Wall Street Journal columnist William A. Galston says “the Great Decoupling of wages and benefits from productivity [is] the biggest economic story of the past 40 years.” Wow! The Biggest Economic Story of the past 40 years! Imagine that! I have been researching such data longer than 40 years yet this particular story is so old (and so wrong) I had almost forgotten about it.
The alleged decoupling of growth of pay from productivity, as Robert Gordon explained in 2009, “compares apples with oranges, and then oranges with bananas.” Median wages for the whole economy were deflated by the consumer price index, which exaggerated inflation and understated real income growth. Rapidly growing health and retirement benefits were often excluded. These muddled measures of real pay, which also failed to adjust for changing household size or hours, were compared to productivity of the nonfarm business sector, not the whole economy. And real output was calculated using GDP deflators that showed much less inflation than the CPI. With those errors, one estimate for the income-productivity gap from 1979-2007 was 1.46 percentage points, but Gordon’s adjustments shrunk that to a negligible 0.16. He also noted that mean and median incomes grew at remarkably similar rates, suggesting inequality did not explain much.
A 2013 study from the London School of Economics likewise found no significant gap between growth of compensation and productivity in the United States or UK (unlike the EU and Japan) if both measures are properly calculated with the same price index. The LSE study concluded that, “the debate around net decoupling in the UK and US is rather a distraction (it is actually more important in Continental Europe and Japan). Obtaining faster productivity growth is a highly desirable policy goal in the current climate of near recession as it will ultimately lead to faster wage growth and consumption.”
Galston tells other stories, such as “mobility has stalled” – which is indefensible nonsense. His allusion to the “past 40 years,” appears based on a Pew Research paper’s pointless claim that the “middle class” constituted a smaller share of adults in 2011 than in the idyllic year of 1971. As Pew Research hesitantly revealed, that is mainly because millions of people moved up – “the upper-income tier [earning more than double median income] rose to 20% of adults in 2011, up from 14% in 1971.”
All this statistical fog is thin camouflage for Galston’s invitation to grant authoritarian politicians and bureaucrats the discretion to somehow “link the tax rates individual firms have to the compensation practices they adopt.” That may well be the worst economic policy idea of the past 40 years, trailing barely behind Nixon’s dictatorial price controls.
As the Ukrainian security forces are moving to clear Kiev’s ‘Maidan’ protest camp again, after an unsuccessful attempt last night, the events are unfolding quickly and with the characteristically scary dynamics of an autocratic regime acting under pressure:
Ukraine’s state security service said it was launching an “anti-terrorist operation” across the country after the seizure of administrative buildings and arms and ammunition depots by “extremist groups.”
Labeling the opposition as ‘terrorists’ is a common rhetorical device used by authoritarian governments under duress. But we should make no mistake – the current situation is not just an outcome of the divisions existing within Ukrainian society but also a result of Vladimir Putin’s long standing and sinister meddling in Ukraine.
For Mr. Putin, the current situation is both a source of fear and an opportunity. The fear stems from the possibility of Ukraine setting a precedent of a bottom-up, civil society-driven initiative displacing a Moscow-sponsored leadership in a country with strong cultural and historical ties to Russia. The opportunity lies in leveraging the current unrest and the ethnic divisions it has uncovered to strengthen Russia’s influence over the country’s politics. The Russian government already provided Mr. Yanukovych with cash in December 2013; this week, another bond purchase worth $2 billion was announced, conditional on the government successfully tackling the opposition.
The international response is too timid given the magnitude of the problem and its proximity to the European Union’s borders. Targeted EU sanctions, such as the asset freezes and travel bans directed at Ukrainian officials, which are likely to be adopted tomorrow, seem fully justified–although they come very late. Still, care needs to be exercised so that they hurt the regime and not ordinary citizens.
More importantly, European leaders need to clearly articulate the long-term alternative that they are offering to Ukraine lest it remain the Kremlin’s client state. The roadmap to full EU membership ought to have an accelerated timeline, incentivizing Ukrainian policymakers to adopt open political and economic institutions.
The EU’s engagement with the country needs to come with tangible benefits for Ukrainians. Those would include most fundamentally a removal of trade and regulatory barriers, as well as immigration restrictions, making Ukrainians a de facto part of the common European market now rather than at an uncertain point in the future.
Patrick J. Michaels and Paul C. "Chip" Knappenberger
Rather than wait on the market to demand more fuel efficient trucks, President Obama, bypassing Congress, has directed the Environmental Protection Agency to draw up a new round of regulations raising the fuel efficiency standards on heavy-duty trucks. He promises that this will save billions of dollars in fuel costs, lower prices and reduce greenhouse gas emissions—or, as he describes it, a “win-win-win” situation.
Thank you, Mr. President for taking such good care of us.
Apparently, we are too stupid to have realized the manifold benefits of this chain of events ourselves.
Or is it that we realize these actions will have no impact of climate change and will probably result in higher prices for new trucks and everything that they transport?
You can use our “Handy-Dandy Temperature Change Calculator” to see that, using the EPA’s own computer model, if Americans cut all of our carbon dioxide emissions to zero, today, the amount of warming that would be prevented (assuming a warming forecast that is itself probably to high) by 2100 is around two-tenths of a degree—an amount that would be virtually impossible to measure against natural climate variability. Increasing the fuel efficiency of heavy trucks would have considerably less of an effect than cutting all carbon dioxide emissions and would simply not be discernible in climate data.
And the President’s claim that increasing the fuel efficiency will lower the price of all things neglects the fact that we simply do not know what technology would accomplish this end.
Perhaps he should have said—”if you like your truck, you can keep your truck,” that is, until you have to replace it with something that will cost much more than you would have otherwise purchased and not do what it is supposed to do.
Again, thank you, Mr. President.
Ted Galen Carpenter
Secretary of State John Kerry seems to be suffering a case of foot-in-mouth disease before and during his current trip to East Asia. We had already learned to be wary of his judgment on substantive foreign policy issues. He was, for example, an enthusiastic proponent of U.S. military intervention in Syria, a move that would have mired the United States in yet another expensive, futile war in the Muslim world. Fortunately, intense congressional opposition and a timely Russian diplomatic initiative spared the Obama administration from its own folly—at least for the time being.
