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A Closer Look at Congress’s Views on Trade

Fri, 02/28/2014 - 14:28

K. William Watson

Cato’s congressional trade votes database now includes votes from last year on major trade bills and amendments in both houses of Congress. The purpose of the database is to educate the public about the trade policy preferences of individual members. We do that by recording their votes on major trade bills and amendments and using the data to map a broader ideological profile.

Whether a particular member qualifies as a free trader, an isolationist, an internationalist, or an interventionist based on our methodology depends on their support for (or opposition to) trade barriers and subsidies.

 

In previous years, the farm bill and its various amendments have provided a treasure trove of vote data to pin down members’ proclivities on specific commodities and willingness to use public money to distort the economy for the benefit of select cronies. This year was no different, except that votes taken in the House of Representatives on the full package bill have been excluded. Those votes hinged almost entirely on the issue of food stamps, and because the purpose of the database is to reveal members’ trade policy positions, including them in the database would be inappropriate. 

That doesn’t mean, of course, that you shouldn’t be dismayed by Republicans who, after successfully removing food stamps from the bill so that productive debate could be had on reforming farm programs, nevertheless voted en masse to continue our Soviet-style agriculture policy with no significant change.

The new votes on the site include the Senate farm bill, failed votes in both houses to reform the sugar program, an amendment to avoid protectionist regulations on imported olive oil, an extension of “Buy American” policies in government procurement, and a continuation of export marketing subsidies for wealthy agribusiness.

I encourage you to check out the site, read up on our unique methodology, and find out just how protectionist your favorite (or least favorite) member of Congress really is.

Categories: Policy Institutes

Some Like It Hot

Fri, 02/28/2014 - 13:23

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

The Current Wisdom is a series of monthly articles in which Patrick J. Michaels and Paul C. “Chip” Knappenberger, from Cato’s Center for the Study of Science, review interesting items on global warming in the scientific literature that may not have received the media attention that they deserved, or have been misinterpreted in the popular press.

 

With all the stern talk about global warming and widespread concern over climate change, you would think that we humans would have a propensity for cooler temperatures. Everywhere you look, the misery that rising temperatures (and the associated evils) will supposedly heap upon us seems to dominate reports about the coming climate. But do patterns of population movement really support the idea that we prefer cooler locations?

Increased Mobility

Since 1900, the population of the United States increased from about 76 million people to about 309 million people in 2010. Accompanying that population growth were major advances in technology and industry, including vast improvements in our nation’s system of transportation. As planes, trains, and automobiles replaced the horse and buggy, Americans became more mobile, and where we live was no longer connected primarily with proximity to where we were born. Instead, we became much freer to choose our place of residence based on considerations other than ease of getting there.

Where has our new-found freedom of mobility led us? Figure 1 shows the rate of population change from 1900 to 2010 for each of the contiguous 48 states. Notice the increases in states with warm climates such as Florida, Texas, and California, and also in states with big industry (that is, jobs), such as New York, Michigan, and Ohio for example.

 

 

Figure 1. The state-by-state population trend (people/year) from 1900 to 2010 (data from U.S. Census Bureau).

Which states are people less likely to choose to live in? States such as North Dakota, South Dakota, Montana, Maine, Vermont—all of which have harsh climates and low temperatures.

Comparing a map of the change in population (Figure 1) with a map depicting the average temperature of each state (Figure 2) reveals a pretty strong indication that people seem to be seeking out warmer states.

 


Figure 2. The state-by-state average annual temperature for the period 1900-2010 (statewide temperture data available from the U.S. National Climatic Data Center).

Experiential Temperature

Another way of looking at human temperature preferences is to calculate what we’ll call the “average experiential temperature”—that is, the annual temperature that the average person living in the lower 48 states experiences each year. We can calculate this value by first multiplying the average temperature in each state during a particular year by the state’s population in the same year. Then we sum this product across the 48 contiguous states, and finally divide this sum by the total population of the country. In other words, the temperature in states with larger populations weigh more heavily on the national composite experiential temperature than does the temperature in those states with sparser populations. As the population of the country redistributes itself over time, we can track how the average person’s climate changes.

When we do that for each year from 1900 to 2013, we get the result shown in Figure 3—a steadily rising temperature. In fact, the average experiential temperature has risen by a total of about 3.85ºF over the course of the last 114 years (a rate of 0.34ºF per decade).

 

Figure 3. The average experiential temperature of the population of the United States, 1900 to 2013.

But the history of experiential temperatures alone can’t tell us whether the increase has been unwillingly forced upon us by a large-scale warming of the climate from, say, an enhanced greenhouse effect, or whether the change results from Americans seeking out warmer locales on their own accord.

U.S. Average Temperature

To answer this question, we must calculate the area-weighted average temperature of the United States—that is, the combination of the yearly average temperature within each state weighted by that state’s total area. In this case, it is the size of the state, rather than the size of its population, that matters—the bigger the state, the bigger its contribution to the nationwide average.

The result of this calculation is a quite different looking temperature history. In Figure 4, we included the annual U.S. average temperature history along with the annual U.S. “experiential” temperature from Figure 3. We see that, while the United States actual temperature has fluctuated a bit, experiencing warm decades such as the 1930s and 1990s and cold ones such as the 1910s and 1970s, it has increased only slightly during the 20th century—about 0.90ºF (a rate of 0.08ºF/decade).

Figure 4. Average temperature of the United States, 1900 to 2013.

For what it’s worth, when you calculate the national temperature this way (using the state-by-state temperature data from the National Climatic Data Center, NCDC), you get a heckuva lot less warming than is in the “official” NCDC record put out by the U.S. Department of Commerce.  The difference lies in the “adjustments” plastered on to the original data.  Both records are adjusted for a bias known as “time of day” when the previous 24-hour highs and lows recorded.  It’s complicated, but it also does slightly alter the data.

But the official version is additionally massaged more than—well, we can’t say in polite company.  A laundry list can be found here. The sum of all of those adjustments is to put about twice as much warming in the record as is in our state-averaged plot.

