Taobao is an online retailer like Amazon. There are few qualifications to open an online store with Taobao. Chinese villagers, having little more than their cheap labor to offer, sell handicrafts on the website. The villagers get paid for their work and amass greater opportunities in return, while money and prosperity flow into their previously sleepy villages.
Globalization is making Chinese villagers richer, contrary to critics who claim that globalization generates poverty. Interconnected, free markets generate wealth and pull people out of poverty. This occurs as the connective technologies of globalization (like the Internet) increase competition. That benefits consumers who can buy more, increasingly inexpensive products to better their quality of life. That also creates innovation and employment, as is the case for Chinese villagers.
For more on the relationship between human progress and economic freedom, visit HumanProgress.org
For years, I’ve been fighting what feels like a rearguard battle to keep free trade agreements focused on free trade. It can be a real struggle. Labor issues, environmental issues, and intellectual property are all solidly part of U.S. trade policy. Next up might be human rights.
The European Union has had human rights in its trade agreements for a while now, in the form of a provision that allows the EU to suspend the trade agreement if its partner does not sufficiently protect human rights. Recently, in their trade talks with the EU, both Canada and Japan have raised objections to such a provision, based on the view that they are developed countries that already protect human rights, and thus shouldn’t be subject to the EU’s scrutiny on this issue.
It will be interesting to see how the United States reacts if the EU demands such a provision as part of the Transatlantic Trade and Investment Partnership (TTIP) talks. Many lawmakers and commentators would object, I think. On the other hand, there might also be some U.S. support for the provision. Consider this from the Financial Times:
In a move that will cause concern with some US negotiating partners such as Brunei and Vietnam, [Senator Ron] Wyden says he would also like to see trade agreements address human rights, something advocated by fellow Democrats.
“I think it’s the responsible thing to do and I think it will bring more support for the cause of trade expansion,” Mr Wyden says.
I have a number of objections to the inclusion of human rights in trade agreements. One is that, contrary to what Senator Wyden suggests, including these issues will, in my view, make it much harder to achieve the trade liberalization that is at the core of these agreements. It moves the debate away from the basic issue of how we are better off with free trade, and in the process adds new opponents to such agreements.
Another is that people don’t really agree on what constitutes human rights. Are we talking about the right to free speech or the right to food? There are very different implications from the different conceptions.
I think it’s important to have conversations about rights at the international level. Even if we don’t all agree, we can learn a lot from each other. But as a condition for negotiating free trade agreements, adding in human rights probably just means we are less likely to achieve freer trade.
The Associated Press reports:
For a growing number of children in Rhode Island, Iowa and other states, the school day starts and ends in the same way — they walk with their classmates and an adult volunteer to and from school. Walking school buses are catching on in school districts nationwide because they are seen as a way to fight childhood obesity, improve attendance rates and ensure that kids get to school safely….
Many programs across the country are funded by the federal Safe Routes to School program, which pays for infrastructure improvements and initiatives to enable children to walk and bike to school.
As we head into the last month of the Supreme Court term – the Court releases its final, typically highest profile, opinions the last week of June – it’s time to take a deep breath and survey the lay of the land. Here’s what we can expect in coming weeks as the justices rush to get their final opinions out before heading out on their summer vacation/lecture/exile:
- Currently scheduled opinion-release days are June 2 (this coming Monday), 9, 16, 23, and 30. I’d expect the Court to cut June 30 – I’m sure some of the justices already have travel planned for that week – and add 3-4 more opinion days the weeks of June 9, 16, or 23. Each week’s extra days are typically announced on the Monday of the given week.
- There are 25 cases outstanding, most notably Bond (treaty power, argued in November), Noel Canning (recess appointments, January), McCullen (abortion-clinic buffer zone, January), Harris (forced unionization of home healthcare aides, January), Hobby Lobby/Conestoga Wood Specialties (Obamacare contraceptive mandate, March), Susan B. Anthony List (criminalizing false political speech, April), and Riley/Wurie (cell phone searches, April).
As for how all these cases will turn out, all I can say is that it’s fortunate that I’m not paid for my predictive abilities because I don’t think anyone could make a living doing that. Unlike many Court-watchers, however, I’m happy to go on a limb with my best guesses at what’ll happen:
Bond (Cato’s brief)
This one is likely to come down this coming Monday because it’s the case from the November sitting left (and there are none from October, and only one from December). This one is perhaps the most difficult to gauge of the end-of-termers. The oral argument was all over the place, with the justices not really satisfied with what either Solicitor General Don Verrilli or (Mrs. Bond’s super-lawyer) Paul Clement argued. I don’t think that the government will get a ruling eplaining that a treaty can expand Congress’s powers. The Court is also wary of making sweeping constitutional rulings when it can avoid it, however, so it’s unlikely that Missouri v. Holland will be overruled. The most likely result would be a ruling for Bond on the ground that her prosecution was beyond federal power here. Whether that means Missouri is limited in any way or the ruling effectively applies only to this bizarre case is anybody’s guess. Whatever happens, it’s likely that Chief Justice Roberts will be the lead author because he’s the only one without a majority opinion from the November cases.