But whatever challenges might exist when handling difficult foreign policy issues, one should be able to expect a secretary of state not to mangle basic facts about key countries and regions. Alas, that expectation is apparently erroneous when it comes to John Kerry. During a press conference in Washington prior to his departure for East Asia, he emphasized Washington’s support for Japan’s position regarding the bitter dispute with China over the Senkaku/Diaoyu islands in the East China Sea. Unfortunately, Kerry’s credibility became somewhat suspect when he initially placed those islands in the South China Sea (the arena of territorial disputes involving China and other neighbors).
Matters got worse when he traveled to South Korea. During a press conference in Seoul, a reporter asked him about the long-standing territorial dispute between Tokyo and Seoul over the Dokdo/Takeshima islands in the Sea of Japan. The audience was astonished when he appeared to signal a major shift in U.S. policy by stating that the U.S.-South Korean mutual defense treaty covered those islands. Such a position would place the United States on the side of South Korea against Washington’s principal ally in East Asia, Japan.
A State Department spokesman had to scramble later to rectify Kerry’s verbal gaffe, insisting that the Secretary apparently had misunderstood the question, believing it had referred to the Senkaku/Diaoyu dispute. One problem with the revised version of events is that South Korea is not a party to that controversy; as noted above, it’s a feud between Japan and China.
Unfortunately, Kerry’s blunders are indicative of widespread problems in President Obama’s foreign policy team. The president appointed Caroline Kennedy to the crucial post of ambassador to Japan, although her knowledge of Japan (or foreign policy in general, for that matter) is exceedingly meager. Other ambassadorial appointees have embarrassed themselves in Senate confirmation hearings, displaying little or no knowledge of the country to which they would be assigned. In some cases, their principal qualification for the diplomatic post appeared to be their record in raising funds for President Obama’s election campaigns.
The American people have every right to expect a better performance from individuals who are tasked with running the foreign policy of the United States. And that expectation should start with Secretary Kerry.
On Free Thoughts, the newish podcast from Libertarianism.org, Aaron Ross Powell, myself, and our guests explore the deep questions in libertarian thought. Guests include philosophers, economists, other Cato scholars. Rather than focusing on current public policy issues, we try to take a deeper look at how libertarians see the world.
Nick Gillespie and Matt Welch joined us for this week’s episode, and Jason Kuznicki filled in for Aaron. We discuss whether there is a growing movement of independents that is a cause for optimism among libertarians. Are we in for a better, more libertarian era than ever before? Or should we be skeptical of this kind of optimism, given the growth of the federal government in recent years?
Steve H. Hanke
A hallmark of socialism and interventionism is failure. Venezuela is compelling proof of this, having spent the past half century going down the tubes. Indeed, in the 1950’s, it was one of Latin America’s most well off countries. No more. Now it is a basket case – a failed state that’s descending into chaos.
How could this be? After all, Venezuela’s combined reserves of oil and gas are second only to Iran’s. Well, it might have reserves, but thanks to the wrongheaded policies of President Hugo Chavez, Venezuela is the only major energy producer that has seen its production fall over the past quarter of a century. The following chart tells that dismal tale:
The Obama administration is preparing to treat virtually every antique collector, dealer, and auctioneer in America as a criminal. In the name of saving elephants, the administration is effectively banning the sale of all ivory objects, even if acquired legally decades ago. Doing so will weaken conservation efforts and enrich those engaged in the illegal ivory trade.
Under the Convention on the International Trade in Endangered Species of Wild Fauna and Flora (CITES) only ivory from before 1989 can be sold. Unfortunately, ivory prohibition has not stopped the slaughter of elephants.
The greatest demand for new ivory comes from Asia. Most ivory in America arrived legally, many years ago.
Until now the rules were simple and sensible. Ivory imported legally can be sold. Moreover, the burden of proof fell on the government to convict you of violating the law. That’s the way America normally handles both criminal and civil offenses.
However, in mid-February the administration issued what amounted to a ban on ivory sales. As I point out in my new Forbes online column:
In practice, virtually every collector, dealer, auctioneer, and other person in America is banned from selling ivory items, even if acquired legally, owned for decades, and worth hundreds or thousands of dollars. Every flea market, junk shop, estate sale, antique store, auction showroom, and antique show is at risk of raids, confiscations, and prosecutions.
First, no imports are allowed, not even of antiques, which before could be brought to America with a CITES certificate.
Second, all exports are banned, except antiques (defined as over a century old) in what the Fish and Wildlife Service says are “exceptional circumstances.” At best the administration is raising the administrative and cost burdens of exporting to countries which already limit ivory imports to items with appropriate CITES documentation. Or the new rule may restrict the sale of items previously allowed, thereby hindering Americans in disposing of their legal collections.
Third, interstate transactions are prohibited, except for antiques. But the latter requires “documented evidence.” Unfortunately, for items inherited or purchased years ago such evidence rarely exists. Thus, the sale of almost all ivory across state lines is effectively banned.
Fourth, intrastate commerce, said the agency, is “prohibited unless seller can demonstrate item was lawfully imported prior to” 1990, when the international ban took effect. But how does someone “demonstrate” when, say, a gift from his or her parents was imported? If you can’t, you can’t sell the object.
By any standard, the administration rule is unfairly penalizing thousands of Americans. Why?
The administration complained about the difficulty in distinguishing ivory imported legally and illegally. But banning everything fails to distinguish between guilt and innocence. Moreover, much older ivory, given its manifold unique characteristics, is easily distinguishable from new work.
The illegal ivory supply also is small compared to that of legal ivory. Rather than ban the latter in an attempt to limit the former, the government should aid African countries in protecting their elephants, better interdict illegal imports, and identify sellers who specialize in new ivory.
