Policy Institutes

Patrick J. Michaels and Paul C. "Chip" Knappenberger

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger. While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic. Here we post a few of the best in recent days, along with our color commentary.

Apart from the Northeast blizzard, its global warming hype, and postmortem analysis, climate talk during the past week has been dominated by polls … and poles … and Poles.

First off is a Pew Research Center poll that found there was a growing difference between what scientists think about some “science” issues and what the general public thinks about them. One take—an overly worried one—on the “gulf” in opinions is presented by reformed genetically modified organism (GMO) activist Mark Lynas in his article “Even in 2015, the Public Doesn’t Trust Scientists” in the Washington Post. On issues such as vaccine effectiveness, evolution, GMO food safety, and causes of climate change, the level of agreement between the general public and scientific consensus is much less than Lynas is comfortable with and he worries that this growing divide—that he largely lays at the feet of “lobbyists and activists”—has “serious implications for democratic governance.”

This seems a bit overly dramatic.

What is the “correct” level of public agreement with the prevailing scientific consensus? Just as skepticism is a valuable trait for scientists, so too is it for the general public. In many cases, policy and personal decisions are based on much more than simple (known) science alone.

We suggest that the situation would be worse if the general public swallowed everything scientists say—even in the form of the prevailing “scientific consensus”—hook, line, and sinker.

After all, what was once prevailing thought often turns out not to have been true.

In essence, lagging public opinions acts to steady and slow federal policy decisions that would, if based only on the current scientific consensus, prove to be rather herky-jerky.  We have enough of that already.

While this may prove frustrating for scientists working in policy-relevant fields, we don’t see the future with 20-20 vision, so a degree of caution is preferable to full speed ahead. And that, on a general level, is what the divide between public opinion and scientific opinion provides.

That brings us to the results of a New York Times/Stanford University poll on public attitudes on federal actions directed at climate change. The Times’ headline screamed, “Most Americans Support Government Action on Climate Change, Poll Finds.”

Of course, the pollsters didn’t ask the most important question: How much are you willing to spend in an attempt to mitigate future global warming? In previous polls, when such a question was asked, the answer was always “not much.”

And like previous Stanford polls, the respondents seemed to show a lack of understanding about how the U.S. system of taxes works. (But who can really blame them for that?) While they largely were opposed, or shied away from, imposing a tax on their own greenhouse gas-generating activities (like using electricity or gasoline), they largely were in favor of giving corporate tax breaks for renewable energy deployment and development, and for less greenhouse gas–emitting fossil fuel use. But what goes around, comes around.

What we found interesting was what seemed like a lessening of the extreme position that human greenhouse emissions are in no way affecting the climate. This position is being replaced by a realization that climate change is occurring and we are playing some role in it. This seems like another example of the acceptance of the “lukewarmers” stance on global warming: that it is happening, that humans are in part responsible, but that the result will be manageable more so through adaptation and innovation than through government policies aimed at mitigation.

And a word to the wise: before any politician (mis)takes the poll results as reason to pursue, say, a carbon tax, recall that support of past greenhouse gas emission limiting measures affected subsequent elections in big ways: in 2010 after the House passage of cap and trade, and again in 2014 in Kentucky and West Virginia (a result of EPA  regulations). So tread lightly.

The past week was not just dominated by talk of opinion polls, but also by talk of polarized opinions.  

U.K. economist Richard Tol posted a somewhat disturbing blog piece on the polarization of climate policy, highlighting the role of “radical greens”—a group that is becoming increasingly, well, radical.

Tol begins:

The debate on climate policy has long been polarized. Asking an utterly sensible question—which of the many options is the best course of action—is met with howls of derision from both sides. Some protest the idea of taking climate change at all serious. Others are convinced that the maximum action is not enough.

Polarization is not conducive to sound policy.

According to Tol, things have recently turned nasty:

There are now elements in the environmental movement who are so worried about the state of the planet that they have lost all sense of proportion. This is alarming for those at the receiving end of their mindless wrath. It does not help to protect the environment either. Just like Boko Haram does not endear anyone to Muslims, green radicals taint all environmentalists. But whereas Islamic leaders immediately distance themselves from any new outrage, environmental leaders pretend nothing happened.

Tol concludes:

Environmental protection has come a long way since the early 1970s. Pollution is much reduced, and care for the environment is widely shared and supported—at least in Europe. Sensible policies and respectable pressure groups are the best way forward to solve the remaining environmental problems. Green radicals risk throwing that away.

Have a look at Tol’s article for an example of how radical things have become—it’s kind of frightening.

And finally, on a lighter note, comes news from a research team led by a group of Polish scientists that calving icebergs make different sounds depending on whether they fall into the water from above or whether they slide into the water from below. According to Oskar Glowacki, a researcher from the Institute of Geophysics at the Polish Academy of Sciences, “We just place the hydrophones—underwater microphones—in the water and listen to the sounds.”

They produced an audiovisual to illustrate their finding. You can check it out here (if you dare). Sometimes it’s little wonder why the public isn’t always engaged with scientists!

Adam Bates

Referring to the federal government’s forfeiture regime as “an important tool” in fighting crime, attorney general nominee Loretta Lynch staunchly defended the concept of civil asset forfeiture during the first day of her confirmation hearings.

After Sen. Mike Lee (R-UT) questioned the “fundamental fairness” of Americans having their property taken by the government without any proof (or often even suspicion) of criminal wrongdoing, Lynch asserted that there are “safeguards at every step of the process” to protect innocent people, “certainly implemented by [her] office … as well as an opportunity to be heard.”

Even setting aside the litany of federal civil asset forfeiture abuses that have come to light recently across the country, Lynch’s reference to her own office’s handling of civil forfeiture is particularly concerning.

Lynch is currently the U.S. attorney for the Eastern District of New York, and her office, despite its safeguards, is responsible for one of the more publicized and questionable uses of the asset forfeiture program.  In May of 2012 the Hirsch brothers, joint owners of Bi-County Distributors in Long Island, had their entire bank account drained by the Internal Revenue Service working in conjunction with Lynch’s office. Many of Bi-County’s customers paid in cash, and when the brothers made several deposits under $10,000, federal agents accused them of “structuring” their deposits in order to avoid the reporting requirements of the Bank Secrecy Act. Without so much as a criminal charge, the federal government emptied the account, totaling $446,651.11.