Noel Canning (Cato’s brief)
The administration will likely suffer a big, near-unanimous, loss here; the only real question is how broad a rule will the Court announce (the broader, the less unanimous). If I had to bet, I’d say that seven justices will side with the challengers, agreeing with Miguel Estrada, who argued on behalf of amici Republican senators that regardless of the scope of the recess-appointment power, it is the Senate that determines when it’s in recess, not the president. A few justices would likely then join a separate opinion going further, limiting the power to inter-session recesses or to vacancies that arise during recesses. Only Justices Ginsburg and Sotomayor are likely to dissent.
McCullen (Cato’s brief)
The views of Chief Justice Roberts and Justice Kagan seem to be the key ones here; there are clearly four votes to strike down a 35-foot buffer zone and three to uphold it. Kagan seemed taken aback at how large this no-speech, no-entry zone was, encompassing public sidewalks. Roberts seemed to be searching for a practical solution to the problem. But it’s hard to see a Court that in recent terms has struck down laws against funeral protests and violent videogames upholding the law in this context.
Harris (Cato’s brief)
This is one of the very rare cases where Justice Scalia is the swing vote. At oral argument, Justices Alito and Kennedy (and, presumably, the silent Thomas) seem ready to overturn the 1977 case (Abood) that has allowed compelled contributions for certain union activities, with Chief Justice Roberts also on the workers’ side for a different reason. The “liberal” justices, meanwhile, were foursquare on the side of the pro-union Illinois law (which has equivalents in about a dozen other states). Scalia’s main concern seemed to be about how to draw the line between union actions meant to better working conditions – such as collective bargaining – versus other public policy-related activities that state governments can’t force individual workers to support. Given that his is the deciding vote, it’s likely that Scalia will end up writing the majority opinion, which gives all of us more reason to anticipate the Court’s ruling.
Hobby Lobby/Conestoga (Cato’s brief)
There should be about seven votes to reach the merits of this controversy; that is, that someone (whether the privately held corporations at issue or their owners) has standing to challenge the HHS rule requiring employers to cover 4 contraceptives (of 20 on the full list) as part of their Obamacare health insurance. On the merits, it’s more likely than not that the challengers will win because the government hasn’t shown that its mandate is the most narrowly tailored way of achieving a compelling interest – which is what it must do to justify imposing a substantial burden of religious exercise under the law at issue, the federal Religious Freedom Restoration Act. While Justice Breyer appeared skeptical of the government’s position at oral argument, he’ll probably still dissent to prevent the ruling from being six men versus three women.
SBA List (Cato’s hilarious brief)
Ohio’s solicitor general, an excellent attorney put in a difficult position, was met with an incredulous bench at oral argument. I don’t think we’ll see a single vote denying the plaintiff advocacy group standing to challenge a ridiculous law that criminalizes making “false statements” about political candidates. I further predict that, on remand, the district court will strike down this law, the appellate Sixth Circuit will summarily affirm that ruling, and we’ll never hear about the case again except in the context of the “best amicus brief ever.”
The defendant with the smartphone (Riley) will win, while the defendant with the “dumb” (flip) phone (Wurie) will lose – not necessarily due to the difference in technology but because the police’s warrantless search was much more intrusive in the former case than in the latter. How the Court will reach those conclusions I can’t begin to estimate, although I’ll say that the justices are extremely wary of pronouncing legal rules that could be rendered obsolete or unworkable as newer technology develops.
Well, there you have it. Tune in starting Monday at 10am to see what happens in the denouement of the Supreme Court’s October Term 2013. Just remember that these predictions are worth about what you’re paying for them.
Peter Van Doren
Yesterday the New York Times published an op-ed by Morris Kleiner making the case for occupational licensing reform. In it, Kleiner argues that there is a bipartisan case for reform, and that the real losers of occupational licensing are consumers. Kleiner notes that occupational licensing has noble aims, to protect the health and safety of the public from those who seek to defraud them. But the actual result provides more protection from competition for those in the professions rather than protection for consumers from low-quality providers.
Thirty percent of the work force requires some kind of occupational license today compared with ten percent in the 1970s. This raises costs to consumers, especially those with low incomes who do not wish to pay for the minimum level of “quality” that licensing boards claim to provide.
Kleiner proposes to replace licensing boards with optional certification programs. All individuals could legally practice in a particular profession, but individuals could choose to undergo certification to signal the quality of their training and service provision. Cheaper, uncertified professionals could provide services to those who are more price sensitive.
Kleiner has spent his career studying the decline of labor unions and the rise of occupational licensure as the U.S. economy has shifted from manufacturing to services. In 2006 Regulation published A License for Protection in which Kleiner describes this shift. I’ve also covered his work on dental hygienist regulation here, and the upcoming Summer issue of Regulation will look at his work on nurse practitioner regulation.
