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Las Vegas is Ripe For Ridesharing

Tue, 10/21/2014 - 11:35

Matthew Feeney

The regulations that govern taxis in the Las Vegas area impose especially heavy restrictions on consumer choice and driver availability. Such an environment is ideal for rideshare companies, which provide consumers with more choice and drivers with more flexibility. Yet perhaps unsurprisingly, regulators and market incumbents in Sin City may prove to be among ridesharing companies’ most defensive and rigid opponents.

Taxi drivers in Las Vegas are not only restricted in regards to where they can pick up passengers, they are also restricted in how they pick up passengers. For instance, individuals are unable to hail Las Vegas cabs from the street. Cabs must be called and requested or found at designated areas.

The Nevada Taxicab Authority has a web page dedicated to describing the sixteen different taxi medallions available in the state.

The “North Las Vegas” medallion allows operators to drive 24 hours a day, seven days a week. Holders of this medallion “are permitted to stage on any taxicab stand North of Owens Avenue. They can then provide an on-call service within a five-mile radius of North Las Vegas. The southern border of North Las Vegas is Flamingo Road. Taxis with the “North Las Vegas” medallion may pick up passengers when directed to do so by a dispatcher; however the ride must originate north of Flamingo Road and cannot originate on Las Vegas Boulevard or Paradise Road (in the map below Owens Avenue is blue, Flamingo Road is green, and Las Vegas Boulevard and Paradise Road are highlighted in brown). 

“Providing that adequate service is maintained” in North Las Vegas, taxis with this medallion are permitted to provide service from ten specified locations, most of which are hotels.  

The restrictions detailed above affect cabs with only one of the Las Vegas area taxi medallions. Other taxi medallions restrict where drivers can pick up passengers (including a ban on picking up passengers from McCarran International Airport) as well as when drivers can provide rides (such as a prohibition on picking up passengers after 2am).

Uber and Lyft allow their rideshare drivers to pick up whom they want, where they want, when they want. Las Vegas taxi drivers are allowed no such flexibility. So if Uber, Lyft, and other rideshare companies were to move into Las Vegas, it wouldn’t be surprising if the effect on the taxi industry were similar to what was seen in San Francisco.  

In an article published in Forbes on Sunday, Teamly CEO Scott Allison highlighted reporting on Uber’s recent meeting with prospective Las Vegas drivers. Last summer, the Nevada Transportation Authority suggested it would impound unlicensed vehicles providing rides for hire. Allison also highlighted that as it stands Nevada legislation effectively prohibits Uber and similar companies from operating in the state. 

Las Vegas, which has a huge tourist and convention industry and a far-from-ideal public transport system, is ripe for ridesharing. Unfortunately, Uber, Lyft, and other ridesharing companies should expect strong opposition from regulators and taxi companies if they launch there. 

Categories: Policy Institutes

Accuracy of Macroeconomic Forecasts

Fri, 10/17/2014 - 16:24

Chris Edwards

One of my first professional jobs 25 years ago was with the economic forecasting firm DRI/McGraw-Hill. It was fun work, but I noticed that the firm’s gross domestic product forecasts with models hundreds of equations long were no better than simple forecasts based on the interest rate yield curve.

I’m sure that macroeconomic models have grown more sophisticated today, but they still can’t predict very well. Former chair of the Council of Economic Advisers, Edward Lazear, has a terrific piece today describing the inaccuracy of government forecasting models:

My analysis of 1999–2013 reveals that the [Congressional Budget Office]’s real GDP growth forecasts for the next year were off, on average, by 1.7 percentage points, either too high or low. Administration forecasts were similarly off by a slightly larger 1.8 percentage points on average, also too high or too low. Given that the average growth rate during this period was only 2.1%, errors of this magnitude are substantial.

Perhaps most damning: History is a better predictor of annual growth than government forecasts. Simply assuming that GDP growth will be 3.1% in each year—the average annual rate for the 30 years that precede the study period—results in an average forecast error of 1.5 percentage points.

Lazear’s article should be posted above the desk of every reporter and pundit writing about the macroeconomy. And it should be kept in mind by politicians, who often claim that such-and-such policy will create such-and-such number of jobs based on such models.

The lesson for federal budget policy should be one of prudence. We don’t know where the economy is headed, so policymakers should cut spending, zero out deficits, and start paying down debt now while we’re enjoying a run of sustained growth.

Categories: Policy Institutes

Backyard Birds Spreading as Climate Changes

Fri, 10/17/2014 - 11:14

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

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.”

———-

In a recent Global Science Report, we posted some good news coming out of California’s Sierra Nevada, where climate change (from whatever cause), has been partially responsible for a greening of the organo state. Technically, the biomass in the montane forests has been on the increase over the past several decades.

Turns out climate change is for the birds, too. Yes, little Eastern Bluebirds (which almost went extinct because of habitat damage)—raising their young in cute houses, awakening us with their melodious songs, providing free cat food, and selectively messing only on my car. What’s not to like? And who wouldn’t like more birds? And if you live in the Eastern United States, there is a climate-related increase in cat purring because global (actually, local/regional) warming is increasing the range of songbirds.

A new study appearing in the journal Global Change Biology, authored by Karine Princé and Benjamin Zuckerberg from the University of Wisconsin-Madison’s Department of Forest and Wildlife Ecology, finds that:

[A] shifting winter climate has provided an opportunity for smaller, southerly distributed species to colonize new regions and promote the formation of unique winter bird assemblages throughout eastern North America.

The operative word here is “colonize.” In other words, they are spreading out from their home range, not moving north in lockstep.

Linking observations from the amateur bird surveys with temperature data from nearby locations, the authors track how the birds are responding to changing winter conditions. During the period 1990–2011, Princé and Zuckerberg find that the average environmental temperature characteristic of the observed bird assemblages indicate a “northward shift in the community composition of wintering birds” of about 93 miles during the period 1990-2011. Most of that shift is the result of warm-weather adapted species with short migratory paths, such as the Chipping Sparrow and the Carolina Wren, which are both expanding their ranges northward as well as increasing their populations within already established ranges. The authors tell us:

We found that the stronger positive … trends in southerly latitudes were driven by warm adapted birds increasing in their local abundance and regional occurrence… Despite diminished trends … in the more northerly latitudes, these trends were also driven by southerly species expanding their range (e.g., Carolina Wren and Eastern Bluebird) as opposed to cold adapted birds becoming locally extirpated and shifting northward.