For more than two years, and in defiance of the 60-day deadline for the initiation of proceedings included in the Civil Asset Forfeiture Reform Act of 2000, Lynch’s office simply sat on the money while the Hirsch brothers survived off the goodwill their business had engendered with its vendors over the decades.

That case, which was handled by the Institute for Justice, finally ended just days ago when Lynch’s office quietly returned the money, having found no evidence of any wrongdoing. The Hirsch brothers and their business survived, but just how many law-abiding small businesses can afford to give the government a 33-month, interest-free loan of nearly half a million dollars?

Civil asset forfeiture is rife with government abuse. The tales of lost livelihoods and predatory government agencies are legion. The data support the indignation. A bipartisan coalition of congressmen and even the current attorney general himself have acknowledged the need for reform.

Unfortunately, Lynch’s comments and her history as a champion of civil forfeiture inspire little hope that major and much-needed reform is imminent at the Department of Justice.

Chris Edwards

Republicans say they favor cutting regulations to spur growth and create jobs. And they generally favor expanding international trade. They can attain those goals by reforming labor union laws.

America’s West Coast seaports are getting hammered by aggressive unionism. The damage spreads out across the economy during these labor disputes, affecting billions of dollars worth of trade. It’s an economically absurd situation, and it’s hugely unfair to the millions of workers whose jobs depend on trade. It should not be happening in America in the 21th century.

In her official response to President Obama’s SOTU, new GOP senator Joni Ernst (Iowa) said, “Let’s tear down trade barriers in places like Europe and the Pacific. Let’s sell more of what we make and grow in America over there so we can boost manufacturing, wages, and jobs right here, at home.”

She’s right, and she should use her prestige and tough-gal credentials to push for change. In the 1980s, Margaret Thatcher challenged the militant unions in Britain and she privatized most of that nation’s seaports. Senator Ernst has an opportunity to push for the same reforms here.  

The key to union reform is repealing the 1935 National Labor Relations Act, also called the Wagner Act. That act imposed “collective bargaining,” which is a euphemism for monopoly unionism. Monopoly unionism is incompatible with individual rights and it encourages unions to disrupt workplaces. The private-sector unionization rate is down to just 7 percent in the United States, but where it persists it causes major damage.

That brings us to the West Coast seaports. The Wall Street Journal reports:

The labor dispute that has magnified snarls at U.S. West Coast ports may be on the brink of a settlement, but it will take months to end the widespread pain, freight disruptions, and losses caused by the massive cargo traffic jam.

The near-paralysis at the ports is rippling through the economy. Railroads are reducing service to the West Coast. Cargo ships have slowed down—and even turned around—as containers have stacked up at the ports. And an official of a meat-industry trade group said last week that port gridlock was costing meat and poultry companies more than $30 million a week.

… Neely Mallory III, president of Mallory Alexander International Logistics in Memphis … is having trouble getting railroads to take loads west from Memphis, Dallas or Chicago, because they are reducing service to the ports until the congestion clears. He can’t arrange to export more than 10,500 containers of cotton. Last Friday, a ship due in with imports for his customers gave up, he said. It will avoid the U.S. for 30 days. “It’s devastating,” he added.

Manufacturers also are feeling the pain. The National Association of Manufacturers has heard from members that container shipments through the West Coast ports in recent months have become “incredibly erratic,” said Robyn Boerstling, director of transportation and infrastructure policy for the trade group. “Everyone is feeling extremely uneasy and frustrated,” she said. Companies fear that if they can’t deliver on orders it will be very hard to win business back, she said.

NAM said a small U.S. maker of pulp and paper told it that the company had lost about $1 million of pulp exports to China in the past few months because it couldn’t meet shipment deadlines or customers feared it might not deliver on time. FastenalCo., a distributor of industrial and construction supplies based in Winona, Minn., said some deliveries of screws, nails and other fasteners from Asia are delayed by a week or two, forcing it and some customers to hold larger inventories.

For more on the West Coast seaports, see here.

Nicole Kaeding

On Monday, the White House will release President Obama’s budget proposal for Fiscal Year 2016. The president is expected to reemphasize his previous fiscal approach of higher spending coupled with higher taxes, while completely ignoring the country’s long-term fiscal problems.

A new study published by the National Bureau of Economic Research (NBER) provides evidence of the best way to solve those problems, should the president decide to tackle the nation’s fiscal mess. The study, by Alberto Alesina, Omar Barbiero, and others, tries to answer one central question: What is the best way for a country to rebalance policy to solve a fiscal crisis?  

The study looked at Organization of Economic Cooperation and Development member countries and their response to the financial crisis from 2009 to 2013. Following the crisis, many of those countries became burdened by large amounts of debt and deficit as a result of rising spending and falling revenues. Government spending grew to an average of 43 percent of gross domestic product (GDP) within the European Union.

With a fiscal crisis on the horizon, many of the countries turned to so-called “austerity” measures in order to promote economic growth. Some countries adopted policies that focused on increasing revenue to close budget gaps, while others focused spending cuts. Researchers distinguished between fiscal plans based on spending cuts and those based upon tax increases.

The researchers found that spending cuts, not tax increases, are the best way to resolve a fiscal crisis. According to the researchers, “Fiscal adjustments based upon cuts in spending appear to have been much less costly, in terms of output losses, than those based upon tax increases.” Tax-based fiscal plans are an inefficient solution to fiscal problems in the long-term. An average tax-based plan with a size of 1 percent of total GDP was shown to shrink the economy by almost twice that amount over the next three years.

The NBER study provides valuable insight regarding the effectiveness of different types of fiscal adjustment plans. Fiscal plans emphasizing cuts in spending are more successful in promoting economic growth in the long term.

Thanks to Kristina Pepe for her excellent research assistance on this piece.

