Policy Institutes

Little Evidence Supports the FDA's Proposed Food Label Rules

Cato Op-Eds - 1 hour 47 min ago

Matthew Feeney

In the upcoming issue of Regulation magazine, Robert Scharff, associate professor in the Department of Consumer Sciences at the Ohio State University, and Sherzod Abdukadirov, research fellow in the Regulatory Studies Program at the Mercatus Center at George Mason University, argue that the FDA’s two proposed rules on food nutrition labeling are supported by little evidence and should be scrapped.

The food labeling rule would, as Scharff and Abdukadirov explain, result in a number of changes “involving both formatting and content changes to labels, increases in recordkeeping, and new analytic requirements.” The second rule, the serving size rule, would affect packages that contain a small number of servings. 

The FDA claims that implementing both of these rules will help Americans make healthier food choices. However, as Scharff and Abdukadirov point out, the FDA does not cite any work that supports the underlying assumption that consumers will change their short-sighted behavior if changes are made to food labels. In fact, an FDA-commissioned study found that increasing the font size for calorie information on food labels had no effect on consumer behavior. In addition, the FDA has provided little evidence that inserting a separate line on labels for “added sugars” will result in health benefits.

Aside from the lack of evidence cited by the FDA, Scharff and Abdukadirov explain that the study on the effects of regulations written to comply with the Nutrition Labeling and Education Act of 1990, which is used by the FDA to make the benefits calculations of its proposed rules, is flawed. Not only is the study unpublished and yet to be peer reviewed, its sample is limited to women aged between 19 and 50 years old, which artificially inflates the effects of nutrition labels on behavior because women are more likely to view nutrition panels than men.    

If the two proposed rules are implemented they will add billions of dollars in costs for consumers. Such an expensive change in regulations should have to be justified with good empirical data. Scharff and Abdukadirov show that the FDA’s proposed rules are justified mostly by good intentions, not data.  

Categories: Policy Institutes

Obama Puts Americans at Risk: ISIL’s Neighbors Should Eliminate the "Caliphate"

Cato Op-Eds - 4 hours 6 min ago

Doug Bandow

President Barack Obama is channeling George W. Bush in launching a new Mideast war. Why is Washington involved? 

The Islamic State is evil, but the organization’s raison d’etre is establishing a Middle Eastern caliphate, or quasi-state, not terrorizing Americans. In fact, grabbing territory provided the United States with a target for retaliation in response to any attack, something lacking with al-Qaeda. 

The murder of two Americans captured in the region was horrid but opportunistic. Morally abominable, yes. Cause for war, no.

Washington has never had much success in fixing the Middle East. The United States has been bombing Iraq since 1991. ISIL would not exist but for America’s 2003 invasion. 

Washington has been battling al-Qaeda since 2001. While the national organization is largely kaput, the group has spawned multiple national off-shoots.

The Bush administration justifiably overthrew the Afghan Taliban as punishment for hosting al-Qaeda. But 13 years of nation-building has been far less successful.

Three years ago, the Obama administration declared that Syria’s Bashar al-Assad had to go. Since then, “moderates” have lost ground. The Islamic State’s capture of the city of Raqqa created a base for attacking Iraq.

Washington joined European states in ousting Libya’s Moammar Qaddafi in the name of the Arab Spring. Today the country is in collapse. Yemen, the subject of a lengthy and heavy drone campaign, appears headed in a similar direction.

Now Washington plans to rid the world of ISIL.

Targeting the “caliphate” removes the most important deterrent to terrorist attacks by the Islamic State. If it finds its conventional ambitions frustrated by Washington, the group might switch direction and cooperate with groups such as al-Qaeda.

The administration almost certainly will be drawn ever deeper into the conflict. Pinprick aerial bombing won’t wipe out ISIL adherents. 

U.S. policy in Syria, the scene of the group’s initial success, is bound to fail. The administration intends to step up efforts to train and arm the “moderates,” some of whom cooperate with ISIL. The likelihood of these groups defeating both Assad and Islamic State is small. While American bombing will hamper the latter’s efforts, the organization has been adapting and advancing. The administration could end up helping ISIL plant its flag in Damascus.

The administration’s campaign is particularly misguided because there are so many other candidates to take on the Islamic State. The organization is essentially at war with every major country in the Middle East. 

ISIL’s territorial claims directly threaten Iraq, Syria, Jordan, Turkey, and Lebanon, as well as autonomous Kurdistan. The group’s stance as self-proclaimed Sunni guardian challenges Iran and Israel. ISIL’s Sunni radicalism targets Saudi Arabia and the smaller Gulf kingdoms, as well as assorted Islamist and secular insurgents in Syria. 

No doubt, Washington’s allies prefer that the world’s superpower take care of the problem. But they obviously are capable of acting. Indeed, since its spectacular summer successes, the Islamic State has lost momentum and the element of surprise.

However, the United States is determined again to “lead.”  Other countries will help out a little, but most coalition members are likely to do only as much as they believe necessary to limit Washington’s kvetching.

America should leave ISIL to its neighbors. Only they can create stability.  As I wrote on Forbes online, “they must adopt economic and political reforms to satisfy discontented publics, nurture popular loyalties to thwart triumphal ideological and theological movements, and employ competent militaries to suppress security threats.” 

Obviously, such a regional effort would take time.  But administration officials are saying the same for the American-led campaign against an enemy that has not seriously threatened America.

Washington has made a hash of the Mideast. Yet President Obama is continuing Washington’s policy of endless war in the Middle East.  As Yogi Berra said, it’s “déjà vu all over again.”

Categories: Policy Institutes

Washington Should Recognize India as an Emerging Great Power

Cato Op-Eds - 4 hours 43 min ago

Doug Bandow

Before becoming prime minister, India’s Narendra Modi was barred from receiving a visa to visit the United States.  A rising leader in the Hindu nationalist Bharatiya Janata Party (BJP), he was tied to deadly sectarian violence. But now he leads one of Asia’s most important powers and the Obama administration is rolling out the red carpet.

India long was ruled by the dynastic India National Congress Party, which enshrined dirigiste economics as the state’s secular religion.  Eventually, however, reality seeped into New Delhi. The Congress Party liberalized the economy. The BJP broke the Congress monopoly on power. 

New Delhi appeared ready to follow the People’s Republic of China to international superstar status. But then enthusiasm for economic reform ebbed, economic growth slowed, and conflict with Pakistan flared. 

However, on May 26, Narendra Modi became prime minister.  He is visiting the United States to speak before the United Nations and meet with President Barack Obama. The trip could yield rich benefits for both countries.

Of course, there was that embarrassing visa ban, the only one ever issued for that reason by Washington.  While serving as the chief minister of the state of Gujarat in 2002, Modi was implicated in Hindu riots which killed more than 1200 people, mostly Muslims. However, Modi escaped responsibility and the matter has been quietly forgotten in Washington.

The prime minister’s visit to America offers an opportunity for a reset in bilateral relations. The George W. Bush administration improved ties by accepting New Delhi’s development of nuclear weapons, but little progress has occurred during the current administration. Indeed, trade and diplomatic controversies have put the two governments at sharp odds.

