Steve H. Hanke
As the price of crude oil continues its downward tumble towards $80 per barrel, I am reminded of a similar scenario from near the end of the Cold War in the 1980s. When Saudi Arabia announced in 1985 that protecting oil prices was no longer its main priority, oil production surged and prices fell off a cliff, briefly plunging below $10 per barrel, as I had correctly predicted.
Lower prices delivered a fatal blow to the Soviet economy, which ended up seeing $20 billion per year in oil revenues evaporate. The resulting fiscal shortfalls proved to be a dagger in the heart of the U.S.S.R.
On October 1st of this year, Saudi Arabia’s national oil company announced that it had abandoned a policy of price protection and would start to focus on protecting its market share. Combined with falling global demand and rising supplies elsewhere, oil prices have fallen accordingly. This has put a squeeze on eight of the world’s top oil producers. States like Iran, Venezuela, and Iraq can only balance their current budgets at oil prices ranging from $110 to $135 per barrel (so-called break-even prices).
If oil prices stay below $90 per barrel for any length of time, we will witness massive fiscal squeezes and regime changes in one or more of the following countries: Iran, Bahrain, Ecuador, Venezuela, Algeria, Nigeria, Iraq, or Libya. It will be a movie we have seen before.
Daniel R. Pearson
Mexican Economy Secretary Ildefonso Guajardo was in Washington this week arguing on behalf of an agreement to suspend the U.S. antidumping/countervailing duty (AD/CVD) investigation against imports of sugar from Mexico. The case will soon enter its final phase, with the U.S. International Trade Commission (ITC) expected to determine early next year whether the U.S. sugar industry has been injured by imports from Mexico.
In the context of North American sugar politics, an agreement to suspend the AD/CVD process and implement a managed-trade arrangement makes some sense. Both U.S. and Mexican sugar industries already are more or less wards of the state, or at least are very heavily guided and controlled by their respective governments. Both governments have given indications that they are interested in settling this dispute. The history of bilateral sugar trade has been dominated by government intervention rather than by free-market economics. It seems almost natural to take the next obvious step by allowing Mexican sugar to enter the United States only under terms of a suspension agreement (i.e., with the quantity limited or the price set high).
It’s worth mentioning that Mexican sugar growers are the only ones in the world currently allowed to sell as much sugar as they wish in the U.S. marketplace. Even U.S. growers are not permitted to do so. Years ago they gave up that right in exchange for retaining an almost embarrassingly high level of price support. That strong price incentive was inducing them to grow more sugar than the market could absorb. Under the provisions of the U.S. sugar program, that excess sugar could end up being owned by the U.S. Department of Agriculture at considerable expense to taxpayers. So U.S. sugar growers made the decision to sell less sugar, but keep the price high.
Mexican growers, on the other hand, obtained unfettered access to the U.S. market in 2008. That followed a contentious period of bilateral trade in sugar and high-fructose corn syrup (HFCS) dating to 1994, which was when the North American Free-Trade Agreement (NAFTA) began to be implemented. In a nutshell, the United States adopted a much more restrictive approach to imports of Mexican sugar than Mexico thought had been negotiated, and the Mexicans reciprocated regarding imports of HFCS.
Given that historic context, the open access to the U.S. market enjoyed by the Mexicans since 2008 seems to be rather an anomaly. Why not go back to the good old days of closely managed trade?
Two reasons occur to me. One is that Mexico negotiated its access to the U.S. sugar market in good faith during the NAFTA talks. The two countries each made concessions to the other and received benefits in return. The fact that the U.S. industry subsequently lobbied Congress for an excessively generous sugar program does nothing to change the commitment to keep imports from Mexico unrestricted. Within the construct of current U.S. sugar policy, the way for the United States to honor its international trade obligation would be to add further restrictions to sales of U.S. sugar in the U.S. market. (Or, of course, the U.S. sugar price support could be reduced or eliminated, which could obviate the need both for restrictions on sales of U.S. sugar and imports of Mexican sugar. That approach is far too market oriented for this industry, though.)
The other reason not to skip blithely back toward managed trade is that it’s not at all clear that the U.S. sugar industry will prevail in its AD/CVD case. I could explain that I served as an ITC commissioner for ten years and voted on several hundred AD/CVD cases. I have not discussed this investigation with current commissioners. (That wouldn’t be appropriate, and they wouldn’t tell me anything, anyway.) However, I have read the public version of key materials from the preliminary phase of the ITC investigation in some detail. The Commission voted 6-0 affirmative in favor of going forward to the final phase. This was not at all surprising; I would have voted with the majority. To vote in the negative would have required meeting a high standard: finding that there was no “reasonable indication that a domestic industry is materially injured or threatened with material injury.” There was not sufficient information on the preliminary record to make such a determination, which is the general rule in a complicated investigation such as this one.
However, there was enough information to make me think that a negative vote in the final phase was entirely plausible. The legal standard is different in a final than in a preliminary. Instead of finding only a “reasonable indication” of material injury, the Commission actually has to determine that the domestic industry has been materially injured or is threatened with material injury. There also needs to be a clear causal link between imports from Mexico and any injury that the U.S. industry might have been experiencing. Yes, U.S. sugar prices fell during a portion of the period of investigation (POI), but world sugar prices also were falling. Did sugar imports from Mexico actually cause U.S. sugar prices to slide, or was the domestic market being driven down by the declining global price? (For more on these issues, see my previous post.)