This is pretty good news. Biodiversity—which everyone seems to like—is on the rise.

The authors sagely point out that “[c]limate change should not be viewed as the sole driver of changes in winter bird communities in eastern North America,” and note that changing landscapes, changing backyard bird feeding habits, changes in the observing network, etc., may play some role in the results. They also note that the changing community structure of the bird species may act to alter the “biotic interactions” within the winter bird communities, implying that there may ultimately be winner and losers. (A “W” goes to the cats.)

The data show that bird species are pretty much doing what rational climate optimists (h/t to Matt Ridley) expected all along, that is, adapting to changing climate conditions—and not only adapting, but thriving. And cats are purring with approval.

Reference:

Princé, K. and B. Zuckerberg. 2014. “Climate Change in Our Backyards: The Reshuffling of North America’s Winter Bird Communities.” Global Change Biology, doi:10.1111/gcb.12740.

Ridley, M. 2010.  The Rational Optimist: How Prosperity Evolves. New York: Harper.

Categories: Policy Institutes

Updates on President Obama’s Immigration Enforcement Record

Fri, 10/17/2014 - 10:48

Alex Nowrasteh

Last May I wrote a blog post about President Obama’s immigration enforcement record. In that post I made some assumptions about the percentage of all “interior removals” (that is, deportations of illegal immigrants who were living in the United States) for the years 2001—2007, because of a lack of data.

A recent report from the Migration Policy Institute (MPI) fills in those data gaps, except for the first two years of the Bush administration. Here are the updated data:

The total number of internal removals over the last six years of the Bush administration was about 475,000. From 2009 to 2013, the Obama administration removed just under 848,000 from the interior. Those numbers make for an incomplete comparison of the two administrations’ enforcement policies, but they paint an interesting picture.

Source: MPI

On average, President Bush removed about 276,000 unauthorized immigrants per year for the years data are available. That is total removals, including both interior and “border” removals; interior removals alone averaged 79,000 annually. President Obama has removed an average of 404,000 unauthorized immigrants a year, including an average of 170,000 interior removals. It should be noted that initially there were large numbers of “unknowns”—that is, removals that were not classified as either interior or border—during the Bush administration, but those numbers decreased in the administration’s later years and have been very small so far during the Obama administration.

Source: MPI

As I’ve written before, the best way to measure the intensity of immigration enforcement is to look at the percentage of the unauthorized immigrant population deported in each year.

Source: MPI, Department of Homeland Security, Pew, author’s calculations

For the years that data are available, the Bush administration deported an average of 0.7 percent per year of the interior unauthorized immigrant population. President Obama’s administration has deported an average of 1.47 percent per year of the interior unauthorized immigrant population—more than twice the rate of the Bush administration.

Obama’s interior removal statistics show a downward trend in 2012 and 2013. However, the Obama administration has clearly not gutted interior immigration enforcement, as their 2013 figures for interior removals are higher than for every year of the Bush administration except for 2008.

Categories: Policy Institutes

Now More Than Ever, Courts Should Police Administrative Agencies

Fri, 10/17/2014 - 10:07

Ilya Shapiro

Under the Bush administration, the Labor Department interpreted a piece of the Fair Labor Standards Act as exempting mortgage-loan officers from eligibility for overtime pay. The Obama Labor Department didn’t see the law the same way, however, and issued a re-interpretation.

This was a worrying development for the Mortgage Bankers Association, which represents banks that relied on the original interpretation and whose interests were greatly affected by the re-interpretation, but were given neither notice nor the chance to comment on the change. The MBA thus sued the Labor Department, arguing that the re-interpretation violated the Administrative Procedure Act, the 1946 law that determined (among other things) the processes that agencies must go through when exercising their “interpretive” and “legislative” powers—that is, when they interpret laws and when they make their own regulations.

Under the APA, agencies have to give affected parties notice and the opportunity for comment when making legislative rules, but do not have to do so when they merely make interpretive rules. The MBA argued that the APA requires an agency to go through the notice-and-comment process when it changes its interpretation of a law or regulation to such a degree that it is effectively making a legislative rule.

The U.S. Court of Appeals for the D.C. Circuit agreed with the MBA, and now the Supreme Court has decided to review the case. The government argues that agencies are due deference when they change the application of a law through interpretive rules—so long as they come in the form of an interpretation—and that the courts don’t get a say regarding when this action becomes a legislative rulemaking.

Cato disagrees with the government’s position—if there’s anything our country needs, it’s not fewer checks on the administrative state—and has filed a brief supporting the MBA, joined by the Competitive Enterprise Institute and the Judicial Education Network, and with former White House Counsel Boyden Gray as co-counsel. In our brief, we examine the APA’s framers’ goal of rebutting the government’s assertion of administrative power. We argue that the boundary between “interpretive” and “legislative” rules is a blurry one that should be policed by the courts. The APA’s architects assumed that the courts would play such a role; they wouldn’t have made interpretive rulemaking so procedurally easy otherwise. Scholarly sources and legislative history agree that judicial review is necessary—for example, determining when “interpretive” flip-flopping necessitates greater due-process protection—to protect those whose livelihood depends on relying on and complying with agency interpretations.

In sum, our brief looks to history to make clear a few important points that only the government would dispute. In a time when more people’s lives are staked on administrative rulings than ever before, we shouldn’t weaken the APA’s due-process protections. This case boils down to the government’s desire for agencies to more easily exercise power and for the subjects of regulations to have a harder time challenging that awesome authority. We, with the APA’s framers, think it should be the other way around.

The Supreme Court will hear oral argument in Perez v. Mortgage Bankers Association on December 1.

This blogpost was coauthored by Cato legal associate Julio Colomba.

Categories: Policy Institutes

How to Stop Wasting Money on Science

Fri, 10/17/2014 - 09:56

Patrick J. Michaels

In Thursday’s Wall Street Journal, former Energy Secretary (and Stanford professor) Steven Chu and his colleague Thomas R. Cech penned an opinion piece entitled How to Stop Winning Nobel Prizes in Science, in which they argue for better long-term planning and consistency in the public funding of science. Cato Adjunct Scholar Dr. Terence Kealey agrees, suggesting the right amount would be consistently $0.