Christopher A. Preble
One of the overlooked aspects of President Obama’s speech at West Point yesterday was his call for other countries to step forward, and do more to defend themselves and their interests. He also expected them to contribute “their fair share” in places like Syria.
It might have been overlooked because it was neither new, nor unexpected. Polls consistently show that Americans believe we use our military too frequently, and they are tired of bearing the costs of policing the planet. Meanwhile, the minority who believe that we should be spending more on the military – 28 percent of Americans, according to a recent Gallup poll – might not feel that same way if they knew how much we spend as compared to the rest of the world, especially our wealthy allies.
This new Cato infographic, prepared with the able assistance of my colleague Travis Evans, might help to put it all in perspective. In addition to showing how much American taxpayers spend, it also shows, indirectly at least, how that spending discourages other countries from spending more to defend themselves.
The average American spends nearly $1,900 each year on the military, based on the latest data available. In fact, Americans spend much more than that, because that figure includes the costs of the Pentagon’s base budget, as well as the costs of the wars, but excludes other national security-related expenditures in the Departments of Veterans Affairs, Homeland Security and Energy. Still, that conservative $1,896 figure is roughly four and a half times more than what the average person in other NATO countries spends on defense. These countries boast a collective GDP of approximately $19 trillion, 18 percent higher than the United States. They obviously can afford to spend more, but they don’t. The disparity between what Americans spend relative to our Asian allies is nearly as stark: South Koreans spend about a third as much, and Americans outspend people in Japan by more than four to one.
The reason why is obvious: people are disinclined to pay for things that others will buy for them. Countries are no different. Uncle Sam has picked up the tab for defending other countries since the earliest days of the Cold War, and that pattern continues to this day.
In practical terms, this means that U.S. alliances constitute a massive wealth transfer from U.S. taxpayers to bloated European welfare states and technologically-advanced Asian nations. In most of these countries, the governments who are relieved of the responsibility of defending their citizens from threats have chosen to spend their money on other things.
Consider, for example, the disparity between what the United States spends on the military as a share of total government spending, and what other countries spend. While the United States spends 16.8 percent of the budget on the military, Japan spends a paltry 2.4 percent. Our NATO allies? The average is 3.45 percent. Even South Korea’s share of military spending is only 11 percent, and they have an erratic, hostile regime on their northern border. By promising to provide for these countries’ security, and by spending hundreds of billions of dollars to back up these promises, we have encouraged them to divert resources away from defense.
The U.S. Constitution stipulates that the federal government should provide for the “common defence.” But the document never talks about providing for the defense of other nations. Some of the defenders of the current arrangement try to convince us that our allies are grateful, and that they know they would be lost without us. Just last week, for example, Secretary of State John Kerry told students at Yale, “I can tell you for certain, most of the rest of the world doesn’t lie awake at night worrying about America’s presence – they worry about what would happen in our absence.” But what our allies are really grateful for is the free ride.
We could have revisited our alliances after the end of the Cold war. We could have paid more attention to the culture of dependency we created among our allies. Instead we continued to spend vast sums on the military, discouraging others from developing their capabilities, and removing their will to use their militaries in ways that could have advanced both their and our security. Today, our wealthy allies are little more than wards of Uncle Sam’s unending dole, and they will remain militarily irrelevant so long as we continue along our present path.
Central Intelligence Agency. “The World Factbook 2013.” Washington, D.C., 2013.
The International Institute for Strategic Studies. The Military Balance 2014. Edited by James Hackett. London: Routledge, 2014.
Paul C. "Chip" Knappenberger and Patrick J. Michaels
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
This is getting embarrassing.
Another scientific paper has just been published that again finds no association between Arctic sea ice loss and extreme cold and wintery conditions across the U.S.—White House Science Advisor John Holdren’s favorite mechanism for tying last winter’s persistent “polar vortex” over the eastern US to anthropogenic global warming (AGW).
We wonder just what it will take for the White House to publicly admit that it was grossly wrong. At the very least, it needs to disavow a widely-disseminated YouTube video featuring Holdren explaining the link between last winter’s polar vortex and human-caused climate change. There is no such link. Of course, this won’t happen, as Holdren was simply engaging in a publicity stunt relying on tenuous science to scare up support for President Obama’s Climate Action Plan. The President is hell-bent on an endless string of executive actions aimed at manipulating the energy market and reducing our energy choices along the way.