There’s no doubt that there would be considerable risk for the Mexican government if it was to abandon efforts toward a suspension agreement and to focus solely on obtaining a negative vote from the ITC. If Mexico loses at the Commission, it would then be too late to negotiate a settlement. Rather, the U.S. industry would be in a relatively stronger position, with AD/CVD duties in place for the next five years. On the other hand, perhaps one or more Mexican producers would succeed in obtaining low or zero AD/CVD duties from the Department of Commerce. Such companies could continue to sell sugar profitably into the United States, potentially leaving the quantity of imports from Mexico unchanged from what it would have been otherwise. The larger the gap between the world price and the U.S. domestic price, the more likely this would be the case. If the next best alternative is to sell at a low price on the world market, paying a duty to sell into the United States might make good sense.
The upside to Mexico from achieving a negative vote at the ITC is really quite substantial. Not only would it retain the market access it paid for in the NAFTA, but its sugar industry also would be better positioned to grow and prosper.
From the standpoint of free traders, there could be another benefit. Knowing that imports from Mexico would continue to be present in the marketplace might help prompt the U.S. sugar industry to reconsider its protectionist policy instincts. Lowering the U.S. price support level would go a long way toward eliminating the artificial incentive that now draws Mexican sugar into the United States.
Daniel Henninger nailed it in his article “Killer Bureaucracies,” which discussed the poor performance of so many federal agencies recently. He called for “scaled-down, distributed public responsibilities” to reduce bureaucratic failure.
To that end, Congress should pursue three reforms:
- Eliminate bureaucracies that we do not need. Departments that mainly pump out subsidies and intrude on properly state, local, and private activities should be terminated, including the Departments of Agriculture, Education, and Energy. Federal organizations that perform useful business functions should be privatized, including USPS, FAA, TSA, Amtrak, TVA, and the Army Corps of Engineers.
- When feasible, scrap department superstructures—such as Homeland Security—because they add complexity and blur responsibility. Homeland agencies, such as the Secret Service and Border Patrol, should stand on their own, have narrowly-defined tasks, and report directly to the president.
- Assign the oversight for each agency to a single House and single Senate committee so that citizens know which politicians are to blame for failures. Homeland Security is currently overseen by more than 90 committees and subcommittees, but that’s absurd because when every politician is responsible, none of them are.
The federal bureaucracy can work better, but only if it is much smaller.
George W. Bush’s foolish invasion of Iraq sowed the wind. Now Iraq, its neighbors, and America are reaping the whirlwind. Some Iraqi officials are calling for the return of U.S. combat troops. Washington should say no.
American conservatives traditionally rejected domestic social engineering. But the neoconservative takeover of the Republican Party pushed the GOP into social engineering on a global scale.
Alas, it didn’t work out that way in Iraq. At the cost of several thousand dead the U.S. opened a geopolitical Pandora’s Box, unleashing a sectarian-guerrilla conflict which claimed hundreds of thousands of Iraqi lives.
Bush’s legacy was a corrupt, authoritarian, and sectarian state, friendly with Iran and Syria. Even worse was the emergence of the Islamic State, ripping Iraq apart, seizing large chunks of Syria, threatening Kurdistan, committing murder and mayhem, and threatening to destabilize Jordan, Lebanon, and Turkey.
The Iraq disaster’s architects, however, insisted that nothing had been their fault. Indeed, Iraq hawks claimed, the fault for Iraq’s collapse was entirely President Obama’s since he followed the Bush withdrawal schedule.
In fact, even had the administration succeeded in maintaining a garrison, little likely would have changed. Washington’s only leverage would have been to threaten to withdraw its troops, which, of course, would have frustrated its objective of staying.
Worse would have been deploying American troops against the Maliki regime’s domestic enemies. That would have made Washington an active combatant in sectarian conflict, tied America even closer to Maliki, and turned U.S. forces into a lightning rod for discontented Iraqis.
How should Washington respond today? Renewed American intervention is no less likely to again stir the whirlwind. As I note on Forbes online: “bombing jihadist radicals, supporting authoritarian regimes, taking sides in sectarian conflict, playing multiple sides in Syria, hectoring allied states, and pursuing new but still unattainable objectives in the Middle East offer a multitude of opportunities for bloody blowback.”
In fact, the Islamic State became a significant U.S. interest only because Washington termed it one. ISIL’s fighters are insurgents, not terrorists. The Islamic State stands apart from al-Qaeda because the former is seeking to become an organized government rather than a terrorist group.
Of course, the Islamic State’s objectives could change. But butchering two Americans who fell into its hands illustrated the group’s monstrous philosophy, not its threat potential. Ironically, Washington’s attempt to thwart the group’s regional ambitions might push ISIL toward al-Qaeda and the terrorism business.
Moreover, the administration’s strategy is a bust. U.S. airstrikes have not prevented the group from advancing. Yet Washington’s tepid intervention has discouraged the countries with the greatest interest in defeating the Islamic State, most notably Turkey, from taking action.
Worse, Washington has stepped up its commitment to overthrow Syria’s Assad regime. President Bashar al-Assad is an ugly character, but his army is the best force currently opposing ISIL. Aiding the so-called “moderate” insurgents in Syria could tie down government forces, enabling the Islamic State’s black flag to eventually fly over Damascus.
The only serious alternative to fully reentering the war is to step back, making clear that the Islamic State’s neighbors will bear the cost of any further advances. Iraq desperately requires a political solution separating anti-Baghdad Sunni tribes and former Baathists from their ally of convenience, ISIL.
Jordan and the Gulf States also have much at stake and military forces available for use. Most important is Turkey, which alone has some 400,000 men under arms. Washington should inform Ankara that there will be no NATO involvement in a problem Turkey should confront.
The administration’s Iraq policy has failed. The U.S. is more entangled in war; Americans have been killed in retaliation for Washington’s intervention; the Islamic State is still advancing.
U.S. officials should back out of Iraq, not jump in. This may be President Obama’s final opportunity to avoid a lengthy conflict which could come to define his legacy as the 2003 Iraq War came to define that of George W. Bush.