In August, 2013, Professor Kealey wrote precisely about this in that month’s edition of Cato Unbound. Since then, he has stepped down after a long and successful tenure  as Vice-Chancellor (equivalent to President in the US) of the University of Buckingham in the United Kingdom.

First, Kealey introduced the notion that science is a “public good”, i.e. something that should rightly be funded government, because scientific developments are central  the improvement of society as a whole.  

The myth [that Science is a public good] may be the longest-surviving intellectual error in western academic thought, having started in 1605 when a corrupt English lawyer and politician, Sir Francis Bacon, published his Advancement of Learning”.

Kealey went on to document that there is no evidence the public good model (as opposed to laissez faire) indeed does provide for the betterment of the public.

The world’s leading nation during the 20th century was the United States, and it too was laissez faire, particularly in science. As late as 1940, fifty years after its GDP per capita had overtaken the UK’s, the U.S. total annual budget for research and development (R&D) was $346 million, of which no less than $265 million was privately funded (including $31 million for university or foundation science). Of the federal and states governments’ R&D budgets, moreover, over $29 million was for agriculture (to address—remember—the United States’ chronic problem of agricultural over productivity) and $26 million was for defence (which is of trivial economic benefit.) America, therefore, produced its industrial leadership, as well as its Edisons, Wrights, Bells, and Teslas, under research laissez faire.

Meanwhile the governments in France and Germany poured money into R&D, and though they produced good science, during the 19th century their economies failed even to converge on the UK’s, let alone overtake it as did the US’s. For the 19th and first half of the 20th centuries, the empirical evidence is clear: the industrial nations whose governments invested least in science did best economically—and they didn’t do so badly in science either.

What happened thereafter? War. It was the First World War that persuaded the UK government to fund science, and it was the Second World War that persuaded the U.S. government to follow suit. But it was the Cold War that sustained those governments’ commitment to funding science, and today those governments’ budgets for academic science dwarf those from the private sector; and the effect of this largesse on those nations’ long-term rates of economic growth has been … zero. The long-term rates of economic growth since 1830 for the UK or the United States show no deflections coinciding with the inauguration of significant government money for research (indeed, the rates show few if any deflections in the long-term: the long-term rate of economic growth in the lead industrialized nations has been steady at approximately 2 per cent per year for nearly two centuries now, with short-term booms and busts cancelling each other out in the long term.)

The contemporary economic evidence, moreover, confirms that the government funding of R&D has no economic benefit. Thus in 2003 the OECD (Organisation of Economic Cooperation and Development—the industrialized nations’ economic research agency) published its Sources of Economic Growth in OECD Countries, which reviewed all the major measurable factors that might explain the different rates of growth of the 21 leading world economies between 1971 and 1998. And it found that whereas privately funded R&D stimulated economic growth, publicly funded R&D had no impact.

The authors of the report were disconcerted by their own findings. “The negative results for public R&D are surprising,” they wrote. They speculated that publicly funded R&D might crowd out privately funded R&D which, if true, suggests that publicly funded R&D might actually damage economic growth. Certainly both I and Walter Park of the American University had already reported that the OECD data showed that government funding for R&D does indeed crowd out private funding, to the detriment of economic growth. In Park’s words, “the direct effect of public research is weakly negative, as might be the case if public research spending has crowding-out effects which adversely affect private output growth.”

For more on the history of the failure of public science, from Francis Bacon to the modern era, read Dr. Kealey’s The Case against Public Science at Cato Unbound.

Categories: Policy Institutes

More Censorship Will Hardly Save Xi’s Dictatorship

Thu, 10/16/2014 - 16:52

Xia Yeliang

In recent days, I’ve received messages from several groups on WeChat (a popular social media network in China) reporting on the arrest of more than 40 Chinese activists who support the protests in Hong Kong, as well as on an official order to ban the publication or sale of books written by authors considered to be supporters of the Hong Kong protests, human rights and the rule of law. The crackdown was also reported this week in the Washington Post.

Among the authors now banned is economist Mao Yushi, the 2012 recipient of the Milton Friedman Prize for Advancing Liberty.

This is not the first time Mr. Mao has suffered unfair and illegal treatment (an official, public written notice is often not even issued to carry out censorship; sometimes an “anonymous” phone call understood to be from an authority or from an official agency to the publisher will suffice). Mr. Mao’s books were also banned, although not for the first time, in 2003 when he signed a petition at a conference in Qingtao appealing to the government to exonerate the students’ protests and democratic movement which was ended with the June 4th massacre on 1989.

In my own experience, a couple of articles in one of my books were deleted without an official explanation, while the deletion of phrases, sentences and even paragraphs from my columns and commentaries in journals and newspapers were quite common.

Another very respected author is Mr. Yu Ying-shih, an 84-year-old emeritus professor of history at Princeton who has taught at Ivy League universities since the 1950s. Mr. Yu supports the Hong Kong protests and has criticized the tyranny of the Chinese Communist Party (CCP) for more than five decades. In his books he develops analytical critiques of traditional culture and classical philosophy in China, and advances universal values based on Western scholarly traditions. The books have sold well and contain no direct reference to contemporary political issues, yet his books were officially considered critical of CCP rule and deemed damaging to social stability.

Another banned scholar is Prof. Zhang Qianfan, one of my former colleagues at Peking University (a professor at the School of Government as well as the School of Law). He is a very cautious and prudent scholar (we have disagreements on several issues in which he suggests my opinions are too radical and aggressive against the current regime) who focuses on constitutional studies, and serves as vice president for the China Society for Constitutional Studies. He opposes the Hong Kong protests – in what seems to me to be a contradiction of his own views – for fear that the June 4th Massacre might happen again if the students and civilians in Hong Kong do not withdraw.

Therefore I presume that the banning of Prof Zhang’s books is not a result of his views on the Hong Kong protests, but is rather aimed at his research in Constitutional Studies.

The arrest of famous activist and human rights advocate Guo Yushan is not a surprise to most of us since he has been involved in so many so-called sensitive issues in the past decade, with the most politically irritating one being his role in the escape of the world-famous blind activist Chen Guangcheng. Yet the timing of his arrest is troubling since the 4th plenary session of the CCP’s 18th National Congress will be held next week while the plenary session will purportedly focus on the Rule of Law or “Governing the State with Law” even if the majority of Chinese is suspicious about the possibility of implementing that agenda.