The result is a lost opportunity for both nations. India, which trails only America and China economically in purchasing power parity, performs far below its potential.

Modi naturally hopes to expand his nation’s commercial ties throughout Asia, which increasingly is the world’s economic center of gravity. But America remains the most important single state—with the largest (depending on measure), most sophisticated, and wealthiest economy. 

Geopolitically, India has yet to play the international game as well as possible, though the new prime minister embarked upon an ambitious travel schedule abroad. New Delhi’s most persistent foreign antagonist is Pakistan.  In the long term, New Delhi’s desire to develop international counterweights to China, even while cooperating economically, is most important.

The greatest prize for New Delhi would be the strengthening relations with the United States.  The prime minister recently cited the improvement in bilateral relations and explained:  “Our ties have deepened.  India and the United States of America are bound together, by history and by culture.  These ties will deepen further.” 

Washington is thinking in similar terms. When Secretary of State John Kerry visited New Delhi in July, he said he wanted the two nations to become “indispensable partners.”

No one expects a formal military alliance, which would be in neither nation’s interest.  And important issues will continue to divide the two capitals.  But friendlier political relations, increased security cooperation, and enhanced trade and investment would remind the PRC that its growing power is matched by that of its wary neighbors. 

India has further to travel than China to geopolitical greatness, but it still matters today.  New Delhi will matter much more tomorrow, especially if Prime Minister Modi commits his political capital to eliminate barriers to entrepreneurship, investment, and growth.

The 21st century will be the Asian century, with a major assist from the United States. Most analysts presume Chinese dominance, but India could prove them wrong.  As I wrote in Forbes online:  “If Barack Obama and Narendra Modi make a serious effort to overcome past differences, their governments could find themselves, like Rick and Captain Renault in the movie Casablanca, at the ‘beginning of a beautiful friendship’.”

Categories: Policy Institutes

China Celebrates an Anniversary of Its Dictatorship

Cato Op-Eds - 7 hours 19 min ago

David Boaz

Today the People’s Republic of China is celebrating the 65th anniversary of its founding on October 1, 1949, which is likely to produce even bigger crowds of protesters in Hong Kong demanding democracy. China’s opposition to democracy in Hong Kong and in China itself is not just the recalcitrance of cranky old men. It’s part of the Chinese Communist state’s founding mission. 

Take the speech of Mao Zedong on July 1, 1949, as his Communist armies neared victory. The speech was titled, “On the People’s Democratic Dictatorship.” Instead of life, liberty, and the pursuit of happiness, it spoke of “the extinction of classes, state power and parties,” of “a socialist and communist society,” of the nationalization of private enterprise and the socialization of agriculture, of a “great and splendid socialist state” in Russia, and especially of “a powerful state apparatus” in the hands of a “people’s democratic dictatorship.”

Tragically, unbelievably, this vision appealed not only to many Chinese but even to Americans and Europeans, some of them prominent. But from the beginning it went terribly wrong, as really should have been predicted. Communism created desperate poverty in China. The “Great Leap Forward” led to mass starvation. The Cultural Revolution unleashed “an extended paroxysm of revolutionary madness”  in which “tens of millions of innocent victims were persecuted, professionally ruined, mentally deranged, physically maimed and even killed.” Estimates of the number of unnatural deaths during Mao’s tenure range from 15 million to 80 million. This is so monstrous that we can’t really comprehend it. What inspired many American and European leftists was that Mao really seemed to believe in the communist vision. And the attempt to actually implement communism leads to disaster and death.

Fortunately, after Mao died in 1976, China changed rapidly. His old comrade Deng Xiaoping, a victim of the Cultural Revolution, had learned something from the 30 years of calamity. He began to implement policies he called “socialism with Chinese characteristics,” which looked a lot like freer markets—decollectivization and the “responsibility system” in agriculture, privatization of enterprises, international trade, liberalization of residency requirements.

The changes in China over the past generation are the greatest story in the world—more than a billion people brought from totalitarianism to a largely capitalist economic system that is eroding the continuing authoritarianism of the political system. On its 65th birthday, the CCP still rules China with an iron fist. There is no open political opposition, and no independent judges or media. And yet the economic changes are undermining the party’s control, a challenge of which the party is well aware. Six years ago Howard W. French reported in the New York Times:

Political change, however gradual and inconsistent, has made China a significantly more open place for average people than it was a generation ago.

Much remains unfree here. The rights of public expression and assembly are sharply limited; minorities, especially in Tibet and Xinjiang Province, are repressed; and the party exercises a nearly complete monopoly on political decision making.

But Chinese people also increasingly live where they want to live. They travel abroad in ever larger numbers. Property rights have found broader support in the courts. Within well-defined limits, people also enjoy the fruits of the technological revolution, from cellphones to the Internet, and can communicate or find information with an ease that has few parallels in authoritarian countries of the past.

The CCP remains in control. But it struggles to protect its people from acquiring information, routinely battling with Google, Star TV, and other media. Howard French noted that “the country now has 165,000 registered lawyers, a five-fold increase since 1990, and average people have hired them to press for enforcement of rights inscribed in the Chinese Constitution.” People get used to making their own decisions in many areas of life and wonder why they are restricted in other ways.

I hope that the protests in Hong Kong will not only succeed in their immediate aims, but will inspire the people of China to demand more political and speech rights than they have ever had. And that’s exactly what the leaders of the Chinese Communist Party fear.

Categories: Policy Institutes

New Research Erases Global Warming from Pacific Northwest

Cato Op-Eds - 7 hours 24 min ago

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

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

Poof, it was gone.

Just like that, the human fingerprints on a century-long warming trend in Northwestern United States were erased and replaced instead by the telltale signs of natural variability. 

That is the conclusion of new research published last week by a pair of scientists from the University of Washington. James Johnstone and Nathan Mantua published their paper titled “Atmospheric controls on northeast Pacific temperature variability and change 1900-2012” in the Proceeding of the National Academy of Sciences (PNAS).

So as not to be accused of putting words in their mouth, here, in full, are the contents of a box labeled “Significance” from their paper:

Northeast Pacific coastal warming since 1900 is often ascribed to anthropogenic greenhouse forcing, whereas multidecadal temperature changes are widely interpreted in the framework of the Pacific Decadal Oscillation (PDO), which responds to regional atmospheric dynamics. This study uses several independent data sources to demonstrate that century-long warming around the northeast Pacific margins, like multidecadal variability, can be primarily attributed to changes in atmospheric circulation. It presents a significant reinterpretation of the region’s recent climate change origins, showing that atmospheric conditions have changed substantially over the last century, that these changes are not likely related to historical anthropogenic and natural radiative forcing, and that dynamical mechanisms of interannual and multidecadal temperature variability can also apply to observed century-long trends.

 

Translation: Natural variability in the atmosphere/ocean dynamics of the northern Pacific Ocean rather than human-caused global warming can largely explain the century-long rise in temperature in the Pacific Northwest.