As we reported when the video was first released last January, the science linking human-caused climate change to the southward excursions of the polar vortex was a stretch to begin with. It was then dealt a major blow by a study led by Colorado State climate researcher Elizabeth Barnes that was coincidentally published a few days after Holdren’s YouTube video. Barnes’s found that natural variability dominates the observed record, making it impossible to detect any human-caused global warming signal even if one were to exist in the vortex data (which there is no proof of). Shortly after that, a collection of very prominent climate scientists specializing in research into atmospheric circulation patterns wrote a letter to a prominent journal stating that drawing the type of connection that Holdren did was not scientifically advisable
Spurred by all of this, the Competitive Enterprise Institute (CEI) sent a petition to the White House Office of Science & Technology Policy (OSTP) to force Holdren issue a correction under the terms of the Data Quality Act. According to CEI, “OSTP guidelines require the agency to correct any published information that does not meet ‘basic standards of quality, including objectivity, utility, and integrity.’”
Holdren and the White House have been unmoved.
Now comes this: a brand new study, led by Thomas Ballinger of Kent State University, which directly examined the size and magnitude of the 2014 “polar vortex” event and found it to be not particularly unusual. Yes, it was a significant event ushering a lot of really cold air southward over the eastern 2/3rds of the U.S. and bringing with it all sorts of winter misery, but it wasn’t historically unusual. In fact, Ballinger’s team, found, in examining polar vortex behavior across North America since 1948, that the 2014 polar vortex excursion into the lower 48 ranked 6th in southerly extent and 7th in total area. The authors concluded that their analysis “revealed that the spatial features of the January 2014 [polar vortex over the U.S.] were not extreme relative to certain 1948-2013 Januaries.”
Ballinger and colleagues took their analysis one step further and examined the historical record to see if they could find a link between the loss of Arctic sea ice and an increase in polar vortex excursions into the U.S.—Holdren’s favored explanation for tying human actions into their own winter suffering. Here is what they wrote:
While this [polar vortex] study solely examines January, a regional domain, and uses different data to quantify atmospheric circulation, the results presented here are not congruent with the large-scale flow changes suggested in those latter papers [linking Arctic sea ice loss to polar vortex behavior].
So with a large and growing body of scientists and scientific evidence aligning against Holdren’s explanation of things, it is high time for a recognition of this by the White House. But since they are no doubt too focused on pushing their new carbon dioxide emissions regulations to find the time to insure that their justification for the regulations are based in fact, we thought we’d help them out and draft a public announcement for them. Here is what we have come up with:
From the White House:
We’d like to take this opportunity to correct something that we put forward regarding human-caused climate change and the polar vortex from this past winter. In actuality, and as a collection of new science has shown, that linkage is much more tenuous that we stated, if it even exists at all.
Our purpose for releasing that video and associated press material was to take advantage of an extreme weather event that was inconveniencing a large number of Americans. We wanted to use the opportunity to try to scare you into supporting our executive actions aimed at restricting carbon dioxide emissions in an effort to mitigate future climate change. Admittedly, the science is much weaker than federal pronouncements like these make it out to be. But if we were forthcoming with all the data and the complete story that it told, there would be even less support for the Climate Action Plan than currently exists. And since we’re coming clean about things, we’ll go ahead and admit that we realize the regulations forwarded under the Climate Action Plan, most notably the soon-to-be-announced sweeping carbon dioxide emissions restrictions on existing power plants, will have no measureable impact on the very thing that they aim to achieve—mitigating climate change—unless, by eliminating coal-fired electricity generation, there is a technological miracle that no one can anticipate or forecast. While waiting, you’ll just have to live with more expensive electricity.
We really aren’t very concerned about this because one of the confident predictions from government scientists is that winters should warm preferentially to summers. So you won’t need as much electricity to heat your house. If we were right about the polar vortex and very cold temperatures in the East, that would be too bad, but we were wrong.
So, next time you hear a federal pronouncement about climate change and extreme weather (likely coming sometime this summer when it gets hot), note that we are largely making it up and that the larger body of science, economics, and statistics, generally doesn’t support our wild assertions.
We’ll let you know when our phone rings.
Ballinger, T., M.J. Allen, and R.V. Rohli, 2014. Spatiotemporal analysis of the January Northern Hemisphere circumpolar vortex over the contiguous United States. Geophysical Research Letters,doi:10.1002/2014GL060285.
Barnes, E., et al., 2014. Exploring recent trends in Northern Hemisphere blocking. Geophysical Research Letters, doi:10.1002/2013GL058745.
Today, I’m at the House Administration Committee’s Legislative Data and Transparency Conference. It’s become the annual confab for learning what the House is doing to improve transparency, for learning what the Senate is not doing to improve transparency, and to mix and mingle with others working on opening Congress’s deliberations to digital access.
In our 2012 study, Grading the Government’s Data Publication Practices, we issued letter grades reflecting the quality of data the government makes available about its own deliberations, managment, and results, covering legislative process and budgeting, appropriating, and spending. The grading was based on criteria set out in an earlier study, Publication Practices for Transparent Government.
Grades are a way of showing the public, opinion leaders, and legislators what’s going on. For most areas, the grading study showed that access to data is relatively poor.
There is no question that people are working hard on things, and the House has consistently put in the most effort over the last few years. (The recently passed DATA Act now requires the administration to make an effort. Oversight and badgering will help ensure that it does.)