In fact, targeting owners of legal ivory will perversely undermine such enforcement efforts. Making most ivory in America illegal will vastly expand the ivory black market and dramatically dilute enforcement resources.
Ivory commerce will continue, only mostly underground. More objects will privately pass among dealers and collectors, never reaching public view.
The interstate ban, too, will be flouted. Owners also may hand carry items to other nations without similar restrictions. Moreover, documentation will be faked.
Collectors and dealers will turn to those already participating in the illegal market, helping criminals expand their networks and increase their profits. Finally, overtaxed federal agents may prefer to go after easy targets, such as local flea markets, rather than secretive smugglers.
If the administration does not withdraw its rules, Congress should overturn this unfair attack on the law-abiding. Washington should penalize poachers and their seller allies—not collectors and dealers who have followed the rules. Especially since the administration’s new regulations will divert enforcement resources and push owners of legal ivory into the illegal trade, meaning more elephants are likely to die.
Daniel J. Mitchell
The tax code is a complicated nightmare, particularly for businesses.
A discriminatory rate structure adds to complexity, to be sure, but the main reason for a convoluted business tax system (for large and small companies) is that politicians don’t allow firms to use the simple and logical (and theoretically sound) approach of cash-flow taxation.
Here’s how a sensible business tax would work.Total Revenue - Total Cost = Profit
And it would be wonderful if our tax system was this simple, and that’s basically how the business portion of the flat tax operates, but that’s not how the current tax code works.
We have about 76,000 pages of tax rules in large part because politicians and bureaucrats have decided that the “cash flow” approach doesn’t give them enough money.
So they’ve created all sorts of rules that in many cases prevent businesses from properly subtracting (or deducting) their costs when calculating their profits.
One of the worst examples is depreciation, which deals with the tax treatment of business investment expenses. You might think lawmakers would like investment since that boosts productivity, wage, and competitiveness, but you would be wrong. The tax code rarely allows companies to fully deduct investment expenses (factories, machines, etc) in the year they occur. Instead, they have to deduct (or depreciate) those costs over many years. In some cases, even decades.
But rather than write about the boring topic of depreciation to make my point about legitimate tax deductions, I’m going to venture into the world of popular culture.
Though since I’m a middle-aged curmudgeon, my example of popular culture is a band that was big about 30 years ago.
The UK-based Guardian is reporting on the supposed scandal of ABBA’s tax deductions. Here are the relevant passages.
The glittering hotpants, sequined jumpsuits and platform heels that Abba wore at the peak of their fame were designed not just for the four band members to stand out – but also for tax efficiency, according to claims over the weekend. …And the reason for their bold fashion choices lay not just in the pop glamour of the late 70s and early 80s, but also in the Swedish tax code. According to Abba: The Official Photo Book, published to mark 40 years since they won Eurovision with Waterloo, the band’s style was influenced in part by laws that allowed the cost of outfits to be deducted against tax – so long as the costumes were so outrageous they could not possibly be worn on the street.
When I read the story, I kept waiting to get to the scandalous part.
But then I realized that the scandal - according to our statist friends - is that ABBA could have paid even more in tax if they wore regular street clothes for their performances.
In other words, this is not a scandal at all. It’s simply the latest iteration of the left-wing campaign (bolstered by tax-free bureaucrats at the Paris-based OECD) to de-legitimize normal and proper tax deductions.
So I guess this means that the New York Yankees should play in t-shirts and gym shorts since getting rid of the pinstripes would increase the team’s taxable income.
And companies should set their thermostats at 60 degrees in the winter since that also would lead to more taxable income.
Or, returning to the example of ABBA, perhaps they should have used these outfits since there wouldn’t be much cost to deduct and that would have boosted taxable income.
Shifting to the individual income tax, another potential revenue raiser is for households to follow this example from Monty Python and sell their kids for medical experiments. That would eliminate personal exemptions and lead to more taxable income.
Heck, maybe our friends on the left should pass a law mandating weekend jobs so we could have more income for them to tax.
Though I’m not sure how that would work since the statists are now saying Obamacare is a good thing because it “liberates” millions of people from having to work.
I’m not sure how they square that circle, but I’m sure the answer is more class-warfare tax policy.
P.S. A very low tax rate is the best way of encouraging taxpayers to declare income and minimize deductions.
When ABBA first became famous, the top personal tax rate in Sweden was at the confiscatory level of about 80 percent and the corporate tax rate was about 55 percent. With rates so high, that meant taxpayers had big incentives to reduce taxable income and little reason to control costs.
After all, a krona of deductible expense only reduced income by about 20 öre for individual taxpayers.
Corporate taxpayers weren’t treated as badly, but a rate of 55 percent still meant that a krona of deductible expense only reduced after-tax income by 45 öre.
But if the rate was very modest, say 20 percent, then taxpayers might be far more frugal about costs (whether the cost of uniforms or anything else) because a krona of deductible expense would reduce income by 80 öre.
By the way, the United States conducted an experiment of this type in the 1980s and the rich wound up declaring far more income to the IRS.
Juan Carlos Hidalgo
Today could be a very tragic day in Venezuelan history. Two large marches, one from the opposition and the other organized by the government, are already taking the streets of the capital and might converge in the same district. The regime of Nicolas Maduro outlawed the opposition march and threatened violence if they try to enter the municipality of Libertador, in downtown Caracas. Things could get very ugly.
Tensions have built up since last week when tens of thousands of people, mostly students, took to the streets to protest against the government. The heavy-handedness with which the regime has dealt with the protests is almost unprecedented. At least 3 people died, scores have been detained and many are still missing. The students that were released have denounced that they were tortured and raped while in custody. Moreover, the government issued an arrest warrant against Leopoldo López, former mayor of the district of Chacao and one of the most emblematic leaders of the opposition. As leader of the march today, he turned himself in to the National Guard.