Caleb O. BrownRemembering Leonard Liggio (Tom G. Palmer)
Leonard Liggio, who died this week, was an important pillar in the modern libertarian movement and someone who connected modern libertarian ideas with their historical antecedents. I chatted briefly with Tom G. Palmer about Liggio’s impact on ideas and libertarianism.
Several of Liggio’s lectures are available at libertarianism.org.
Steve H. Hanke
President Lyndon Johnson’s legacy was the so-called Great Society (read: entitlement programs). As these programs have matured, along with the U.S. population, the proportion of the people dependent on the State has soared. Indeed, spending on entitlement programs gobbles up bigger and bigger chunks of the federal budget.
As the population grows older, entitlements will grow. Worryingly, the ratio of people receiving government benefits to those paying taxes will continue to climb, too. As the accompanying chart shows, those who receive government goodies already number the same as those who pay taxes (the ratio is one). With the steady progression of the ratio, it will be very hard to put the genie of the Great Society back in the bottle. Can you just imagine how difficult it will be to cut entitlement programs when those who are dependent on the government outnumber taxpayers by two to one?
Steve H. Hanke
For a clear snapshot of a country’s economic performance, a look at my misery index is particularly edifying. The misery index is simply the sum of the inflation rate, unemployment rate, and bank lending rate, minus per capita GDP growth.
The epicenter of the Ebola crisis is Liberia. As the accompanying chart shows, the level of misery, as measured by the misery index, has decreased since Charles Taylor ruled Liberia.
That said, the index was still quite elevated, at 19.4, in 2012. Yes, 2012; that was the last year in which all the data required to calculate a misery index were available. This inability to collect and report basic economic data in a timely manner is bad news. It simply reflects the government’s lack of capacity to produce. If it can’t produce economic data, we can only imagine its capacity to produce public health services.
With Ebola wreaking havoc on Liberia (and neighboring countries), the level of misery is, unfortunately set to soar.
Every two years, the Cato Institute awards the Milton Friedman Prize for Advancing Liberty to an individual who has made a significant contribution to advancing human freedom. More than anything, past winners have embodied the old adage that the price of liberty is eternal vigilance.
It should therefore be no surprise that Milton Friedman Prize winners continue to show up in the news, pushing for freedom and standing up to power. In recent days, three awardees have appeared in the news because of their unyielding commitment to the principles of individual liberty, limited government, free markets, and peace.
In September, the ruling Communist Party in Beijing announced that the people of Hong Kong, who have enjoyed considerable autonomy since the city’s transition from a British protectorate in 1997, could only vote for electoral candidates that were pre-approved by the Communist Party. Protesters bravely took to the streets and have faced strong-arm tactics from the police, including beatings and pepper spray. Beijing has refused to budge and this week “made its highest-level denunciation yet of the protesters,” reports the New York Times, “accusing them of pursuing a conspiracy to challenge Beijing’s power over the city.”
The authorities in Beijing aren’t satisfied with cracking down on protests in Hong Kong; they are also curtailing freedom on the mainland. Mainland supporters of the protesters are being arrested. And as the Washington Post reported this week, “books by scholars considered supporters of the demonstrations are suddenly becoming harder to find,” as Beijing imposes an apparent ban on material critical of the government.
Mao Yushi, awarded the Milton Friedman Prize in 2012, is one of those scholars. Mr. Yushi is an economist and one of China’s most outspoken activists. In response to the news that his books were being censored by Beijing, Yushi wrote, “A national government organ is daring to risk universal condemnation, in open opposition to the constitution. What is our government actually trying to do?” His internet post was then swiftly deleted by government censors.
Fortunately, Mao Yushi has overcome much worse repression. Under Mao Zedong, Yushi wrote in the Washington Post just weeks before the Hong Kong protests broke out, “I was labeled a ‘rightist’ and persecuted, along with thousands of others. We were removed from our posts and sent to the countryside for ‘re-education.’ I was reduced to the lowest human form, constantly stalked by the nightmare that I could never shake: hunger.”
Hernando De Soto
The rise of ISIS, the terrorist group in Syria and Iraq, reminds Hernando De Soto of how he helped battle a radical terrorist group in Peru. And he didn’t do it with bombs. He did it through capitalism.
Hernando De Soto is a renowned economist whose work has focused on the lack of formal property rights as the source of poverty in poor countries. In his native Peru, De Soto helped initiate sweeping reforms that instituted property rights and a formal legal system for the country’s vast network of informal enterprises. The Peruvian government reduced the complicated red tape that was hindering economic activity by 75 percent. Hundreds of thousands of informal business were recognized and millions of jobs were created.
De Soto wrote about his efforts in two famous books, The Other Path and the Mystery of Capital. In 2004, the Cato Institute awarded him the Milton Friedman Prize.
Beyond lifting people out of grinding poverty, the reforms inspired by De Soto’s insights also undermined the violent communist guerrilla movement in Peru called The Shining Path, which had killed up to 30,000 farmers by 1990 who had “resisted being herded into mass communes.” By unleashing Peru’s untapped economic potential, the reforms effectively stole all of Shining Path’s potential recruits, directing them toward creative, wealth-producing pursuits instead.
Writing in the Wall Street Journal last week, De Soto urges policymakers to heed these lessons in the fight against ISIS:
As the U.S. moves into a new theater of the war on terror, it will miss its best chance to beat back Islamic State and other radical groups in the Middle East if it doesn’t deploy a crucial but little-used weapon: an aggressive agenda for economic empowerment. Right now, all we hear about are airstrikes and military maneuvers—which is to be expected when facing down thugs bent on mayhem and destruction.