David Boaz

The new Spanish leftist party Podemos takes great inspiration from the victory of Syriza in Greece. As NPR reports:

Much of Europe is watching Greece closely after an anti-austerity party won elections there last weekend. And Spaniards are paying particular attention because Greece may be influential. A similar new political party–left-wing, anti-establishment–has formed in Spain over the past year. And polls show that it could win power in elections this fall.

If Podemos is elected, Spaniards may be disappointed in the results. Consider the cognitive dissonance here:

Many Spaniards are … frustrated that while the economy here is growing, unemployment still tops 23 percent and double that for youth. Polls show voters are switching to Podemos. It promises to raise the minimum wage, hike taxes on the rich and re-evaluate whether Spain should pay its debts.

Making it more expensive to hire workers and reducing the return on investment don’t seem like policies designed to deal with Spain’s appalling unemployment problem. Europe has had higher unemployment than the United States for most of the past two decades. In 2004, economist William B. Conerly suggested some reasons for that: longer and more generous unemployment benefits, reducing the incentive to find a job; inflexible wages; and job protections that make businesses reluctant to hire workers whom they won’t be able to let go. The economist Mark Perry reports that the unemployment rate in European countries with a minimum wage is twice as high as in countries with no minimum wage. And minimum wage laws certainly seem to reduce youth employment.

Alas, as I noted after the State of the Union, President Obama also

wants more and better jobs. And yet he wants to raise taxes on the savings and investment that produce economic growth and better jobs. And he proposes a higher minimum wage, which would cost some low-skilled workers their jobs. 

Perhaps if we copy enough European policies, we can achieve European unemployment rates. In the meantime, the Spaniards seem likely to worsen their dire economic situation. 

Paul C. "Chip" Knappenberger

Today, in a 62-38 vote, the U.S. Senate passed a bill to approve the Keystone XL pipeline. The House passed a similar measure a few weeks ago. These actions come more than 6 years after TransCanada Corp originally submitted its application to the State Department to build a pipeline linking the Alberta oil sands to refineries along the U.S. Gulf Coast.

Did I say State Department?

Yep, in matters involving the crossing of an international border (in this case the one with Canada) the State Department must make a determination as to whether or not the project is in the “national interest.” Two-thousand, three hundred and twenty-three days later, the ultimate head of the State Department still hasn’t made up his mind.

So Congress has attempted to make the decision for him.

But it probably won’t work.

President Obama has already advertised that he plans on vetoing the measure, because, well, because the State Department already has a procedure in place to handle cross border pipeline projects like this one.

In fact, this procedure has worked flawlessly up until the Keystone XL pipeline.  The previous cross-border pipeline that was proposed—the Alberta Clipper in 2007—was approved in just over two years. At the time, the State Department wrote in glowing terms about the project praising it for advancing “strategic interests,” being a “positive economic signal” and adding that “reduction of greenhouse gas emissions are best addressed through each country’s robust domestic policies.”

In the intervening years, Obama has come to view climate change as a matter of utmost urgency and as a defining issue of his legacy as president. And leading environmentalists have planted it in his head that the Keystone XL pipeline is make or break when it comes to climate change.

It is not.

Keystone XL will have virtually no impact on the global climate now or in the future.

But that doesn’t matter any longer. Instead, the pipeline has become a symbol of climate action, a line in the sand that can’t be crossed if you are truly concerned about climate change and the fate of humanity.

I have repeatedly pointed out that it is in President Obama’s best interest to keep the pipeline in limbo. This way, climate change stays front page news. And with a left-leaning press, this means more coverage playing up the pipeline protests and playing down needless government meddling in private economics.

President Obama has asked interested federal agencies to comment on the Keystone XL pipeline proposal. These comments are due February 2nd.  The State Department will then sift through them and consider them and ponder what to do next.

This is what the President will say when he vetos the bill.

The stalling will continue.

And so will the conversation.

Ted Galen Carpenter

The recent dramatic drop in global oil prices has significant geopolitical as well as economic implications.  Consumers in the United States and other countries enjoy substantial savings, while marginal producers, both here and abroad, find their profit margins severely squeezed.  As I discuss in an article at Aspenia Online, some of the oil-producing states that have been especially hard hit include Russia, Venezuela, and Iran.  All of those countries are governed by regimes that are on bad terms with the United States, so there is a temptation among American political leaders and pundits to relish the current discomfort of those governments.

Greater restraint is warranted.  The geopolitical benefits to the United States from the current depressed pricing environment are not trivial.  Increased economic constraints appear to be one factor making Iran’s clerical regime more willing to negotiate seriously about that country’s nuclear program.  Venezuela’s already substantial financial woes, caused by the leftist government’s chronic economic mismanagement since the late 1990s, has made that country a less appealing political model for the rest of Latin America.  Washington’s worries about a leftist “Bolivarian” revolution sweeping the region, which were prominent just a few years ago, have faded considerably.

The Obama administration is especially pleased about how lower oil prices are putting pressure on Vladimir Putin’s government.  Although Western economic sanctions, imposed after Russia’s annexation of Crimea, account for some of the country’s distress, the precipitous drop in oil prices (with Brent crude now selling for well under $50 per barrel) is a more important factor.  Not only has the value of the Ruble shrunk by more than 50 percent, the Russian government faces a budgetary squeeze verging on a crisis.  U.S. officials hope that the growing financial and economic discomfort will compel Putin to make major foreign policy concessions.

Washington’s expectations of drastic concessions, much less outright capitulation, from Iran and Russia are likely to prove illusory.  Tehran’s behavior over the past two decades indicates that gaining international acceptance of the country’s nuclear program is a high policy priority.  Increased economic pain resulting from depressed oil prices is unlikely to alter that calculation.

Likewise, Moscow will probably stay the course regarding its foreign policy, despite the ongoing financial and economic turmoil.  It is difficult to imagine any Russian government agreeing to disgorge Crimea or to tolerate Ukraine joining NATO.  Both the Russian leadership and the Russian population are prepared to endure considerable hardship before surrendering to Western demands. 