We need to keep a few things in mind as events unfold:
A large segment of the population is fed up: This is not the first time that tens of thousands of Venezuelans take the streets to protest against the government. However, as the acute economic crisis worsens, the level of desperation among the population, especially the middle class, is reaching a boiling point. The scarcity index shows that more than one out of four basic products is out of stock. Hour-long lines are an every-day occurrence in super markets. And when you can actually find a product, your income is rapidly dwindling to purchase it. The official inflation rate reached 56 percent last year, but according to my colleague Steve Hanke’s Troubled Currency Project, the implied annual inflation rate is actually 305 percent. Crime has significantly worsened living conditions: Venezuela is now one of the most dangerous places in the world with almost 25,000 homicides in 2013 –a murder rate of 79 killings for 100,000 inhabitants. The country is quickly becoming unlivable and many Venezuelans think that they have nothing to lose.
The government will do anything to maintain its hold on power: This is almost verbatim from Nicolás Maduro this past weekend, who even stated that he doesn’t mind being called a dictator. People who fear the breakout of a civil war in Venezuela don’t understand that only one side is armed: the government and its supporters. The Maduro regime, whose security apparatus is closely controlled by Cuba’s secret services, has already engaged in brutish repression of protestors. The army and the National Guard are firmly aligned with the government and there is little or no chance that they might balk at exercising unrestrained violence against unarmed civilians. Moreover, armed gangs of government supporters, called “tupamaros,” act freely with the complicity of the security services and were supposedly behind the killings of a couple of protesters last week. It’s hard to have a civil war when only one side is armed.
Maduro’s real threat is from within: The opposition is disarmed and doesn’t constitute a real threat to Maduro’s hold on power. His real enemies are inside the government, especially military-types aligned with the speaker of the National Assembly, Diosdado Cabello. Any sign of weakness from Maduro could give the green light to this wing of chavismo to take over power. Maduro knows this, and is another reason he is likely to exert unrestrained repression against the protestors.
Latin American countries will back Maduro or remain silent: Maduro doesn’t have to worry about the international community, at least about his Latin American peers. Mercosur has already issued a statement declaring its solidarity with the Venezuelan regime. Similar declarations were made by other left-wing governments such as Ecuador, Bolivia and Nicaragua. On the other hand, Latin American nations with more mature democracies such as Mexico, Colombia, Peru, Chile and Costa Rica have been silent, out of cowardice or cynicism, and will probably remain so. Thus, the Venezuelan government has a free hand to repress its people without having to be held accountable by its neighbors or regional groupings such as the Organization of American States or the Community of Latin American and Caribbean States. The Venezuelan government will simply brush off any other criticism coming from Washington or Brussels.
There won’t be an easy way out. The question is whether the opposition will be intimidated by the threat of violence, as has been the case before, or will continue its struggle even if that means mounting casualties. My guess is that things will get a lot uglier.
K. William Watson
The Associated Press reports that “30 women protesters in Kazakhstan were arrested and thrown into police vans while wearing lace underwear on their heads and shouting ‘Freedom to panties!’”
Is this the beginning of a sexual revolution in authoritarian central Asia? Alas, no. The protest is a response to new rules from the Russia-led Eurasian Customs Union banning the sale or importation of underwear containing less than 6% cotton. The ban will outlaw 90% of the underwear currently being sold in those countries, stoking concerns of a return to Soviet-era underwear.
Although it is unclear to me at this point exactly why, lacy silk lingerie apparently threatens the economic vitality of Russia, Kazakhstan, and Belarus.
Banning clothes for economic reasons is unfortunately nothing new. In her thorough and informative book, The Travels of a T-Shirt in the Global Economy, Georgetown professor Pietra Rivoli details the efforts of the English Parliament in the 17th Century to keep people from abandoning English woolens in favor of cotton garments from India. In 1700, Parliament went so far as to mandate that all corpses be buried wearing nothing but wool.
Will trade historians one day write about the great Russian panty raid of 2014? Will they tell of the uprisings in the streets, the dangerous and exotic world of black market lingerie smugglers, Vladimir Putin’s regime-shattering silk drawers scandal? Only time will tell.
The purpose of trade barriers is always to control consumers, because free consumers are a danger to the goals of the state. And so, I call on free traders all around the world to stand in solidarity with these protestors. Freedom to panties! Freedom for all!
What should be done about the nation’s rustbelt cities–or, as they are being repackaged by marketers, “Legacy Cities”? The populations of at least a dozen major cities declined by more than 10 percent between 2000 and 2010, including Buffalo, Cincinnati, Cleveland, and of course Detroit and New Orleans (whose population decline has little to do with the rest of them). In many cases, such as Pittsburgh and St. Louis (which declined between 8 and 9 percent in the 2000s), recent declines are merely a continuation of trends since 1950.Click image to download the report (7.6 MB)
A new report from the Lincoln Land Institute offers a set of prescriptions for these cities. While they may sound good at first glance, close scrutiny reveals that they are the same tired policies that have been trotted out by urban planners for decades.
These policies include:
- Urban renewal, funded with tax-increment financing and other subsidies, to “leverage assets” in the city;
- Regional government “to better distribute the burdens of urban infrastructure and other costs,” i.e., make the suburbs pay for the central cities’ mismanagement;
- “New urban forms,” meaning high-density, mixed-use developments;
- “Re-establishing the central role of the city,” meaning demands that employers move to cities rather than suburbs; and
- “New governance structures,” meaning “economic development corporations” that can “leverage assets” (use tax dollars) to benefit selected developers in selected neighborhoods with little public scrutiny.
The report gives examples of cities that are doing some of these things, but fails to show that any of them have actually succeeded at attracting new people and jobs. In fact, the higher taxes and increased regulation called for by this report is more likely a recipe for accelerated disaster.