The treatment of dissidents outside and inside China is abhorrent. Many dissidents have not been able to visit their parents, brothers, sisters or relatives for two or three decades. Even many scholars, researchers and even businessmen who sympathize with human rights ideas in China or have expressed different views than those of the CCP have been denied visas or have had them cancelled. Among those who are still not allowed into China, for example, are former Princeton professor Perry Link and Andrew Nathan of Columbia University.

Chinese citizens should be free to exit and enter their homeland no matter what political positions or beliefs they maintain.  The refusal to allow the exit or entry of a dissident without a legal justification is an obvious violation of modern law and international norms, and is inhumane.

I hereby wish to call the attention of the international community to this new round of crackdowns and violations of freedoms of speech, publication, assembly, association and movement unfolding in China.

Categories: Policy Institutes

Oil Price Blues (Read: Dangers) for Some

Thu, 10/16/2014 - 15:38

Steve H. Hanke

As the price of crude oil continues its downward tumble towards $80 per barrel, I am reminded of a similar scenario from near the end of the Cold War in the 1980s. When Saudi Arabia announced in 1985 that protecting oil prices was no longer its main priority, oil production surged and prices fell off a cliff, briefly plunging below $10 per barrel, as I had correctly predicted.

Lower prices delivered a fatal blow to the Soviet economy, which ended up seeing $20 billion per year in oil revenues evaporate. The resulting fiscal shortfalls proved to be a dagger in the heart of the U.S.S.R.

On October 1st of this year, Saudi Arabia’s national oil company announced that it had abandoned a policy of price protection and would start to focus on protecting its market share. Combined with falling global demand and rising supplies elsewhere, oil prices have fallen accordingly. This has put a squeeze on eight of the world’s top oil producers. States like Iran, Venezuela, and Iraq can only balance their current budgets at oil prices ranging from $110 to $135 per barrel (so-called break-even prices).

If oil prices stay below $90 per barrel for any length of time, we will witness massive fiscal squeezes and regime changes in one or more of the following countries: Iran, Bahrain, Ecuador, Venezuela, Algeria, Nigeria, Iraq, or Libya. It will be a movie we have seen before.

Categories: Policy Institutes

Managed Trade for Sugar from Mexico?

Thu, 10/16/2014 - 14:03

Daniel R. Pearson

Mexican Economy Secretary Ildefonso Guajardo was in Washington this week arguing on behalf of an agreement to suspend the U.S. antidumping/countervailing duty (AD/CVD) investigation against imports of sugar from Mexico.  The case will soon enter its final phase, with the U.S. International Trade Commission (ITC) expected to determine early next year whether the U.S. sugar industry has been injured by imports from Mexico. 

In the context of North American sugar politics, an agreement to suspend the AD/CVD process and implement a managed-trade arrangement makes some sense.  Both U.S. and Mexican sugar industries already are more or less wards of the state, or at least are very heavily guided and controlled by their respective governments.  Both governments have given indications that they are interested in settling this dispute.  The history of bilateral sugar trade has been dominated by government intervention rather than by free-market economics.  It seems almost natural to take the next obvious step by allowing Mexican sugar to enter the United States only under terms of a suspension agreement (i.e., with the quantity limited or the price set high).

It’s worth mentioning that Mexican sugar growers are the only ones in the world currently allowed to sell as much sugar as they wish in the U.S. marketplace.  Even U.S. growers are not permitted to do so.  Years ago they gave up that right in exchange for retaining an almost embarrassingly high level of price support.  That strong price incentive was inducing them to grow more sugar than the market could absorb.  Under the provisions of the U.S. sugar program, that excess sugar could end up being owned by the U.S. Department of Agriculture at considerable expense to taxpayers.  So U.S. sugar growers made the decision to sell less sugar, but keep the price high.

Mexican growers, on the other hand, obtained unfettered access to the U.S. market in 2008. That followed a contentious period of bilateral trade in sugar and high-fructose corn syrup (HFCS) dating to 1994, which was when the North American Free-Trade Agreement (NAFTA) began to be implemented.  In a nutshell, the United States adopted a much more restrictive approach to imports of Mexican sugar than Mexico thought had been negotiated, and the Mexicans reciprocated regarding imports of HFCS. 

Given that historic context, the open access to the U.S. market enjoyed by the Mexicans since 2008 seems to be rather an anomaly.  Why not go back to the good old days of closely managed trade? 

Two reasons occur to me.  One is that Mexico negotiated its access to the U.S. sugar market in good faith during the NAFTA talks.  The two countries each made concessions to the other and received benefits in return.  The fact that the U.S. industry subsequently lobbied Congress for an excessively generous sugar program does nothing to change the commitment to keep imports from Mexico unrestricted.  Within the construct of current U.S. sugar policy, the way for the United States to honor its international trade obligation would be to add further restrictions to sales of U.S. sugar in the U.S. market.  (Or, of course, the U.S. sugar price support could be reduced or eliminated, which could obviate the need both for restrictions on sales of U.S. sugar and imports of Mexican sugar.  That approach is far too market oriented for this industry, though.)

The other reason not to skip blithely back toward managed trade is that it’s not at all clear that the U.S. sugar industry will prevail in its AD/CVD case.  I could explain that I served as an ITC commissioner for ten years and voted on several hundred AD/CVD cases.  I have not discussed this investigation with current commissioners. (That wouldn’t be appropriate, and they wouldn’t tell me anything, anyway.)  However, I have read the public version of key materials from the preliminary phase of the ITC investigation in some detail.  The Commission voted 6-0 affirmative in favor of going forward to the final phase.  This was not at all surprising; I would have voted with the majority.  To vote in the negative would have required meeting a high standard:  finding that there was no “reasonable indication that a domestic industry is materially injured or threatened with material injury.”  There was not sufficient information on the preliminary record to make such a determination, which is the general rule in a complicated investigation such as this one. 

However, there was enough information to make me think that a negative vote in the final phase was entirely plausible.  The legal standard is different in a final than in a preliminary.  Instead of finding only a “reasonable indication” of material injury, the Commission actually has to determine that the domestic industry has been materially injured or is threatened with material injury.  There also needs to be a clear causal link between imports from Mexico and any injury that the U.S. industry might have been experiencing.  Yes, U.S. sugar prices fell during a portion of the period of investigation (POI), but world sugar prices also were falling.  Did sugar imports from Mexico actually cause U.S. sugar prices to slide, or was the domestic market being driven down by the declining global price?  (For more on these issues, see my previous post.)