And the authors have the figures to prove it.

The left-hand panel of Figure 1 (below) illustrates the observed trends over the period 19002012 for weather observing stations in the contiguous United States located west of longitude 116°W—this includes all of Washington and Oregon, most of California, and parts of Idaho and Nevada. Notice all the red, upward-pointing arrows indicating an overall temperature rise since 1900 across the entire region. The right-hand panel shows the trend in the same stations once the natural variability identified by Johnstone and Mantua has been removed.  If global warming were having an influence, it would be evident in both panels—more strongly so in the right-hand one.  Instead, in that panel, we have a mixed bag of up and down trends of very low magnitude—no strong signal of any kind, no sign of global warming.

 

Figure 1. (left)  Northeast Pacific annual temperature trends, 19012012.  Map of trends (°C/century) of annual (JulyJune) mean surface air temperature for observing stations west of 116°W. Triangles mark statistically significant (p < 0.05) trends (red, upward pointing: positive; blue, downward pointing: negative). Gray dots mark locations of insignificant trends.  (Right) Map of residual surface air temperature trends after removal of natural variability temperature signals  (adapted from Johnstone and Mantua, 2014).

Now, we’ll be among the first to admit that PNAS does not have the reputation of publishing the most robust of studies, but, still, this result is intriguing. We hope that it will be verified by publication in a more rigorous peer-reviewed journal in the near future.

In the meantime, we can only wonder what the authors of the recent U.S. National Climate Assessment (NCA) are thinking.  After all, they have an entire chapter of their new report (a report basically crafted to support President Obama’s Climate Action Plan) dedicated to present and future climate change in the Northwest. While the NCA authors coyly admit that the region’s “climate trends include contributions from both human influences (chiefly heat-trapping gas emissions) and natural climate variability” they are quick to add “[t]hey are also consistent with expected changes due to human activities.”

Hmm. While the observed trends may be “consistent with” the NCA authors’ “expected changes due to human activities,” in actuality they are, in fact, not caused by human activities.

This is a good lesson that “consistent with” does not equate with “a result of.”  Which means that all the other regional changes in the Northwest noted in the NCA—wildfires, insect outbreaks, changes in the timing of stream flow, etc.—are also largely a result of influences other than human-caused climate change.  And, it means that all the projections of future climate changes forwarded by the NCA are also nonrobust.

Somehow, we doubt a correction will be forthcoming.

After all, the NCA and the president are not particularly interested in what the science actually says about climate change and its causes and effects, but rather how it can be molded to support the climate change activism that will shape the legacy of the current administration. Inconvenient truths are too readily brushed aside.

Reference:

Johnstone, J. A., and N. J. Mantua, 2014. Atmospheric controls on northeast Pacific temperature variability and change, 1900-2012. Proceedings of the National Academy of Sciences, doi:10.1073/pnas.1318371111.

Categories: Policy Institutes

Pruitt v. Burwell: A Victory for the Rule of Law

Cato Op-Eds - Tue, 09/30/2014 - 16:55

Michael F. Cannon

From Darwin’s Fool:

The U.S. District Court for the Eastern District of Oklahoma handed the Obama administration another – and a much harsher — defeat in one of four lawsuits challenging the IRS’s attempt to implement ObamaCare’s major taxing and spending provisions where the law does not authorize them. The Patient Protection and Affordable Care Act provides that its subsidies for private health insurance, its employer mandate, and to a large extent its individual mandate only take effect within a state if the state establishes a health insurance “Exchange.” Two-thirds (36) of the states declined to establish Exchanges, which should have freed more than 50 million Americans from those taxes. Instead, the Obama administration decided to implement those taxes and expenditures in those 36 states anyway. Today’s ruling was in Pruitt v. Burwell, a case brought by Oklahoma attorney general Scott Pruitt.

These cases saw two appellate-court rulings on the same day, July 22. In Halbig v. Burwella three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ordered the administration to stop. (The full D.C. Circuit has agreed to review the case en bancon December 17, a move that automatically vacates the panel ruling. In King v. Burwell, the Fourth Circuit implausibly gave the IRS the thumbs-up. (The plaintiffs have appealed that ruling to the Supreme Court.) A fourth case, Indiana v. IRS, brought by Indiana attorney general Greg Zoeller, goes to oral arguments in federal district court on October 9.

Today, federal judge Ronald A. White issued a ruling in Pruitt that sided with Halbig against King, and eviscerated the arguments made by the (more senior) judges who sided with the government in those cases…

Read the rest.

Categories: Policy Institutes

The EEOC Loses (And Loses. And Loses.) In Federal Court Again

Cato Op-Eds - Tue, 09/30/2014 - 15:58

Walter Olson

We keep reporting in this space about how federal courts have slapped down the long-shot lawsuits and activist legal positions advanced by the Obama administration’s Equal Employment Opportunity Commission (EEOC). In the Freeman case last year, a Maryland federal judge used such unflattering terms as “laughable,” “unreliable,” and “mind-boggling” to refer to Commission positions, while in the more recent Kaplan case, in which Cato filed a brief, a Sixth Circuit panel was only slightly more polite about the systematic shortcomings in the commission’s case. Both of those cases arose from the commission’s controversial crusade against the use of criminal and credit background checks in hiring.

Since our report in April, the commission has extended its epic, cellar-dwelling record of federal court losses with at least three more defeats. 

* Yesterday a Second Circuit panel ruled on a case in which the EEOC had claimed that female and male lawyers at the Port Authority of New York and New Jersey had not received equal pay for substantially equal work. The problems with the commission’s case were many, including a seemingly “random” choice of comparison employees that tried to dodge the significance of substantial differences between them based on how long they had been practicing law and had been at the Port Authority. Above all, the EEOC chose to rest its case on the notion that “an attorney is an attorney is an attorney,” which meant it was entitled simply to assume that Port Authority lawyers “in practice areas ranging from Contracts to Maritime and Aviation, and from Labor Relations to Workers’ Compensation” were all doing the “same” work meriting the same pay. The panel of appeals judges barely concealed its impatience with this unrealistic assumption – judges are if nothing else experienced lawyers themselves – and upheld the dismissal

* The Obama EEOC had stirred wide alarm in the business community when it decided to take the position that many clauses used in garden-variety severance agreements, in which the departing employee agrees not to sue or disparage the employer, are in reality unlawful “retaliation” against protected activity. But in the first tryout of that position, the commission fell flat on its face, as InHouse Cafe relates

On September 18, 2014, Judge John Darrah of the U.S. District Court for the Northern District of Illinois dismissed the EEOC’s lawsuit against CVS challenging CVS’ standard separation agreement. The judge will issue a written opinion explaining his decision at a later date.