Indeed, U.S. leaders need to exercise caution.  Lower oil prices may provide some geopolitical benefits to the United States and its Western allies, but officials must guard against unrealistic expectations.  Pressing economically stressed countries too far could even backfire, making incumbent regimes more recalcitrant. U.S. policymakers need to carefully consider whether the onset of severe economic instability in Iran and Russia would really benefit American interests or the cause of peace.  Such a scenario might instead strengthen extremist forces and produce a surge of public hostility toward the United States, as angry populations make America the scapegoat for their problems.  At a minimum, we must recognize that the oil price crash does not provide geopolitical benefits for Washington without some worrisome potential drawbacks. 

Chelsea German

Journalists know that alarmism attracts readers. Just yesterday, an article in the British newspaper The Independent titled, “Have we reached ‘peak food’? Shortages loom as global production rates slow” claimed humanity will soon face mass starvation. Just as Paul Ehrlich’s 1968 bestseller The Population Bomb  predicted that millions would die due to food shortages in the 1970s and 1980s, the article from yesterday tried to capture readers’ interest through unfounded fear. Let’s take a look at the actual state of global food production.

The alarmists cite statistics showing that while we continue to produce more and more food every year, the rate of acceleration is slowing down slightly. The article then presumes that if the rate of food production growth slows, then widespread starvation is inevitable. This is misleading. Let us take a look at the global trend in net food production, per person, measured in 2004-2006 international dollars. Here you can see that even taking population growth into account, food production per person is actually increasing:

Food is becoming cheaper, too. As K. O. Fuglie and S. L. Wang showed in their 2012 article “New Evidence Points to Robust but Uneven Productivity Growth in Global Agriculture,” food prices have been declining for over a century, in spite of a recent uptick:

In fact, people are better nourished today than they ever have been, even in poor countries. Consider how caloric consumption in India increased despite population growth:

Given that food is more plentiful than ever, what perpetuates the mistaken idea that mass hunger is looming? The failure to realize that human innovation, through advancing technology and the free market, will continue to rise to meet the challenges of growing food demand. In the words of HumanProgress.org Advisory Board member Matt Ridley, “If 6.7 billion people continue to keep specializing and exchanging and innovating, there’s no reason at all why we can’t overcome whatever problems face us.”

Chris Edwards

There are major spending battles on the Washington agenda this year, including over the defense budget. Congress needs to decide whether to stick with capped spending levels agreed to in 2011, or allow its past restraint efforts to unravel.

Republican defense hawks want to bust the spending caps, while the small-government wing of the party wants to hold the line. Rep. Justin Amash (R-Mich.) told the Wall Street Journal, “We’ve been spending too much on defense for years because we have a lot of waste within the Department of Defense … There’s room to cut, and I think we are perfectly capable of staying within the sequester caps.” Sen. Rand Paul (R-Ky.) noted, “To defend ourselves, we need a lean, mean fighting machine that doesn’t waste money on a bloated civilian bureaucracy.”

Amash and Paul’s position is buttressed by a new GAO study on the management bloat in Department of Defense (DoD) headquarters.

It is also buttressed by looking at DoD civilian and uniformed employment levels. The chart below shows that civilian DoD employment has grown 105,000 since 2001, while uniformed employment has grown just 22,000. Based on numbers in the chart, the ratio of bureaucrats-to-soldiers has increased from 47 percent in 2001 to 54 percent in 2014. But with the advance of computer power and other technologies, one would think that the bureaucratic overhead costs of our fighting force would be falling over time, not increasing.

How much could we save by improving bureaucratic efficiencies, and cutting the number of Pentagon civilians by at least the apparent excess of about 100,000? Annual pay and benefits for federal civilians is about $120,000 a year, so we could save roughly $12 billion a year by trimming this aspect of Pentagon bloat.

All data from the “Analytical Perspectives” sections of the FY2003 and FY2015 federal budgets. Data for 2014 are OMB estimates.

Caleb O. Brown

For School Choice Week, Austin Bragg and I produced a short documentary that details the struggle to adopt and implement a scholarship tax credit program in New Hampshire. The program had to overcome a governor’s veto, a repeal fight and a lawsuit that went to the New Hampshire Supreme Court. We talked with three families that have benefitted from the scholarship program and people working to keep the program.

Live Free and Learn: Scholarship Tax Credits in New Hampshire

Cato’s Jason Bedrick has detailed the history of this program at length. He also played a key role in adopting and evaluating the results of the scholarship program in the face of sometimes less-than-civil opposition.

On Monday, we hosted an event featuring Jason and two other folks who played a key role keeping scholarships alive in New Hampshire where we discussed the potential for scholarship tax credits in other states with so-called “Blaine amendments.” And feel free to snag a free DVD of our short film while supplies last.

Andrew J. Coulson

Georgia has a schoalrship donation tax credit program that makes it easier for lower-income families to afford private schooling—if that’s what they think is best for their children. The program is so popular that the cap imposed upon it by the legislature was reached within the first few hours of January 1st, this year. Over at Education Next I argue today that raising the cap would do a lot of good for Georgia children.

Neal McCluskey

If you like feeling conflicted, you’ll love being a libertarian thinking about President Obama’s recent proposal – and even more recent rescinding of that proposal – to essentially end 529 college savings plans. The President proposed killing the ability to use funds saved under a 529 plan tax free to pay for college, which would have gutted the program’s real value.

On one side, a libertarian should be aggravated by such a proposal. The goal certainly seemed to be income redistribution, generating new revenues from relatively well-to-do Americans and giving it to (presumably) less well-to-do Americans with free community college and expanded “refundable” tax credits. It also seemed intended to support a divisive, rhetorical war of the “middle class” vs. “the rich” (though certainly many people who use 529s consider themselves middle class). And unlike federal grants, loans, and those refundable credits that are often essentially grants for people who don’t owe much in taxes, 529s are about people saving their own money to pay for college, not taking it from taxpayers.

On the other side, libertarians – heck, everyone – should want a simple tax code that isn’t riven with special breaks, loopholes, and encouragements to do things politicians decide are worthy but which have massive negative, unintended consequences. And when it comes to higher education, those consequences are huge, including rampant tuition inflation, awful completion rates, major underemployment, serious credential inflation, and a burgeoning academic water park industry. And where does the federal government get the authority to incentivize saving for college in the first place? Not in the Constitution.

