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Ilya Shapiro

Here’s Boston College law professor Kent Greenfield, writing at The Atlantic about the racist-chant scandal at the University of Oklahoma:

We are told the First Amendment protects the odious because we cannot trust the government to make choices about content on our behalf. That protections of speech will inevitably be overinclusive. But that this is a cost we must bear. If we start punishing speech, advocates argue, then we will slide down the slippery slope to tyranny.

If that is what the First Amendment means, then we have a problem greater than bigoted frat boys. The problem would be the First Amendment.

Cato’s brief in Walker v. Texas Division (the Confederate flag license-plate case) pokes plenty of fun at government censors who would protect us from “offensive” speech, but this is no laughing matter. 

H/t Trevor Burrus

Simon Lester

This is from Ezra Klein:

I’m skeptical of the sheer size of modern trade deals and the opaque process that creates them. The negotiation process isn’t quite as secretive as some think — the congressional briefings are constant, and the advisory committees are sprawling — but it is insanely complex.

The result is that even where there is transparency, it’s a form of transparency that can only really be navigated by politically sophisticated, highly motivated actors — which is to say it’s a form of transparency that quickly becomes a venue for lobbying. That’s one reason these deals end up including so much … stuff. The process is constructed in such a way that the negotiators get a lot of special pleading from individual industries and interests. Responding to those requests feels like responding to the public, but it isn’t, and it leads to deals jam-packed with individual provisions that look a lot like giveaways.

This is a great insight about modern trade agreements.  It’s important to think of a trade agreement as just another piece of legislation.  In the past, trade agreements focused mainly on tariffs.  Now they govern a wide range of policies (“stuff”), and as a result they are susceptible to regulatory capture.  Special interest groups see them as just another way to achieve their political goals.  What this means is, as with any piece of legislation, don’t be fooled by the marketing.  Look closely at all the details.

Alan Reynolds

Business news pages are suddenly full of hand-wringing about how the rising dollar threatens to slash U.S. exports and economic growth.  “The strong dollar is the biggest threat to economic recovery,” warns one reporter.  Others quote White House chief economist Jason Furman saying “the strong dollar is undoubtedly a headwind” for the U.S. economy.

It’s not that simple.

The graph above compares real U.S. exports with the trade-weighted exchange rate.  The dollar was rising much faster in 1995-2000, when both exports and the economy were growing at an impressive pace.  Exports eventually fell with recession, as always.  But it is much harder to blame the recession on exchange rates than on interest rates – the Fed pushed the fed funds rate 4.7 percentage points above core inflation.   

From 2001 to 2007, the dollar fell and exports rose.  That pattern might appear to justify recent lobbying for a lower dollar were it not for the familiar connection between oil prices and the dollar.  As the dollar fell, the price of West Texas crude soared from $19 a barrel in December 2001 to over $133 in June-July 2008.  Every postwar recession except 1960 was preceded by a spike in oil prices, and the Great Recession turned out to be no exception.

The dollar weakened at the start of this recovery, but related inflation cut average real wages by 1.5% in 2011 and 0.6% in 2012.   As the dollar firmed up, by contrast, real wages rose by 0.7 % in 2013 and 0.8% in 2014.

The recent rise in the dollar has merely brought it back to about where it was in 1998 or 2006, which were not bad years.  The latest exchange rate gyrations are dominated by self-inflicted wounds to the euro and yen, but U.S. exports to the EU are only 1.3% of GDP, and exports to Japan are 0.4% of GDP.

U.S. multinationals have complained about “translation losses” – the fact that profits of subsidiaries in Europe or Japan will be less valuable when translated into dollars.  But that is equally true for earnings of European and Japanese firms too (and for their stock prices when translated into dollars). And multinationals often leave foreign earnings abroad, due to the uniquely foolish U.S. tax if offshore earnings are brought home.  