My contribution this year is a brief talk in which I’ll present what’s happening with data another way: by presenting a visualization of what’s happening with data flows—pictures!
Water is a good metaphor for data. Ideally, data would emerge at the source, like a spring, drinkable and ready for use. But very often, key information about government is not available as data at all. People have to pump it out of the ground, turning paper or PDF documents into usable data. Sometimes data isn’t in a format that’s truly useful. It’s undrinkable or “polluted.”
A lot of people in a lot of places are working to take data that is not ready for use and make it available. Our own contribution at Cato is the Deepbills project, which adds data to bills that allows computers to more readily access their meaning. Like a little water treatment plant. It’s not the only one.
It’s a big file (5.6 MB), but if you want, you can look through the PowerPoint. (Ignore the “Soup to Nuts” page—that’s a funny, funny joke, in my opinion, aimed at those who attended last year.)
Why does the Canadian federal government collect 1.9 percent of GDP in revenues with a 15 percent corporate tax rate, while the U.S. federal government only collects about the same (2.0 percent) with a 35 percent corporate tax rate?
One reason is that a low corporate tax rate induces higher real investment and economic growth, which in turn generates higher government revenues.
Another reason is profit shifting by multinational corporations. Over time, paper profits are steadily shifted out of countries (such as the United States) that have unfavorable tax rates and tax rules. The (now abandoned) plan for American Pfizer to merge into British AstraZeneca to save $1 billion a year on taxes was one illustration of how tax based migration works.
This May 5 story in Tax Notes International (subscription required) provides another illustration from the pharmaceutical industry:
The combined entity resulting from the proposed acquisition of U.S.-based Allergan Inc. by Valeant Pharmaceuticals would have an effective tax rate in the single digits, around 20 percentage points lower than Allergan’s current rate, according to Valeant CEO J. Michael Pearson.
Quebec-based serial acquirer Valeant on April 22 announced an offer of close to $46 billion in cash and stock in its bid for competitor Allergan, the company behind Botox. The acquisition would make Valeant the second largest company in eye health globally, ahead of Johnson & Johnson and behind Alcon.
Valeant has partnered with Allergan’s largest shareholder, Pershing Square Capital Management, led by CEO William Ackman, to solicit support for the deal from Allergan shareholders.
Ackman said he has spent time familiarizing himself with the sustainability of Valeant’s tax structure. “The company has the benefit of being based in Canada; there are some unique attributes of the Canadian tax system,” he said during an April 22 presentation to investors led by Valeant’s management team. High on the list of selling points are tax synergies that would result from the deal. The combined company would have a high single-digit cash tax rate, Pearson said, adding, “and those of you who know us know what we’re able to do there.”
Pearson may have been alluding to tax savings Valeant has achieved in the past using strategic deal structures and intellectual property migration.
Valeant, which began as a New Jersey company with an effective tax rate in the mid-30 percent range, merged with Canadian pharmaceutical company Biovail Corp. in a 2010 inversion that resulted in a combined company domiciled in Canada with offshore IP and a worldwide effective tax rate of about 5 percent. Last year Valeant bought New York-based Bausch & Lomb for around $8.7 billion cash and promptly integrated the U.S. company into Valeant’s decentralized model.
During the April 22 presentation, Valeant CFO Howard Schiller confirmed that the Allergan acquisition plan would be business as usual on the tax front: Allergan would be integrated into Valeant’s corporate structure in much the same way as Bausch & Lomb, with the new company based in Canada.
“We’ll use an installment sale approach to migrate our IP to our Irish subsidiary and, just like in Bausch & Lomb, we expect to get immediate synergies in that regard,” Schiller said, adding, “and we will have a high single-digit tax rate for the foreseeable future.”
The tax projection comes from five- to six-year models and should be welcome news to shareholders of Allergan, which expects an effective tax rate for 2014 of between 26 and 27 percent.
But Valeant is sensitive to those who might see the new effective rate as high, compared with the company’s typical low single-digit rates. “There are things that we’re looking at that we could possibly do to improve that,” Schiller said. “Over time, if we bought assets outside the U.S., which, given our footprint we’re likely to do, that would create opportunities.”
K. William Watson
The government of India is set to impose antidumping duties on solar panels imported from the United States. These duties represent just one more episode in the bizarre saga of global solar protectionism that has seen governments in Europe and the United States impose tariffs on solar panels while simultaneously subsidizing the consumption of solar power. Unfortunately, India seems set on following Western economies in the pursuit of irrational green industrial policy.
The increased duties are sure to further inflame a preexisting dispute between India and the United States over solar power subsidies. The WTO is currently reviewing a U.S. complaint against India for requiring that subsidized solar power plants use domestic solar panels.
Imposing tariffs on foreign panels is just another way to achieve the same protectionist goals and is equally bad for India’s economy. Either way, the demand for domestic panels is artificially inflated, enabling Indian panel makers to charge less competitive prices. The losers from this policy are not just U.S. manufacturers, but also Indian consumers, Indian taxpayers, and every other business in India.
