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Randal O'Toole

While many interest groups are promoting increased federal spending on infrastructure on the grounds that it will spur economic growth, the Wall Street Journal reports that the “benefits of infrastructure spending [are] not so clear-cut.” Yet there is a simple way to determine whether a particular infrastructure project will generate economic benefits.

Spending on transportation infrastructure, for example, generates benefits when that new infrastructure increases total mobility of people or freight. New infrastructure will increase mobility if it provides transportation that is faster, cheaper, more convenient, and/or safer than before. 

In 1956, Congress created the Interstate Highway System and dedicated federal gas taxes and other highway taxes to that system. The result was the largest public works project in history and one of the most successful. Today, more than 20 percent of all passenger travel and around 15 percent of all freight in the United States is on the interstates.

Moreover, this is all new travel; the interstates didn’t substitute for some other form of travel, as other highway and airline travel) have also significantly increased in those years. (Rail passenger travel decreased, but that decrease was a lot smaller than increases in other travel.) The interstates were successful because they provided transportation that is faster, cheaper (because it saves fuel), more convenient, and safer than before. 

For the past two decades or so, however, much of our transportation spending has focused on infrastructure that is slower, more expensive, less convenient, and often more dangerous than before. Too many cities have given up on trying to relieve congestion. Instead, they have allowed it to grow while they spend transportation dollars (nearly all paid by auto users) on other forms of travel such as rail transit. Such transportation is:

  • Slower: Where highway speeds even in congested cities average 35 miles per hour or more, the rail transit lines built with federal dollars mostly average 15 to 20 mph.
  • More expensive: In 2013, Americans auto users spent less than 45 cents per vehicle mile (which means, at average occupanies of 1.67 people per car, about 26 cents per passenger mile), and subsidies to roads average under a penny per passenger mile. By comparison, transit fares are also about 26 cents per passenger mile, but subsidies are 75 cents per passenger mile.
  • Less convenient: Autos can go door to door, while transit requires people to walk or use other forms of travel, often at both ends of the transit trip.
  • Less safe: For every billion passenger miles carried, urban auto accidents kill about 5 people, while light rail kills about 12 people and commuter trains kill 9. Only subways and elevateds are marginally safer than auto travel, at 4.5, but we haven’t built many of those lately.

Not surprisingly, most transit projects lead to almost no new travel. Yet their backers claim this is a virtue. They have demonized the new travel generated by the interstates by calling it “induced demand.” They have celebrated transportation projects that generate no new travel but merely get people to shift from one mode to another, usually more expensive, mode as “sustainable.”

Even when cities spend money on roads, they often spent it making travel slower, less convenient, and more dangerous. Many cities are doing various forms of what planners euphemistically called “traffic calming,” meaning narrowing streets, putting barriers in roads, and turning one-way streets into two-way streets. The overt goal is to slow down traffic, and it often has the side effect of making it more dangerous for both auto users and pedestrians.

A very simple test can determine whether any particular transportation project will be faster, cheaper, more convenient, and/or safer than before: Will the users themselves pay for it? Users will pay for real improvements in transportation; they won’t pay for slower, more expensive, less convenient, and more dangerous transportation.

The Interstate Highway System was paid for exclusively out of user fees. Gas taxes aren’t a very good user fee, as there was no guarantee that the users who paid the taxes were driving on the interstates their taxes were building. As it happened, the interstates mostly were paid for by users, but there is no guarantee of that for future road projects. That’s one reason why it makes sense to shift from gas taxes to http://mbufa.org“>mileage-based user fees or tolls.

Yet there is a major push to increase gas taxes. A recent article in the Atlantic’s CityLab argues that gas taxes should be increased by 70 cents a gallon because current taxes aren’t paying the “true cost of driving.” Yet the costs that the article says taxes aren’t paying–things like congestion and auto accidents–are nearly all paid by road users in other ways, so there is no reason why gas taxes should be increased to cover those costs or any reason to think that higher taxes will reduce those costs.