The weakened euro and yen will raise the cost of living and cost of production for citizens of the afflicted countries (including the price of oil and other commodities).  It is true that such expertly planned impoverishment of such large economies can scarcely benefit the global economy. If other countries want to make their money less trustworthy and less desirable, however, there is not much we can do about that.  

Nicole Kaeding

The federal government’s debt ceiling will return on Monday following a 14 month suspension. This is the first of many important fiscal deadlines that Congress must consider before the end of the calendar year. These deadlines represent opportunities for Congress to control spending growth and reform entitlement programs.

Below is a list of the major fiscal deadlines:

  • Debt Ceiling: The federal debt ceiling limits the amount of outstanding federal debt. When the debt ceiling returns on March 16, it will be approximately $18.1 trillion. Congress is not expected to raise the limit this weekend, so the Treasury Department will have to use its flexibility to fit the debt within that limit. With these Treasury procedures, the Congressional Budget Office expects that congressional action can be put off until October or November.
  • Sustainable Growth Rate: The Sustainable Growth Rate (SGR or “doc fix”) was passed in 1997 and attempts to control Medicare spending growth. If Medicare grows faster than the legislated formula, reimbursements to doctors are cut. However, Congress has never let the cuts go into effect. The current relief from cuts expires on April 1. If Congress doesn’t act, reimbursements would be cut by 20 percent. Congress is expected to pass a short-term patch, the 18th time it will have done so in 13 years.
  • Budget Resolution: The House of Representatives and the Senate are supposed to pass the annual budget resolution by April 15. The budget resolution sets the broad trajectory of spending for the upcoming fiscal year. Both chambers are expected to release their budget drafts during the week of March 16 to give themselves several weeks to work through this process and provide an opportunity to reconcile the two proposals.
  • Highway Trust Fund: The Highway Trust Fund will become insolvent on May 31. For a number of years, the Highway Trust Fund has spent more than it collects in revenue from the federal gas tax. Its current annual imbalance is $14 billion. Congress will need to figure out a way to balance the trust fund’s spending and revenue.
  • Export-Import Bank: The charter for the bank expires on June 30. The bank “provides access to favorable financing for the foreign customers of some U.S. companies.” It essentially provides handouts to large companies, namely General Electric and Boeing who receive the bulk of the benefits. Congress must decide whether to extend, reform, or end the bank.
  • Appropriations Bills: Federal spending is governed by 12 appropriations bills, which provide detailed spending instructions for federal agencies and departments. These 12 bills, or a substitute, must be passed by the end of the fiscal year on September 30. If these spending levels are above the amounts set by the 2011 bipartisan Budget Control Act, automatic spending cuts, known as the sequester, will take effect. The cuts hit both defense and nondefense parts of the budget.
  • Children’s Health Insurance Program: The Children’s Health Insurance Program (CHIP) expires on September 30. CHIP provides health care benefits to children whose family income is below 200 (or 250) percent of the federal poverty level, approximately $48,000 for a family of four. Congress must decide if it will extend the program, and if so, how that will be done.

Congress has a full plate. Each of these items presents a challenge to the new Republican Congress. Will they resist calls to increase defense spending? Will they control domestic spending? Will they use their leverage to make some modest reforms to entitlement programs?

Next week’s budget resolutions will provide a glimpse into Congress’s thinking and set the tone for the remainder of the calendar year. 

Patrick J. Michaels

As we’ve mentioned before on the Cato blog, over the past few weeks some members of Congress have been sending letters of intimidation to researchers whose scientific findings were politically inconvenient to the members’ policy proposals. First, seven scientists working at public universities were harassed by Rep. Raul Grijalvav (D-AZ). This was followed by an email to 107 organizations, ranging from private companies to think tanks, attempting to create a whisper campaign of allegations of impropriety. My boss, Cato CEO John Allison, received one of these letters.