The Indian case is especially exasperating because, as reported in the Wall Street Journal, India’s government is hoping to dramatically increase its domestic manufacturing base. There are few policies more detrimental to achieving that goal than an increase in the cost of energy.
The great irony is that government-led schemes to promote the use of renewable energy are one of the greatest obstacles to the development and broad adoption of solar technology in the future. This ought to be intuitive. Just imagine if the government had decided in the 1960s that computers were important to the future, but since they were slow and big and clunky, we should develop bureaucratic incentive programs to usher in a new high-tech economy. Does anyone really believe such a policy would have hastened the adoption of digital technology or enabled development of the innovative devices, services, and business models that have revolutionized American life?
The inconvenient truth is that green industrial policy isn’t going to lead to a future of renewable energy, but it does benefit cronies and politicians. Bureaucrats who don’t make decisions based on market realities still respond to incentives, making them susceptible to capture by special interests at public expense (see Solyndra). Even if bureaucrats are enlightened saints, the centralization of decision-making benefits large firms at the expense of entrepreneurs and other innovative competitors. Over time, the relationship between commercial success and political acumen leads businesses to invest more in lobbying and leads to a culture of rent-seeking and privilege.
The global proliferation of protective tariffs on solar and wind energy components offers one of the clearest examples of how industries built on government subsidies learn to rely on government solutions. It’s what they know how to do. The result is an irrational government policy that taxes what it subsidizes, funneling all the benefits toward an increasingly narrow group of people—the green energy future be damned.
The most immediate policy fix for this problem is for countries to agree to zero tariffs on all “environmental goods” like solar panels. There are already efforts in place at various international fora to work out just such an agreement. As Simon Lester and I pointed out in a policy bulletin last year, if an environmental goods agreement is going to be truly effective, it must include a moratorium on antidumping duties like the ones currently imposed by the United States, the EU, and now India.
Michael F. Cannon
David A. Hyman is the H. Ross & Helen Workman Chair in Law and director of the Epstein Program in Health Law and Policy at the University of Illinois Urbana-Champaign, as well as an adjunct scholar at the Cato Institute.
Earlier this month, Hyman gave the following erudite presentation on the implementation of the Patient Protection and Affordable Care Act – which he calls PPACA, not “ObamaCare” or “the Affordable Care Act” – at a faculty seminar hosted by the University of Chicago’s MacLean Center for Clinical Medical Ethics.David Hyman - Implementation Challenges of PPACA
Hyman’s remarks begin at about 5:00.
Be sure to read Hyman’s excellent satire, Medicare Meets Mephistopheles.
After my blogpost yesterday about Department of Veterans Affairs spending, my research assistant Nick created the chart below on the number of VA employees. Wow, you don’t often see bureaucracies expand that rapidly! A 56 percent increase in just 13 years, from 219,000 to 341,000 employees. The VA has 100,000 new employees just since 2006.
The data is from this OPM website, which also provides a breakdown for agencies within departments. About 90 percent of VA employees are in the Veterans Health Administration, which is currently in the news for its horrendous mismanagement.
Steve H. Hanke
Since Hassan Rouhani assumed the presidency of the Islamic Republic of Iran in August of last year, the economic outlook for Iran has improved. When Rouhani took office, he promised three things: to curb the inflation which had become rampant under Mahmoud Ahmadinejad, to stabilize Iran’s currency (the Rial), and to start talks to potentially end the sanctions which have battered Iran since 2010. Rouhani has delivered on each of these promises. From this, one might assume that the Iranian economy, and the Iranian people, are headed towards better times.
Unfortunately, the Misery Index paints a different picture. The Misery Index is the sum of the inflation, interest, and unemployment rates, minus the annual percentage change in per capita GDP. It provides a clear picture of the economic conditions facing Iranians.
The accompanying Misery Index chart gives us both a snapshot of the Iranian misery levels spanning the past three administrations, as well as a forecast of Iran’s future misery levels. Over the past three administrations, Iran’s miserable state of economic affairs has been driven in large part by its unstable currency and high inflation. The most dramatic peak in the Misery Index occurred in October of 2012, when, under Ahmadinejad, Iran’s monthly inflation rate reached 69.6 percent – throwing Iran into a brief period of hyperinflation.
Rouhani’s administration has delivered on exactly what it promised, but now Rouhani is running into popular resistance to his administrations’ proposed cuts in fuel, electricity, and food subsidies – subsidies which were expanded greatly during the Ahmadinejad years.
And if the prospect of not being able to deliver on promised subsidy cuts and other economic reforms aren’t sobering enough, forecasts by the International Monetary Fund and The Economist Intelligence Unit indicate that Iran’s Misery Index will probably remain elevated for the next four years. Inflation, though stabilized since the 2012 hyperinflation episode, is predicted to remain above 20 percent in the next few years. Meanwhile, GDP growth is predicted to remain low, and unemployment and lending rates are predicted to remain high.