* In late June, a federal judge in North Carolina granted summary judgment against the agency in a disabled-rights case brought by a complainant who, the judge found, “cannot perform the essential functions of the job with or without a reasonable accommodation.” The case was notable in at least two ways. First, it had been brought against Womble Carlyle, one of the bigger law firms in the South, which seemed to betoken the commission’s hubris: not only will we bring weak cases, it seemed to be saying, but we’ll even bring ‘em against the sorts of law firms that have the means and will to fight such things. The second notable feature was that the court had earlier ordered the EEOC to pay $22,900 in sanctions to the law firm, over an episode in which the plaintiff admitted that after the commission had begun representing her, she had shredded and discarded job-search records relevant to Womble Carlyle’s case. Lawyers call that spoliation of evidence. 

Somewhere, I’m sure, someone is thinking the commission’s real problem must be with holdover Republican-appointed judges unwilling to cut civil rights complainants a break. So it’s worth noting that in the Port Authority case, two of the three judges on the appellate panel are Obama appointees, while the district judge who dismissed the case was an appointee of Bill Clinton. The district judges in Illinois and North Carolina who dismissed the commission’s claims are respectively Clinton and Obama appointees. The problems with overreaching, extreme, and just plain sloppy litigating at the EEOC go beyond differences between liberal and conservative judges. 

Categories: Policy Institutes

Peace, Love, & Liberty: A Brilliant New Book

Cato Op-Eds - Tue, 09/30/2014 - 15:13

David Boaz

Hundreds of thousands of protesters are marching in Hong Kong under the banner of “Occupy Central for Love and Peace.” Have I got a book for them!

Cato Senior Fellow Tom G. Palmer has just edited Peace, Love, & Liberty, a collection of writings on peace. This is the fifth book edited by Palmer and published in collaboration with the Atlas Network, where he is executive vice president for international programs, and Students for Liberty, which plans to distribute some 300,000 copies on college campuses.

But don’t write this book off as a student handout. There’s really impressive material in here. Palmer wrote three long original essays: “Peace Is a Choice,” “The Political Economy of Empire and War,” and “The Philosophy of Peace or the Philosophy of Conflict.” These are important and substantial articles. 

But his aren’t the only impressive articles. The book also includes:

  • Steven Pinker on why we’ve seen a decline in war
  • Eric Gartzke on how free trade leads to peace
  • Rob McDonald on early Americans’ wariness of war
  • Justin Logan on the declining usefulness of war
  • Radley Balko on the militarization of police
  • Emmanuel Martin on how we all benefit if other countries prosper
  • Chris Rufer on a businessman’s view of peace
  • Sarah Skwire on war in literature
  • Cathy Reisenwitz on what individuals can do to advance peace

Plus classic pieces of literature including Mark Twain’s “War Prayer” and Wilfred Owen’s “Dulce et Decorum Est.”

And all this for only $9.95 at Amazon! Or even less from Amazon’s affiliates. If you want to buy them in bulk – and really, you should, especially for your peace-loving friends who aren’t yet libertarians – contact Students for Liberty.

Categories: Policy Institutes

Government Crowding Out, USPS Style

Cato Op-Eds - Tue, 09/30/2014 - 14:44

Chris Edwards

This is a really bad policy idea: the U.S. Postal Service wants to get into the grocery delivery business. Economists will sometimes support government interventions in industries where there are serious market failures. But with grocery delivery, private businesses are already performing the service, and no market failure is evident.

The USPS grocery idea is a desperate attempt to save the agency’s hide, rather than to solve any problems in the marketplace. The Washington Post frames it correctly: “After nearly six years of multibillion-dollar losses, the U.S. Postal Service has developed a new plan to help turn its finances around: Daily grocery deliveries.”

The problem is that government expansion into an activity squeezes out private providers and deters entrepreneurs from getting in. As the government expands, the private sector shrinks. Such “crowding out” occurs in many areas. An op-ed in the Wall Street Journal [$] today on retirement savings in different countries notes, “OECD data show a strong negative relationship between the generosity of public pensions and the income that retirees collect from work and private saving.”

The decline in mail volumes is prompting the USPS to extend its tentacles. GovExec reports, “from banking to passport photos, nearly all postal reform stakeholders agree any legislation must unchain the Postal Service to leverage its unique, in-every-community network to create new sources of revenue.” By “stakeholders,” GovExec appears to mean groups—such as the labor unions—that benefit from the subsidized status quo.

The Wall Street Journal reports [$] that the grocery gambit “is the latest in a string of aggressive moves by the Postal Service to compete in the package-delivery market.” But why would we want the government “aggressively” undermining private businesses, especially in an industry like package delivery that is already efficient and competitive?

If the USPS expands into new areas such banking and groceries, we will end up with a mess of cross-subsidies between the agency’s different activities. Banks, for example, would complain that subsidized USPS banking was undercutting them, which would be inefficient and unfair. Such disputes would be chronic, and each dispute would descend into a battle over accounting between lobby groups in front of Congress.

For more efficiency and less lobbying, Congress should be encouraging the USPS to shrink, not expand. Does it make sense for a letter carrier to deliver groceries? The best way to find out is to privatize the letter carrier, repeal its legal monopoly, and then let it have a go. Postal privatization works. Britain, Germany, and the Netherlands have shown the way. 

Categories: Policy Institutes

How School Choice Saves Money

Cato Op-Eds - Tue, 09/30/2014 - 09:50

Jason Bedrick

School choice programs expand educational opportunity, but at what cost?

Opponents of school choice frequently claim that vouchers and scholarship tax creditssiphon” money from public schools and increase the overall cost of education to the taxpayers. However, these critics generally fail to consider the reduction in expenses associated with students switching out of the district school system, wrongly assuming that all or most school costs are fixed. When students leave, they claim, a school cannot significantly reduce its costs because it cannot cut back on its major expenses, like buildings, utilities, and labor. But if that were true, then schools would require little to no additional funds to teach additional students. A proper fiscal analysis considers both the diverted or decreased revenue as well as the reduction in expenses related to variable costs.

A new study by Jeff Spalding, Director of Fiscal Policy at the Friedman Foundation for Educational Choice, does exactly that. The study examines the fiscal impact of 10 of the 21 school voucher programs nationwide, finding a cumulative savings to states of at least $1.7 billion over two decades. Spalding, the former comptroller/CFO for the city of Indianapolis, is cautious, methodical, and transparent in his analysis. He walks readers through the complex process of determining the fiscal impact of each program, identifying the impact of each variable and explaining equation along the way. He also makes relatively conservative assumptions, such as counting food service and interscholastic athletics as fixed costs even though they are variable with enrollment. Critically, Spalding accounts for those students who would have attended private school anyway, explaining:

One common complicating factor is student eligibility. If a voucher program allows students already enrolled in a private school to qualify, then those students do not directly relieve the public school system of any costs. Thus, there is a new public cost incurred for the vouchers provided to those students, but no corresponding savings for the public school system. Anytime voucher eligibility extends to students not currently enrolled in a public school, the net savings calculation must include that complicating factor.

States save money when the variable cost of each student to the district schools is greater than the cost of the voucher, accounting for the students who would have attended private school anyway. After wading through each state’s byzantine school funding formula, Spalding calculated that the voucher programs reduced expenditures across all 10 programs by $4.5 billion over two decades while costing states $2.8 billion, producing $1.7 billion in savings.