Our gas taxes are “underpriced,” CityLab argues, because taxes are higher in Europe. Yet the higher taxes in Europe aren’t spent on roads; they mostly go for non-road activities, and not for reducing congestion and other road-related costs.

Infrastructure is important. But throwing federal dollars at it won’t take care of the problems. Instead, infrastructure spending only makes sense if users are willing to pay for it. For the most part, that means infrastructure can and should be funded privately or by state and local governments out of user fees, rather than by the federal government.

Emma Ashford

The release of a report this week by eight former U.S. government officials calling for the United States to send arms to Ukraine has reopened debate on the issue. The dispute is also lent urgency by the recent sickening escalation of violence in the Donbas, especially against civilians, as well as signs that some within the Obama administration may be reconsidering their stance on this issue. As appalling as the ferocity of recent fighting has been, however, the arguments against arming Ukraine remain as solid as they were three months ago. It would raise the stakes with Russia, while offering little prospect of ending the conflict.

The arguments made in the report, cosponsored by Brookings, the Atlantic Council and The Chicago Council on Global Affairs - seem compelling on the surface. The authors argue that the provision of lethal, but solely defensive, weapons would better allow Ukrainian troops to defend themselves against continuing attacks from pro-Russian rebels. As the evidence indicates that the rebels themselves are being supplied with advanced weapons from Moscow, American weapons would place Ukrainian forces on a more even footing. The report further asserts that such weaponry could raise the continued costs of backing the rebels for Moscow, bringing Vladimir Putin to the negotiating table.

Unfortunately, arming Ukraine will cause more problems than it solves. Certainly, such a move would be a propaganda coup for Russia, which has already been using state media to perpetuate the idea that NATO is involved in the crisis. Russian media is extremely good at blurring key facts to make a coherent, anti-Western narrative, even if the narrative itself is fundamentally false. It won’t matter than the weapons are ‘defensive’ in nature; the Russian media can spin this to bolster their arguments that Ukraine’s government is illegitimate and that the conflict is being driven by NATO. It could even increase popular support for the war among the Russian population.

Arming Ukraine will also shift U.S. policy further away from that of European allies. Although the report’s authors note that many European states could also be encouraged to provide weapons, several key states have already weighed in against such a move. Just yesterday, German Chancellor Angela Merkel told reporters: “Germany will not support Ukraine with weapons… I am convinced that this conflict cannot be solved militarily.” Differentiating the U.S. response from that of European leaders will only provide more ammunition for Russian dissension, further minimizing the likelihood of a diplomatic settlement.

Logistical problems abound. Compatibility may be a major problem given Ukraine’s primarily Soviet and post-Soviet armaments. Timing is another concern: although the report suggests that the U.S. could use current stocks of weapons, it may be logistically impossible to get large quantities of arms to Ukraine, or complete any necessary training, in time for the likely spring offensive by pro-Russian rebels. Even if these problems were overcome, the assumption that weapons will help Ukrainian forces is itself problematic. The Ukrainian army is poorly trained, and would likely require expert support and training from U.S. personnel. The integration of volunteer units into fighting forces is patchy, and corruption remains a problem. Even with U.S. weapons, there is effectively no prospect of a Ukrainian military triumph. 

This brings us to the fundamental problem with the report: an assumption that if Western states can simply raise the costs of conflict high enough, Vladimir Putin will fold under domestic pressure. Raising the costs of conflict for Russia will necessarily increase in the violence in the Donbas. The conflict is already bloody, with thousands of military and civilian casualties. While the Russian government has shown some sensitivity to the costs of the conflict – i.e., casualty numbers are being effectively hidden from the Russian people – it is still extremely unlikely that Putin, who has in large part staked his domestic credibility on this confrontation, will back down. If he does not, the West has little comeback.

Arming Ukraine won’t help to secure military victory, and will not encourage Vladimir Putin to back down. At best, it may help Ukraine to better withstand rebel attacks. But doing so comes at a very high cost, giving Russia additional propaganda material and driving a wedge between Europe and the United States. Worse, it raises the stakes in Ukraine, and will likely serve to increase, not decrease the bloodshed. Let’s hope the White House continues to take a pragmatic approach to the crisis, and resists the temptation to arm Ukraine.