But if the goal is not only to degrade what President Barack Obama rightly calls Islamic State’s “network of death” but to make it impossible for radical leaders to recruit terrorists in the first place, the West must learn a simple lesson: Economic hope is the only way to win the battle for the constituencies on which terrorist groups feed.
Read the whole article here.
Last month marked the 25th anniversary of what has been described as the “Polish Miracle.” Six weeks before the fall of the Berlin wall, Leszek Balcerowicz, Poland’s new deputy prime minister and minister of finance, “outlined a plan to transform Poland’s economy from communism to capitalism,” reported Market Watch in September. “Prices would be decontrolled, individuals allowed to start businesses, the survival of state enterprises determined by the market [and] the printing press would be shut down — halting hyperinflation…”
Balcerowicz, whom Cato Senior Fellow James Dorn described as “the architect of Poland’s transition from Soviet-style central planning to a market economy,” was awarded the Milton Friedman Prize this year. The reforms he initiated lifted the Polish people out of the poverty and misery of Soviet-style economics. From 1992-2012, Poland’s economy more than doubled in size, growing at an annual average rate of 4.42 percent.
In August, former U.S. Senator Phil Gramm and Michael Solon wrote an op-ed in the Wall Street Journal comparing the experiences of post-Soviet Ukraine and Poland. Whereas Ukraine “largely squandered its economic potential with pervasive corruption, statist cronyism and government control,” and now faces a serious threat to its independence, “Poland created the prosperity that has strengthened and solidified its freedom and independence.” And “[t]he man largely responsible for Poland’s transformation is Leszek Balcerowicz.”
Today, the Cato Institute hosted an event on “The Transition from Communism 25 Years after the Fall of the Berlin Wall,” in which scholars explored the uneven transition from communist dictatorship to democracy and market economics, drawing lessons about which reforms worked and which did not. Balcerowicz’s historic leadership of one of the most successful of those transitions is precisely what earned him the prestigious Milton Friedman Prize for Advancing Liberty. Listen to his acceptance speech here.
Karen Tumulty asks in the Washington Post,
what label do you put on the political philosophy of a state that one year would legalize marijuana for recreational use and the next year recall two state senators who voted for stricter gun laws?
Readers of this blog might have an answer. So, it turns out, does Sen. Mark Udall:
“We’re a libertarian state — small ‘l’ — when it comes to privacy issues, issues of reproductive freedom, gun ownership, who you worship, who you spend your life with,” Udall said. “We’re a pro-environment state. We self-identify with environmentalists more than any other state in the nation. But we’re also very pro-business.”
So now those small-l libertarian voters will have to decide whether they prefer a not-so-libertarian Democrat, a not-so-libertarian Republican, or a big-L Libertarian.
With the election only weeks away, pundits are visualizing how a Republican-controlled Senate would impact future policy decisions. Today’s Washington Post highlights the supposed plight of federal workers under a Republican Congress.
The piece discusses House Budget Chairman Paul Ryan’s budget proposal:
Under the Ryan budget, the contribution of most federal employees toward their retirement plan would increase by 5.5 percentage points with no increase in benefits — effectively a pay cut. Ryan emphasizes a “defined-contribution system” that centers on employee payments to their retirement program instead of the current system, which includes pensions from the U.S. government. He estimated his plan would save the government $125 billion over 10 years.
That $125 billion in savings, however, would come from the pockets of federal employees.
The piece continues in a similar vein discussing Republican-supported legislation that would make it easier for federal employees to be disciplined, fired, and restricted in their conference expenditures–all reasonable proposals. It cites federal employee union officials on the difficulties these policies would place on federal workers.
But the piece fails to mention the elephant in the room: federal employees are compensated more generously than their private-sector counterparts.
Using data from the Bureau of Economic Analysis, the average wage for a federal civilian employee in 2013 was $81,076, compared to the average wage of $55,424 for private-sector employees.
The big advantage for federal employees is their robust benefit packages. Federal employees receive the largest selection of health insurance of any employer in the country, generous vacation and time-off policies, and both a defined benefit pension and 401(k)-style retirement account. Adding in the value of these benefits, the average federal civilian employee receives annual compensation of $115,524. Compensation for the average private-sector employee is $66,357.
Particularly striking is that availability of pensions to federal employees. According to the Bureau of Labor Statistics, only 10 percent of private-sector employers are offered defined benefit pension plans. The majority of recipients are unionized employees, concentrated in the utilities industry.
Given this large disparity it is reasonable that the Ryan Budget would increase employee contributions to their pensions. This plan was also endorsed by the Bowles-Simpson commission as a meaningful step to reforming compensation for the federal civilian workforce.
While $125 billion sounds like a large cut to federal employee compensation, it represents less than 5 percent of compensation over the next ten years. Asking federal employees to pay a bit more for their lavish benefits is a common-sense reform for the new Congress. Hopefully, Congress will go further and phase-out the defined-benefit pension program in its entirely.
Secretary of State John Kerry met late yesterday in Paris with Russian Foreign Minister Sergei Lavrov. Though somewhat overshadowed by Kerry’s meetings with Iran, the meeting nonetheless provided some fascinating clues as to where the Ukraine crisis is headed.
First, international tensions over Ukraine seem to be slowly relaxing, although violence continues to mar the ceasefire in the Donbas itself. Russian troops are withdrawing from the border, as specified in the Minsk Protocol. The United States is making encouraging noises about the possibility of sanction removal. More importantly, Kerry made a clear point of emphasizing Russian-American cooperation and announced that the two countries would engage in intelligence sharing on ISIS. This represents a major about-face for the Obama administration, which just six months ago said its goal was to “isolate President Vladimir Putin.” It seems that faced with the difficulty of managing simultaneous conflicts – something the White House is not good at – officials are opting for a more conciliatory approach to Russia.