There’s no doubt that there would be considerable risk for the Mexican government if it was to abandon efforts toward a suspension agreement and to focus solely on obtaining a negative vote from the ITC.  If Mexico loses at the Commission, it would then be too late to negotiate a settlement.  Rather, the U.S. industry would be in a relatively stronger position, with AD/CVD duties in place for the next five years.  On the other hand, perhaps one or more Mexican producers would succeed in obtaining low or zero AD/CVD duties from the Department of Commerce.  Such companies could continue to sell sugar profitably into the United States, potentially leaving the quantity of imports from Mexico unchanged from what it would have been otherwise.  The larger the gap between the world price and the U.S. domestic price, the more likely this would be the case.  If the next best alternative is to sell at a low price on the world market, paying a duty to sell into the United States might make good sense.

The upside to Mexico from achieving a negative vote at the ITC is really quite substantial.  Not only would it retain the market access it paid for in the NAFTA, but its sugar industry also would be better positioned to grow and prosper.

From the standpoint of free traders, there could be another benefit.  Knowing that imports from Mexico would continue to be present in the marketplace might help prompt the U.S. sugar industry to reconsider its protectionist policy instincts.  Lowering the U.S. price support level would go a long way toward eliminating the artificial incentive that now draws Mexican sugar into the United States.

Categories: Policy Institutes

Less Is More in the Federal Government

Thu, 10/16/2014 - 10:53

Chris Edwards

Daniel Henninger nailed it in his article “Killer Bureaucracies,” which discussed the poor performance of so many federal agencies recently. He called for “scaled-down, distributed public responsibilities” to reduce bureaucratic failure.

To that end, Congress should pursue three reforms:

  1. Eliminate bureaucracies that we do not need. Departments that mainly pump out subsidies and intrude on properly state, local, and private activities should be terminated, including the Departments of Agriculture, Education, and Energy. Federal organizations that perform useful business functions should be privatized, including USPS, FAA, TSA, Amtrak, TVA, and the Army Corps of Engineers.
  2. When feasible, scrap department superstructures—such as Homeland Security—because they add complexity and blur responsibility. Homeland agencies, such as the Secret Service and Border Patrol, should stand on their own, have narrowly-defined tasks, and report directly to the president.
  3. Assign the oversight for each agency to a single House and single Senate committee so that citizens know which politicians are to blame for failures. Homeland Security is currently overseen by more than 90 committees and subcommittees, but that’s absurd because when every politician is responsible, none of them are.

The federal bureaucracy can work better, but only if it is much smaller.

Categories: Policy Institutes

Washington Should Back out Of Iraq’s New Civil War

Thu, 10/16/2014 - 10:20

Doug Bandow

George W. Bush’s foolish invasion of Iraq sowed the wind.  Now Iraq, its neighbors, and America are reaping the whirlwind.  Some Iraqi officials are calling for the return of U.S. combat troops.  Washington should say no.

American conservatives traditionally rejected domestic social engineering.  But the neoconservative takeover of the Republican Party pushed the GOP into social engineering on a global scale. 

Alas, it didn’t work out that way in Iraq.  At the cost of several thousand dead the U.S. opened a geopolitical Pandora’s Box, unleashing a sectarian-guerrilla conflict which claimed hundreds of thousands of Iraqi lives. 

Bush’s legacy was a corrupt, authoritarian, and sectarian state, friendly with Iran and Syria.  Even worse was the emergence of the Islamic State, ripping Iraq apart, seizing large chunks of Syria, threatening Kurdistan, committing murder and mayhem, and threatening to destabilize Jordan, Lebanon, and Turkey.   

The Iraq disaster’s architects, however, insisted that nothing had been their fault.  Indeed, Iraq hawks claimed, the fault for Iraq’s collapse was entirely President Obama’s since he followed the Bush withdrawal schedule

In fact, even had the administration succeeded in maintaining a garrison, little likely would have changed.  Washington’s only leverage would have been to threaten to withdraw its troops, which, of course, would have frustrated its objective of staying.

Worse would have been deploying American troops against the Maliki regime’s domestic enemies.  That would have made Washington an active combatant in sectarian conflict, tied America even closer to Maliki, and turned U.S. forces into a lightning rod for discontented Iraqis. 

How should Washington respond today?  Renewed American intervention is no less likely to again stir the whirlwind.  As I note on Forbes online:  “bombing jihadist radicals, supporting authoritarian regimes, taking sides in sectarian conflict, playing multiple sides in Syria, hectoring allied states, and pursuing new but still unattainable objectives in the Middle East offer a multitude of opportunities for bloody blowback.”

In fact, the Islamic State became a significant U.S. interest only because Washington termed it one.  ISIL’s fighters are insurgents, not terrorists.  The Islamic State stands apart from al-Qaeda because the former is seeking to become an organized government rather than a terrorist group. 

Of course, the Islamic State’s objectives could change.  But butchering two Americans who fell into its hands illustrated the group’s monstrous philosophy, not its threat potential.  Ironically, Washington’s attempt to thwart the group’s regional ambitions might push ISIL toward al-Qaeda and the terrorism business. 

Moreover, the administration’s strategy is a bust.  U.S. airstrikes have not prevented the group from advancing.  Yet Washington’s tepid intervention has discouraged the countries with the greatest interest in defeating the Islamic State, most notably Turkey, from taking action.

Worse, Washington has stepped up its commitment to overthrow Syria’s Assad regime.  President Bashar al-Assad is an ugly character, but his army is the best force currently opposing ISIL.  Aiding the so-called “moderate” insurgents in Syria could tie down government forces, enabling the Islamic State’s black flag to eventually fly over Damascus.

The only serious alternative to fully reentering the war is to step back, making clear that the Islamic State’s neighbors will bear the cost of any further advances.  Iraq desperately requires a political solution separating anti-Baghdad Sunni tribes and former Baathists from their ally of convenience, ISIL. 

Jordan and the Gulf States also have much at stake and military forces available for use.  Most important is Turkey, which alone has some 400,000 men under arms.  Washington should inform Ankara that there will be no NATO involvement in a problem Turkey should confront.