So how should libertarians feel about the demise of the President’s 529 plan? I guess a little sad, because the Feds simply shouldn’t be in the business of encouraging college consumption. Even more, though, they should feel angry, because we are so deep in a federally driven, college-funding quagmire.

Doug Bandow

Ukraine’s military has lost control of the Donetsk airport and the rebels have launched another offensive. Fortune could yet smile upon Kiev, but as long as Russia is determined not to let the separatists fail, Ukraine’s efforts likely will be for naught.

As I point out on Forbes online:  “Only a negotiated settlement, no matter how unsatisfying, offers a possible resolution of the conflict. The alternative may be the collapse of the Ukrainian state and long-term confrontation between the West and Russia.”

Ukraine’s most fervent advocates assume anyone not ready to commit self-immolation on Kiev’s behalf must be a Russian agent. However, there are numerous good reasons for Washington to avoid the fight.

1) Russia isn’t Serbia, Iraq, Afghanistan, or Libya.

While the Obama administration has resisted proposals for military confrontation with Moscow, a gaggle of ivory tower warriors has pushed to arm Ukraine, bring Kiev into NATO, and station U.S. men and planes in Ukraine. These steps could lead to war.

Americans have come to expect easy victories. However, Russia would be no pushover. In particular, Moscow has a full range of nuclear weapons, which it could use to respond to allied conventional superiority.

2) Moscow has more at stake than the West in Ukraine.

Ukraine matters far more to Moscow than to Washington. Thus, the former will devote far greater resources and take far greater risks than will the allies. The Putin government already has accepted financial losses, economic isolation, human casualties, and political hostility.

3) Alliances should enhance U.S. security, not provide foreign charity.

It’s impossible to blame Ukraine for wanting the West to protect it. But it makes no sense for the allies to do so. Adding Ukraine to NATO would dramatically degrade U.S. security by transforming a minor conflict irrelevant to Washington into a military dispute between America and Russia.

4) Security guarantees and alliance commitments often spread rather than deter conflict.

NATO advocates presume that membership would dissuade Russia from taking military action. Alas, deterrence often fails. In World War I alliances become transmission belts of war.

5) U.S. foreign policy should be based on the interest of America, not other nations.

The greatest distortion to U.S. foreign policy may come from ethnic lobbying. There’s nothing wrong with having affection for one’s ancestral homeland, like Ukraine. But U.S. foreign policy should be designed to benefit America, not other nations.

Some advocates for Kiev argue that Ukraine deserves support since France helped the American colonists win their independence. But France intervened in the American Revolution because Paris believed it was in France’s interest to weaken Britain. Going to war with Moscow would offer Americans no similar benefit.

6)  It’s Europe’s turn to act.

If Ukraine matters geopolitically, it is to Europe. But most NATO members continue to shrink their militaries. It is time Europe did the military heavy-lifting.

7)  A negotiated settlement is the only solution. 

Unfortunately, weaker parties often must make accommodations. During the Cold War Finland maintained its domestic liberties by not antagonizing the Soviet Union.

The world is similarly unfair to Ukraine today. Military victory is unlikely. Stalemate threatens Ukraine with economic crisis.

The allies hope that sanctions will force Russia to concede. But Putin won’t retreat voluntarily.

Massive public discontent could spark a popular revolution. However, foreign penalties more often cause people to rally around their governments. As of last month Putin’s popularity was at 85 percent.

Moreover, the prospect of Weimar Russia should cause Ukrainians and their friends in the West to be careful what they wish for. A Russia in crisis likely would not be democratic and docile.

Moscow could say no. If so, it is better to find out now than to do so only after suffering through an extended Cold War lite.

The Ukraine-Russia conflict is an unnecessary tragedy. Thankfully the ongoing battle doesn’t much threaten America. However, the only ending in something other than disaster is likely to come through negotiation. Instead of acting as a belligerent party, Washington should focus on shaping a diplomatic solution.

Ilya Shapiro and Julio Colomba

The Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws against employment discrimination. Along with enforcing these laws—most notably, Title VII of the Civil Rights Act, which outlaws discrimination on the basis of race, color, religion, sex, or national origin—the EEOC tells employers how not to discriminate. For example, the EEOC’s Best Practices for Eradicating Religious Discrimination in the Workplace instructs that an employer should “avoid assumptions or stereotypes about what constitutes a religious belief” and that managers “should be trained not to engage in stereotyping based on religious dress and grooming practices.” 

It’s passing strange, then, that the government is now arguing before the Supreme Court not only that employers can do these things, but that they must, or face liability under Title VII, in the context of reasonable accommodations that companies have to make for religious practice. Discerning when such accommodations are necessary can be difficult because people practice religion differently—and often in their own personal, non-obvious way. 

Title VII has thus traditionally been understood to leave it to the employee to determine when a company policy conflicts with his or her religious practice and then to request an accommodation. This interpretation leaves employers free to pursue neutral policies up to the point that they have actual knowledge of such a conflict. 

In the last several years, however, the EEOC has apparently taken the position that employers must pry into their employees’ religious practices whenever they have an inkling of suspicion that an accommodation may be needed. Abercrombie & Fitch is one company that has found out just how impossible a situation this puts employers into. When Abercrombie decided not to hire Samantha Elauf as a sales associate based on her violation of the company’s “Look Policy”—a branding guide that, among other things, prohibits the wearing of clothing generally not sold by the store, like Elauf’s black headscarf—the company found itself on the wrong end of a government lawsuit. 

A federal district court ruled for the EEOC even though Elauf never informed them that she would need a religious accommodation.  The U.S. Court of Appeals for the Tenth Circuit reversed, holding that an employer must actually know about a religious practice before it can be held liable for discriminating on that basis. The Supreme Court took the case at the EEOC’s request and Cato has now filed a brief in support of Abercrombie. 