In the last 40 years, government spending on K-12 education has nearly tripled while results have been flat. Moreover, the Census Bureau projects that the elderly will make up an increasingly larger share of the population in the coming decades, straining state budgets with spending on health care and retirement benefits. Schools will have to compete with hospitals and nursing homes for scarce resources.

In other words, our education system needs to become more effective and financially efficient, fast. Large-scale school choice programs promise to do both.

Categories: Policy Institutes

Amtrak Shouldn't Get to Write Its Own Ticket

Cato Op-Eds - Tue, 09/30/2014 - 09:21

Ilya Shapiro

Article One, Section One of the Constitution vests “all legislative powers” in Congress. The sovereign power to make laws comes from the people, so their representatives—Congress—should make those laws.

It sounds simple enough, but once the federal government started ballooning in size and regulating everything under the sun, that simple understanding had to go. There was too much governing for Congress to handle on its own, so the courts adjusted, allowing a proliferation of government agencies to exercise lawmaking power, within certain guidelines.&

We’ve now apparently gotten to the point, however, that there’s so much governing to do that it’s too much for the government to handle on its own. In a case now before the Supreme Court, Amtrak—the for-profit, quasi-public entity that the federal government has deemed private for these purposes—has been given a part to play in making laws to regulate its competitors in the rail transportation industry.

If you think this sounds like a far cry from “all legislative powers” being vested in Congress, you’re not alone. The Association of American Railroads, which represents the rail companies subject to these regulations, sued the Department of Transportation, arguing that the Passenger Rail Improvement and Investment Act of 2008 unconstitutionally vests federal legislative power in a private entity by giving Amtrak the ability to set rail standards (in conjunction with the DOT). AAR has battled through the federal courts, most recently winning in the U.S. Court of Appeals for the D.C. Circuit, and is now trying to preserve that victory before the Supreme Court.

Cato, joined by the National Federation of Independent Business, has filed a brief supporting AAR. We argue that this case is different from other cases where courts have found prudential reasons for not enforcing the nondelegation doctrine, the concept that Congress can’t delegate its own legislative powers. As we explain, the judicial administrability, political accountability, and necessity arguments in favor of liberal delegation of lawmaking powers are far less valid in the context of delegation to private entities. Further, apart from these prudential concerns, the Court has vigilantly enforced these important structural limitations on delegation and should continue to do so here.

It’s perhaps too late to expect the courts to meaningfully rein in the massive delegation of power to the administrative state—though we should limit that delegation to implementation of law rather than actual legislation—but, as our brief explains here, it could be much worse. Many agencies are already dominated by the private interests they’re supposed to regulate (a dynamic known as “regulatory capture”), but allowing a private entity to secure a legislative role in governing its competitors not only exacerbates the problems that the administrative state already poses, it makes a mockery of the Constitution and erodes one more important structural protection for liberty.

The Supreme Court will hear oral arguments in Dept. of Transportation v. Association of American Railroads on December 8, with a decision expected in the spring.

This blog post was co-authored by Cato legal associate Julio Colomba

Categories: Policy Institutes

Addressing the Critics of This Purportedly No Good, Very Bad Chart

Cato Op-Eds - Mon, 09/29/2014 - 15:52

Andrew J. Coulson

For the past few years I have charted the trends in American education spending and performance (see below). The goal is to see what the national data suggest about the productivity of our education system over time. Clearly, these data suggest that our educational productivity has collapsed: the inflation-adjusted cost of sending a student all the way through the K-12 system has almost tripled while test scores near the end of high-school remain largely unchanged. Put another way, per-pupil spending and achievement are not obviously correlated.

Not everyone is happy with these charts, and in this post I’ll respond to the critics, starting with the most recent: Matt DiCarlo of the Albert Shanker Institute, an organization that honors the life and legacy of the late president of the American Federation of Teachers. DiCarlo finds the chart “misleading,” “exasperating,” and seemingly designed to “start a conversation by ending it.” Since we’re actually having a conversation about the chart and what it shows, and since I’ve had countless such conversations over the years, perhaps we can agree that the last of those accusations is more of a rhetorical flourish than a serious argument.

DiCarlo links to a couple of earlier critics to do the heavy lifting in support of his antipathy, but he does admonish the use of a single percent-change y-axis as “not appropriate for and totally obscur[ing] changes in NAEP scale scores.” This is ironic. When I first began to publish these charts, I used two separate y-axes, as shown in the image below which dates back to around 2009.

This, DiCarlo may be exasperated to hear, was roundly critized for the ostensible crime of using… 2 separate y-axes, which, apparently, is only done by knaves and charlatans according to several e-mails I received at the time. But of course the use of 2 separate y axes is not inherently misleading. It depends on why they are used, whether or not the scales are sensible, etc. But when you are trying to reach a suspicious audience, it’s not very effective to just say: “no, you’re mistaken, there’s nothing wrong with this use of 2 y-axes.” They’ll just put that down to more knavery on your part. So, thinking I would eliminate one source of spurious objections, I switched to a single percent-change axis. And now we have DiCarlo’s objection to that. Catch-22.

But let’s investigate DiCarlo’s criticism. Does the percent change scale obscure important changes in the NAEP scores? Looking at the first chart, it is easy to see that the science score fell and never quite recovered to its original level before the test was discontinued, while the reading and math scores seem largely unchanged. As it happens, the raw NAEP score for math rose from 304 to 306, while the raw reading score rose from 285 to 287, and the raw science score fell from 305 to 295. We can see the science decline quite clearly, so it hasn’t been obscured. But the two-point gains in math and reading look essentially like flat lines. Which raises the question: is a two point gain essentially equivalent to a flat line, or is it substantial?

Some people like to answer that question by saying that a gain of x points on the NAEP is equivalent to one school-year’s worth of learning. But, according to a 2012 paper commissioned by the NAEP Validity Studies Panel, claims of that sort are unempirical guesswork.

Fortunately, there is a tried-and-true metric that researchers use to quantify effect sizes: they express them in terms of standard deviations, and those measures can in turn be converted to percentile scores. For example, the earliest available std deviation for the mean reading score of 17-year-olds was 46 points. Dividing 2 by 46, we get an effect size of 0.0435 SDs. That would take you from being in the middle of the pack in the early 1970s (that is, the 50th percentile), to being at the 51.7thpercentile. So instead of outscoring half your peers, you’d outscore 51.7 percent of them. That’s not a huge difference is it? That’s not a spike-the-football, endzone dance, “In. Your. Face!” kind of improvement. It’s really pretty small.

In math, the story is similar. The earliest SD available is for the 1978 admin of the test, and it was 35. A two-point gain would be an effect size of 0.057 SDs, which would raise you from median performer to the 52.3rd percentile. Again, this is not winning the lottery. This is not an “I’d like to thank the Academy” kind of moment.

So the fact that the reading and math scores look essentially flat in the chart at the top of this post is an accurate representation of the trend in raw NAEP scores. They are essentially flat.