The administration’s Iraq policy has failed.  The U.S. is more entangled in war; Americans have been killed in retaliation for Washington’s intervention; the Islamic State is still advancing. 

U.S. officials should back out of Iraq, not jump in.  This may be President Obama’s final opportunity to avoid a lengthy conflict which could come to define his legacy as the 2003 Iraq War came to define that of George W. Bush.

Categories: Policy Institutes

Remembering Leonard Liggio

Wed, 10/15/2014 - 17:39

Caleb O. Brown

Remembering Leonard Liggio (Tom G. Palmer)

Leonard Liggio, who died this week, was an important pillar in the modern libertarian movement and someone who connected modern libertarian ideas with their historical antecedents. I chatted briefly with Tom G. Palmer about Liggio’s impact on ideas and libertarianism.

Several of Liggio’s lectures are available at libertarianism.org.

Categories: Policy Institutes

The Great Society Meets the Taxpayer

Wed, 10/15/2014 - 17:35

Steve H. Hanke

President Lyndon Johnson’s legacy was the so-called Great Society (read: entitlement programs). As these programs have matured, along with the U.S. population, the proportion of the people dependent on the State has soared. Indeed, spending on entitlement programs gobbles up bigger and bigger chunks of the federal budget.

As the population grows older, entitlements will grow. Worryingly, the ratio of people receiving government benefits to those paying taxes will continue to climb, too. As the accompanying chart shows, those who receive government goodies already number the same as those who pay taxes (the ratio is one). With the steady progression of the ratio, it will be very hard to put the genie of the Great Society back in the bottle. Can you just imagine how difficult it will be to cut entitlement programs when those who are dependent on the government outnumber taxpayers by two to one?

Categories: Policy Institutes

The Cost of Ebola and the Misery Index

Wed, 10/15/2014 - 17:21

Steve H. Hanke

For a clear snapshot of a country’s economic performance, a look at my misery index is particularly edifying. The misery index is simply the sum of the inflation rate, unemployment rate, and bank lending rate, minus per capita GDP growth. 

The epicenter of the Ebola crisis is Liberia. As the accompanying chart shows, the level of misery, as measured by the misery index, has decreased since Charles Taylor ruled Liberia.

That said, the index was still quite elevated, at 19.4, in 2012. Yes, 2012; that was the last year in which all the data required to calculate a misery index were available. This inability to collect and report basic economic data in a timely manner is bad news. It simply reflects the government’s lack of capacity to produce. If it can’t produce economic data, we can only imagine its capacity to produce public health services.

With Ebola wreaking havoc on Liberia (and neighboring countries), the level of misery is, unfortunately set to soar.

Categories: Policy Institutes

Friedman Prize Winners in the News

Wed, 10/15/2014 - 16:45

John Glaser

Every two years, the Cato Institute awards the Milton Friedman Prize for Advancing Liberty to an individual who has made a significant contribution to advancing human freedom. More than anything, past winners have embodied the old adage that the price of liberty is eternal vigilance.

It should therefore be no surprise that Milton Friedman Prize winners continue to show up in the news, pushing for freedom and standing up to power. In recent days, three awardees have appeared in the news because of their unyielding commitment to the principles of individual liberty, limited government, free markets, and peace.

Mao Yushi

In September, the ruling Communist Party in Beijing announced that the people of Hong Kong, who have enjoyed considerable autonomy since the city’s transition from a British protectorate in 1997, could only vote for electoral candidates that were pre-approved by the Communist Party. Protesters bravely took to the streets and have faced strong-arm tactics from the police, including beatings and pepper spray. Beijing has refused to budge and this week “made its highest-level denunciation yet of the protesters,” reports the New York Times, “accusing them of pursuing a conspiracy to challenge Beijing’s power over the city.”

The authorities in Beijing aren’t satisfied with cracking down on protests in Hong Kong; they are also curtailing freedom on the mainland. Mainland supporters of the protesters are being arrested. And as the Washington Post reported this week, “books by scholars considered supporters of the demonstrations are suddenly becoming harder to find,” as Beijing imposes an apparent ban on material critical of the government.

Mao Yushi, awarded the Milton Friedman Prize in 2012, is one of those scholars. Mr. Yushi is an economist and one of China’s most outspoken activists. In response to the news that his books were being censored by Beijing, Yushi wrote, “A national government organ is daring to risk universal condemnation, in open opposition to the constitution. What is our government actually trying to do?” His internet post was then swiftly deleted by government censors.

Fortunately, Mao Yushi has overcome much worse repression. Under Mao Zedong, Yushi wrote in the Washington Post just weeks before the Hong Kong protests broke out, “I was labeled a ‘rightist’ and persecuted, along with thousands of others. We were removed from our posts and sent to the countryside for ‘re-education.’ I was reduced to the lowest human form, constantly stalked by the nightmare that I could never shake: hunger.”

Read Mao Yushi’s article in the latest issue of The Cato Journal and the corresponding Op-Ed in the Washington Post.

Hernando De Soto

The rise of ISIS, the terrorist group in Syria and Iraq, reminds Hernando De Soto of how he helped battle a radical terrorist group in Peru. And he didn’t do it with bombs. He did it through capitalism.

Hernando De Soto is a renowned economist whose work has focused on the lack of formal property rights as the source of poverty in poor countries. In his native Peru, De Soto helped initiate sweeping reforms that instituted property rights and a formal legal system for the country’s vast network of informal enterprises. The Peruvian government reduced the complicated red tape that was hindering economic activity by 75 percent. Hundreds of thousands of informal business were recognized and millions of jobs were created.

De Soto wrote about his efforts in two famous books, The Other Path and the Mystery of Capital. In 2004, the Cato Institute awarded him the Milton Friedman Prize.

Beyond lifting people out of grinding poverty, the reforms inspired by De Soto’s insights also undermined the violent communist guerrilla movement in Peru called The Shining Path, which had killed up to 30,000 farmers by 1990 who had “resisted being herded into mass communes.” By unleashing Peru’s untapped economic potential, the reforms effectively stole all of Shining Path’s potential recruits, directing them toward creative, wealth-producing pursuits instead. 