Mr. Allison’s response to the letter he received from Sens. Ed Markey (D-MA), Barbara Boxer (D-CA), and Sheldon Whitehouse (D-RI) is reproduced below the jump.

We at the Center for the Study of Science, as with the rest of the Cato Institute, are very proud not only of the quality of the work we produce but also of our values—and those morals compel us to not bow to those using their authority as a weapon to silence legitimate scientific inquiry.

The actions of these members of Congress are exactly why Cato’s Center for the Study of Science was founded: the government wishes to use science as a weapon to increase its political power, then use that political power to create a more convenient political climate. We wish to change this climate of fear into one of truth—and we would like to extend an invitation to Sens. Markey, Boxer, and Whitehouse to join us.

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

Another day, another negative impact from pernicious global warming caused by humanity’s relentless quest for self-betterment.

Today, it is our coffee supply that is in jeopardy. Earlier this week, global warming was melting mummies in Chile. Last week, it was blamed for war in Syria. Turns out that global warming is a highly selective beast—it only harms the things we love, while enhancing the things we don’t.

Penguins? Polar bears? Songbirds? Coffee?

Harms. Harms. Harms. Harms.

Jellyfish? Poison ivy? Ragweed? War?

Helps. Helps. Helps. Helps.

Mummies are sort of a special case.  If they were roaming around attacking people, we’d imagine that global warming would empower them. But in this case, the mummies are harmlessly laying around in the (apparently poorly climate-controlled) vaults in a museum in Chile.  There, they are a natural treasure. So, predictably, global warming is causing harm. 

[Gotta wonder what warming could do to poor old Lenin lying entombed in Red Square.  Our greener friends might want him reincarnated, while others would hope he would begin to leak like the Chilean mummies].

And the list goes on and on—something that we’ve pointed out previously (see here and here, for example).

Consequently, the news of the past week should hardly come as a great surprise. We’re pretty used to it by now.

But what may come as a surprise is that according to U.K. economist Richard Tol, recent studies into the economic impacts of climate change find the positives to be increasing and the negatives to be decreasing.

Tol writes:

Since 2009, however, more estimates of the economic impact of climate change have been published…The new trend shows positive impacts for warming up to about two degrees global warming, just like the old trend did. The new trend, however, shows markedly less negative impacts for more profound warming than did the old trend. In other words, in the last five years, we have become less pessimistic about the impacts of climate change.

Couple this result with the bevy of new scientific findings indicating the future climate change is likely to be on the low side of climate model projections and we have some good news about climate change’s impact on something that we all like—money!

Got to wonder why it is that you only find this result highlighted in these pages and not headlining the front page of the Washington Post or New York Times.

Neal McCluskey

Common Core supporters love to accuse opponents of peddling misinformation, and sometimes opponents do. On the flip side, Core supporters are frequently guilty not only of peddling deceptive information of their own, but promising the world without sufficient evidence to justify it. A new report from Harvard’s Paul Peterson – generally a pretty sober analyst – comes a bit too close to making such a leap, strongly suggesting that the Common Core has caused appreciable improvement in the rigor of state standards.

Based on a rough trend of decreasing differences between the percentage of students scoring “proficient” on state tests and on the National Assessment of Educational Progress, Peterson and co-author Matthew Ackerman report that state standards are rising. In other words, “proficient” on state tests is looking more like presumably high-flying “proficient” on the “Nation’s Report Card.”

Between 2011 and 2013, “20 states strengthened their standards, while just 8 loosened them,” Peterson and Ackerman report. To what do they attribute this? “A key objective of the CCSS [Common Core] consortium – the raising of proficiency standards – has begun to happen.” In case the text of the report didn’t make the attribution of success to the Core clear, the report’s subhead intoned that, “commitments to the Common Core may be driving the proficiency bar upward.”

At the very least, there should be a huge emphasis on “may,” and the Core probably shouldn’t be mentioned at all.  