We argue that employers must have actual knowledge of the potential need for a religious accommodation before they can be held liable for violating Title VII because the EEOC hasn’t offered any coherent alternative and because employers already know how to use this tried-and-true actual-knowledge standard. In addition, the burden of identifying the need for accommodations has to be on the employee because, after all, it’s their religion, and thus they are in a significantly better position to identify conflicts than employers—who aren’t mind-readers and shouldn’t have to rely on crude stereotypes or pry into employees’ personal lives. 

An opposite rule would create an awkward and uncomfortable scenario all-around. The EEOC’s position is short-sighted; if the agency somehow prevails, it will have done what federal agencies do best: turn minimal burdens for some people into heavy burdens for everyone.

The Supreme Court will hear argument in EEOC v. Abercrombie & Fitch Stores, Inc. on February 25.

Peter Van Doren

By now we have all heard of the disruptive force that is the ridesharing company Uber. The company, which is beating traditional taxi companies at their own game, has caused headaches for competitors and regulators alike. Moreover, as Eduardo Porter argues in his New York Times column, Uber also brings the entire regime of occupational licensing into question.

Porter notes that Uber has made the public much more aware of the anti-consumer inefficiencies in the regulated taxicab industry. The medallion system limits the number of taxis on the roads.  Thus, the supply of cabs is much less than demand, which reduces the incentives for taxi owners to innovate and care about consumers.  Uber, outside of this licensing regime, has thrived while providing wages that are on par with (or more than) licensed taxi drivers.  This is possible because drivers (which are not in short supply) do not benefit from the limited number of medallions; only the medallion owners benefit.    

Porter cites the research of University of Minnesota economist and occupational licensing expert Morris Kleiner. Kleiner’s work describes how the labor market has changed since the early 1950s from blue collar and unionized to white collar and licensed. Protectionism has not declined. It has been transformed.   

The mischief created by occupational licensing appears to be a concern even for Democrats. The Obama administration has sought to streamline the licensing process nationwide, and the president’s Council of Economic Advisors seeks to subject licensure to cost-benefit analysis. 

For more from Morris Kleiner, see his recent essay from the Cato Reviving Economic Growth forum, or my other blog posts on his work.

Doug Bandow

Greece’s parliamentary elections could reshape Europe. In voting for the radical left the Greek people have reinvigorated home rule and democracy across the continent.

Greece has been in economic crisis seemingly for eternity. Even in the Euro the system could not generate the growth necessary to repay the debt:  the economy was hamstrung by enervating work rules, corrupting political influences, profiteering economic cartels, and debilitating cultural norms.

The inevitable crisis hit in 2009. Athens couldn’t make debt payments or borrow at affordable rates. Nor could Greece devalue its currency to make its products more competitive. The European “Troika” (European Central Bank, European Commission, and International Monetary Fund) developed a painful rescue plan.

Syriza, meaning Coalition of the Radical Left, arose to challenge the two establishment parties. Headed by Alexis Tsipras, Syriza won 36.2 percent and 149 seats, two short of a majority, on Sunday.

Syriza offered dreamy unreality:  free health care and electricity along with food subsidies, pension increases, salary hikes, and more public sector jobs. Billions in new revenue is to magically appear.

Most important, Syriza promised international debt renegotiation. Current debt runs a crushing $270 billion, or 175 percent of GDP (up from 109 percent in 2008).

European officials expressed hope that Tsipras would move to the center after winning office. But abandoning the promises that got him elected would wreck his credibility. Doing so also would threaten the unity of Syriza, a heterogeneous collection of smaller parties.

However, Athens does not have much time to win concessions. The current bailout plan expires at the end of February. Without a replacement program Greek banks would no longer have access to the European Central Bank.

Athens has few other revenue sources. Since the Syriza government cannot print Euros, it would have no way to fund a budget estimated to be in the red even before any new spending. Moreover, Athens would face default on its debt payments and a possible financial crisis.

At this point the only answer might look like exiting the Euro, or “Grexit,” which would allow Athens to print money freely. The process would be difficult, but would free Greeks to learn from their mistakes and find their own path.

Still, Syriza says it remains committed to a negotiated settlement within the Eurozone. But European leaders so far insist that the bail-out essentials cannot be renegotiated.

Syriza assumes its creditors are bluffing because they want to keep Greece in the Euro. That’s no longer clear, however. Greece accounts for just two percent the Eurozone’s collective GDP. The prospect of Greece’s departure no longer triggers panic elsewhere in Europe.

Indeed, if the EU does not hang tough, it will encourage other hard-hit governments to demand similar concessions. Moreover, a slowing economy has reduced the German public’s willingness to act as the Europe’s banker of last resort.

The political consequences might be more important than the economic impact. Grexit would return economic decisions to Athens.

Leaving also might stop further continental consolidation. The 19-member Eurozone is unstable because the unified monetary policy is not matched by unified budgetary policy. Eurocrats have been trying to expand their control. Moreover, while the Eurozone is separate from the 28-member European Union, a fracturing of the first would exacerbate tensions in the second.

A Eurocratic elite, consisting of politicians, academics, businessmen, journalists, bureaucrats, and lobbyists based in Brussels and national capitals, favors European consolidation in part because the system suppresses public accountability. But now popular opposition is exploding.

Euroskeptic parties did well in last year’s election for the European Parliament and having been gaining votes in national contests as well. If Syriza successfully flouts the Brussels consensus popular opposition to the EU as well as Euro is likely to grow.

As I note in Forbes online: “Europe will survive, whatever the fate of Greece, the Euro, and the EU. But the latest election in the birthplace of democracy offers hope for greater popular accountability and control across the continent. For this Tsipras and Syriza deserve Europe’s thanks irrespective of what happens next in Greece.”

Daniel R. Pearson

Interest groups in the United States have focused on the possibility of including provisions in trade agreements with the intent of countering currency manipulation.  The concern is that another country may choose to reduce the value of its currency relative to the U.S. dollar in order to encourage its businesses to export more goods to the United States.   Such currency realignment also would tend to make it more expensive for the devaluing nation to import products from this country.