Seeking the Heat

Although there has been a slight warm-up of the actual temperature, that rise is nowhere near the increase in the experiential temperature. In fact, the average experiential temperature has climbed at a rate more than four times that of the U. S. average temperature—which is the experiential temperature had the population distribution not changed at all. That means that Americans have actively been moving to warmer climates. And there is every indication that they are continuing to do so, as evidenced by the strong rise in experiential temperatures during the past 20 or 30 years.

While climatologists have not generally appreciated this fact, it has been long recognized and appreciated by sociologists.  As both people’s mobility and their ability to select the climate they prefer have increased throughout this past century, the core of the U.S. population has moved southward—into warmer climates. The overall migration of people into the southern “Sunbelt” states has created a temperature change over time for the “average American” that far outstrips the most pessimistic measurements of global warming for the past century, and rivals the projections for the next!

Apparently, people–or Americans at least–seem to prefer a warmer climate to a cooler one. Next time climate prognosticators warn of the perils of rising temperatures, remember this: when given the means and a choice, some (or rather, most) like it hot!

(Special thanks to Robert C. Balling Jr. and Randy Cerveny, who assisted with early versions of this research.)

Categories: Policy Institutes

Krugman on the TPP

Fri, 02/28/2014 - 12:14

Simon Lester

Paul Krugman weighed in yesterday on the Trans Pacific Partnership (TPP). I agree with one of his points; I disagree with another.

First, the disagreement: Krugman claims protectionism is mostly gone, and thus the TPP is not all that important:

The first thing you need to know about trade deals in general is that they aren’t what they used to be. The glory days of trade negotiations—the days of deals like the Kennedy Round of the 1960s, which sharply reduced tariffs around the world—are long behind us.

Why? Basically, old-fashioned trade deals are a victim of their own success: there just isn’t much more protectionism to eliminate. Average U.S. tariff rates have fallen by two-thirds since 1960. The most recent report on American import restraints by the International Trade Commission puts their total cost at less than 0.01 percent of G.D.P.

He said the same thing a while back, but it’s just as wrong now as it was then. Here’s what I said at the time:

Tariffs on certain goods are still quite high. A publication called World Tariff Profiles illustrates this nicely. If you look at p. 170 for U.S. statistics, you will see tariff duties for four general product categories of over 10%. You’ll also see maximum tariffs (i.e., the high tariff on particular products) of over 100%!

And if you look at the duty rates for other countries, they are generally much higher.

And none of that includes special “trade remedy” tariffs (anti-dumping, countervailing duties, safeguards), subsidies, discriminatory government procurement, or domestic laws and regulations that discriminate (such as local content requirements).

So, protectionism is alive and well. 

Turning to the part where I agree with him, he says:

But the fact remains that, these days, “trade agreements” are mainly about other things. What they’re really about, in particular, is property rights—things like the ability to enforce patents on drugs and copyrights on movies. And so it is with T.P.P.

… Is this a good thing from a global point of view? Doubtful. The kind of property rights we’re talking about here can alternatively be described as legal monopolies. True, temporary monopolies are, in fact, how we reward new ideas; but arguing that we need even more monopolization is very dubious—and has nothing at all to do with classical arguments for free trade.

Now, the corporations benefiting from enhanced control over intellectual property would often be American. But this doesn’t mean that the T.P.P. is in our national interest. What’s good for Big Pharma is by no means always good for America.

I don’t have much to add to his points, which I think are pretty good ones. In my view, there’s a need for a real debate on how much intellectual property protection is appropriate (and, in fact, we will be discussing this here at Cato next week). Unfortunately, that’s not what we are getting either domestically or in the international trade context, where it seems that more is always better.

Categories: Policy Institutes

Grading the Camp Tax Reform Plan

Fri, 02/28/2014 - 12:01

Daniel J. Mitchell

To make fun of big efforts that produce small results, the Roman poet Horace wrote, “The mountains will be in labor, and a ridiculous mouse will be brought forth.”

That line sums up my view of the new tax reform plan introduced by Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee.

To his credit, Chairman Camp put in a lot of work. But I can’t help but wonder why he went through the time and trouble. To understand why I’m so underwhelmed, let’s first go back in time.

Back in 1995, tax reform was a hot issue. The House Majority Leader, Dick Armey, had proposed a flat tax. Congressman Billy Tauzin was pushing a version of a national sales tax. And there were several additional proposals jockeying for attention.

To make sense of the clutter, I wrote a paper for the Heritage Foundation that demonstrated how to grade the various proposals that had been proposed.

As you can see, I included obvious features such as low tax rates, simplicity, double taxation, and social engineering, but I also graded plans based on other features such as civil liberties, fairness, and downside risk.

There obviously have been many new plans since I wrote this paper, most notably the Fair Tax (a different version of a national sales tax than the Tauzin plan), Simpson-Bowles, the Ryan Roadmap, Domenici-Rivlin, the Heritage Foundation’s American Dream proposal, the Baucus-Hatch blank slate, and—as noted above—the new tax reform plan by Chairman Camp.

Given his powerful position as head of the tax-writing committee, let’s use my 1995 methodology to assess the pros and cons of Camp’s plan.

Rates: The top tax rate for individual taxpayers is reduced from 39.6 percent to 35 percent, which is a disappointingly modest step in the right direction. The corporate tax rate falls from 35 percent to 25 percent, which is more praiseworthy, though Camp doesn’t explain why small businesses (which file using the individual income tax) should pay higher rates than large companies.

Simplicity: Camp claims that he will eliminate 25 percent of the tax code, which certainly is welcome news since the code has swelled to 70,000-plus pages of loopholes, exemptions, deductions, credits, penalties, exclusions, preferences, and other distortions. And his proposal does eliminate some deductions, including the state and local tax deduction (which perversely rewards states with higher fiscal burdens).

Saving and Investment: Ever since Reagan slashed tax rates in the 1980s, the most anti-growth feature of the tax code is probably the pervasive double taxation of income that is saved and invested. Shockingly, the Camp plan worsens the tax treatment of capital, with higher taxation of dividends and capital gains and depreciation rules that are even more onerous than current law.