Indeed, Peterson and Ackerman’s results could suggest that the Common Core actually dampened rigor. According to the report, of the four states that never adopted the Core, Texas and Virginia raised their standards while Alaska and Nebraska stood pat. That means 50 percent of non-adopters lifted their standards and 50 percent stood their ground. None went backward. Among Core adopters, in contrast, eight states, or 18 percent, lowered their standards; 19, or 42 percent, stood still; and only 18, or 40 percent, raised their bars. (I exclude Minnesota, which adopted the English standards but not the math, and West Virginia, for which data was unavailable. Among adopters I include Indiana and Oklahoma, which eventually dropped out but were Core states as of 2013.)

That said, the bigger point is that you can’t reasonably reach any conclusion about the Core’s effect from Peterson and Ackerman’s analysis. For one thing, only Kentucky had fully implemented the Core as of the 2013 NAEP administration, which took place at the beginning of the year, and the vast majority of states weren’t even close. Indeed, most states are just now – 2015 – starting to give the tests associated with the Core, which also happen to define “proficiency.”

There is also a huge problem of controlling for the effects of numerous variables besides the Core, including other federal, state, and local policies; changes in socio-economic conditions; etc. Indeed, toward the end of the report Peterson and Ackerman note the possibility that waivers from No Child Left Behind encouraged some states to raise their standards. Unfortunately, they don’t mention that possibility without also crediting the Core: “Indeed, the waivers—as well as CCSS expectations—may help to account for the increasing rigor of state standards since 2011.”

There’s one last, interesting bit of information in the report: Between 2005 and 2013 – basically, the No Child Left Behind era – almost the same number of states appeared to lower their standards as raise them. Couple that with the possible effect of waivers and the superior performance of non-Core states, and this report could easily be used to say centralized policy interventions don’t work, be they No Child Left Behind or the Common Core. Of course, the report doesn’t justify that conclusion, either. 

Alan Reynolds

Jason Furman, chairman of the Council of Economic Advisers, set out to explain “middle-class economics” in the Wall Street Journal, March 11, in an earlier Vox blog and in a presentation to National Association of Business Economists (NABE), as well as the first chapter of the Economic Report of The President

The intent is to make the recent economy look healthier (massaging 2.3-2.4 percent growth for 2013-14 into 2.7 percent), and to claim that “subpar” 2010-14 income gains for the middle class (generously defined as the bottom 90 percent) are not due to a subpar recovery but to something that has gone on ever since 1973.  His Wall Street Journal article complains of “the decades-long trend of slower income growth for the middle class.”

Furman says, “Congressional Budget Office data (with a minor extrapolation) show, median U.S. incomes are up 17 percent since 1973.”  Actually, CBO data start with 1979 and end with 2011, so it takes more than minor extrapolation to extend that back to 1973 or forward to 2013.  CBO estimates show real after-tax median income rising from $45,400 in 1983 to $68,000 in 2008 (in 2011 dollars), but not yet back to the 2008 level by 2011. Making up a number for 1973 can’t undo stagnation after 2008. 

He continues: “But from 1948-73, median incomes rose 110 percent, according to broadly comparable Census estimates.”  Yet the two series aren’t remotely comparable.  Unlike pre-tax “money income” from the Census Bureau, the CBO subtracts federal taxes (middle-income tax rates were nearly cut in half since 1981) and includes rapidly increased health and other in-kind benefits from employers and government (Medicaid, SNAP, CHIP and housing allowances). 

Furman repeatedly sets up 1973 as the ideal, with productivity, incomes, and fairness all supposedly downhill after that.  The reason this old trick is still so popular is that 1973 was the last year Nixon’s price controls appeared to keep the consumer price index artificially low – creating a brief artificial spurt in measured real wages and productivity.  When price controls exploded in a wave of shortages, average weekly earnings (in 1982-84 dollars) dropped from $341.36 in 1973 to $314.77 in 1975, $308.74 in 1979, and $290.80 in 1980.  A falling dollar and rising tax rates stimulated demand and discouraged supply, giving us two nasty episodes of “stagflation.”  Amazingly, those trying to blame current discontents on the distant past continue to hold up 1973 or 1979 as ideals – idolizing the economics of Richard Nixon and Jimmy Carter. 