Chris Edwards

President Obama’s budget would raise taxes to fund a $478 billion infrastructure spending plan for highways, transit, and other items. The budget (on page 26) cites an International Monetary Fund study that “highlights the importance of choosing high-efficiency infrastructure projects based on rigorous benefit-cost analysis.”

Unfortunately, that is not the type of “choosing” that the federal government usually does, based on more than a century of experience. As one historical example, here is what I found out about the choosing of federal dam projects in the wake of the 1902 Reclamation Act:

To secure support from the western states, the 1902 legislation required that 51 percent of the revenue from federal land sales in each state be spent on Reclamation projects within that state. However, there wasn’t necessarily a relationship between land-sale revenues and the locations of the best projects. This requirement “seriously compromised the ability of government engineers to select projects objectively.”

After the Reclamation Act passed, the Republican Party saw political advantage in quickly proposing a large number of projects in as many states as possible. This rush to launch projects for political reasons reduced efficiency. By 1907 Reclamation had requested and received congressional approval for 24 projects, with every western state receiving at least one. “Most of the projects were begun in great haste with little attention paid to economics, climate, soil, production, transportation, and markets.”

Much of the federal government’s history with infrastructure is one of pork barrel spending, environmental harm, fudged cost-benefit analyses, and cost overruns. Of course, there are mistakes and waste in state, local, and private infrastructure as well, but federal spending is usually worse for basic structural reasons. Those structural reasons—such as parochial politics and lack of oversight—are likely worse now than in 1902.

The upshot is that if we do not absolutely need federal involvement in certain infrastructure, we should avoid it, and that includes most of current federal infrastructure spending. If particular states—such as Sen. Bob Corker’s Tennessee—think that they need more highway spending, they can raise their own gas taxes to fund it. There is no advantage in kicking funding up to the federal level, as Corker and the president want to do.

Interestingly, while the president’s budget cited one IMF study, a different IMF study undermines the president’s case for more government spending. The 2014 study by Andrew M. Warner takes a statistical look at episodes of government infrastructure spending booms across 124 countries. It found that “there is little evidence of long term positive impacts” to the economy.

He says his findings argue:

against the importance of long term productivity effects, as these are triggered by the completed investments (which take several years) and not by the mere spending on the investments. In fact a slump in growth rather than a boom has followed many public capital drives of the past. Case studies indicate that public investment drives tend eventually to be financed by borrowing and have been plagued by poor analytics at the time investment projects were chosen, incentive problems and interest-group-infested investment choices.

Langer’s study looks at low- and middle-income countries, while the United States is a high-income country. Nonetheless, Langer’s observations about why government infrastructure spending often does not spur long-term growth applies here as well, such as the government’s distorted incentives and the fact that government benefit estimates are often too high, a problem he calls “the iron law of public investment.”

Kudos to the Wall Street Journal’s Mark Magnier for his piece on the Langer study.

Simon Lester

In a recent piece on the negotiations for a Trans-Pacific Partnership (TPP), economist Joseph Stiglitz was critical of a provision that would prevent governments from using regulation to keep pharmaceutical prices lower.  He argued:

The second strategy [of the TPP] is to undermine government regulation of drug prices. More competition is not the only way to keep down the prices of essential goods and services. Governments can also directly restrain prices through law, or effectively restrain them by denying reimbursement to patients for “overpriced” drugs — thus encouraging companies to bring down their prices to approved levels. These regulatory approaches are especially important in markets where competition is limited, as it is in the drug market. If the United States Trade Representative gets its way, the T.P.P. will limit the ability of partner countries to restrict prices. And the pharmaceutical companies surely hope the “standard” they help set in this agreement will become global — for example, by becoming the starting point for United States negotiations with the European Union over the same issues.

So the way Stiglitz tells it, government regulation – in the form of government influence over pricing – could help bring down medicine prices, but the TPP looks like it will constrain this regulation.