It’s true that an adjustment in currency exchange rates – regardless of the reason for the adjustment – can have an effect on trade flows.  U.S. industries that export to foreign customers, or compete with imported goods in the domestic marketplace, understandably would prefer that currency relationships not become skewed against their commercial interests.  Currency stability improves the business climate by making it easier to build long-term relationships with customers and suppliers. 

However, currency exchange rates have fluctuated throughout recorded history.  Sometimes those changes may be driven by a government’s conscious desire to devalue its currency.  More often the variability in exchange rates reflects fundamental economic realities.  Economies that experience growing productivity and rising prosperity should not be surprised to find that market pressures cause their currencies to strengthen.  The reverse is true for countries that are growing slowly or not at all. 

A shift in exchange rates changes a country’s “terms of trade,” which is a term  used by economists to describe the ratio of a country’s export prices to its import prices.  From a U.S. perspective, if another country sets its currency at an artificially low level relative to the dollar, the U.S. terms of trade will improve.  The United States will be able to obtain a greater value of imports for the same value of exports.  Exporting the same number of airplanes and soybeans as before will pay for the importation of larger quantities of shoes, coffee, and automobiles. 

The country that chooses to undervalue its currency will be placing an artificially low value on the output created by workers and capital in its domestic economy.  It will, in effect, be selling its exports for less than their true economic worth, thus transferring wealth to the United States.  People in this country experience meaningful increases in their standards of living at the expense of the country that has devalued.

Yes, most buyers like to get a good deal.  An increase in affordable imports generally doesn’t strike consumers as a bad thing.  Assuming those imports don’t compete too directly with goods and services produced widely in the United States (think of coffee, bananas, shoes, clothing, diamonds, rare earth metals, etc.), they tend to be well accepted even by people with mercantilist tendencies.   Some imports that do compete directly with U.S. products – such as crude oil or cars – also may not raise strong political objections, either because domestic demand is larger than can be served solely by domestic supplies, or because consumers desire a variety of choices.

The politics of affordable imports become more complicated when those products compete directly with goods and services produced in the importing country.  Competition always is a challenge, whether it comes from other domestic firms or from overseas.  Firms often struggle to deal with forces as diverse as changing technology or changing consumer tastes and preferences.  Not all firms survive forever.  Rather, the process of creative destruction keeps the economy in an ongoing state of reinvigoration and renewal.  There’s no doubt, though, that an increase in imports can create adjustment headaches for import-competing U.S. companies and their workers.

The good news is that the United States already has a policy framework with which to address unfairly priced imports, regardless of whether those imports relate to currency undervaluation.  U.S. trade remedy laws allow industries to seek antidumping or countervailing duty (AD/CVD) protection against imports that may be injuring domestic producers.  From a free-trade perspective, it’s important to understand that U.S. trade remedy laws leave a lot to be desired.  They generally are seen to be relatively protectionist – slanted in favor domestic industries over imports. 

However, trade remedies are a better policy response (even though suboptimal) to currency manipulation than would be the case for special provisions in trade agreements.  Trade remedies are relatively selective.  They are applied only to unfairly priced imports that are troublesome to U.S. industries, and only after those producers have demonstrated that they’ve been injured.  On the other hand, currency provisions included in trade agreements would apply to all imports from the offending country.  American consumers would end up paying more even for tea and T-shirts, for which there is little or no U.S. production.  Given the broad negative implications of using trade agreement provisions to counteract currency manipulation, U.S consumers would be much better off dealing with the narrower negative consequences of AD/CVD measures.

A concluding thought:  Since currency undervaluation by other countries serves to transfer wealth to the United States, should we consider finding some diplomatic way to thank them?  Such a gesture likely would do far more good than including misguided currency provisions in trade agreements.  It might help prompt policymakers around the world to rethink the plusses and minuses of allowing currencies to get out of alignment.

(For more detail on issues surrounding currency manipulation, see this article from Forbes.com by my colleague, Dan Ikenson.)

Simon Lester

Yesterday, my colleague Bill Watson made the following point on this blog: “Perhaps China’s growing use of subsidies can change the dynamic, making it finally possible for international negotiations to take on U.S. agriculture subsidies.”  I’ve been thinking the same thing.  When it was just a few rich countries subsidizing, the political dynamic of subsidy reduction was challenging.  But if we are all subsidizing now, can’t we all just agree to stop?  Unfortunately, I fear the reality is going to be less promising than we might hope.

I confess that I did get a little excited and optimistic when I read a recent piece from U.S. Trade Representative Michael Froman, in which he said:

Take the example of agriculture, the subsidies for which have proven one of the toughest issues to tackle. In 2008, the proposed solution was that developed countries would cut their agricultural subsidies while developing countries would not.

But much has changed since that time. Just last year, a group representing agriculture-exporting countries, developed and developing alike, published a report listing the top four users of trade-distorting agricultural subsidies in today’s world, with India first, followed by China, the European Union, and the United States.

In a global commodities market, this double-standard makes no economic sense. In reality, trade-distorting subsidies from emerging economies have the same impact on global commodity prices as trade-distorting subsidies from developed countries. The United States is willing to wade back into the complex thicket of agricultural trade negotiations, but only if the discussion reflects today’s reality.

Parsing his words, he says the United States is “willing to wade back” in to these issues.  That’s slightly positive, suggesting the possibility of action.  But it’s going to take a bit more than this.  At some point, someone has to make an actual concrete proposal to eliminate or reduce agriculture subsidies.  That is, someone has to lay out specific details of a proposal for everyone to rein in subsidies.  It would be great if it were the United States, but it could be any of the big subsdizers.  However, it’s not going to happen unless and until someone takes this initiative.

Does the political will exist in Washington right now?  Ambassador Froman’s op-ed notwithstanding, it doesn’t seem like it.  When there is talk of agriculture subsidies in trade negotiations, it is very limited.  In the context of the Trans Pacific Partnership, the current talk is going like this (subscription only): 

The United States has indicated it is willing to agree to an unconditional and complete ban on agricultural export subsidies in the Trans-Pacific Partnership (TPP) region as part of a final deal if other negotiating partners drop their demands for new disciplines for export credits, according to informed sources. 