While Rouhani has been successful in pulling Iran out of its death spiral, the economy has settled into stagflation (high inflation coupled with low GDP growth). Projections of the Misery Index levels suggest that Iranians’ will remain, well, miserable, for some time.
Ted Galen Carpenter
South Korean officials insist that China now agrees that North Korea’s nuclear program poses a serious security threat to the region. If that interpretation is accurate, it is a strong indicator that Beijing’s patience with its troublesome ally is wearing very thin. But as I point out in a new article in China-U.S. Focus, the United States and its East Asian allies have a long-standing tendency to overestimate China’s willingness, even its ability, to restrain Pyongyang without incurring excessive risks to its own national interests.
Rumors continue to swirl that North Korea plans to conduct yet another nuclear test. China is apparently trying to dissuade its volatile ally from taking such a provocative step. According to Reuters, Beijing has used various “diplomatic channels” to convey its wishes to Kim Jong-un’s regime. But China adopted a similar stance with regard to Pyongyang’s last nuclear test, as well as the test of a long-range ballistic missile. Unfortunately, Beijing’s latest expression of opposition is not likely to fare better than previous efforts. Both Kim and his father, Kim Jong-il, defied China’s wishes and conducted such tests. If that weren’t enough, North Korea also attacked the South Korean naval vessel Cheonan and shelled a South Korean island. Although Beijing was clearly unhappy about such incidents, it did not prevent Pyongyang’s dangerous, destabilizing conduct.
Because China provides North Korea with a majority of its food and energy supplies, Pyongyang would seem to be highly vulnerable to pressure from Beijing. But a decision by China to employ maximum economic power to impose its will on the North Korean regime would also require a willingness to incur grave risks. Bringing such pressure to bear could cause the North Korean state to unravel. Not only would that development produce a massive refugee crisis (and possibly a civil war) on China’s border, but North Korea’s demise would obliterate a crucial geographic buffer between the Chinese homeland and the U.S. sphere of influence throughout the rest of Northeast Asia. Few Chinese leaders want to risk that outcome.
If Washington and its East Asian allies want Beijing to become more assertive in leashing Pyongyang, they need to create far more appealing incentives. Perhaps the most important one would be to eliminate China’s worry that the fall of North Korea would lead to a U.S. alliance with a united Korea and the establishment of U.S. air and naval bases on the northern portion of the Peninsula.
Offering the necessary reassurances would require a drastic change in U.S. policy, most notably abolishing the “mutual” defense treaty with Seoul. If North Korea collapsed (or even if the hard-line communist regime was replaced by a non-aggressive, reform government) the ostensible rationale for the treaty would also disappear. Retaining the alliance would then make Beijing extremely suspicious that the real purpose was to contain China. Understandably, Beijing would not want to take action against Pyongyang, if that were the ultimate outcome.
Washington should instead make Chinese leaders an offer that might prove very tempting, given Beijing’s noticeably increased annoyance with the North Korean government. The Obama administration should prod China to use its considerable economic leverage to bring Pyongyang to heel, and offer an explicit assurance that if a significantly less threatening environment develops on the peninsula, Washington will phase-out its alliance with Seoul. As an added incentive, U.S. officials should make it clear that under no circumstances would the United States station forces in the northern portion of a united Korea.
Such an agreement might well be enough to soothe China’s worries about U.S. intentions and get Chinese leaders to take a firmer stance against the dangerous behavior of its client, despite the underlying risk that applying serious pressure might destabilize that client. Since current U.S. policy clearly is not working, we have little to lose by making such an innovative offer to Beijing.
President Obama will likely take some executive action this fall to reduce deportations or legalize some unauthorized immigrants. He recently ordered Jeh Johnson, Secretary of Homeland Security, to delay the release of a review of current deportation policy until after the summer.
A White House official revealed the reason for the delay: “[President Obama] believes there’s a window for the House to get immigration reform done this summer, and he asked the secretary to continue working on his review until that window has passed.”
President Obama has taken a much more conciliatory tone toward Republicans in his push for immigration reform. His 2014 State of the Union address asked Republicans to support reform without blaming them for obstructing it. The White House official’s statement that Obama will delay executive action until after the summer is consistent with that bipartisan tone. It also allows President Obama to appear to be working with Republicans on reform while leaving his policy options open prior to the 2014 elections.
There is no doubt that President Obama’s attitude is better than blaming Republicans for all immigration problems and is more likely to motivate House Republicans to pass some kind of reform, but the mere mention of executive action only deepens the distrust that many Republicans have for the president – not to mention the many legal issues it raises. Republicans are justifiably concerned that President Obama may not enforce any immigration law that is passed or may change it with executive actions.