What’s missing from his story, however, is how the prices got so high in the first place.  The prices are high because of, you guessed it, regulation!  This regulation takes the form of 20 year monopolies granted by the government, also known as patents.  Now perhaps we need patents to promote innovation, although I’m sympathetic to those who argue that patent terms should be more flexible.  But regardless, when someone proposes that Regulation X is needed to counteract the negative effects of Regulation Y, I start to question things.  If Regulation Y is such a problem, perhaps we simply need to rethink and revise Regulation Y, rather than add a brand new Regulation X, in the hopes that multiple, conflicting regulations will balance each other out and leave us no worse off than where we started.

Doug Bandow

The Greek elections, in which the radical left-wing Syriza won a near majority, shattered the Brussels consensus.  A breakdown of the European bail-out program might make a Greek exit from the Euro (“Grexit”) the only feasible option.  And the popular revolt against outsiders dictating economic policy may block new attempts to expand Brussels’ power over EU members.

Europe remains the world’s most important economic unit.  However, the EU failed to live up to the grand hopes of the Eurocrats, the academic, bureaucratic, business, media, and political elites who dominate continental politics and policy.  Voters rejected the proposed constitution to expand Brussels’ authority and reduce national independence a decade ago. 

The Eurocrats then repackaged the convoluted constitution as an incomprehensible treaty, for approval by national parliaments. More power shifted to Brussels. 

However, multiplying bureaucracy stifled action.  Loyalty to the EU failed to extend beyond the organization’s sprawling headquarters buildings in Brussels. 

Then the Euro crisis exploded.  The Eurozone created a common currency.  Only 19 of 28 EU members today belong, but in theory all are supposed to eventually join.  Even the Euro’s architects recognized the inherent instability of creating a monetary union without a common budget.

Once in, Athens borrowed at essentially German interest rates and spent wildly.  Soon the loan bills came due and Athens couldn’t pay, which triggered a cascade of crises and bail-outs.

Although nominally concerned about Greece and other aid recipients, many Eurocrats had a larger purpose in mind.  Said German Chancellor Angela Merkel:  “We must overcome the architectural flaws that worked their way into the economic and monetary union during its formation.”  Thus, Euroelites used the crisis to bludgeon the European public to accept further continental consolidation. 

European leaders insisted that no country, no matter how badly indebted, should leave the Eurozone.  The EU would lend more in return for economic austerity.  Although the Greek economy has started growing again, it shrank a quarter since 2008 and unemployment still tops 26 percent. 

That explains why Greeks voted for Syriza, which offered dreamy promises of more spending along with angry demands for debt relief.  The Eurocrats imagined that Tsipras would moderate like so many previous radicals had done.  But so far he and his party have given no indication of retreating. 

Doing so would disillusion Syriza’s supporters, who voted for non-violent revolution against a corrupt, failed establishment.  Tsipras also would risk his government—Syriza is a coalition of leftist parties. 

Crisis could come quickly.  The existing bailout program ends in a month.  Tax revenues are down, borrowing will become difficult, spending is set to spike.  Grexit might look attractive to Athens.

This horrifies the Eurocrats.  Worried Chancellor Angela Merkel:  “If the Euro fails it’s not just the currency that fails, but Europe and the idea of European unification.” 

Yet if European leaders blink in their game of financial chicken with the Tsipras government, their credibility will be destroyed.  If the Troika proves willing to deal, other states will demand similar concessions.  Caving in to debtors also would anger the wealthier countries footing the bill. 

Although the European Union is separate from the Eurozone, a break in the latter would impact the former.  And the EU already faces increasing challenges.  In part because of the lack of popular accountability, electoral opposition to Brussels is exploding.

Euroskeptic parties polled well in last year’s European Parliament elections.  These groups are playing an ever greater role in national contests as well.  As I point out in National Interest online:  “If Tsipras delivers on his promise that “Democracy will return to Greece,” popular opposition to the EU as well as Euro could swell elsewhere.”