Next, turning to the cost series in the top chart, both of the earlier critics cited by DiCarlo believed they smelled a rat. The legend of the version of the chart they reviewed referred to the cost trend line as a “13yr running total, i.e. K-12, spending per pupil,” which I thought was self-explanatory. It wasn’t. It seems that at least one of the critics was unfamiliar with the concept of a running total, thinking it was equivalent to simply multiplying the current year figure by 13. It’s not. Because of his misunderstanding, he wrote: “the cost figure increases (supposedly the total cost of a K-12 education taken by multiplying per-pupil costs by 13) are false.” Of course the error was his own, the result of failing to understand that a running 13yr total is the annual per-pupil spending for the given year, plus the corresponding figures for the preceding 12 years. This is an estimate of what was spent to put a graduate in the given year all the way through the K-12 system–i.e., the total cost of that graduate’s K-12 public schooling.

The other critic cited by DiCarlo seems not to have read the chart’s legend at all, claiming that I use “total rather than per pupil spending (and call it ‘cost’).” The legend explicitly states that it is a running 13yr total of per-pupil spending.

But, though both these critics were mistaken, I did learn (to my great surprise) that the idea of a running total is not universally understood. So, since that time, I have elaborated the explanation in the legend and raised it to the top of the chart in an effort to make the cost trend line easier to understand.

Yet other critics have alleged that the overall flat performance of 17-year-olds is purely the result of changing demographics—i.e., the increasing test participation rates of historically lower-scoring groups, and so the aggregate data are misleading. There is a little something to the premise of this argument, but the conclusion still doesn’t follow. I explained why in my 2011 testimony before the House Education and the Workforce Committee, but I’ll summarize it here for completeness. 

It is true that both black and Hispanic students now score higher than they did in the early 1970s, and the difference isn’t negligible as it is with the overall aggregate trend. The first caveat is the that the trends for white students, who still make up the majority of test takers, are only marginally better than the overall trends. Whites gained four points in each of reading and math, and lost six points in science. The overall picture for whites is thus also essentially a flat line, and it is their performance that is chiefly responsible for the stagnation in the overall average scores, not the increasing participation of historically lower-scoring groups.

The second caveat is that all of the improvement in the scores of Hispanic and black students had occurred by around 1990, and their scores have stagnated or even declined slightly since that time (see the testimony link above). While the improvements for these subgroups of students are not negligible, they have no relationship to the relentlessly rising spending trend. Spending increased before, during, and after the period during which black and Hispanic students enjoyed their score gains. If per-pupil spending were an important cause of those gains, we would expect more uniform progress, and that is not what the data show.

Finally, what of the claims that it is unfair to chart test scores over this period because students have become harder to teach—because of poverty, single-parent families, low-birthweight or other factors associated with student performance. Claims like this are seldom accompanied by any sort of systematic numerical analysis. That’s too bad, because if the overall trend in such factors really has been negative, then they might well be dragging down student performance and skewing the NAEP scores lower. Fortunately, several years ago, prof. Jay Greene of the University of Arkansas decided to take these criticisms seriously, tabulating the trends in 16 different factors known to be associated with student achievement (including the ones listed above), and combining them into a single overall index of “teachability.” What Greene found is that, if anything, children have become marginally more teachable over this period. So we should expect some improvement in scores even if schools haven’t improved at all.

In sum, while I grant that this particular chart does not capture every interesting piece of the puzzle—no single chart could—it is both useful and an accurate depiction of the lack of correspondence between spending and student achievement in U.S. schools over the past two generations, and of the fact that spending has risen out of all proportion with the academic performance of students near the end of high school.

Categories: Policy Institutes

Venezuela: A Military Regime

Cato Op-Eds - Mon, 09/29/2014 - 15:30

Juan Carlos Hidalgo

Bloomberg has a story today on the many perks that the Venezuelan army enjoys vis-à-vis the downtrodden civilian population. Whereas a regular Venezuelan has to line up for hours to get basic goods (when they are available), officers enjoy privileged access to fully stocked supermarkets, new cars, housing, and many other benefits.

The obvious strategy of the Venezuelan government is to keep the armed forces happy in case it needs them to hold on to power.  But the reality is far worse.  In fact, Venezuela is now a military regime. Even though President Nicolás Maduro is a civilian, he is surrounded by people who have donned a uniform: according to Bloomberg, “A third of Venezuela’s 28 ministers and half the state governors are now active or retired officers.”

The rise in prices is not the only kind of inflation affecting Venezuela. Bloomberg reports that “its military now has between 4,000 and 5,000 generals” for a ratio of one general for every 34 servicemen (in the United States the ratio is one general per 1,490 servicemen). As expected, generals enjoy higher salaries and many other benefits. Moreover, the intelligence community believes that high-ranking army officers control most illegal activities in Venezuela, from smuggling to drug trafficking. In other words, military men are profiteering from the status quo.

All this points to an unlikely scenario where the armed forces would threaten the continuity of chavismo in power. Just the opposite, the army will be a key actor in propping up the regime, even if Venezuelans decide otherwise in the polls.

Categories: Policy Institutes

New York Airbnb Law Hurting B&Bs

Cato Op-Eds - Mon, 09/29/2014 - 15:22

Matthew Feeney

The campaign against Airbnb in New York City has claimed some surprising collateral damage – actual B&Bs. According to Mary White of BnB Finder, half of all the B&Bs in the city have closed down since legislation in 2011 aimed at limiting Airbnb abuses came into effect. The statewide law prohibits building owners renting rooms in residential buildings and apartments for less than 30 days.

The law may have been aimed at preventing apartment buildings from being turned into illegal hotels, but it has resulted in fines being issued to B&B owners. The owner of one of New York City’s B&Bs launched an advocacy group in 2011 that lobbies for changes in legislation but does not list its members. Given the legislation affecting B&Bs it is understandable that BnB owners would be hesitant to increase their exposure. A Crain’s New York Business article on the decline of B&Bs in New York City quotes the owner of a Brooklyn inn, who limits the amount of attention her business receives online in order to avoid city investigators:

Most people don’t even know B&Bs exist in the city. Now many innkeepers are keeping a lower profile, hoping not to attract the city’s attention.

The owner of a European-style inn in Brooklyn, who did not want to be identified, said she limits her online exposure by not listing her property with travel sites like Expedia. The reason is twofold: She wants to speak personally with her guests before they arrive to ensure “that the people who stay with us won’t steal anything from us,” and to keep out of the crosshairs of city investigators.

Airbnb has made enough on an impact in New York City for hotel industry representatives, local officials, and activists to launch Share Better, a coalition group which claims the popular site is contributing to New York City’s affordable housing crisis and allowing tenants to violate lease agreements. Earlier this month, I wrote about Share Better’s claims and discussed the regulatory gray area Airbnb operates in with MSNBC’s Eric Ortega and The New Republic’s Noam Scheiber.

As Share Better continues to make its arguments against Airbnb, regulators and lawmakers should not forget the recent decline in New York City B&Bs, the hard hit unintended victims of anti-competitive rental restrictions.