The new U.S. position on export subsidies represents a concession from its previous position, under which the U.S. was willing to accept a ban on the use of agricultural export subsidies within the TPP region only if there was an escape clause. 

The new position also appears to represent a broader shift for the U.S., which had previously insisted that export subsidies be addressed in a multilateral rather than regional context in order to capture the EU’s subsidies.

That all sounds good for agriculture subsidies (although not so good for export credits), BUT, keep in mind that export subsidies can be tweaked in small ways to turn them into just regular old domestic subsidies.  In this way, governments can keep offering the same money, but in a manner that is permitted under international trade obligations.

So, while I’m happy to hear talk of bringing down agriculture subsidies, I’m not going to get too excited until someone makes an actual proposal to bring down agriculture subsidies.

Chris Edwards

Reading some Frederic Bastiat last night, I circled his observation that the government takes advantage of citizen passivity to increase its power, often by promising to “cure all the ills of mankind.” The government initiates “in the guise of actual services, what are nothing but restrictions; thereafter the nation pays, not for being served, but for being disserved.”

The Wall Street Journal reports that we pay our hard-earned tax dollars for the federal government to spy on us on the highways. Americans might think they are footing the $29 billion annual bill for the Department of Justice to secure our freedoms, but instead the department is abusing those freedoms:

The Justice Department has been building a national database to track in real time the movement of vehicles around the U.S., a secret domestic intelligence-gathering program that scans and stores hundreds of millions of records about motorists, according to current and former officials and government documents.

The database raises new questions about privacy and the scope of government surveillance. The existence of the program and its expansion were described in interviews with current and former government officials, and in documents obtained by the American Civil Liberties Union through a Freedom of Information Act request and reviewed by the Wall Street Journal. It is unclear if any court oversees or approves the intelligence-gathering.

The documents show that the DEA also uses license-plate readers operated by state, local and federal law-enforcement agencies to feed into its own network and create a far-reaching, constantly updating database of electronic eyes scanning traffic on the roads to steer police toward suspects.

“Any database that collects detailed location information about Americans not suspected of crimes raises very serious privacy questions,’’ said Jay Stanley, a senior policy analyst at the ACLU. “It’s unconscionable that technology with such far-reaching potential would be deployed in such secrecy. People might disagree about exactly how we should use such powerful surveillance technologies, but it should be democratically decided, it shouldn’t be done in secret.’’

The disclosure of the DEA’s license-plate reader database comes on the heels of other revelations in recent months about the Justice Department, as well as the agencies it runs, gathering data about innocent Americans as it searches for criminals. In November, the Wall Street Journal reported that the U.S. Marshals Service flies planes carrying devices that mimic cellphone towers in order to scan the identifying information of Americans’ phones as it searches for criminal suspects and fugitives.

Why do government officials try to keep such programs secret? I suspect it’s because they know they are disserving us by undermining our liberties. As for members of Congress, they often do little more than say government spying on us “raises concerns,” but the license plate program is a good opportunity for them to stand up to the executive branch and put a stop to it.

Notes:

The Journal’s report is not an entirely new revelation. In this essay, I mentioned that the Department of Homeland Security also has a license plate spying program.

Walter Olson weighs-in here.

K. William Watson

This morning, U.S. Trade Representative Mike Froman appeared before the Senate Finance Committee to talk and answer questions about U.S. trade policy.  Most of the questions centered around trade promotion authority, the Trans-Pacific Partnership, and how best to further the interests of industries or commodity groups that lobby Senators.  One popular way to phrase a question is to accuse other countries, especially China, of unfairly propping up their own industries and then asking how the administration is going to counteract that.

So it was that Senator Johnny Isakson (R-GA) asked Ambassador Froman about China’s cotton subsidies.

China is basically hoarding … buying cotton and hoarding it, and is stockpiling it.  And they’re subsidizing their producers at twice the world market price.  What can be done with China to enforce through the WTO or through any agreements we might otherwise have to keep them from manipulating the cotton prices and suppressing the cotton market?  

This accusation is kind of funny.  The United States is by far the world’s leading exporter of cotton.  We also subsidize that cotton like crazy.  Admittedly, the U.S. government props up domestic agriculture in slightly more complex and opaque ways than simply hoarding cotton, but if Senator Isakson wants to end distortions of global cotton prices, he could just stop voting for them.

Ambassador Froman’s response:

Well I think this is a very important point more generally, which is that the whole pattern of agricultural subsidies has changed a lot over the last 10 or 15 years.  When the Doha Round started, the focus on agricultural subsidies was really the United States and the European Union.  But in both of those areas, subsidies have come down, while subsidies from China and India in the agriculture area have increased, and by some measure China’s now the largest subsidizer of cotton.  And so we’re engaging with them and we had conversations also in the last couple days about that and about taking a fresh look at where subsidies are being provided, how it’s distorting the market, and how that should play into global trade negotiations.  I think it’s important that we update our view of where subsidies are coming from and what impact it has. 

If you’re a poor subsistence farmer in Africa, it doesn’t matter whether the subsidy’s coming from the U.S. or from China; it matters that the subsidy exists.  And so we’re hoping to engage with China on this and to create some disciplines around this.

These remarks are noteworthy for at least two reasons.  First, the U.S. Trade Representative is admitting that U.S. cotton subsidies harm poor African farmers.  Second, the fact that China is now doing it too provides an incentive to “create some disciplines around this.”

Reciprocal trade liberalization is a strange and wonderful thing.  U.S. cotton subsidies exist because elected officials are willing to burden the U.S. economy as a whole in order to support politically powerful special interests.  That same impulse motivates them to complain about foreign interventions that harm those interests.  Trade agreements harness that political reality to eliminate or reduce both distortions—to the benefit of almost everyone.

U.S. cotton subsidies have so far proven too politically popular for trade negotiations to make any difference.  The United States even paid Brazilian cotton farmers a total of over $700 million to settle a WTO complaint rather than reduce payments to U.S. cotton growers according to existing rules. 

Perhaps China’s growing use of subsidies can change the dynamic, making it finally possible for international negotiations to take on U.S. agriculture subsidies.

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