Second, Crimea wasn’t mentioned. Though it calls for Ukrainian sovereignty to be respected, the protocol doesn’t explicitly discuss Crimea. In short, it looks like Crimea may be off the negotiating table, effectively ceded to Russia. Instead, the main point of contention between Kerry and Lavrov appears to have been the worry that Ukrainian separatists will hold another referendum on joining Russia, in place of Ukrainian parliamentary elections in late October.
Third, no Ukrainian representatives were present at the meeting, although President Poroshenko is set to meet with Vladimir Putin and several European heads of state tomorrow in Milan. Ukraine is struggling to fund its fight against the separatists, and international assistance is drying up. If Ukraine is being edged out of the process, it would be extremely bad for them, but could be positive for the United States, which gains little from a protracted cold war-style stand-off with Russia.
So where does this leave us? Distracted by developments in the Middle East, America seems content to let the status quo triumph in Ukraine, turning the dispute into a fairly typical post-Soviet frozen conflict, like those found in Georgia or Azerbaijan. Crimea would remain a de facto but unrecognized part of Russia, while Donetsk and Luhansk would be part of Ukraine in name only. Low levels of conflict will continue, but as long as Russia doesn’t get involved, the international community will likely ignore it. This outcome is probably the best that Russia could hope for, as it has the secondary advantage of preventing Ukraine from joining NATO or the European Union.
But while a diplomatic solution in Ukraine is wise, it shouldn’t be allowed to metastasize into a frozen conflict. As we saw in Georgia in 2008, these situations are inherently unstable and have the potential to spring back to life unexpectedly. For the sake of long-term stability, it would be better to negotiate now a more long-lasting deal between Russia and Ukraine, one which provides for substantial autonomy of the disputed regions within a Ukrainian federal structure.
As members of the faculty of Harvard Law School, we write to voice our strong objections to the Sexual Harassment Policy and Procedures imposed by the central university administration…
Amid the clamor to provide fuller remedies to complainants who file sexual assault and harassment charges, the university is preparing to trample the interests of others:
Harvard has adopted procedures for deciding cases of alleged sexual misconduct which lack the most basic elements of fairness and due process, are overwhelmingly stacked against the accused, and are in no way required by Title IX law or regulation.
Among the problems: overly broad definitions of misconduct in situations like that of mutual incapacitation by alcohol, and procedures that deny “any adequate opportunity to discover the facts charged and to confront witnesses and present a defense at an adversary hearing.”
Had Harvard arrived at these rules as a result of purely internal deliberations, it would be one thing. But in practice it’s yielding to strong-arm pressure from the combined efforts of the Obama Department of Justice and Education Department Office of Civil Rights (for more details, see my article for Commentary last year.) Like hundreds of other colleges and universities over the past year, Harvard responded to this pressure by meekly folding its hand:
The university’s sexual harassment policy departs dramatically from [existing] legal principles, jettisoning balance and fairness in the rush to appease certain federal administrative officials.
We recognize that large amounts of federal funding may ultimately be at stake. But Harvard University is positioned as well as any academic institution in the country to stand up for principle in the face of funding threats.
It’s especially gratifying to see that the letter’s signers include prominent scholars associated over the years variously with feminist, liberal, and left-leaning causes, such as Nancy Gertner, Charles Ogletree, Charles Nesson, Janet Halley, and Elizabeth Bartholet, along with perhaps more expected names like longtime contrarian Alan Dershowitz. A turning point? Let’s hope so. The letter is here (h/t Eugene Volokh).
Michael F. Cannon
Randy Barnett has an excellent post at the Volokh Conspiracy about his recent amicus brief requesting the D.C. Circuit grant en banc review of Sissel v. HHS. (Sound familiar?) Sissel challenges the constitutionality of ObamaCare’s individual mandate – which the Supreme Court ruled could only be constitutional if imposed under Congress’ taxing power – on the grounds that this, ahem, tax originated in the Senate rather than the House, as the Constitution’s Origination Clause requires.
A three-judge panel of the D.C. Circuit ruled against Sissel. The panel’s rationale was that the Patient Protection and Affordable Care Act was not the sort of “Bill for raising revenue” that is subject to the Origination Clause, because the purpose of the PPACA is to expand health insurance coverage, not to raise revenue. Barnett explains why this reasoning is nutty. Under the Sissel panel’s ruling, no bills would ever be considered revenue measures because all revenue measures ultimately serve some other purpose. The panel’s interpretation would therefore effectively write the Origination Clause out of the Constitution. Barnett argues instead that the courts must recognize the PPACA as a revenue measure subject to the Origination Clause because the Supreme Court held the taxing power is the only way Congress could have constitutionally enacted that law’s individual mandate.
A shorter way to describe Barnett’s argument is that he turns ObamaCare supporters’ own victory against them: “You say the individual mandate is constitutional only as a tax? Fine. Then it’s subject to the Origination Clause.”
Barnett again corners the D.C. Circuit with another sauce-for-the-gander argument on the procedural question of whether that court should grant en banc review of its panel decision in Sissel:
Of course, en banc review is rarely granted by the DC Circuit, but given that it recently granted the government’s motion for en banc review of the statutory interpretation case of Halbig v. Burwell presumably because of the importance of the ACA, the case for correcting a mistaken constitutional interpretation is even more important, especially as the panel’s reasoning has the effect of completely gutting the Origination Clause from the Constitution…
Or, the shorter version: “You guys think Halbig is worthy of en banc review? Fine. If the Sissel panel erred, the downside is even greater.”
We’ll see whether the D.C. Circuit thinks the Constitution is as worthy of its protection as ObamaCare.
(Cross-posted at my comment-friendly blog, Darwin’s Fool.)
Do you hear the people sing?