Here’s a completely different set of recommendations that I suggest is more likely to succeed:
- Improve schools, probably by using a voucher system to create a competitive environment for both public and private schools;
- If the city has a large African-American underclass, make absolutely sure that all elementary students have caught up to their middle-class peers by the time they reach high school, and gather private funding to insure that all high-school students who graduate with decent grades know they will get scholarships to a major university, thus giving them an economic path out of poverty;
- Eliminate cronyism and corruption in city government, problems never mentioned in the Lincoln Land Institute report but which could actually be exacerbated by the report’s recommendations. Cities are the creation of state legislatures, and if cities can’t reform themselves, the legislatures should take action by rechartering the city governments;
- Reduce crime by doing things like changing the gridded city streets that planners love into cul de sacs so that criminals have fewer escape routes;
- Reduce taxes by eliminating all but the most essential urban services–this means no government-funded convention centers, sports stadiums, hotels, streetcar lines, or other things that ought to be privately funded, if they are needed at all;
- Reduce regulation, including zoning rules, so property owners can engage in urban renewal without government subsidies or top-down planning. Historic preservation ordinances may sound cool, but they are one of the biggest obstructions to private redevelopment;
- Fix city pension and health care funds, even if it means going bankrupt to allow cities to renegotiate unsustainable contracts with public employee unions;
- If it hasn’t been done already, legalize the sale of beer from the same premises in which it is made. As I’ve argued elsewhere (see page 6), the micro brewpub revolution has done more to revitalize cities than rail transit, urban renewal, and the other expensive programs planners and city officials love.
In short, rather than adding to the layers of taxes and regulation that already hinder city growth, government should get out of the way.
The latest NSA spying revelations involve international trade issues, in particular an Indonesian complaint brought at the WTO in response to a U.S. ban on clove cigarette. (The trade problem was that the U.S. banned clove cigarettes, which are mostly made in Indonesia, but did not ban menthol cigarettes, a competing U.S.-made product). According to the New York Times, the Australian government monitored communications between the Indonesian government and its DC-based trade lawyers, possibly in relation to this case, and passed the information along to the NSA. (Note that law prof Orin Kerr is skeptical about the way the story is presented in the Times.)
Let me offer the following thoughts:
1. It’s hard to imagine that any information gathered by the Australians had much impact on the WTO case. I suppose it could be a slight advantage to get an early look at your opponents’ arguments, and see how they are thinking about the issues. But I can also imagine that all this additional information would be a distraction, with too much time being spent on marginal points. It’s worth noting that, in spite of any information U.S. government trade lawyers may or may not have received, the U.S. lost the case. Thus, like most NSA spying, any spying here was probably of limited value.
2. Regardless of its value, this kind of spying is likely to be pretty offensive to our trading partners. The WTO has detailed rules of procedure for its disputes, one of which says the parties must act in good faith (“all Members will engage in these procedures in good faith in an effort to resolve the dispute”). It’s hard to see how receiving confidential information about your opponents’ arguments, if that happened, satisfies this requirement. It will be interesting to see if this gets discussed in upcoming WTO meetings.
3. I wonder whether all of these revelations about spying will accelerate proposals being made by foreign governments to develop non-U.S.-based communications networks: “German Chancellor Angela Merkel said on Saturday she would talk to French President Francois Hollande about building up a European communication network to avoid emails and other data passing through the United States.”
Steve H. Hanke
Foreign airlines have begun to restrict ticket sales in Venezuela. As the bolivars’ value evaporates, and with exchange controls in force, the airlines fear that the funds they have in Caracas will evaporate, too. By restricting ticket sales, the airlines will limit the amount of new money that is trapped behind the government’s wall of exchange controls.
Of course, President Nicolas Maduro isn’t the first autocrat to impose exchange controls, and he won’t be the last to impose these confiscatory policies. Indeed, the pedigree of exchange controls can be traced back to Plato, the father of statism. Inspired by Lycurgus of Sparta, Plato embraced the idea of an inconvertible currency as a means to preserve the autonomy of the state from outside interference.
So, the temptation to turn to exchange controls in the face of disruptions caused by hot money flows is hardly new. Tsar Nicholas II first pioneered limitations on convertibility in modern times, ordering the State Bank of Russia to introduce, in 1905–06, a limited form of exchange control to discourage speculative purchases of foreign exchange. The bank did so by refusing to sell foreign exchange, except where it could be shown that it was required to buy imported goods. Otherwise, foreign exchange was limited to 50,000 German marks per person. The Tsar’s rationale for exchange controls was that of limiting hot money flows, so that foreign reserves and the exchange rate could be maintained. The more things change, the more they remain the same.
This brings me to Nobel laureate Friedrich Hayek’s 1944 classic, The Road to Serfdom. Many thought Prof. Hayek hurt his case because he was extreme. What nonsense. Just consider the Wall Street Journal’s reportage from Caracas about the real concerns of foreign airlines that have funds locked up in Venezuela. And then reflect on the following insightful analysis from the Road to Serfdom:
The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges. Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference. Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape—not merely for the rich but for everybody.
Hayek’s message about convertibility has regrettably either been overlooked, or thought to be too extreme. Exchange controls are nothing more than a ring fence within which governments can expropriate their subjects’ property. Open exchange and capital markets, in fact, protect the individual from exactions, because governments must reckon with the possibility of capital flight.
Happy Valentine’s Day, Washington: Netflix has a present for you. Tonight, you and your significant other can curl up on the couch with Frank and Claire Underwood, D.C.’s favorite backstabbing power couple. House of Cards, Netflix’s ridiculous (yet hard to resist) telenovela, is back. Apparently, many Hill staffers were irate that Netflix didn’t release the show early, for binge-streaming during yesterday’s snow day.
HoC’s story, focused on a Machiavellian congressman’s rise to power, isn’t heavy on verisimiltude. Like many fictional depictions of Washington, it fails to capture “the nation’s capital as the bureaucratic and constipated place that it in fact is,” as Christopher Hitchens once put it. It takes a lot of suspension of disbelief to buy into the show’s vision of a Capitol of cunning and competent schemers.
Still, some of the characterization rings true. Two decades in, this town probably would transform Princess Bride’s pure-hearted “Buttercup” into a vicious social X-ray running a phony environmental think tank. Likewise, my colleagues at Cato’s Center for Educational Freedom will probably appreciate the casting choice that led to former Sopranos hitman Mikey Palmice’s turn as a teacher’s union leader.