Alexis Tsipras and Syriza have delivered an electoral earthquake.  Even if Syriza’s economic nostrums fail, its electoral victory may end up reinvigorating popular sovereignty and accountability throughout Europe.  That could make radical party’s victory worthwhile.

Julian Sanchez

Back when I was the editor of the school paper at my affluent public high school, a bunch of the paper’s staff took a trip to a much poorer high school in Patterson, New Jersey, to meet and talk with some of our counterparts.  The gap in resources between the two schools was, as you might guess, pretty striking.  But so was this: During a break between meetings, one of my fellow editors casually mentioned to an adult employee of the Patterson schools her college plans—the schools she was applying to, the majors she was considering; unremarkable stuff we discussed with peers and teachers all the time.  The adult’s response was something along the lines of: “Oh, that’s great sweetie; it’s wonderful to have dreams” — as though my friend had declared her goal of becoming president, or the next Madonna.  This was meant to be an “encouraging” response, of course, but my friend and I were both taken aback at the (presumably unintended) implication that something she’d regarded as a simply the obvious next step in her life—because of course you graduate high school and then go on to college—was a kind of childish fantasy to be indulged, but not taken terribly seriously.

Statistically, the adult’s attitude was, of course, perfectly realistic: The odds of a student at that Patterson school making it into the elite colleges my friend was considering (she ultimately went to Wellesley) were slim indeed.  But we both sensed intuitively that this “realistic” attitude, even couched in words of “encouragement,” had to make the odds longer still. Surely some of those students were capable of succeeding in higher education, despite all the barriers we were lucky enough not to face. But if this was the default attitude they imbibed from the adults around them, even at school, how many of them would be too demoralized to really try?

This little anecdote popped into my head as I read a story in The Atlantic’s CityLab, reporting on research that shows Americans believe class mobility in our society is far more common than it really is.  Moreover, belief in mobility appears to vary across classes, and the researchers think they know why:

The most interesting group effect occurred on self-reported social status: the higher a participant’s social class, the more that participant tended to overestimate the prospect of social mobility. In other words, a wealthy American appears more likely to believe social status is the direct product of hard work and not an artifact of, say, birth or luck. Or, as Kraus and Tan put it, the finding may reflect a hope that “elevated positions in society are achieved fairly by individuals.”

Clearly there is at least something to this: Plenty of research confirms that everyone likes to attribute their successes in life to their own virtues, and their disappointments to misfortune.  Only at the end of the article does it float the possibility that the causality may, at least in part, run in the other direction: That believing it’s a matter of luck how one fares in life may lead one to do less well, while believing (even somewhat unrealistically) that your fate is in your own hands is a prerequisite for having the motivation to do as well as you can.  Perhaps—and there’s a whiff of paradox here—a belief in that kind of personal responsibility for outcomes is one of the lucky advantages that affluent parents pass on to their children.

This is not mere speculation: There’s abundant empirical research around what psychologists call “locus of control” suggesting that this is precisely the case.   If students are primed to think that one’s performance on a math test, say, is largely a matter of how hard they work, they will do better on a subequent test than students primed with the suggestion that some students simply have a natural aptitude that others lack.  (This is related to another much-discussed phenomenon called “stereotype threat”: Reminding students that members of their demographic group are expected to perform less well on a certain type of test decreases their measured performance on such tests.)  It remains true, of course, that a great deal is down to luck—time and chance, as Ecclesiastes memorably put it, happeneth to all—and factors ranging from natural endowments to early childhood environment and nutrition to the quality of schooling all exert a powerful influence on life outcomes. But holding those factors constant, someone who focuses on the power of those factors is likely to do worse than someone similarly situated who believes—even to an unrealistic degree—that effort and determination can overcome those circumstances.  In other words, Han Solo’s famous line from The Empire Strikes Back—”Never tell me the odds!”—may contain some genuine psychological wisdom.