Singing the song of angry men?
It is the music of the people
Who will not be slaves again!
Will you join in our crusade?
Who will be strong and stand with me?
Beyond the barricade
Is there a world you long to see?
Then join in the fight
That will give you the right to be free!
I hope that the students of Hong Kong will be more successful than the French students were in June 1832. This time, of course, the whole world is watching, and that may make some difference.
Cato Conference: "Pruitt, Halbig, King & Indiana: Is ObamaCare Once Again Headed to the Supreme Court?"
Michael F. Cannon
On October 30, the Cato Institute will host a conference featuring leading experts on four legal challenges that critics understandably yet mistakenly describe as “the most significant existential threat to the Affordable Care Act”:
Thursday, October 30, 2014, 9:00AM – 1:30PM.
Luncheon to follow.
Featuring: Oklahoma Attorney General Scott Pruitt; Indiana Attorney General Greg Zoeller; Robert Barnes, The Washington Post; Jonathan Adler, Case Western Reserve University School of Law; David Ziff, University of Washington School of Law; Brianne Gorod, Constitutional Accountability Center; James Blumstein, Vanderbilt University; Michael F. Cannon, Cato Institute; Len Nichols, George Mason University; Tom Miller, American Enterprise Institute; and Robert Laszewski, Health Policy and Strategy Associates, LLC.
In Pruitt v. Burwell and Halbig v. Burwell, federal courts have ruled that the Internal Revenue Service is misinterpreting the Patient Protection and Affordable Care Act, unlawfully paying billions of dollars to private health insurance companies, and unlawfully subjecting more than 50 million individuals and employers to the Act’s individual and employer mandates. In King v. Burwell, another federal court found the IRS’s interpretation is permissible. A fourth lawsuit, Indiana v. IRS, is due a ruling at any time.
While these cases attempt to uphold the ACA by challenging the Obama administration’s interpretation, supporters and critics agree they could have as large an impact on the law as any constitutional challenge. Is the IRS acting within the confines of the law? Is the ACA unworkable as written? Is it inevitable that the Supreme Court will hear one of these cases, or a similar challenge yet to be filed? What is the impact of the IRS’s (mis)interpretation? What impact would a ruling for the plaintiffs have on the health care sector and the ACA? Leading experts, including the attorneys general behind Pruitt v. Burwell and Indiana v. IRS, will discuss these and other dimensions of this litigation.
To register to attend this event, click here and then submit the form on the page that opens, or email events [at] cato [dot] org, or fax (202) 371-0841, or call (202) 789-5229 by 9:00 a.m. on Wednesday, October 29, 2014.
Patrick J. Michaels and Paul C. "Chip" Knappenberger
You Ought to Have a Look is a recurring feature from the Cato’s Center for the Study of Science that briefly highlights a few interesting blog posts from around the web that are comments on subject areas we are currently emphasizing. Climate change issues currently top the list. Here we post a few of the best in recent days, along with our color commentary. This is the first installment of You Ought to Have a Look
We start off with the estimable Judith Curry, former chairwoman of the highly regarded School of Earth and Atmospheric Sciences at Georgia Institute of Technology (aka “Georgia Tech”). Her musings, published every few days on her blog “Climate Etc.” have a wide following amongst climate geeks (like us), while oftentimes her postings should be of interest to a wider, more general audience.
Judith scored big last week with an excellent op-ed in the Wall Street Journal. In her subsequent blog post “My WSJ op-ed: Global warming statistical meltdown,” she takes you through the version that appeared in print as well as some of the earlier drafts of it highlighting lessons she learned along the way. The article focuses on her recent blockbuster publication in which she and co-researcher Nic Lewis peg the earth’s climate sensitivity—how much warming will occur as a result of a doubling of the atmospheric concentration of carbon dioxide—at a value about one-half that which is produced by the collection of “state-of-the-art” climate models used by the UN and the Obama Administration to underpin their calls to mitigate carbon dioxide emissions from the production of energy.
And nearly every Friday, she posts her “Week in Review” where she highlights things that have recently caught her eye or events that she was involved in. In the current issue, she describes her recent travels which included a trip to Ohio’s Oberlin College where she “debated” me (PJM). As she describes it:
The debate went fine, we each had 10 minutes to make opening statements on the science, and then an additional 10 minutes to discuss broader implications. I used my time to discuss the values issues and decision making under deep uncertainties. PJM discussed the increasingly perverse incentives in academia and government funded science, see [link] for some of his recent writing on this topic. He definitely makes some valid points.
Next, you might want to check out the witty Matt Briggs (“Statistician to the Stars”) post on “Don’t Say ‘Hiatus’” in which he takes us (and virtually everyone else) to task for using the terms “pause” and/or “hiatus” to refer to the past 18 years or so of no statistically significant overall change in the earth’s average surface temperature. Briggs’ main point is that since climate change models are so bad (unskillful), there is no reason for a priori expectations of the temperature behavior one way or the other. In other words, a “pause” from what?
Be aware that Briggs is a very twisty writer, often leading the reader down a path that takes a sharp turn further down his somewhat detailed essays. But there is always some gem to find at the end!
Briggs is an interesting character. He is associated with Cornell, where he teaches on advanced statistics course. He was an editor of Journal of Climate, the American Meteorological Society’s flagship climate journal, but he quit after getting tired of the terrible manuscripts that were sent in (and often published).
It’s hard not to like Matt’s style, and you will be seeing a lot of his work highlighted here.