Writing in the Wall Street Journal last week, De Soto urges policymakers to heed these lessons in the fight against ISIS: 

As the U.S. moves into a new theater of the war on terror, it will miss its best chance to beat back Islamic State and other radical groups in the Middle East if it doesn’t deploy a crucial but little-used weapon: an aggressive agenda for economic empowerment. Right now, all we hear about are airstrikes and military maneuvers—which is to be expected when facing down thugs bent on mayhem and destruction.

But if the goal is not only to degrade what President Barack Obama rightly calls Islamic State’s “network of death” but to make it impossible for radical leaders to recruit terrorists in the first place, the West must learn a simple lesson: Economic hope is the only way to win the battle for the constituencies on which terrorist groups feed.

Read the whole article here.

Leszek Balcerowicz

Last month marked the 25th anniversary of what has been described as the “Polish Miracle.” Six weeks before the fall of the Berlin wall, Leszek Balcerowicz, Poland’s new deputy prime minister and minister of finance, “outlined a plan to transform Poland’s economy from communism to capitalism,” reported Market Watch in September. “Prices would be decontrolled, individuals allowed to start businesses, the survival of state enterprises determined by the market [and] the printing press would be shut down — halting hyperinflation…”

Balcerowicz, whom Cato Senior Fellow James Dorn described as “the architect of Poland’s transition from Soviet-style central planning to a market economy,” was awarded the Milton Friedman Prize this year. The reforms he initiated lifted the Polish people out of the poverty and misery of Soviet-style economics. From 1992-2012, Poland’s economy more than doubled in size, growing at an annual average rate of 4.42 percent.

In August, former U.S. Senator Phil Gramm and Michael Solon wrote an op-ed in the Wall Street Journal comparing the experiences of post-Soviet Ukraine and Poland. Whereas Ukraine “largely squandered its economic potential with pervasive corruption, statist cronyism and government control,” and now faces a serious threat to its independence, “Poland created the prosperity that has strengthened and solidified its freedom and independence.” And “[t]he man largely responsible for Poland’s transformation is Leszek Balcerowicz.”

Today, the Cato Institute hosted an event on “The Transition from Communism 25 Years after the Fall of the Berlin Wall,” in which scholars explored the uneven transition from communist dictatorship to democracy and market economics, drawing lessons about which reforms worked and which did not. Balcerowicz’s historic leadership of one of the most successful of those transitions is precisely what earned him the prestigious Milton Friedman Prize for Advancing Liberty. Listen to his acceptance speech here.

Categories: Policy Institutes

Libertarian Choices in Colorado

Wed, 10/15/2014 - 14:38

David Boaz

Karen Tumulty asks in the Washington Post

what label do you put on the political philosophy of a state that one year would legalize marijuana for recreational use and the next year recall two state senators who voted for stricter gun laws?

Readers of this blog might have an answer. So, it turns out, does Sen. Mark Udall:

“We’re a libertarian state — small ‘l’ — when it comes to privacy issues, issues of reproductive freedom, gun ownership, who you worship, who you spend your life with,” Udall said. “We’re a pro-environment state. We self-identify with environmentalists more than any other state in the nation. But we’re also very pro-business.”

So now those small-l libertarian voters will have to decide whether they prefer a not-so-libertarian Democrat, a not-so-libertarian Republican, or a big-L Libertarian.

Read more on libertarian voters, especially in the Mountain West.

Categories: Policy Institutes

Overpaid Federal Employees

Wed, 10/15/2014 - 13:54

Nicole Kaeding

With the election only weeks away, pundits are visualizing how a Republican-controlled Senate would impact future policy decisions.  Today’s Washington Post highlights the supposed plight of federal workers under a Republican Congress.

The piece discusses House Budget Chairman Paul Ryan’s budget proposal:

Under the Ryan budget, the contribution of most federal employees toward their retirement plan would increase by 5.5 percentage points with no increase in benefits — effectively a pay cut. Ryan emphasizes a “defined-contribution system” that centers on employee payments to their retirement program instead of the current system, which includes pensions from the U.S. government. He estimated his plan would save the government $125 billion over 10 years.

That $125 billion in savings, however, would come from the pockets of federal employees.

The piece continues in a similar vein discussing Republican-supported legislation that would make it easier for federal employees to be disciplined, fired, and restricted in their conference expenditures–all  reasonable proposals. It cites federal employee union officials on the difficulties these policies would place on federal workers.

But the piece fails to mention the elephant in the room: federal employees are compensated more generously than their private-sector counterparts.

Using data from the Bureau of Economic Analysis, the average wage for a federal civilian employee in 2013 was $81,076, compared to the average wage of $55,424 for private-sector employees.

The big advantage for federal employees is their robust benefit packages. Federal employees receive the largest selection of health insurance of any employer in the country, generous vacation and time-off policies, and  both a defined benefit pension and 401(k)-style retirement account. Adding in the value of these benefits, the average federal civilian employee receives annual compensation of $115,524. Compensation for the average private-sector employee is $66,357.

Particularly striking is that availability of pensions to federal employees. According to the Bureau of Labor Statistics, only 10 percent of private-sector employers are offered defined benefit pension plans. The majority of recipients are unionized employees, concentrated in the utilities industry.

Given this large disparity it is reasonable that the Ryan Budget would increase employee contributions to their pensions. This plan was also endorsed by the Bowles-Simpson commission as a meaningful step to reforming compensation for the federal civilian workforce.

While $125 billion sounds like a large cut to federal employee compensation, it represents less than 5 percent of compensation over the next ten years. Asking federal employees to pay a bit more for their lavish benefits is a common-sense reform for the new Congress. Hopefully, Congress will go further and phase-out the defined-benefit pension program in its entirely.

Categories: Policy Institutes

Letting it Go: Ukraine's Frozen Future

Wed, 10/15/2014 - 13:29

Emma Ashford

Secretary of State John Kerry met late yesterday in Paris with Russian Foreign Minister Sergei Lavrov. Though somewhat overshadowed by Kerry’s meetings with Iran, the meeting nonetheless provided some fascinating clues as to where the Ukraine crisis is headed.

First, international tensions over Ukraine seem to be slowly relaxing, although violence continues to mar the ceasefire in the Donbas itself. Russian troops are withdrawing from the border, as specified in the Minsk Protocol. The United States is making encouraging noises about the possibility of sanction removal. More importantly, Kerry made a clear point of emphasizing Russian-American cooperation and announced that the two countries would engage in intelligence sharing on ISIS.  This represents a major about-face for the Obama administration, which just six months ago said its goal was to “isolate President Vladimir Putin.” It seems that faced with the difficulty of managing simultaneous conflicts – something the White House is not good at – officials are opting for a more conciliatory approach to Russia.