Social Engineering: Some of the worst distortions in the tax code are left in place, including the health care exclusion for almost all taxpayers. This means that people will continue to make economically irrational decisions solely to benefit from certain tax provisions.

Civil Liberties: The Camp plan does nothing to change the fact that the IRS has both the need and power to collect massive amounts of private financial data from taxpayers. Nor does the proposal end the upside-down practice of making taxpayers prove their innocence in any dispute with the tax authorities.

Fairness: In a non-corrupt tax system, all income is taxed, but only one time. On this basis, Camp’s plan is difficult to assess. Loopholes are slightly reduced, but double taxation is worse, so it’s hard to say whether the system is more fair or less.

Risk: There is no value-added tax, which is a critically important feature of any tax reform plan. As such, there is no risk the Camp plan will become a Trojan Horse for a massive expansion of the fiscal burden.

Evasion: People are reluctant to comply with the tax system when rates are punitive and/or there’s a perception of rampant unfairness. It’s possible that the slightly lower statutory rates may improve incentives to obey the law, but that will be offset by the higher tax burden on saving and investment.

International Competitiveness: Reducing the corporate tax rate will help attract jobs and investment, and the plan also mitigates some of worst features of America’s “worldwide” tax regime.

Now that we’ve taken a broad look at the components of Camp’s plan, let’s look at the grades in comparison to the other plans I’ve reviewed over the years:

You can see why I’m underwhelmed by his proposal.

Camp’s proposal may be an improvement over the status quo, but my main reaction is, what’s the point?

In other words, why go through months of hearings and set up all sorts of working groups, only to propose a timid plan?

Now, perhaps, readers will understand why I’m rather pessimistic about achieving real tax reform.

We know the right policies to fix the tax code.

And we have ready-made plans—such as the flat tax and national sales tax—that would achieve the goals of tax reform.

Camp’s plan, by contrast, simply rearranges the deck chairs on the Titanic.

P.S.: If you need to be cheered up after reading all this, here’s some more IRS humor to brighten your day, including the IRS version of the quadratic formula, a new Obama 1040 form, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, a sale on 1040-form toilet paper (apparently a real product), and two satirical songs about the tax agency (here and here).

Categories: Policy Institutes

Political Poster Week Concludes: Posters and Press Freedom

Fri, 02/28/2014 - 09:22

Walter Olson

Whatever its words, a poster without a striking image is a missed opportunity, and incongruous, vaguely disturbing images often work best. (The snake is among the most unsettling creatures on earth to gaze at, yet it figures as the sympathetic subject in not one but two great American political images, the “Don’t Tread on Me” Gadsden flag and Ben Franklin’s “Join or Die.”)  For World Press Freedom Day last year, a journalists’-advocacy group in Jordan came up with this simple design. Yes, today’s tyrants are more interested in clamping controls on keyboards, blogs, and cellphone transmissions, but for evocativeness it’s hard to beat the chained nib of an old-style fountain pen, trembling somewhat as if in resistance.  

Today, social media and meme culture endlessly rework classic posters and poster genres for purposes of commentary and satire. That stands in a great tradition: as a means of persuasion, posters are themselves a powerful part of the press. Use them in a good cause, and enjoy them too. [Earlier entries in this series: Monday, Tuesday, Wednesday, Thursday]

Categories: Policy Institutes

More Evidence for a Low Climate Sensitivity

Fri, 02/28/2014 - 08:47

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

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

We have two new entries to the long (and growing) list of papers appearing the in recent scientific literature that argue that the earth’s climate sensitivity—the ultimate rise in the earth’s average surface temperature from a doubling of the atmospheric carbon dioxide content—is close to 2°C, or near the low end of the range of possible values presented by the U.N.’s Intergovernmental Panel on Climate Change (IPCC).  With a low-end warming comes low-end impacts and an overall lack of urgency for federal rules and regulations (such as those outlined in the President’s Climate Action Plan) to limit carbon dioxide emissions and limit our energy choices.

The first is the result of a research effort conducted by Craig Loehle and published in the journal Ecological Modelling. The paper is a pretty straightforward determination of the climate sensitivity.  Loehle first uses a model of natural modulations to remove the influence of natural variability (such as solar activity and ocean circulation cycles) from the observed temperature history since 1850. The linear trend in the post-1950 residuals from Loehle’s natural variability model was then assumed to be largely the result, in net, of human carbon dioxide emissions.  By dividing the total temperature change (as indicated by the best-fit linear trend) by the observed rise in atmospheric carbon dioxide content, and then applying that relationship to a doubling of the carbon dioxide content, Loehle arrives at an estimate of the earth’s transient climate sensitivity—transient, in the sense that at the time of CO2 doubling, the earth has yet to reach a state of equilibrium and some warming is still to come. 

Loehle estimated the equilibrium climate sensitivity from his transient calculation based on the average transient:equilibrium ratio projected by the collection of climate models used in the IPCC’s most recent Assessment Report. In doing so, he arrived at an equilibrium climate sensitivity estimate of 1.99°C with a 95% confidence range of it being between 1.75°C and 2.23°C.

Compare Loehle’s estimate to the IPCC’s latest assessment of the earth’s equilibrium climate sensitivity which assigns a 66 percent or greater likelihood that it lies somewhere in the range from 1.5°C to 4.5°C. Loehle’s determination is more precise and decidedly towards the low end of the range.

The second entry to our list of low climate sensitivity estimates comes from  Roy Spencer and William Braswell and published in the Asia-Pacific Journal of Atmospheric Sciences. Spencer and Braswell used a very simple climate model to simulate the global temperature variations averaged over the top 2000 meters of the global ocean during the period 1955-2011. They first ran the simulation using only volcanic and anthropogenic influences on the climate. They ran the simulation again adding a simple take on the natural variability contributed by the El Niño/La Niña process. And they ran the simulation a final time adding in a more complex situation involving a feedback from El Niño/La Niña onto natural cloud characteristics. They then compared their model results with the set of real-world observations.