Finally, our friend Roy Spencer’s wide ranging drroyspencer.com (usually on things atmospheric, but sometimes otherwise) has an interesting article pointing out that size matters when it comes to climate change. In his post “Climate Change: A Meaningless Artifact of Technology?,” Roy notes that if you can’t distinguish the signal of climate change from the noise of natural variability (or even if you can, if it is exceedingly tiny), then there is really nothing worth getting worked up about. Roy worries:
“This seems to be the fate of our advanced society — we must find increasingly obscure things to fret over as we solve our major problems…hunger, disease, water-borne illness, infant mortality. But with real problems now appearing – renewed terrorist threats, Ebola — I fear we are straining gnats as we swallow camels.”
In a case of good timing, Roy followed-up that post with one illustrating a prime example of all this from Secretary of State John Kerry, who recently said something along the lines of “Life as you know it on Earth ends if climate change skeptics are wrong.” In his post “Life as You Know It Will End if John Kerry is Wrong…OR Right,” Roy demonstrates that, given the catastrophically high cost of converting even half of our fossil-fuel based energy to renewables, most of us will be living in poverty if Kerry’s solutions are implemented. Roy includes a video in which he and other energy policy experts discuss how the premature push toward renewable energy on a large scale will increase human suffering. It is well worth watching.
Stay tuned to our You Ought to Have a Look series for more blog highlights like these in the days ahead!
Craig D. Idso and Patrick J. Michaels
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
With all of the negative effects predicted to occur in response to the ongoing rise in the air’s carbon dioxide (CO2) concentration—a result of burning fossil fuels to produce energy—it is only natural to want to see what has been happening to our Earth’s many ecosystems as the atmospheric carbon dioxide load has risen. (Its atmospheric concentration has risen from around 280 parts per million to nearly 400 ppm, an increase of about 43 percent).
A new study by the University of California’s Christopher Dolanc and colleagues does just that, for the diverse Sierra Nevada forests of California.
Dolanc and his colleagues analyzed two periods: historic measurements between 1929 and 1936, and modern data from 2001 through 2010. And when we said “diverse,” we meant it. They “classified 4,321 historical plots and 1,000 modern plots into nine broad groups of vegetation types that are widely used by land managers and researchers in the region.” This is what grad students are for!
They compared tree density and composition between the two periods, within and between the nine types of forest. The results shown in Figure 1 below.
Figure 1. Percent change in tree density by forest type in the Sierra Nevada Range, USA, as determined from historic (1929-1936) and modern (2001-2010) measurements. Green bars denote a statistically significant change. You might want to call this “California Greening.” Source: Dolanc et al. (2014).
As you can see, they found that tree density was significantly higher (in eight of nine forest types) in the current era of high carbon dioxide, when compared to the early period when concentrations were around 306 ppm, only about 10 percent above the pre-industrial background.
In addition, by looking across forest types, they find that density was higher in all western slope forests. Note to the numbers people: a 128 percent increase in tree density, as seen for montane hardwood forests, is a huge greening.
With respect to why there was a significant increase in tree density over the past several decades, Dolanc offers that the changes in the density and composition of lower-elevation forests are consistent with fire suppression; but that the density increases in high-elevation vegetation types (subalpine forests generally don’t burn) are “more likely to be caused by changing climate.”
Some of this climate change may be due to the CO2 emitted to the atmosphere by the burning of fossil fuels over the past century, although an inspection of regional climate data shows most of the Sierra warming occurred from 1910 through the early 1930s, long before the major emissions. Also, recent research has tied 20th century temperature fluctuations in northern California, and much of the Pacific Northwest, to naturally occurring atmospheric/ocean circulation patterns over the Pacific Ocean.
Let’s be charitable and say that the Sierra vegetation is responding favorably to all kinds of climate change, whether induced by humans or natural variability. At a minimum, the observations of this study do not support fears of widespread forest decline in the face of rising temperatures and atmospheric CO2. It is noteworthy that this occurs over the substantial diversity of ecosystems that occurs along this altitudinal gradient.
Another factor not considered in this report is the direct fertilization effect of carbon dioxide, a well-known phenomenon documented in thousands of laboratory and field experiments around the world. That’s a different subject altogether. But, from this study, it is apparent that whatever subtle changes in Sierra Nevada climate are occurring, we are witnessing a California Greening.
Dolanc, C.R., Safford, H.D., Dobrowski, S.Z. and Thorne, J.H. 2014. Twentieth century shifts in abundance and composition of vegetation types of the Sierra Nevada, CA, US. Applied Vegetation Science, 17, 442-455.
It’s not just high-profile culture-war issues like same-sex marriage and the right to bear arms that the Supreme Court is avoiding like the plague. On issues ranging from federalism to property rights to criminal law, the justices increasingly decline to hear any case they don’t absolutely have to – no matter how important the issues presented – especially if there’s a threat of an irreconcilable split. Such is the brave new world of John Roberts’s minimalism/unanimity.
The latest such example came yesterday morning, in a criminal procedure case called Jones v. United States, in which Cato filed an amicus brief that I previously blogged about. The issue here is whether, pursuant to the Sixth Amendment, a judge can base a sentence on facts that the jury did not find beyond a reasonable doubt. (The Court ruled in a 2000 case called Apprendi v. New Jersey that judges can’t enhance sentences beyond statutory maximums based on facts, other than prior convictions, not decided by the jury – but in Jones the sentences in question, while seemingly harsh and unreasonable, were still within the sentencing guidelines.)
While normally we don’t know what the justices are thinking when they deny a cert petition, or even how the vote went (four votes are needed to grant), but in the Jones denial, Justice Antonin Scalia wrote a rare dissenting opinion, joined by Justices Clarence Thomas and Ruth Bader Ginsburg. Here’s the salient bit:
The Sixth Amendment, together with the Fifth Amendment’s Due Process Clause, “requires that each element of a crime” be either admitted by the defendant, or “proved to the jury beyond a reasonable doubt.” Any fact that increases the penalty to which a defendant is exposed constitutes an element of a crime, and “must be found by a jury, not a judge.” We have held that a substantively unreasonable penalty is illegal and must be set aside. It unavoidably follows that any fact necessary to prevent a sentence from being substantively unreasonable—thereby exposing the defendant to the longer sentence—is an element that must be either admitted by the defendant or found by the jury. It may not be found by a judge. [emphasis original; internal citations omitted.]