I remember pointing out a similar paradox to the great social scientist Philip Zimbardo when he came to Cato a few years back.  Zimbardo’s famous “Stanford Prison Experiment” showed how powerfully social circumstances and expectations (in that case, whether subjects were randomly assigned to the role of “prisoner” or “guard”) could determine behavior, overwhelming the effects of individual character and disposition for many of the subjects.  Yet as Zimbardo himself noted, it was only when his then-girlfriend held him personally responsible for the mental anguish he was visiting on his student volunteers that he broke out of the “detatched scientist” script he’d been following and halted the experiment. His experiment showed that social circumstance was a powerful determinant of individual behavior—but a norm that said each individual is responsible for his conduct turned out to be a critical component of the determining circumstances.

That isn’t to say that we should ignore empirical data about class mobility or perpetuate a “noble lie” that luck and unchosen environmental factors are irrelevant to life chances.  In our capacity as citizens thinking about policy, we should certainly be clear-eyed about the myriad barriers to upward mobility faced by those at the bottom, and how to reduce them. But it does call into question the CityLab article’s conclusion that “Americans could stand to be quite a bit more cynical about how often upwardly mobile class shifts actually occur.”  We should also consider whether, as a broader cultural attitude, cynicism about mobility might prove a self fulfilling prophecy—and whether, for those already starting from a position of disadvantage, the sense that it’s futile to strive for more is yet another disadvantage to overcome.

Roger Pilon

With Gov. Chris Christie and Sen. Rand Paul now having weighed in on the growing compulsory vaccination debate—Paul telling a radio host yesterday that most vaccines “ought to be voluntary”—the question arises whether there’s a “libertarian” position on the question. Rightly suspicious of government compulsion, a libertarian’s first instinct is to say that this is a question for individual parents to decide. But second thoughts suggest that the matter is more complicated. After all, it isn’t simply a matter of assessing the risk to one’s own child, about which the state is not entirely disinterested—enforceable parental obligations to one’s children come with becoming a parent. It’s also a question of how much risk one can impose, even through one’s children, on others. And on the matter of risk, the rights analyses that easily sort out so many other human conflicts start to break down—or, more precisely, require turning to values as well, about which reasonable people can have reasonable differences. Some people are risk averse, after all, others are risk takers, and between the two there is no principled line, which is why we often have to turn to public solutions through public line-drawing.

Fortunately, there comes just this morning a splendid essay by NYU Prof. and Cato Adjunct Scholar Richard Epstein that sorts out the competing claims on this question in a principled and fairly detailed way. To those reluctant to see any government role, for example, he says:

Even in a free state, quarantines are the only reliable remedy to protect the health of the public at large from the spread of disease. It is sheer fantasy to think that individuals made ill could bring private lawsuits for damages against the parties that infected them, or that persons exposed to imminent risk could obtain injunctive relief against the scores of persons who threaten to transmit disease. The transmission of disease involves hidden and complex interconnections between persons that could not be detected in litigation, even assuming that it could be brought in time, which it cannot. Public oversight should be able to achieve the desired end at a far lower cost.

Yet he adds: “That said, the categorical defense of compulsory vaccination statutes raises serious questions of its own,” which he goes on to illuminate. Read the whole piece. It brings reason to issues too often fraught with and driven by emotion, understandably when it’s our children who are at risk.

Nicole Kaeding

The president released his budget request this morning. As expected, his plan is heavy on new spending and new taxes, and very light on structural reforms.

Overall, the president says that he would collect $2.994 trillion more in revenue from 2016 to 2025 than the Congressional Budget Office (CBO) baseline projections. He would also spend $1.028 trillion more during that same time frame.

The excess revenue would result in slightly smaller deficits than the CBO projected during this period. The president’s budget predicts that debt held by the public will equal 73.3 percent of gross domestic product in 2025, compared to 78.7 percent projected by the CBO.

However, the president’s budget assumes faster economic growth than the CBO does, which makes the president’s budget numbers look rosier. If GDP was constant between the two proposals, the president’s debt-to-GDP ratio in 2025 would increase to 74.2 percent. This is still less than the CBO’s projections, but it comes at the expense of higher taxes.