What the found, was the that the complex situation involving El Niño/La Niña feedbacks onto cloud properties produced the best match to the observations.  And this situation also produced the lowest estimate for the earth’s climate sensitivity to carbon dioxide emissions—a value of 1.3°C.

Spencer and Braswell freely admit that using their simple model is just the first step in a complicated diagnosis, but also point out that the results from simple models provide insight that should help guide the development of more complex models, and ultimately could help unravel some of the mystery as to why full climate models produce  high estimates of the earth’s equilibrium climate sensitivity, while estimates based in real-world observations are much lower.

Our Figure below helps to illustrate the discrepancy between climate model estimates and real-world estimates of the earth’s equilibrium climate sensitivity. It shows Loehle’s determination as well as that of Spencer and Braswell along with 16 other estimates reported in the scientific literature, beginning in 2011. Also included in our Figure is both the IPCC’s latest assessment of the literature as well as the characteristics of the equilibrium climate sensitivity from the collection of climate models that the IPCC uses to base its impacts assessment.

Figure 1. Climate sensitivity estimates from new research beginning in 2011 (colored), compared with the assessed range given in the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5) and the collection of climate models used in the IPCC AR5. The “likely” (greater than a 66% likelihood of occurrence)range in the IPCC Assessment is indicated by the gray bar. The arrows indicate the 5 to 95 percent confidence bounds for each estimate along with the best estimate (median of each probability density function; or the mean of multiple estimates; colored vertical line). Ring et al. (2012) present four estimates of the climate sensitivity and the red box encompasses those estimates. The right-hand side of the IPCC AR5 range is actually the 90% upper bound (the IPCC does not actually state the value for the upper 95 percent confidence bound of their estimate). Spencer and Braswell (2013) produce a single ECS value best-matched to ocean heat content observations and internal radiative forcing.

Quite obviously, the IPCC is rapidly losing is credibility.

As a result, the Obama Administration would do better to come to grips with this fact and stop deferring to the IPCC findings when trying to justify increasingly  burdensome  federal regulation of  carbon dioxide emissions, with the combined effects of manipulating markets and restricting energy choices.

References:

Loehle, C., 2014. A minimal model for estimating climate sensitivity. Ecological Modelling, 276, 80-84.

Spencer, R.W., and W. D. Braswell, 2013. The role of ENSO in global ocean temperature changes during 1955-2011 simulated with a 1D climate model. Asia-Pacific Journal of Atmospheric Sciences, doi:10.1007/s13143-014-0011-z.

Categories: Policy Institutes

Drug Warrior Stumbles During Marijuana Legalization Hearing

Thu, 02/27/2014 - 16:15

Tim Lynch

From the Washington Post:

Annapolis Police Chief Michael A. Pristoop thought he came prepared when he testified before a Maryland state Senate panel on Tuesday about the perils of legalizing marijuana.

In researching his testimony against two bills before the Judicial Proceedings Committee, Pristoop said, he had found a news article to illustrate the risks of legalization: 37 people in Colorado, he said, had died of marijuana oversdoses on the very day that the state legalized pot….

Trouble is, the facts were about as close to the truth as oregano is to pot. After a quick Google search on his laptop, Raskin — the sponsor of the legalization bill that was the subject of the Senate hearing — advised the chief that the Colorado overdose story, despite its deadpan delivery, had been made up for laughs by The Daily Currant, an online comedy magazine.

Ouch! For more on the momentum of marijuana law reform, check out today’s New York Times.

Categories: Policy Institutes

Chairman Murray’s Memo: More of the Same

Thu, 02/27/2014 - 16:07

Nicole Kaeding

Today, Senate Budget Chairman Patty Murray sent her caucus a memo on the country’s fiscal outlook. She details the “$3.3 trillion in deficit reduction put in place over the last few years;” a likely refrain in President Obama’s budget next week. However, Chairman Murray’s memo leaves much to be desired.

The first section of Murray’s memo highlights the various ways that the deficit has been reduced over the last several years by Congress and the President. The bulk of savings are from the discretionary spending caps put into place by the Budget Control Act (BCA) of 2011. Another large share of deficit reduction came from $727 billion in tax increases over the last several years. All told, Murray counts $3.3 trillion in deficit reduction. This is an incredibly small step to tackling our $4 trillion budget.

But after detailing all of the great things this fiscal restraint is doing for the country, Chairman Murray completely turns course. Instead of detailing additional ways to cut spending and continue these marginal improvements, she starts a laundry list of needed government “investments”—spending programs. She calls for more spending on infrastructure, jobs programs, a minimum wage increase, and increased funding for research and development.

Also notably, she also does not include future sequester cuts in her numbers; an implicit acknowledgement that she does not plan to keep those promised cuts.

Chairman Murray’s memo also fails to acknowledge the impending fiscal crisis. According to the most recent Congressional Budget Office (CBO) report, the country’s debt and deficit are stable for the next few years, but by 2017 they increase dramatically again. CBO expects the deficit to rise to 4% of GDP by the end of the decade. Even though, revenues as a percent of GDP will be close to historical levels, Chairman Murray calls for more tax hikes, ignoring the real driver of our fiscal issues: spending.

The refrain from many over the last year has been that the deficit is back under control, and that Congress should go back to wildly spending. Chairman Murray’s memo follows that path. It fails to acknowledge the need for fiscal restraint and sets the stage for next week’s release of the President’s budget.

Categories: Policy Institutes

Free Trade in Doctors

Thu, 02/27/2014 - 16:04

Simon Lester

I wish I knew more about the medical system, so that I could write more intelligently about domestic and international trade issues in this area. With the caveat that there is a lot I don’t know here, I’m excited by the following development that will hopefully allow more inter-state trade in medical services:

A significant barrier to the interstate practice of telehealth is closer to being broken down. The Federation of State Medical Boards (FSMB) has completed and distributed a draft Interstate Medical Licensure Compact, designed to facilitate physician licensure portability that should enhance the practice of interstate telehealth.  Essentially, the compact would create an additional licensing pathway, through which physicians would be able to obtain expedited licensure in participating states.  As the FSMB notes in its draft, the compact “complements the existing licensing and regulatory authority of state medical boards, ensures the safety of patients, and provides physicians with enhanced portability of their license to practice medicine outside their state of primary licensure.”  This is a potentially significant development because burdensome state licensure requirements have been a major impediment to the interstate practice of telehealth. A physician practicing telehealth is generally required to obtain a medical license in the state where the patient—not the physician—is located.  As a consequence, physicians wishing to treat patients in multiple states need to obtain a license in each of those states in order to practice medicine lawfully, a lengthy and expensive process.