And so the petitioners came one vote short. The three dissenters may seem like an unusual grouping, but actually these justices are often together on issues relating criminal defendants’ jury-trial rights. (It’s sort of the left/right versus the center, or the principled versus the pragmatic.) They were in the Apprendi majority, for example, as well as in the majority for the case that struck down the mandatory nature of the sentencing guidelines, United States v. Booker (2005), and recent cases involving the right to confront witnesses against you. Alas, they were joined in those cases by Justices John Paul Stevens and David Souter, who have since been replaced by Justices Sonia Sotomayor and Elena Kagan, respectively. It’s not a big surprise that Kagan seems to have joined the “prgamatic” bloc for these purposes, but Sotomayor’s vote is disappointing. Some commentators point to her background as a prosecutor to explain such deference, but Justice Sotomayor is one of the most pro-defendant votes on Fourth Amendment and habeas corpus cases.
In any event, whatever the reason for the lack of a crucial fourth vote to grant, this was another opportunity lost by the Court, another responsibility shirked. For more commentary, see here, here, here, and here.
The problems with federal highway spending are well documented. The program distorts project incentives and distributes money inefficiently. A new report from the Government Accountability Office (GAO) adds to the list of problems, detailing improper fund management within the Federal Highway Administration (FHWA).
In 2014 the highway trust fund collected $39 billion in fuel tax revenues, but spent $53 billion, creating a $14 billion deficit. This was not an isolated event. Since 2008 Congress has provided $50 billion of general federal revenues to prop up the highway trust fund. The Congressional Budget Office estimates that the highway trust fund will require another $157 billion of general revenues by 2024.
Funds from the highway trust fund are spent by several agencies, with the bulk allocated by FHWA. In fiscal year 2013, FHWA spent $41 billion, or 80 percent, of all highway funds. Of that, $39 billion was sent to states; the majority going to road and bridge construction and improvement.
But GAO found that FHWA is poorly tracking how this money is being spent. According to GAO, “FHWA tracks and reports aggregate obligations for its “major projects” (projects with a total cost of $500 million or more), it does not collect and report aggregate obligations for other projects, which represented nearly 88 percent of all fiscal year 2013 spending.” GAO’s analysis states that $36 billion in federal highway funding is not being properly tracked by FHWA.
Tracking this information would allow FHWA to provide greater oversight on projects, and to provide Congress and the public greater detail about spending projects and priorities. The agency could track cost growth on projects and perhaps stop cost overruns, which are common on transportation projects.
FWHA already has the technology to make these improvements. GAO notes that FHWA’s computer system already has the capability to track this data, but the agency does not feel inclined to use this capability.
Congress’ current short-term patch to the highway trust fund expires in May. FHWA’s adoption of GAO’s recommendations would allow both Congress and the agency to better control spending and lower the imbalance between spending and revenues.
The Secret Service is scandal prone. It spends excessively on foreign presidential trips, and it has agents who get in trouble with prostitutes and liquor bottles. The recent White House fence-jumping incident was a stunning failure. Despite the Service spending $1.9 billion a year, a guy with a knife jumped the fence, sprinted across the lawn, pushed open the front door, galloped through the Entrance Hall, danced across the East Room, and almost had time to sit down for a cup of tea in the Green Room.
In the wake of the incident, the head of the Secret Service resigned. But the Service is an agency within the Department of Homeland Security (DHS), and the head of DHS, Jeh Johnson, did not resign. Indeed, he said very little about it, presumably to evade responsibility. So what is the purpose of having the DHS bureaucratic superstructure on top of agencies such as the Secret Service? If DHS does not correct problems at agencies when they fester for years, and if DHS leaders do not take responsibility for agency failures, why do we need it?
A new survey of 40,000 DHS employees reported in the Washington Post finds that the department has severe management problems:
The government’s 2014 Federal Employee Viewpoint Survey portrays a Department of Homeland Security still facing debilitating morale problems that have plagued it for years but worsened during the Obama administration — and which have grown more serious since Johnson took over in December.
While the survey shows that the vast majority of DHS employees are hard-working and dedicated to their mission to protect the homeland, many say the department discourages innovation, treats employees in an arbitrary fashion and fails to recruit skilled personnel.
At the DHS Science and Technology Directorate, for example, only 21 percent of employees in this year’s survey held positive views of their leadership’s ability to “generate high levels of motivation and commitment in the workforce,’’ according to results for that division.
Since its inception, the department has been plagued by poor morale and a work environment widely seen as dysfunctional, which has contributed to an exodus of top-level officials in recent years, many of whom have been lured by private security companies.
Only 41.6 percent of DHS employees said they were satisfied with the department, down from 44.4 percent a year earlier.
In 2013, only 29.9 percent of employees department-wide had a positive view of their leaders’ ability to “generate high levels of motivation and commitment in the workforce.’’ That number plunged to 24.9 percent this year.
That’s all pretty pathetic. But this is the most stunning result from the survey: “Asked if their leaders ‘maintain high standards of honesty and integrity,’ just 39.1 percent of employees responded positively.”
The 2002 creation of DHS was a mistake. Congress should revisit its handiwork, and begin unbundling the department and closing it down. Some DHS agencies, such as the Secret Service, should be stand-alone organizations that report directly to the president. Some DHS agencies should be moved to existing departments. And some DHS agencies, including TSA, ought to be abolished.