The Obama administration has consistently piled on more complex rules and regulations for the H-2A, H-2B, and H-1B work visas (with some exceptions that will actually liberalize the system) that make the legal migration system difficult to use. A new guest worker visa program created by Congress could be similarly stymied by rules and regulations promulgated by executive agencies. Some Republicans also complain about the president’s deportation policy. These are real concerns that are not mitigated by the president’s threats.
Many of President Obama’s adjustments to immigration enforcement have been disappointing and haven’t legalized as many unlawful immigrants as they could have. The president’s record on enforcing our harsh immigration laws is strict in contrast to his rhetoric and the stated goals of his executive actions.
However, only legislation can create a guest worker visa program and expand legal immigration enough to channel future immigrants into the legal market. Whatever executive actions the president decides to take, they will deal with problems that have emerged due to our restrictive immigration system that makes it virtually impossible for low and mid-skilled workers to immigrate. Expanding the scale and scope of immigration while diminishing the intensive regulatory oversight role of the federal government is a long-term solution in contrast to an executive action that is temporary at worst and at best seeds legal uncertainty.
Wow, more of this please [St. Paul Pioneer Press]:
It’s no longer a crime in Minnesota to carry fruit in an illegally sized container. The state’s telegraph regulations are gone. And it’s now legal to drive a car in neutral — if you can figure out how to do it.
Those were among the 1,175 obsolete, unnecessary and incomprehensible laws that Gov. Mark Dayton and the Legislature repealed this year as part of the governor’s “unsession” initiative. His goal was to make state government work better, faster and smarter….
In addition to getting rid of outdated laws, the project made taxes simpler, cut bureaucratic red tape, speeded up business permits and required state agencies to communicate in plain language.
If lawmakers in Minnesota could identify 1,175 worthless or outdated laws that could be rooted out with little real political resistance, imagine how many other worthless or outdated laws there are that are not so easy to uproot because they work to the benefit of one group or other.
Rep. Ralph Hall is in the news for losing to a primary challenger in his Texas district. I first met 91-year-old Hall just last week as we were on a Capitol Hill panel together organized by the Texas Association of Business (TAB). In the photo, that’s Hall to my right and Rep. Kevin Brady and TAB head Bill Hammond on my left. (Photo credit: Office of Rep. Hall).
One thing we discussed was how tax reform has stalled because the two parties see “reform” so differently. Rep. Brady noted that the Democrats keep insisting on tax increases as part of any tax reform. I noted that the Democrats have moved so far to left on economics in recent years that it makes 1986-style tax reform very difficult to achieve.
The 1986 Tax Reform Act was a major bipartisan success, with Democratic leaders such as Dick Gephardt and Bill Bradley playing key roles. This 1985 article in Cato Journal by Gephardt reads almost like it could have been written by a Cato scholar, so you can see how the tax deal was possible.
The gulf between that article by a leading Democrat in the 1980s and the relentless drive today by the Obama administration to raise taxes in the most anti-growth of ways is huge. I discussed Democratic tax policy then and now in this op-ed.
Rep. Hall himself reflects the changing party ideologies. He had been a Democrat for decades and always considered himself to be a conservative. But a decade ago he finally switched parties to better line up his beliefs with his affiliation. His loss to a Republican challenger apparently stemmed from the desire to see a fresh face in the district. And yet, when it comes to fresh faces, I sure hope I look as good as Hall does at 91.
The administration has apparently decided to combine the alarming developments I chronicled in my last two blogposts, which dealt with racial discrimination in Hawaii and President Obama’s abuse of executive power. In a classic Friday-afternoon news dump – and on the eve of a holiday weekend, no less – the Interior Department issued an advance notice of proposed rule-making (ANPR) to “solicit public comments on whether and how the Department of the Interior should facilitate the reestablishment of a government-to-government relationship with the Native Hawaiian community.” (Our friends at the Grassroot Institute of Hawaii broke the news; it helps that their weekend starts six hours after Washington’s!)
This would be an end-run around both Congress and the Constitution, marking the first step toward the creation of a race-based government in Hawaii. That is, with variations of the Akaka Bill stalled in Congress for over a decade – and Daniel Akaka no longer in the Senate, and congressional Democrats on their heels more generally – the administration has decided that this is yet another area where it can’t wait for the legislative branch. Even setting aside the Fourteenth/Fifteenth Amendment and policy problems with any proposed racial governing body, this brazen executive action raises serious separation-of-powers concerns.
As recently as September 2013, four members of the U.S. Civil Rights Commission wrote a letter to President Obama, urging him not to unilaterally push for a Native Hawaiian government. After extensive historic and legal analysis, the letter noted that “conferring tribal status on a racial group is itself a violation of the equal protection guarantees of the Constitution.” Moreover, “as beyond the scope of Congress’s powers as it would be for Congress to attempt to organize Native Hawaiians as a tribe, we believe it would be doubly so for you to attempt to do so by executive action.”
Quite so. I just wish that the next time the executive branch wanted to piggyback off my ideas, it would pick some reform proposals rather than mixing two blatantly illegal policies I’ve criticizing.