Categories: Policy Institutes

The Federal Government and American Indians

Cato Op-Eds - Mon, 09/29/2014 - 14:54

Chris Edwards

As research for this essay on the Bureau of Indian Affairs, I visited the Smithsonian National Museum of the American Indian (NMAI). I found virtually no information useful for my project.

I stopped by the museum information desk on the way out and said something to the effect, “There is very little here about the relationship between Indians and the federal government, yet that relationship is central to the story of American Indians over the last two centuries.” A few months ago, I emailed a similar complaint to the head of the NMAI, and he did kindly respond to me.

The museum has now taken a big step toward fixing the problem with its new exhibit about the history of treaties between tribes and the federal government. It’s a good exhibit, telling some of the stories about how the government deceived and cheated the Indians again and again, depriving them of their lands, resources, and freedom.

The general topic is interesting to me because it illustrates numerous libertarian themes, including the arrogance and dishonesty of federal officials, the eagerness of officials to substitute their own goals for individual freedom, government corruption, the failure of top-down planning from Washington, and the inability of hand-outs to create lasting prosperity.

As I discuss in my essay, there has been good news on Indian reservations in recent decades. But the federal government continues to fail in creating the legal structure needed so that people on reservations can prosper. One long-standing problem is the very poor functioning of law enforcement. In a story today about Indian tribes in North Dakota, the Washington Post says:

Investigating crime on Fort Berthold is more difficult than most places because the reservation sits in six different counties each with its own sheriff — some of whom do not have a good relationship with the tribe, according to tribal members. If the victim and suspect are both Native American, the tribal police or the FBI handles the arrest. But if the suspect is not Native American, in most cases the tribal police can detain the suspect but then have to call the sheriff in the county where the crime occurred. Sometimes they have to wait several hours before a deputy arrives to make the arrest. In a murder case, the state or the FBI might be involved, depending on the race of the victim and the suspect.

“There are volumes of treatises on Indian law that are written about this stuff,” Purdon said. “It’s very complicated. And we’re asking guys with guns and badges in uniforms at 3:30 in the morning with people yelling at each other to make these decisions — to understand the law and be able to apply it.”

I don’t know what the best solution to these particular problems is. I do know that the U.S. Constitution empowered the federal government to engage with the tribes, and that Congress should spend more time tackling such fundamental issues. Unfortunately, most members of Congress focus most of their efforts on hundreds of programs not authorized by the Constitution.

Anyway, kudos to the Washington Post for doing a series on justice issues in Native American communities. And kudos to the NMAI for informing the public about the government’s often appalling behavior over two centuries of dealing with the first Americans.

Categories: Policy Institutes

The Real Costs of HealthCare.gov

Cato Op-Eds - Mon, 09/29/2014 - 12:05

Nicole Kaeding

In May, Department of Health and Human Services (HHS) Secretary Sylvia Burwell testified to Congress that costs for building HealthCare.gov were $834 million. New research from Bloomberg Government suggests that Burwell’s estimate represents a low-end estimate.

According to the new report, spending for HealthCare.gov has been an estimated $2.14 billion. Burwell’s estimates did not include numerous costs related to the project. For instance, she did not include the contract costs for processing paper applications, which are used as a backup. That contract cost $300 million.

Burwell’s figure also does not include spending at the IRS and other agencies related to ACA requirements. For instance, the IRS is required to provide real-time interfacing with HealthCare.gov to verify income and family size for insurance subsidy calculations. Those requirements cost $387 million.

Bloomberg also includes $400 million in costs that were excluded by HHS using creative accounting. When it wrote the ACA, Congress did not appropriate money to HHS for the construction of a federal exchange. Instead, it provided unlimited grants to states to construct their portals. When many states refused to construct their exchanges, HHS was forced to develop HealthCare.gov, but without a dedicated source of funding. HHS said it would need to “get creative” about funding options, leaving many wondering where HHS would eventually get the money. According to Bloomberg, HHS shifted money around to finance the construction of HealthCare.gov, using a number of existing contracts to finance the website’s construction.

Finally, Bloomberg included $255 million more in costs than Burwell due to time period differences. Burwell’s costs were as of February 2014. Bloomberg included costs until August 20, 2014, and then projected the current level of spending forward to the end of the fiscal year, September 30th. But this means that their figures are likely conservative too because federal agencies often ramp up spending— particularly contract spending—as it closes out its fiscal year.

Implementing the ACA is a costly exercise; Bloomberg says the $2.14 billion for HealthCare.gov administration is only a small part of the full $73 billion costs of Obamacare since its passage in 2010. But the administration nonetheless owes taxpayers an accurate accounting for the costs of the system.

Categories: Policy Institutes

Halbig v. Burwell: House Oversight Committee Subpoenas IRS

Cato Op-Eds - Mon, 09/29/2014 - 12:03

Michael F. Cannon

This was a long time coming.

Those who follow Halbig v. Burwell and similar cases know the IRS stands accused of taxing, borrowing, and spending billions of dollars contrary to the clear language of federal law. The agency is quite literally subjecting more than 50 million individuals and employers to taxation without representation.

Congressional investigators have been trying to figure out how the IRS could write a rule that so clearly contradicts the plain language of the Patient Protection and Affordable Care Act. Unfortunately, the agency has been largely stonewalling their efforts to obtain documents relating the the development of the regulation challenged in the Halbig cases.

Fortunately, finally, last week the House Committe on Oversight and Government Reform used its subpoena power to demand the IRS turn over the documents that show what whent into the agency’s decision.

We’ll see if the IRS complies, or if another of the agency’s hard drives conveniently crashes.

I’ve got a fuller write-up over at Darwin’s Fool.

Categories: Policy Institutes

Democrats and Their Mansions, Again

Cato Op-Eds - Sat, 09/27/2014 - 16:03

David Boaz

Two articles in today’s Washington Post Real Estate section remind me of how off-target a Post political article was a couple of months ago. The House of the Week is Paul and Bunny Mellon’s Upperville, Va., estate, which features a 10,000-square-foot main house on 2,000 acres and is being offered for $70 million. The Mellons often entertained their friends John F. and Jacqueline Kennedy there. Bunny Mellon, the daughter of the man who cofounded the Warner-Lambert drug company, married the heir to the Mellon Bank fortune. Sadly, she made headlines late in her long life for her multi-million-dollar support of Sen. John Edwards’s presidential campaign, including money to cover up his extramarital affair.

Meanwhile, the feature article in the Real Estate section looks at “an American palace,” a 40,000-square-foot house (and you thought the Mellons were extravagant at 10,000 square feet!) in Potomac, Md., built by a businessman who started a company with a federal grant, built it on government contracts, and then sold it for hundreds of millions of dollars. Frank Islam says that “‘to whom much is given, much is expected.’ It’s our responsibility to give back and share.” And share he does, with the kind of people who made all that government largesse possible:

Since moving into their 14-bedroom, 23-bathroom estate in 2013, the homeowners have regularly staged events for the Democratic Party. They held a June dinner attended by Vice President Biden and a fundraiser for Sen. Al Franken (D-Minn.) this month. 