And overall, HoC is a major improvement over the last Beltway drama official Washington fell in love with: The West Wing, Aaron Sorkin’s unctuous Valentine to the Heroic Presidency. Sorkin built that show around the concept of an incorruptible president devoted to good works: the unbearably decent Josiah (Jed) Bartlet, a theologian-cum-Nobel laureate in economics, backed up by a staff of the most selfless, high-minded, public-spirited and charming political operators ever devised. It was altogether the throne-sniffingest portrayal of Washington imaginable.
I’ll take HoC’s Beltway Borgias over Sorkin’s Cartoon Camelot any day. As I wrote in the Washington Examiner this week: “At least ‘House of Cards’ is willing to entertain the idea that political animals aren’t angels and that ‘public service’ often deserves the scare quotes.”
In a recent profile of showrunner Beau Willimon, the New York Times Magazine noted that the Netflix series “stands out for its unblinking commitment to a singularly dark vision of politics.” It’s “a cold dissection of the post-Obama (or post-the-Obama-many-hoped-they’d-elected), post-hope political landscape.” Much too cold for those who still believe in a place called Hope. Last month, AV Club’s Jason Lynch waxed rhapsodic over West Wing’s “preposterous” but inspiring vision of a incorruptible president, and lamented that “a noble image of the presidency, and of politicians, that is absent from TV today.” Where have you gone, Jed Bartlet? A nation turns its lonely eyes to you.
Alas, Lynch writes:
Seven years after The West Wing ended its run, audiences now gravitate toward political shows like House Of Cards, Scandal, Veep, and the new Alpha House, … [that] revolve around presidents and other leaders who are either despicable, incompetent, or both. In other words, they’re just as selfish, sleazy, and/or stupid as we perceive many contemporary leaders to be.
President Obama has been waging a “War on Cynicism” since his first Inaugural Address, deriding “cynics” who “question the scale of our [that is, the federal government’s] ambitions.” And cynicism’s winning. This is progress!
Political “cynicism”—or, less tendentiously, skepticism toward power—is the health of a limited state. It makes ambitious federal programs much less likely to pass, decreases support for foreign-policy adventurism, and makes the public less likely to endorse restrictions on civil liberties. When we trust too much is when we get into trouble.
You wouldn’t think official Washington would be so enthusiastic about a drama that depicts D.C.’s power brokers as utterly untrustworthy, irredeemably venal, and possibly murderous. But boy, are they ever: here’s the 2013 House of Cards spoof from the White House Correspondents dinner, featuring Kevin Spacey, with John McCain, Jay Carney, Valerie Jarrett, and others elbowing each other out of the way to mug for the camera. Here’s another with various congresscritters—including the current and former House Majority Whips—reading Frank Underwood lines from the show. Hollywood for the Pathetic: as Spacey says, “it’s hard to write jokes for a town that already is one.”
Maybe Beltway pols like the show because it’s a power fantasy that appeals to their bottomless self-regard: “Sure, it paints us as evil, but it also makes us look like we know what we’re doing!” If HoC’s cynicism wounds, its vision of competence flatters.
Heck, even Obama likes the show: “I wish things were that ruthlessly efficient,” he’s said: “It’s like Kevin Spacey, man, this guy’s getting a lot of stuff done.” I see what he means, though I’d feel more comfortable if he hadn’t added that last bit.
Need an outrage to carry you through the weekend? If you’re the parent of a school-aged child, some lawmakers in New York state think your parenting skills could use “enhancement”—and want to force you to attend a series of “parenting workshops” as a condition of your kid’s progress to seventh grade.
“Requires parents to attend support programs designed to enhance parenting skills,” reads the official description of Bill S142-2013. The bill would direct New York’s education bureaucracy to develop guidelines for the content and distribution of a series of four or more workshops, of which one would be devoted to issues of abuse. (Why a state bureaucracy would know more about “parenting skills” than parents themselves is not explained.) Not only would parents have to attend, but for good measure the bill would require employers to bestow a paid day off each year for employees who are parents to do so.
The bill has provoked a bit of a public outcry in recent weeks. Among the comments at the official state site: “How about letting us raise our own children?” “An insult and serves no purpose”; “Please keep your noses out of my home”; “The only people that will benefit from this are the ones who will charge for the classes.”
Who’d sponsor such a mind-bending assault on individual rights and the integrity of the family? The bill’s main sponsor is Sen. Ruben Diaz Sr. (D-South Bronx), with co-sponsorship from Sens. Adraino Espaillat (D-Washington Heights) and John Sampson (D-Brooklyn).
Senator Diaz—not to be confused with his son, Ruben Diaz Jr., who serves as Bronx borough president—is a well-known figure in New York City politics who has served in the State Senate for more than a decade. Like most of his New York City Democratic colleagues, he readily votes to approve big government programs; unlike most of them, he also ardently pursues social-conservative causes such as opposition to same-sex marriage (he’s an evangelical minister as well as a politician). In the latter capacity, he regularly wins praise from national groups claiming to speak for “pro-family” positions. One must wonder, are they aware of his scheme for mandatory parenting workshops, and is that something they consider “pro-family”?
California law forbids the carrying of firearms in public places without a license and provides that the issuance of such a license requires “good cause.” San Diego County, as part of its implementation of that law, has set a number of restrictive policies on what it will consider good cause, which must be exceptional circumstances (“distinguish[ed]… from the mainstream”), and it specifies that concern for “one’s personal safety alone is not considered good cause.”
That’s a policy in considerable tension with the language of the Second Amendment, which protects individuals’ right not only to “keep” arms, but also to “bear” them. What does the verb “bear” mean in this context? That has given rise to considerable dispute, and some federal courts, such as the Third Circuit U.S. Court of Appeals, appear to believe that it provides very little protection for individuals’ right to possess guns outside the home. In a case last year by the name of Drake v. Filko – now the subject of a certiorari petition to the Supreme Court, as Ilya explained yesterday – the Third Circuit upheld a regulatory regime under which “virtually nobody in New Jersey can use a handgun to defend themselves outside their home.”