Here are some of the president’s proposals:

Spending

  • Spending Caps: The president proposes lifting the bipartisan Budget Control Act spending caps passed in 2011. He suggests increasing discretionary spending by $75 billion in fiscal 2016. The increase would be split evenly between defense and non-defense spending categories.
  • Infrastructure: The budget includes a $478 billion surface transportation proposal. The money would be spent over six years on highways, mass transit, and freight networks.
  • Entitlement Reform: The budget request does not include any meaningful plans to reform spending for Social Security, Medicare, or Medicaid. The president includes $400 billion in health savings, but a large share of the savings comes from cuts to providers and increased drug costs for pharmaceutical companies. That does not represent real reform of these programs.

Taxes

  • Foreign Earnings: To pay for his large infrastructure proposal, the president proposes a 14 percent one-time tax on the accumulated foreign earnings of U.S. corporations. Currently, multinational corporations are subject to U.S. taxes when their earnings are repatriated to the United States. President Obama would hit companies first with this 14 percent tax, then subject them to an ongoing 19 percent tax on foreign earnings. These proposals would burden U.S. companies with an uncompetitive tax regime compared to the lower-rate territorial systems nearly all our trading partners have.
  • Bank tax: Previewed in the State of the Union, President Obama would assess a new tax on banks with greater than $50 billion in assets.
  • New tax credits: The proposal includes an expanded child tax credit for families making less than $120,000 annually. It also creates a new tax credit of $500 for families where both parents work outside of the home.
  • High-income individuals: The president includes a “Buffett Rule” proposal called a “Fair Share Tax.” He also proposes limiting itemized deductions for high-income earners.
  • Other tax proposals: The president proposes a large expansion of the estate or “death” tax. He also proposes raising the top capital gains tax rate from 23.8 percent to 28 percent for high-income households.

David Boaz

Ayn Rand, the Russian refugee who became America’s bestselling novelist of ideas, was born 110 years ago today in St. Petersburg. I reflect on her life and impact at Townhall.com:

George Gilder called Atlas Shrugged “the most important novel of ideas since War and Peace.” Writing in the Washington Post, he explained her impact on the world of ideas and especially the world of capitalist ideas: “Rand flung her gigantic books into the teeth of an intelligentsia still intoxicated by state power, during an era when even Dwight Eisenhower maintained tax rates of 90 percent and confessed his inability to answer Nikita Khrushchev’s assertion that capitalism was immoral because it was based on greed.”

Rand’s books first appeared when no one seemed to support freedom and capitalism, and when even capitalism’s greatest defenders seemed to emphasize its utility, not its morality. It was often said at the time that socialism is a good idea in theory, but human beings just aren’t good enough for socialism. It was Ayn Rand who said that socialism is not good enough for human beings….

The financial crisis and Wall Street bailouts gave Atlas Shrugged a huge push. A Facebook group titled “Read the news today? It’s like ‘Atlas Shrugged’ is happening in real life” was formed. More than 50 years after publication, the book had its best sales year ever. And sales have remained high – more than a million copies of Rand’s books were sold in 2012.

Whole thing here.

Find my exchange on Objectivism and libertarianism here. Watch two biographers of Ayn Rand talk about her at a Cato forum here. Scholars debate Rand’s moral and political thought at Cato Unbound.

Walter Olson

Don’t believe minimum wage hikes hurt real people? After March 31, a famed sci-fi bookstore on Valencia St. in San Francisco’s Mission District will no longer be able to cater to your taste in fantasy:

The change in minimum wage will mean our payroll will increase roughly 39%.  That increase will in turn bring up our total operating expenses by 18%.  To make up for that expense, we would need to increase our sales by a minimum of 20%.  We do not believe that is a realistic possibility for a bookstore in San Francisco at this time.

And this, which speaks for itself:

In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018.  Although all of us at Borderlands support the concept of a living wage in [principle] and we believe that it’s possible that the new law will be good for San Francisco – Borderlands Books as it exists is not a financially viable business if subject to that minimum wage.  Consequently we will be closing our doors no later than March 31st.  The cafe will continue to operate until at least the end of this year.