Islam and Driesman have hosted nearly all the region’s Democrats, including Maryland Gov. Martin O’Malley and Lt. Gov. Anthony Brown; Sens. Timothy M. Kaine of Virginia and Benjamin L. Cardin of Maryland; and Montgomery County Executive Isiah Leggett.

All of which reminded me of another Post story by a longtime reporter back in May, which turns out to have been about the very same mansion:

The Potomac estate of IT entrepreneur and philanthropist Frank Islam seemed more fitting for a Republican soiree than a Democratic fundraiser, some of Maryland’s top elected officials said Wednesday….

“There are not too many people who own homes like this who are great Democrats,” Sen. Benjamin L. Cardin (D-Md.) told the audience of about 400.

As I said at the time, “Democrats don’t have much trouble finding billionaires and mansions for fundraising events. Reporters shouldn’t act like it’s an unusual event.”  

A month after that Sen. Harry Reid declared in one of his tirades about billionaires in politics that the Democratic party “doesn’t have many billionaires.” (Or maybe he said “any billionaires”; the audio is unclear.) Politifact found plenty of billionaire donors to both parties. Whatever you think of many politics, reporters should stop recycling Democratic spin that big money is found on one side of the aisle.

 

Categories: Policy Institutes

Who Needs to Be More Flexible in the TPP talks? Hint: It's Not Japan.

Cato Op-Eds - Fri, 09/26/2014 - 12:27

K. William Watson

According to news reports, the United States and Japan have again failed to reach a bilateral agreement on lowering import barriers, a necessary prerequisite to completion of the 12-member Trans-Pacific Partnership (TPP) trade agreement. U.S. negotiators and business interests are quick to blame Japan for being reluctant to eliminate tariffs on a handful of highly traded agricultural products. In truth, though, the Japanese government has shown much greater commitment to the TPP and more willingness to take political risk than the United States. If the TPP falls apart, the blame will not lie with the Japanese.

The tariffs in question are what trade negotiators refer to as “sensitivities.” For every country in any trade negotiation, there are some trade barriers that are very difficult to lower because of the domestic political power of the businesses and industries that benefit from them. In Japan’s case these are agricultural tariffs (on rice, wheat, sugar, meat, and dairy) that are the bread and butter of Japan’s politically powerful farmers. Getting rid of sensitive barriers can be done, but it requires greater political will from both local and foreign leaders. Politicians take great risks when they oppose the interests of a powerful lobby.

I’ve noted before that criticisms of Japan’s stance are inappropriately antagonistic in light of how beneficial tariff elimination would be to Japan itself. The Japanese government know this, too. Earlier this week, Japanese Prime Minister Shinzo Abe spoke about how eager his government is to use the TPP talks as a way to enact broad agricultural reforms:

I consider it is indispensable for the future of Japanese agriculture to promote the domestic and international reforms in an integrated way.

To be honest with you, it is indeed an enormous task to suppress the resistance from the people who have been protected by vested interest. However, there is no future for them if they are not exposed to competition.

Rather than sympathize with their Japanese counterparts, however, the U.S. Trade Representative’s office continues to accuse Japan of expecting special treatment when all other TPP members are committed to more ambitious liberalization.

This attitude is incredibly hypocritical, considering that U.S. sensitivities are considered so far out of bounds that they aren’t even being discussed. Issues like agriculture subsidies, maritime shipping, antidumping reform, and government procurement aren’t on the table at all. Their absence is further evidence that it is the United States that lacks interest in taking political risk to advance the TPP.

But even if the U.S. government gets a pass on excluding all those non-tariff issues, it’s still falling short of Japan’s level of commitment. Consider this report from Japan’s Kyodo News Agency:

The United States has told Japan during their recent ministerial talks it will keep tariffs on automotive parts under a Pacific Rim free trade initiative, retracting its previous plan to scrap them immediately, negotiation sources said Thursday.

… The move is apparently out of consideration for the U.S. auto industry, which is a strong political support base for President Barack Obama’s Democratic Party, before U.S. midterm elections in November.

The United States is right to ask a lot from the other 11 countries in the TPP negotiations. But completing the agreement (not to mention getting it passed in Congress) is going to require the Obama administration to step on the toes of particular business groups and explain why the deal is good for the country as a whole. They could learn how it’s done by watching their Japanese counterparts.

Categories: Policy Institutes

Reagan and the Air Traffic Controllers

Cato Op-Eds - Fri, 09/26/2014 - 11:55

Chris Edwards

An obituary in the Washington Post for Robert Poli provides a chance to look back at a decisive moment in Ronald Reagan’s presidency. Poli was the head of the militant Professional Air Traffic Controllers Organization (PATCO), which launched an illegal strike in 1981. The Post describes the significance of the action:

The strike by PATCO, Reagan’s subsequent breaking of the union and the hiring of replacement workers were among the most significant job actions of their time, said Joseph A. McCartin, a professor at Georgetown University and a specialist on labor and social history. They “helped to define labor relations for the rest of the century and even into the 21st century,” he said, turning public sentiment away from striking as a legitimate labor tactic and further emboldening employers in the private sector to permanently replace striking workers.

Reagan’s hard line with the PATCO strikers six months into his presidency helped establish an image of him at home and overseas as a strong leader who would not be pushed around.

Here is the sequence of events: 

The PATCO work stoppage began Aug. 3, 1981, when at least 12,000 of the nation’s 17,000 air traffic controllers defied federal law and walked off their jobs, seeking higher pay, shorter hours, better equipment and improved working conditions in a long-simmering labor dispute.

There were widespread flight cancellations and delays, and 22 of the nation’s busiest airports were directed to reduce their scheduled flights by 50 percent.

That morning in the White House Rose Garden, Reagan declared, “I must tell those who failed to report for duty this morning they are in violation of the law, and if they don’t report for work within 48 hours, they have forfeited their jobs and will be terminated.”

Two days after the walkout began, Transportation Secretary Drew L. Lewis announced that at least 12,000 striking air traffic controllers had been terminated and would not be rehired “as long as the Reagan administration is in office.”

The Reagan administration stuck to its guns. The strikers were replaced by nonstriking controllers, air traffic supervisors, and military controllers until new controllers were trained.

The episode was a very gutsy move by Reagan, with beneficial consequences. But as I note here, the 1981 strike and response did not come out of nowhere—PATCO had been causing problems for years. In 1969, for example, about 500 members of PATCO called in “sick” in a protest, which caused major air service interruptions. And in 1970, about 3,000 members of PATCO took part in another “sickout,” or illegal strike, that caused chaos for the nation’s air traffic. Those sorts of union troubles continued during the 1970s, which set the stage for the Reagan showdown.

Today, the government’s air controllers have a different union organization, NATCA. Rather than illegal striking, these folks do what a growing number of groups in society are doing to advance their agendas: they lobby

Categories: Policy Institutes

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