Today the Ninth Circuit U.S. Court of Appeals stepped forward to defend the individual rights that the Third Circuit would not. It ruled that “San Diego County’s ‘good cause’ permitting requirement impermissibly infringes on the Second Amendment right to bear arms in lawful self-defense.” It emphasized, as the Supreme Court had done in Heller, that the individual right in question is compatible with considerable regulation of such matters as the carrying of firearms in sensitive places (government buildings), by persons of questionable capacity, and so forth. But it went on, quoting McDonald, to get at the wider constitutional issue (footnotes omitted):
We are well aware that, in the judgment of many governments, the safest sort of firearm-carrying regime is one which restricts the privilege to law enforcement with only narrow exceptions. Nonetheless, “the enshrinement of constitutional rights necessarily takes certain policy choices off the table… . Undoubtedly some think that the Second Amendment is outmoded in a society where our standing army is the pride of our Nation, where well-trained police forces provide personal security, and where gun violence is a serious problem. That is perhaps debatable, but what is not debatable is that it is not the role of this Court [or ours] to pronounce the Second Amendment extinct.” Nor may we relegate the bearing of arms to a “second-class right, subject to an entirely different body of rules than the other Bill of Rights guarantees that we have held to be incorporated into the Due Process Clause.”
Part of what makes the new opinion in Peruta v. County of San Diego exciting is the talent ranged on both sides. Today’s 77-page majority opinion was written by highly regarded Judge Diarmuid O’Scannlain, a well-known Reagan appointee, joined by Judge Consuelo Callahan; a strongly worded 48-page dissent was penned by Judge Sidney Thomas, who’s been spoken of (“very smart and very liberal”) as a possible future Obama nominee to the Supreme Court.
Especially when set alongside rulings like the Third Circuit’s, today’s news makes it likely that the scope of the individual right to firearms will be teed up for further Supreme Court review sooner rather than later.
In today’s issue of Nature, scientists from the National Ignition Facility (NIF) in California are trumpeting their advance in achieving fusion ignition. However, the National Ignition Facility is just like so many other projects from the Department of Energy. It’s behind schedule and over budget.
Approved by Congress in 1993, the lab did not officially open until 2009 after numerous delays. According to a report in 2000 by the Government Accountability Office, “NIF’s cost increases and schedule delays were caused by poor Lawrence Livermore management and inadequate DOE oversight.”
The completed lab has cost taxpayers $5 billion, up from the initial estimates of $2.1 billion. It costs an additional $330 million to operate annually.
In 2009, scientists proclaimed that the NIF would achieve fusion within three years. Unsurprisingly for a government-funded project, NIF announced in 2012 that it failed to meet its goal. The New York Times said “the output of the experiments consistently fell short of what was predicted, suggesting that the scientists’ understanding of fusion was incomplete.”
NIF announced that it would spend the next three years trying to evaluate why it hadn’t achieved it. But in a moment of honesty in its report to Congress, NIF conceded “it is too early to assess whether or not ignition can be achieved at the National Ignition Facility.”
So while some news reports herald the advance at NIF as bringing it closer to achieving a sun-like power source, the project is still years away from its goal and billions over budget.
How do you know the Common Core is in trouble? You could religiously follow the news in New York, Indiana, Florida, and many other states. Or you could read just two new op-eds by leading Core supporters who fear their side is getting bludgeoned. Not bludgeoned in the way they describe – an education hero assaulted by kooks and charlatans – but clobbered nonetheless. As Delaware governor Jack Markell (D) and former Georgia governor Sonny Perdue (R) put it:
This is a pivotal moment for the Common Core State Standards.
Although 45 states quickly adopted the higher standards created by governors and state education officials, the effort has begun to lose momentum. Some are now wavering in the face of misinformation campaigns from people who misrepresent the initiative as a federal program and from those who support the status quo. Legislation has been introduced in at least 12 states to prohibit implementation and states have dropped out of the two major Common Core assessment consortia.
Sadly, Markell and Perdue’s piece, and one from major Core bankroller Bill Gates, illustrate why the Core may well be losing: Defenders offer cheap characterizations of their opponents while ignoring basic, crucial facts. Meanwhile, the public is learning the truth.
Both pieces employ the most hulking pro-Core deception, completely ignoring the massive hand of Washington behind state Core adoption. For all intents and purposes, adoption was compulsory to compete in the $4.35-billion Race to the Top program, a part of the “stimulus” at the nadir of the Great Recession. While some states may have eventually adopted the Core on their own, Race to the Top was precisely why so many “quickly adopted the higher standards.” Indeed, many governors and state school chiefs promised to adopt the Core before it was even finished. Why? They had to for Race to the Top! And let’s not pretend federal coercion wasn’t intended all along: In 2008 the Core-creating Council of Chief State School Officers and National Governors Association published a report calling for just such federal pressure.
The coercion didn’t stop with the Race, though. If states wanted waivers from the despised No Child left Behind Act, their only choices were take the Core or have their largest state college system declare their standards “college- and career-ready.” Oh, and the Feds selected consortia to write national tests to go with the Core.
These aren’t minor details. They are absolutely central facts about what happened, and failing to even mention them screams “dodge, dodge, dodge!” Making matters worse, Core defenders seem to revel in calling their adversaries “misinformed,” or purveyors of “myths,” while they pretend basic reality never happened.
The problems go on. Gates, for instance, suggests we need national standards because “Americans move more than 10 times over the course of a lifetime.” But Gates’ source indicates the average American younger than 18 will only move 2.6 times, and deeper mobility data show the large majority of moves are in-state. Since all states have their own standards, even among movers very few lose standards “consistency.”
Then there is the question of whether the Core is “standards” or “curriculum.” Both pieces insist it is the former, as if the whole idea of the Core weren’t to direct what schools teach – curricula. But suppose one were to ignore that. Is it true, as Gates writes, that the Core is just “a blueprint of what students need to know, but they have nothing to say about how teachers teach that information”?