Thinking even bigger, the same idea could be applied internationally.

Categories: Policy Institutes

Does Occupational Licensing Make Sense?

Thu, 02/27/2014 - 11:10

Jeffrey A. Miron

The standard argument for occupational licensing - government-imposed limits on who can supply medical, legal, plumbing, and other services - is that such laws protect the public from low-quality provision of these services.

This argument is not convincing on its own: licensing limits the quantity of services provided, raising price, and thus harming consumers. A necessary condition for licensing to make sense, therefore, is that any improvements in service quality outweight the losses from higher prices.

A new study, however, finds that when de-regulation allows nurse practioners to perform more tasks without doctor supervision, the price of well-child medical exams declines (as implied by standard economics), with no “changes … in outcomes such as infant mortality rates.”

In at least this case, therefore, licensure is all cost and no benefit.

Categories: Policy Institutes

Bulgaria’s Currency Board versus Ukraine’s Chaos

Thu, 02/27/2014 - 10:55

Steve H. Hanke

When Communism inevitably and finally collapsed, Bulgaria’s economy was a basket case – behind almost all other communist basket cases, including Ukraine’s. Indeed, Bulgaria defaulted on its debt in 1990. By February 1991, Bulgaria had broken out in a bout of hyperinflation, with the inflation rate at 123% per month. And in February 1997, Bulgaria experienced the agonies of hyperinflation again, with the inflation rate reaching 242% per month. 

As he looked into the abyss, President Petar Stoyanov decided against taking the plunge and appointed me as his advisor in January 1997. I immediately prescribed a currency board system to put an end to Bulgaria’s malady, something I had laid out for Bulgaria back in 1991 (Steve H. Hanke and Kurt Schuler, Teeth for the Bulgarian Lev: A Currency Board Solution. Washington, D.C.: International Freedom Foundation, 1991.).

Bulgaria installed a currency board in July 1997. The lev was backed 100% by German marks and traded freely at a fixed rate of 1000 leva to 1 mark. Inflation and interest rates fell like stones. The economy stabilized, and the Bulgarians learned that, even though stability might not be everything, everything is nothing without stability. Discipline at last.

Yes, the main feature of a currency board is the fiscal and financial discipline that it provides. No more running to the central bank for a fiscal bailout. A currency board ties the hands of those meddlesome monetary authorities. And forget the silly theoretical and obscure arguments made by economists who don’t embrace fixed exchange rates. A currency board regime is all about discipline.

As we watch Ukraine melt down once again, we can see what could have been (and what could be) if Ukraine would have only embraced a system of discipline (read: currency board) – like Bulgaria did in 1997. The following table tells the tale:

Bulgaria versus Ukraine

Country

GDP per Capita (USD)

Fiscal Balances %GDP

Current Account Balances %GDP

General Govt. Gross Debt %GDP

Gross Borrowing Needs %GDP

Import Coverage Ratio (FX Reserves / Imports)

W.B. Ease of Doing Business 2014 Rank

Bulgaria

$7,623

-1.9%

1.5%

16.0%

2.6%

6.7

58

Ukraine

$4,011

-8.7%

-8.9%

42.8%

11.0%

1.9

112

Sources: Bulgarian National Bank, National Bank of Ukraine, J.P. Morgan (Emerging Markets Research), International Monetary Fund (IFS), World Bank (Doing Business). 

Prepared by Prof. Steve H. Hanke, The Johns Hopkins University.

Categories: Policy Institutes

Obama Administration Rips Off Middle Class and Threatens Elephants

Thu, 02/27/2014 - 10:32

Doug Bandow

As I’ve written before, the Obama administration plans to effectively ban the sale of all ivory in America, even if purchased or inherited legally years ago. If you can’t prove its age, you can be arrested and have your property confiscated—unless you are well-connected and exempted.

Elephants are being killed for their ivory. Activists unable to protect the animals now are targeting Americans who followed the law in buying and selling legal old ivory objects. 

But as I point out my latest piece in the American Spectator:

advocates of banning antique sales seem more interested in punishing people who bought and sold ivory legally because they bought and sold ivory, not because doing so would prevent poaching.  It is an exercise in moral vanity and political posturing, not practical conservation.

Some ban proponents complain of the difficulty of distinguishing between new and old ivory. Actually, European carving disappeared decades ago. Asian carving continues, but old and new differ in character, subject, wear, age, coloring, quality, and more. 

Nor do collectors of and dealers in antiques seek out poached ivory. Punishing people who followed the law and invested in legal objects might make a few extremists feel good, but won’t save a single elephant today.

Ivory entered America legally until 1989. Antiques with proper certification could be imported after that. But in mid-February the administration announced that if you had followed the law, it planned to render your collection or inventory essentially valueless.

The new guidance from the U.S. Fish and Wildlife Service indicated that most every auctioneer, collector, and dealer—and anyone else who has purchased or received something made of ivory—better hire a lawyer before selling their ivory possessions. 

The prospective rules are biased against average folks. If you represent the non-profit cultural establishment, you’ll get around the rules.

Point one, no “commercial” imports even of antiques will be allowed. However, the rules apparently will exempt “museum and educational specimens.” According to the administration’s reasoning, non-profit institutions will have a unique right to continue driving elephants to extinction.

Point two, exports are banned, except antiques in what the government calls “exceptional circumstances.” But “certain noncommercial items” will be allowed, so people with friends in government likely will be able to hurdle any new burdens in a single bound. Everyone else better hire a lawyer or lobbyist.