Second, Crimea wasn’t mentioned. Though it calls for Ukrainian sovereignty to be respected, the protocol doesn’t explicitly discuss Crimea. In short, it looks like Crimea may be off the negotiating table, effectively ceded to Russia. Instead, the main point of contention between Kerry and Lavrov appears to have been the worry that Ukrainian separatists will hold another referendum on joining Russia, in place of Ukrainian parliamentary elections in late October.

Third, no Ukrainian representatives were present at the meeting, although President Poroshenko is set to meet with Vladimir Putin and several European heads of state tomorrow in Milan. Ukraine is struggling to fund its fight against the separatists, and international assistance is drying up. If Ukraine is being edged out of the process, it would be extremely bad for them, but could be positive for the United States, which gains little from a protracted cold war-style stand-off with Russia.

So where does this leave us? Distracted by developments in the Middle East, America seems content to let the status quo triumph in Ukraine, turning the dispute into a fairly typical post-Soviet frozen conflict, like those found in Georgia or Azerbaijan. Crimea would remain a de facto but unrecognized part of Russia, while Donetsk and Luhansk would be part of Ukraine in name only. Low levels of conflict will continue, but as long as Russia doesn’t get involved, the international community will likely ignore it. This outcome is probably the best that Russia could hope for, as it has the secondary advantage of preventing Ukraine from joining NATO or the European Union.

But while a diplomatic solution in Ukraine is wise, it shouldn’t be allowed to metastasize into a frozen conflict. As we saw in Georgia in 2008, these situations are inherently unstable and have the potential to spring back to life unexpectedly. For the sake of long-term stability, it would be better to negotiate now a more long-lasting deal between Russia and Ukraine, one which provides for substantial autonomy of the disputed regions within a Ukrainian federal structure. 

Categories: Policy Institutes

28 Harvard Lawprofs: Stop The Campus Sex-Charge Railroad Now

Wed, 10/15/2014 - 13:22

Walter Olson

This is big

As members of the faculty of Harvard Law School, we write to voice our strong objections to the Sexual Harassment Policy and Procedures imposed by the central university administration…

Amid the clamor to provide fuller remedies to complainants who file sexual assault and harassment charges, the university is preparing to trample the interests of others:

Harvard has adopted procedures for deciding cases of alleged sexual misconduct which lack the most basic elements of fairness and due process, are overwhelmingly stacked against the accused, and are in no way required by Title IX law or regulation.

Among the problems: overly broad definitions of misconduct in situations like that of mutual incapacitation by alcohol, and procedures that deny “any adequate opportunity to discover the facts charged and to confront witnesses and present a defense at an adversary hearing.”

Had Harvard arrived at these rules as a result of purely internal deliberations, it would be one thing. But in practice it’s yielding to strong-arm pressure from the combined efforts of the Obama Department of Justice and Education Department Office of Civil Rights (for more details, see my article for Commentary last year.)  Like hundreds of other colleges and universities over the past year, Harvard responded to this pressure by meekly folding its hand: 

The university’s sexual harassment policy departs dramatically from [existing] legal principles, jettisoning balance and fairness in the rush to appease certain federal administrative officials.

We recognize that large amounts of federal funding may ultimately be at stake. But Harvard University is positioned as well as any academic institution in the country to stand up for principle in the face of funding threats. 

It’s especially gratifying to see that the letter’s signers include prominent scholars associated over the years variously with feminist, liberal, and left-leaning causes, such as Nancy Gertner, Charles Ogletree, Charles Nesson, Janet Halley, and Elizabeth Bartholet, along with perhaps more expected names like longtime contrarian Alan Dershowitz. A turning point? Let’s hope so. The letter is here (h/t Eugene Volokh).

Categories: Policy Institutes

How ObamaCare's Victories Count Against It In Sissel v. HHS

Wed, 10/15/2014 - 13:19

Michael F. Cannon

Randy Barnett has an excellent post at the Volokh Conspiracy about his recent amicus brief requesting the D.C. Circuit grant en banc review of Sissel v. HHS. (Sound familiar?Sissel challenges the constitutionality of ObamaCare’s individual mandate – which the Supreme Court ruled could only be constitutional if imposed under Congress’ taxing power – on the grounds that this, ahem, tax originated in the Senate rather than the House, as the Constitution’s Origination Clause requires.

A three-judge panel of the D.C. Circuit ruled against Sissel. The panel’s rationale was that the Patient Protection and Affordable Care Act was not the sort of “Bill[] for raising revenue” that is subject to the Origination Clause, because the purpose of the PPACA is to expand health insurance coverage, not to raise revenue. Barnett explains why this reasoning is nutty. Under the Sissel panel’s ruling, no bills would ever be considered revenue measures because all revenue measures ultimately serve some other purpose.  The panel’s interpretation would therefore effectively write the Origination Clause out of the Constitution. Barnett argues instead that the courts must recognize the PPACA as a revenue measure subject to the Origination Clause because the Supreme Court held the taxing power is the only way Congress could have constitutionally enacted that law’s individual mandate.

A shorter way to describe Barnett’s argument is that he turns ObamaCare supporters’ own victory against them: “You say the individual mandate is constitutional only as a tax? Fine. Then it’s subject to the Origination Clause.”

Barnett again corners the D.C. Circuit with another sauce-for-the-gander argument on the procedural question of whether that court should grant en banc review of its panel decision in Sissel:

Of course, en banc review is rarely granted by the DC Circuit, but given that it recently granted the government’s motion for en banc review of the statutory interpretation case of Halbig v. Burwell presumably because of the importance of the ACA, the case for correcting a mistaken constitutional interpretation is even more important, especially as the panel’s reasoning has the effect of completely gutting the Origination Clause from the Constitution…

Or, the shorter version: “You guys think Halbig is worthy of en banc review? Fine. If the Sissel panel erred, the downside is even greater.”

We’ll see whether the D.C. Circuit thinks the Constitution is as worthy of its protection as ObamaCare.

(Cross-posted at my comment-friendly blog, Darwin’s Fool.)

Categories: Policy Institutes

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