counter such threats.

(C) An identification of any publicly available resources, including United States Government resources, for countering such threats.

To be truly effective, such an approach would almost certainly require the declassification of some fairly specific intelligence on alleged or actual Russian practices. It will very interesting to see exactly how much push-back this provision gets from the ODNI, DHS, and FBI.

Section 503 calls for a classified report on “containing an assessment of the financing of threat activity by the Russian Federation” which is also due 60 days after enactment.

Given how legislatively dysfunctional Congress has been this year overall (the annual National Defense Authorization Act was nearly two months behind its usual House floor schedule this year), it’s unclear whether the House and Senate will be able to agree on these provisions and actually get the Intel Auth bill to Trump for his signature before the year is out—or whether Trump will threaten a veto over any Russia-related provisions in any final bill. One thing is clear: that this bill is on the suspension calendar means that GOP House Intelligence Committee “Russiagate” investigative lead Mike Conaway (R-TX) and his Democratic counterpart, Adam Schiff (D-CA) are apparently on the same page about these issues. And for a president desperate to move past the “Russiagate” quagmire, that’s bad news indeed.

“Are Shoe Brands Charging You More Based On Your Gender?” asks Footwear News. The website cites data compiled by Datafiniti showing that high-end footwear brands tend to price women’s shoes higher than men’s. As examples, the median price of a Gianvito Rossi pair of women’s shoes was $750 versus $469 for the gent’s.

Such data has become increasingly of interest following the New York City study entitled “From Cradle to Cane: The Cost of Being a Female Consumer,” which was then replicated by The Times newspaper in London, both purporting to show that women were discriminated against in pricing terms for a range of everyday products. Particular examples in the surveys included children’s scooters, women’s hair products and razors. This comes alongside previous studies from the University of Central Florida and Consumer Reports, which found that women tended to pay significantly more for deodorant, haircuts, and dry cleaning.

Does all this show “sexist” pricing and discrimination against women?

Here’s some economics to bear in mind which might explain why the prices of goods might differ in these types of surveys:

  1. There can be cost of production differences in some cases: often men’s clothes and shoes tend to be more standardized than those targeted at, and bought by, women. This explains why both women’s clothing and dry cleaning of that clothing can be more expensive too, given the clothes cannot be handled in the same way. It does not seem a stretch of the imagination to suggest that women’s hair cuts tend to be more expensive as a function of length, time, and the variety of tastes as well.
  2. Though things like different colored razors have the same functional uses, the branding and designs are themselves part of the product. It might be that many women place inherent value on some products being branded as “for women” or else enjoy the scent, colors etc. Indeed, there is nothing to stop women buying male or unisex branded products (some women I know do), suggesting the continued existence of gendered variants is evidence of demand. Prices that maximize profits will be higher for women than men if women are less responsive to price (i.e. have more inelastic demand). This might be because of greater attachment to brand, or because women perceive products tailored to women as being of higher quality.
  3. For some products targeted at women, women may buy fewer units of any given brand relative to men (on products where women prefer variety), which would (other things given) lead to higher prices too.
  4. The surveys themselves may be biased towards standardized products with male and female versions. Tyler Cowen speculates, for example, that women might (on average) have a relative taste for variety and quality on these type of low value products, whereas men tend to spend more cheaply on these but more on products not differentiated by gender (such as automobiles, electronic sound systems etc).
  5. The example of nightclub cover charges, where women frequently obtain “free” entry, shows that for some goods and services men tend to pay more than women. Even in the shoe study, the data shows that the median price for moderately priced sneakers tends to be higher for men than women’s shoes. A pair of Nike women’s shoes was $80 vs. $85 for men. Some of the above economics might explain this (particularly the elasticity explanation), but with things such as nightclub nights the charge may help cover for probability of externalities – i.e. drunken violent behavior. Another example of this is vehicle insurance, where men tend to pay more than women for near identical products due to higher costs associated with a tendency towards more risky behaviors for men.

As seen then, there are many different rational explanations for why different prices might be charged for products targeted at different genders. This is certainly not an area where there are obvious “market failures” which justify government intervention.

The implicit criticism by some of this practice seems to be opposition to the mere existence of “gendered” products at all. Indeed, in a debate I had on the subject in the UK, my female opponent claimed that women did not want products to be “gendered.” If this is true, it suggests there is an exceptional entrepreneurial opportunity for companies to develop more unisex products. 

MacRumors has a piece out today noting that Apple has raised its lobbying game in Washington over the last six months, spending $3.6 million on a team of lobbyists who’ve visited House and Senate offices on issues ranging from “general patent reform” to “green technology” to “issues related to implementation of Section 1502 of the Dodd-Frank Act.” What’s missing from the lobbying disclosure form is any mention of federal government surveillance practices, whether it be Section 702 of the FISA Amendments Act or that nasty encryption-related battle Apple had with the FBI in the wake of the San Bernardino shooting in 2015. 

As Reuters noted earlier this month, the tech industry generally has been rather quiet about FISA reform, though members of the Reform Government Surveillance consortium (of which Apple is a member) like to point to a letter they sent to key Congressional committees earlier this year as evidence of their committment to getting NSA and the FBI to clean up their acts on domestic surveillance. But as the old saying goes, talk is cheap.

Apple, as the richest and most successful tech company in human history, certainly has the resources to make it’s lobbying campaign–or even a surveillance reform-focused PAC–far more robust and politically threatening to pro-Surveillance State House and Senate members. That it has declined to do so to date is telling. Until Apple and the other members of the RSG make it clear to House and Senate members that there will be a steep political price to pay for failing to rein in NSA and the FBI, don’t expect significant domestic surveillance reforms to make it into law.

The federal government funds an array of aid programs aimed at promoting growth in less-developed countries. Funding goes to federal agencies, such as the U.S. Agency for International Development, and it also goes to international aid groups, such as the World Bank.

The federal government spends more than $30 billion annually on foreign aid. Aid spending has more than doubled in the past two decades. The Trump administration has called for substantial cuts to foreign aid spending.

Ian Vásquez has published a new study on foreign aid at DownsizingGovernment.org. He argues that despite the political enthusiasm for aid, there is little evidence that it is effective. Indeed, it is often counterproductive. There is no correlation between foreign aid and economic growth, and efforts to condition the receipt of aid on market reforms have failed. As such, Ian argues that the federal government should end its development aid programs.

However, Ian also discusses the good news on economic development. Decades of experience show a strong relationship between economic growth and market-oriented policies. Countries eager to improve living standards can do so themselves with domestic reforms, such as securing property rights, reducing arbitrary and bureaucratic regulations, and encouraging entrepreneurship and investment.

Ian’s new study on foreign aid is here.

 

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