Point three, only antiques, proved through “documented evidence” will be eligible for sale across state lines. How many antiques in America have “documented evidence” attesting to their age? At least a wealthy collector with a valuable item can try to find an expert and procure a CITES certificate. Of course, museum transfers likely won’t be considered commercial and non-profits may be able to engage in low-key extortion: “Donate it to us and we can ensure a generous appraisal to get you a substantial tax deduction.”

Point four, only documented old ivory, imported before 1990, can be sold even within a state. Say you acquired a bunch of ivory items over the years and retired in, say, Bozeman, Montana. Got notarized certificates for everything? See what you can get for your collection in Helena. 

More likely, of course, you won’t have any documentation when items were brought to America. Then you can’t even take the objects—legally, at least—to a local flea market. Not that people would pay you more than a pittance there.

The administration emphasizes it will still allow legal sales. That’s only if you are friends with the Interior Secretary, or a congressman feared by the Interior Secretary. Or find a broker, well-connected but discreet antique dealer, or private collector network. Otherwise, tough.

Ironically, the new policy will reduce genuine conservation efforts. The Fish and Wildlife Service will have to shift resources away from those linked to the killing of elephants and toward thousands of Americans who’s only mistake was to follow the law.

The administration should reverse course to focus on poaching. If not, Congress should block implementation and enforcement of the rules.  Punishing average Americans for lawful behavior isn’t fair to them—or helpful to elephants. 

Categories: Policy Institutes

Freedom on Film

Thu, 02/27/2014 - 09:15

David Boaz

It’s Oscar time again, and once again there are some Best Picture nominees of special interest to libertarians. Dallas Buyers Club is a terrific movie with a strong libertarian message about self-help, entrepreneurship, overbearing and even lethal regulation, and social tolerance. 12 Years a Slave is a profound and painful movie about the horrors of slavery in a country conceived in liberty. Philomena is a tender personal story that sharply attacks the Catholic church and its censorious attitude toward sex, themes that would resonate with some libertarian viewers. This wasn’t the best year for libertarian movies – 2000 was pretty good – but libertarians will have some rooting interest Sunday night.

As I told Washington Post film critic Ann Hornaday in 2005, “America is basically a libertarian country, so Americans are going to put libertarian themes into the art they create, and sometimes it’s more explicit and sometimes it’s less so. But it’s not a big surprise to see individualism, anti-totalitarianism and fighting for freedom and social tolerance showing up in American art.” Here are some of my favorite examples (and of course they’re not all American):

Shenandoah, a 1965 film starring Jimmy Stewart, is often regarded as the best libertarian film Hollywood ever made. Stewart is a Virginia farmer who wants to stay out of the Civil War. Not our fight, he tells his sons. He refuses to let the state take his sons, or his horses, for war. Inevitably, though, his family is drawn into the war raging around them, and the movie becomes very sad. This is a powerful movie about independence, self-reliance, individualism, and the horrors of war. (There’s also a stage musical based on the movie that’s worth seeing, or you could listen to the antiwar ballad “I’ve Heard It All Before” here.)

War may be the most awful thing men do, but slavery is a close contender. Steven Spielberg’s Amistad (1997) tells a fascinating story about a ship full of Africans that turned up in New England in 1839. The question: Under American law, are they slaves? A long legal battle ensues, going up to the Supreme Court. Libertarians like to joke about lawyers. Sometimes we even quote the Shakespeare line, “The first thing we do, let’s kill all the lawyers” — not realizing that that line was said by a killer who understood that the law stands in the way of would-be tyrants. Amistad gives us a picture of a society governed by law; even the vile institution of slavery was subject to the rule of law. And when the former president, John Quincy Adams, makes his argument before the Supreme Court, it should inspire us all to appreciate the law that protects our freedom.

Lawyers play an important role in two other fine libertarian films. The Castle was produced in Australia in 1997 but reached the United States in 1999. It’s a very funny film about a character who thinks that living near the airport is just great. He even likes looking up at the massive power lines near his house because they remind him of what man can accomplish. Shades of Ayn Rand! Anyway, a man’s home is his castle, and the protagonist is shocked when the airport decides to seize his property to extend its runway. He fights the system to no avail until a smooth, well-dressed lawyer — way out of the lead character’s league — shows up and offers to take his case. Again we see powerful interests forced to defend themselves in a law-governed society. A nice defense of private property, and very funny to boot.

That same season in 1999 I also enjoyed The Winslow Boy, a David Mamet remake of a Terrence Rattigan play/movie from 1948. Despite a very different atmosphere — a stuffy, bourgeois family in Victorian England vs. a comic contemporary Australian family — it has two things in common with The Castle: a proud father who will do anything to defend his home and family, and a distinguished British lawyer who comes to the family’s aid. Mr. Winslow’s teenage son is expelled from the Naval Academy. Convinced his son is innocent, Winslow challenges the expulsion. When the Academy refuses any sort of due process, Winslow exhausts his life savings in a fight through the courts. The theme is the right of every person in a decent society to justice.

So Big (1953) stars Jane Wyman as a wealthy young woman suddenly delivered into poverty. She becomes a teacher, marries a farmer, has a son, loses her husband, and must run the farm on her own, at a time when women didn’t do that. It’s an inspiring story of self-reliance, and the disappointment she feels when her son chooses money and society over the architecture he loves. Based on a novel by Edna Ferber, the screenplay sounds almost Randian at times. Don’t see the 1932 version starring Barbara Stanwyck; it’s flat and boring. The difference is unbelievable.

The Palermo Connection (1990) is an odd Italian-made movie (but in English) cowritten by Gore Vidal. New York city councilman Jim Belushi runs for mayor on a platform to legalize drugs and take the profits out of the drug trade. The Mafia isn’t happy. His life is threatened. So he decides to go on a honeymoon, in the middle of his campaign — to Sicily. I said it was odd. But interesting, and very pointed.