Early reactions from customers online run heavily to two themes: 1) anguish that a beloved cultural institution is passing from the scene and 2) reflections that they, the fans and customers, had supported the minimum wage hike too when it was on the ballot. (It might restrict businesses’ rights, but who cares about that?) But in this world – as in so many of the well-crafted alternative worlds of science fiction – the link between actions and their logical consequences, foreseen and intended or otherwise, is not to be broken.

Ilya Shapiro

I’ve previously written about the way that the existing case law regarding voting-rights protections requires the very kind of odious racialization of politics that Congress wrote the Voting Rights Act to forbid.  Specifically, courts have read the law in a way that essentially requires racial gerrymandering, which also racializes political differences between the parties. (The Supreme Court this term is considering one of the bizarre consequences of this line of precedent.)

Well, a couple of weeks ago an interesting lawsuit was filed by the Equal Voting Rights Institute (a Texas nonprofit run by Dan Morenoff, who is a friend of mine from law school) that illustrates where this jurisprudence leads when paired with the most basic notions of equal protection.

EVRI has brought exactly the same kind of suit long used by traditional voting-rights activists but this time on behalf of non-Hispanic-white voters in Dallas – where they constitute a racial minority that has seen its “preferred candidate” (a term of art in this arcane legal field) win only two county-wide races contested by the major parties over four election cycles, which is 2 out of about 150 elections. EVRI asks the courts to apply the same measuring sticks they’ve used for decades to require the drawing of districts for other groups in the new context of a “minority-majority” jurisdiction whose governing coalition still votes on ethnic lines and uses its political power to strip an out-of-step race of any chance to fairly participate in elections.

It’s hard to imagine a case where equal protection provisions are more starkly implicated: either the VRA protects the out-voted white voters of Dallas exactly as it protects the outvoted African American and Hispanic voters of Texas, or the Voting Rights Act – as construed by the courts – provides unequal protections to different races in flagrant violation of the Fourteenth Amendment.

But this means that a constitutional reading of the VRA would broaden the scope of its case law (and the odious racial gerrymandering it requires) to apply to every minority-majority jurisdiction in the country. In fact, as America becomes more diverse, it makes sense that judges would need to look at actual demographic facts on the ground to determine who needs their protection from racial disenfranchisement. That development may wake up the communities that have long viewed the Voting Rights Act as their proprietary cudgel to the need to return to the original understanding of the legislation: to police against actual instances of discrimination rather than maintain some sort of statistical parity akin to the “disparate impact” theories running rampant in other contexts. 

In other words, and to paraphrase Chief Justice John Roberts’s famous dictum, the way to stop racialized interpretations of the Voting Rights Act is to highlight the way that race-based decision-making has been used to interpret parts of that law. It’s a strange world where a classical liberal is required to root for more racially informed lawmaking in order to recover the core ban on racist voting laws that made the VRA the cornerstone of civil rights movement. But that is the world we live in.

For more on the case of Harding v. County of Dallas, Texas, see the complaint and EVRI’s press release.

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

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

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

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

This seems a bit overly dramatic.

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

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

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

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

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

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

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

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

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

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

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

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

Tol begins:

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

Polarization is not conducive to sound policy.

According to Tol, things have recently turned nasty:

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

Tol concludes:

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

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

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

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

Adam Bates

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

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

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

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

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

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

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

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

Chris Edwards

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

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

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

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

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

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

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

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

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

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

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

For more on the West Coast seaports, see here.

Nicole Kaeding

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

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

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

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

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

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

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

David Boaz

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

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

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

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

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

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

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

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

Paul C. "Chip" Knappenberger

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

Did I say State Department?

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

So Congress has attempted to make the decision for him.

But it probably won’t work.

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

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

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

It is not.

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

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

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

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

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

The stalling will continue.

And so will the conversation.

Ted Galen Carpenter

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

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

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

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

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

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

Chelsea German

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

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

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

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

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

Chris Edwards

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

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

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

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

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

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

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