While the degree of specificity varies between the language arts and math standards, at least in math the Core doesn’t just say what students should be able to do. It prescribes how. Look at the 3rd grade standards, which don’t just say students should be able to multiply or divide, but do so using “arrays, and area models.” Moreover, it is ultimately what gets tested that gets taught, and the federally funded Core tests are coming next school year.
Strangely, Markell and Perdue escalate the curriculum debate to a whole new level, insisting not just that the Core leaves local districts in charge of curriculum, but crediting it with encouraging innovative lessons. Among their anecdotes: Elementary schools in Delaware are teaching physics by having kids build “toy sail cars.” The only problem? Physics for elementary kids isn’t even in the Core!
Core supporters are waking up to the fact their project in trouble. Unfortunately, they seem happy to let crucial facts, and civil debate, continue to slumber.
From the 1939 case of United States v. Miller until 2008’s District of Columbia v. Heller, the Supreme Court left unclear what right the Second Amendment protects. For nearly 70 years, the lower courts were forced to make do with Miller’s vague guidance, which in many jurisdictions resulted in a cramped and limited right to keep and bear arms, erroneously restricted to militia service. While Heller did eventually clarify that the Second Amendment secures an individual right to keep and bear arms for self-defense, the ruling left many questions about the scope of that right unanswered (and 2010’s McDonald v. City of Chicago merely extended the right to people living in the states, without further defining it).
Since then, several courts have made clear that they plan to take only as much from Heller as they explicitly have to. One of these is the U.S. Court of Appeals for the Third Circuit, which last year in Drake v. Filko upheld New Jersey’s “may-issue” handgun law, which says that an individual may be granted a carry license—read: may be permitted to exercise her Second Amendment rights—only if she proves an urgent need to do so to the satisfaction of a law enforcement officer. In order to show this need, one must prove, with documentation, that there are specific, immediate threats to one’s safety that cannot be avoided in any way other than through possession of a handgun. If an individual can actually persuade the local official—who has total discretion to accept or deny the claim—then she gets a license for two years, at which time the gun owner must repeat the entire discretionary process (proving an imminent threat, etc.) to renew the permit.
The effect of this regulatory regime is that virtually nobody in New Jersey can use a handgun to defend themselves outside their home. The state law inverts how fundamental rights are supposed to work—that the government must justify restrictions, not the right-holder the exercise—and the Third Circuit saw no problem with that. The court applied a deferential review far from the heightened scrutiny normally due an individual right enshrined in the Bill of Rights. It also assumed the legislature’s good faith without requiring the state to show any evidence that a restrictive-carry regime lowers the rate of gun crime, and excused what constitutional infringements the law may cause because legislators were acting before Heller clarified that the Second Amendment protected an individual right.
The Third Circuit’s opinion makes clear that it, like some other lower courts, is “willfully confused” about the scope of the right to keep and bear arms as recognized in Heller and the proper judicial methodology to apply when evaluating Second Amendment cases. We think it’s time that circuit and state courts got some guidance from the Supreme Court, so we filed a brief, joined by the Madison Society Foundation, supporting the challengers’ petition for review.
This is an excellent case for the Court to take up to begin clarifying many of the unanswered questions involving the Second Amendment—such as to what extent it extends beyond the home and whether it can be conditioned on a showing of need. The Court has been hesitant to flesh out the contours of the Second Amendment. This hesitance has caused errant rulings that leave the right to bear arms hollow. Unless the Court intends the Second Amendment to lapse back into the second-class status it had before Heller, it needs to set the wayward courts straight.
New Jersey will now have an opportunity to respond to the cert petition, and then the Supreme Court is expected to decide later this winter whether to take Drake v. Jerejian and hear it in the fall.
This blogpost was co-authored by Cato legal associate Julio Colomba.
Andrew J. Coulson
Advocates and critics of universal government Pre-K seem to strongly disagree about what the research shows. Upjohn Institute economist and government Pre-K advocate Tim Bartik, for instance, claims to have a very different view of that research from Russ Whitehurst, an early education expert at the Brookings Institution who is critical of the case for universal government Pre-K.
At least some of that disagreement is illusory, because Bartik and Whitehurst are asking different questions. Bartik seeks to prove that at least a few high-quality early education programs have shown lasting success. Whitehurst wants to know about the long term effects of large scale Pre-K programs, particularly government programs.
Bartik is right that there are two early education programs in particular, High Scope/Perry and Abecedarian, that showed substantial long term benefits. But these were tiny programs operated by the people who had designed them and serving only a few dozen or a few score children. Since it is difficult to massively replicate any service without compromising its quality, the results of these programs cannot be confidently generalized to large scale government Pre-K programs.
In other words, Bartik is providing evidence that is largely irrelevant to the merits of universal government Pre-K, the policy he seems to be championing. Whitehurst and others focus on the results of large scale federal and state programs, because these are relevant to the present policy debate.
So far, there have been four randomized controlled trials of large-scale government Pre-K programs. The first two examined the same group of Head Start students, one observing them at the end of first grade and the other observing them at the end of the third grade. Both studies show initial effects enjoyed during the Head Start program to essentially vanish by the early elementary grades. The next examined Early Head Start and found much the same thing. The fourth looked at Tennesee’s Pre-K program and found it to have a statistically significant negative effect (and the other, statistically insignificant point estimates were mostly negative as well).
When Bartik deals with the evidence on Head Start he juxtaposes the negative results of the gold standard randomized controlled experiments with several non-experimental studies of the same program. But Bartik selectively neglects to discuss the many other non-experimental studies of large scale government Pre-K programs that haven’t shown lasting benefits. Indeed when the federal government reviewed a generation of non-experimental research in the 1980s, its own meta-analysis concluded that the consensus showed Head Start’s effects fading out during the K-12 years.
To sum up, there is at best no favorable consensus among non-experimental studies of large scale government Pre-K programs, but there is a consensus among the more reliable experimental studies: program effects fade out by the elementary school years, sometimes by the end of kindergarten. That is the evidence that matters when discussing proposals for expanding government Pre-K.