Pacific Heights (1990) is a thriller that is almost a documentary on the horrors of landlord-tenant law. A young couple buys a big house in San Francisco and rents an apartment to a young man. He never pays them, and they can’t get him out, and then things get really scary. The lawyer lectures the couple — and the audience — on how “of course you’re right, but you’ll never win.” I just knew this happened to someone — maybe the screenwriter or someone he knew. Sure enough, when Cato published William Tucker’s book Rent Control, Zoning, and Affordable Housing, and I asked Pacific Heights director John Schlesinger for a jacket blurb, he readily offered “If you thought Pacific Heights was fiction, you need to read this book”; and he told me that the screenwriter had a relative who had gone through a tenant nightmare.

Finally, I’ll mention My Beautiful Laundrette, made for British television in 1985. What’s interesting about this film is that novelist/screenwriter Hanif Kureishi thought he was making a savage indictment of Thatcherite capitalism. But to me, the good characters in the movie — white and Pakistani, gay and straight — are the ones who work for a living, and the bad characters are clearly the whining socialist immigrant intellectual, who doesn’t like his son opening a small business, and the British thugs who try to intimidate the young Pakistani businessman. My favorite line: The enterprising brother of the layabout intellectual takes a young working-class Briton (Daniel Day-Lewis) with him to evict some deadbeat tenants. The young Brit suggests that it’s surprising the Pakistani businessman would be evicting people of color. And the businessman says, “I’m a professional businessman, not a professional Pakistani. There is no question of race in the new enterprise culture.” I think Kureishi thinks that’s a bad attitude. The joke’s on him.

If you’d like more film recommendations, I’m delighted to report that Miss Liberty’s Guide to Film is available again—on Kindle. It offers more than 250 short reviews of movies with libertarian themes.

Categories: Policy Institutes

Political Poster Week Continues: "Safety First"

Thu, 02/27/2014 - 09:01

Walter Olson

Countless gorgeous posters, many of them French, promote the consumption of alcohol, but few achieve high style while arguing the Prohibitionist cause. Anti-saloon campaigners were better known for sketches of sentimentally drawn children, drunks in gutters, and pinstriped tycoons in top hats raking in bucks from the liquor traffic (imagery that reminds us of the close affinity between that and other Progressive-era anti-business movements). 

So where’d this Art Deco gem come from? It’s not immediately clear. It would be easy to mistake it for a simple traffic-safety poster, until you notice that as the vehicles whiz past each other in their Futurist way, the red diagonal that keeps them separate is labeled “PROHIBITION.” My online quest for its origins came up blank: among the few clues is the artist signature “LEW” at lower left, which also appears on this almost equally striking poster for the anti-alcohol cause. The latter poster includes the phrase “Outlawed or Legalized,” and the use of “z” rather than “s” in “Legalized” suggests American rather than British origin. 

In retrospect, of course, we know the traffic-safety message was to prove far more effective as an impetus to legal restriction of alcohol than most of the others. It would seem strange today for public officials to lecture us against enjoying a glass of Merlot based on moral disapproval or concern for our family responsibilities, but few flinch when the police chief of Austin proposes criminalizing driving on a meager 0.05 blood alcohol, with a Texas state senator explaining: “Some people shouldn’t be driving after one drink.”

Categories: Policy Institutes

Proposed IRS Rulemaking Would Chill Public Advocacy

Wed, 02/26/2014 - 15:38

Caleb O. Brown

Tomorrow ends the comment period for a proposed IRS rule that would change the way groups from the Sierra Club to the NRA advocate on behalf of their members. By defining “candidate-related political activity” as the rule has, election time could compel these groups to scrub their websites and Twitter feeds of almost any mention of political candidates.   On March 4, join us for an event exploring the proposed rule. And you can learn more by listening to today’s Cato Daily Podcast with Allen Dickerson, legal director of the Center for Competitive Politics.

You can always subscribe to the podcast here.

Categories: Policy Institutes

Is the Grand Jury System a Joke?

Wed, 02/26/2014 - 14:25

Tim Lynch

An excerpt from the Charlotte Observer:

During a single four-hour workday last week, a Mecklenburg County grand jury heard 276 cases and handed down 276 indictments.

That means the 18 jurors heard evidence, asked questions, weighed whether the charges merit a trial, then voted on the indictments – all at the average rate of one case every 52 seconds….

“The entire system is a joke,” said Joe Cheshire, a Raleigh attorney who handles high-profile criminal cases across the state. “There is absolutely no living, breathing person with any kind of intellect who believes that a grand jury could consider and vote on 10 complex issues in the period of time that they use to deliberate on hundreds.”

Charlotte attorney Jim Cooney agrees. Rather than check the power of government, grand juries have become a prosecutor’s ally, he said, “that hands out indictments like they’re boxes of popcorn.”

The article notes that the one recent case where a grand jury declined to issue an indictment involved a police officer.  Hmm.

For Cato scholarship on the problems with the grand jury system, go here.

Categories: Policy Institutes

Further Thoughts on Arizona's "Religious Freedom" Bill

Wed, 02/26/2014 - 14:24

Walter Olson

My colleague Ilya Shapiro has skillfully laid out some points often overlooked in the furor over Arizona’s SB 1062. In particular, the bill is a variation on what’s known as a “mini-RFRA” – that is, a state bill patterned after the federal Religious Freedom Restoration Act (RFRA) of 1993 – and can scarcely be understood outside the context of how RFRAs work, why they managed to sail almost uncontroversially through the U.S. Congress in 1993 with bipartisan support, and how they have since emerged as a serious obstacle to particular policy ambitions such as ObamaCare’s universal employer contraceptive mandate, with a resulting tendency for liberal opinion to swing against them (yet often with a curious reluctance to come right out and say that RFRA itself goes too far).  

A few points I’d add: 

* First, the various religion-and-discrimination bills moving in multiple state legislatures are very different from each other and demand separate analysis. (This Mother Jones account, while strongly opposed to all the bills, is better than most about acknowledging their differences.) The first bill to provoke a national furor was the very extreme measure passed by the Kansas lower house, which would have (among other things) introduced a new legal right for many public servants not to do their jobs and created rights to sue employers for not accommodating anti-gay sentiment. The Republican leadership of the Kansas Senate quite sensibly flagged these incursions on the rule of law and on the freedom of private enterprise as reasons to kill the bill

* What of the Arizona proposal? Eleven leading religion-and-law scholars, including such heavy hitters as Michael McConnell and Douglas Laycock, correct some misconceptions about the bill in this letter reproduced at Power Line. The Arizona bill pushes mini-RFRAs into highly disputed territory by specifying that it applies not just to “government” but to “state action” more broadly, the crucial difference being that it aims to insert a right to religious accommodation as a defense in litigation between private parties arising from state laws. (Contrary to some imaginings, the bill creates a right of attorneys’ fee recovery by prevailing religious-accommodation claimants only when the adverse party is a government.) To confess my biases, as a general matter I like the idea of affording wider religious-liberty defenses in most anti-discrimination statutes applying to private actors. At the same time, doing it this way – by pushing out the boundaries of RFRA to change the playing field of private litigation at one stroke, rather than pause for a debate about how best to address multiple areas and situations – strikes me as fairly sure to generate unintended consequences and unexpected results. When advocates warn Arizona Gov. Jan Brewer she will be sailing the ship of state into uncharted waters if she signs the bill, this is the provision that most makes me think they’re on to something. 

* Why not let the Arizona episode begin a debate about whether RFRAs have gone too far or not far enough? The law’s status as a bright new idea in the Clinton era doesn’t mean it should be immune from renewed scrutiny today with the perspective two decades of experience affords. At best, speaking as one not unsympathetic with its aims, it was and is at best a very blunt instrument, one that tends to privilege sincere religious belief over equally sincere belief grounded in something other than religion. It’s entirely conceivable that it and its state imitators go too far as applied to some subjects, yet perhaps not far enough as applied to others. 

Such a debate might prove more productive than the usual bitter round in the culture wars.

 

Categories: Policy Institutes

Bank Tax Is Wrong "Fix" for Too-Big-To-Fail

Wed, 02/26/2014 - 12:43

Mark A. Calabria

Chair of the House Ways and Means Committee Dave Camp is soon to roll out a plan for comprehensive tax reform. He is to be commended for doing so. Our tax code is an absolute mess with incentives for all sorts of bad behavior. Early reports suggest, however, that Congressman Camp will also include a “bank tax” to both raise revenue and address the “Too-Big-To-Fail” (TBTF) status of our nation’s largest banks. While the evidence overwhelmingly suggests to me that TBTF is real, with extremely harmful effects on our financial system, I fear Camp’s approach will actually make the problem worse, increasing the market perception that some entities will be rescued by the federal government.

Bloomberg reports the plan would raise “would raise $86.4 billion for the U.S. government over the next decade…would likely affect JPMorgan Chase & Co, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley.” The proposal would do so by assessing a 3.5 basis-point tax on assets exceeding $500 billion.

While standard Pigouvian welfare analysis would recommend a tax to internalize any negatives externalities, TBTF is not like pollution, it isn’t something large banks create. It is something the government creates by coming to their rescue. I don’t see TBTF as a switch, but rather a dial between 100 percent chance of a rescue and zero. By turning the banks into a revenue stream for the federal government, we would likely move that dial closer to 100 percent–and that is in the wrong direction. For the same reason, I have opposed efforts to tax Fannie Mae and Freddie Mac in the past. The solution is not to bind large financial institutions and the government closer together, as a bank tax would, but to further separate government and the financial sector. Just over a year ago, I laid out a path for doing so in National Review. Were we to truly end bailouts, limiting government is the only way to get that dial close to zero.   

If we want to use the tax code to reduce the harm of financial crises, then we should focus on reducing the preferences for debt over equity, which drive so much of the leverage in our financial system.  I’ve suggest such here in more detail. There are also early reports that Camp’s plan will reduce some of these debt preferences. Let’s hope those remain in the plan.

Categories: Policy Institutes

Folly of Federal Flood Insurance

Wed, 02/26/2014 - 11:29

Chris Edwards

Subsidized flood insurance is one of the many federal programs that is counter to both sound economic policy and sound environmental policy. Congress created the National Flood Insurance Program (NFIP) in 1968 to help homeowners in flood-prone areas purchase insurance. The FEMA-run program covers floods from river surges and storms on the seacoasts.

In recent years, the NFIP has gone hugely into debt and it may be bailed-out by taxpayers at some point. The program has encouraged people to build homes in areas that are too hazardous to safely occupy. It has encouraged towns to expand development in flood-prone areas. And the program undermines constitutional federalism by prompting the federal government to reach its regulatory tentacles into local zoning issues.

The NFIP subsidizes wealthy people with multiple payouts after their homes on the seacoasts are repeatedly destroyed. The program is very bad policy—a seemingly good idea to policymakers in the 1960s that has ended up creating growing distortions.

When I started reading about the NFIP recently, I was surprised to learn that Congress made sensible reforms to it in 2012 under the Biggert-Waters Act. The best reform would be a complete repeal of the NFIP, but in the meantime the 2012 law was a good start at reducing the program’s costs and distortions.

Alas, the prospect of Congress staying on a pro-market, pro-environment reform path was apparently too good to be true. No sooner had the ink dried on the 2012 law than members of Congress began trying to reverse the reforms.

This week, Congress will be voting on a bill that backtracks on the 2012 reforms. I have not studied the details of the new bill, but Diane Katz at the Heritage Foundation has penned a nice overview.

Categories: Policy Institutes

Political Poster Week Continues: "I Need Smokes"

Wed, 02/26/2014 - 10:30

Walter Olson

 

As I noted in my book The Rule of Lawyers, it’s not by happenstance that the sharpest increases in Americans’ smoking rates have come in wartime. Nicotine staves off the boredom, fear, and loneliness of life on the front lines, and the smoking habit encourages socialization among troops. Years later, the federal government was at pains to downplay its vigorous promotion of tobacco use as part of both the WWI and WWII war effort. (It had a sideline in promoting some other important forms of substance abuse as well, notably amphetamine-munching.)

This poster, of World War I vintage, would have made a good illustration for the article I wrote in Reason a while back on government contributions to product-related risk. For some other tobacco-related war poster themes, check the Hoover Institution political poster database

Categories: Policy Institutes

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