Furman writes, “In 1973 the bottom 90 percent of households received 68 percent of the nation’s income, a figure that has fallen to 53 percent today.”  But because this is no measure of the nation’s income, Furman has no idea what the bottom 90 percent share has been.   Instead of using any official measure of personal or household income, Furman is citing an untenable private estimate of income reported on tax returns –with income frequently redefined by changing tax laws.  “From 1944 on,” Piketty and Saez explain (Table A0), “total income is defined as total Adjusted Gross Income less realized capital gains in AGI, taxable Social Security and Unemployment Insurance benefits, and adding back all adjustments to gross income. Income of non-filers is imputed as 20 percent of average income (50 percent in 1944-1945).”  

As I pointed out in a recent article and blog post, the data Furman cites report that the average real income of the bottom 90 percent was higher in 1968 than it was in 2013.  Claiming to actually believe such preposterous data is a mark of unlimited gullibility or deception.                                                      

 

 

Justin Logan

I’ve been talking about U.S.-Iran policy to groups around the United States for about eight years now. Many members of these groups—World Affairs Councils, university groups, local groups interested in Middle East policy—disagree with my general take on Iran and the Middle East, but I’ve always gotten a fair hearing and good questions.

Given that, it’s been both amusing and depressing to watch the political spectacle that’s been happening in Washington this week. It all began when Bill Kristol’s favorite senator, Tom Cotton (R-AR), got 46 of the other 53 Republican Senators to join him in signing an “open letter to the leaders of the Islamic Republic of Iran,” trying to scare the clerical leadership away from a diplomatic deal by threatening to scotch it themselves once Barack Obama is out of office. Cotton, a Harvard Law grad, was subsequently chided on his understanding of the U.S. Constitution both by the Iranian foreign minister, Javad Zarif, as well as by Jack Goldsmith, a conservative lawyer who worked on the legal aspects of the war on terror for the George W. Bush administration.

In response to media inquiries, GOP Senators gave embarrassing explanations of the letter. Most absurd was Cotton’s protestation that the letter was intended to help produce a better deal. This claim is absurd not because the causal pathway from this letter to a better deal is dubious (although it is), but because Cotton has made perfectly clear that his goal is the destruction of negotiations, not improving them. As he remarked at a January Heritage Foundation event:

the end of these negotiations isn’t an unintended consequence of Congressional action, it is very much an intended consequence. A feature, not a bug, so to speak.

Other legislators’ responses were hardly better. Signatory and presidential hopeful Rand Paul asserted that despite its salutation to “the leaders of the Islamic Republic of Iran” and its translation into Farsi, the letter was in fact addressed to the administration. John McCain took a different interpretation, claiming the letter was intended to signal to Iran that Congress will play a role in implementing any deal, shrugging that “maybe [the letter] wasn’t the best way to do that.” Pulling back the curtain to reveal the care with which senior senators handle the high politics of national security, McCain explained his thought process in deciding to sign the letter:

I saw the letter, I saw that it looked reasonable to me and I signed it, that’s all. I sign lots of letters.

Noted.

Democrats and Obama partisans’ response was also depressing. Noted legal scholar Howard Dean declared that the letter “bordered on treason,” and the absurdity of an online petition asking the White House to prosecute the #47Traitors, as they were hash-tagged on Twitter, under the Logan Act did not stop it from garnering 150,000 signatures in under 48 hours.

It’s always a question whether the American public or the American foreign policy elite have more dangerous views on international politics, and I’m sorry to say this whole spectacle hasn’t helped resolve the question one way or the other. But there is one point that bears noting in conclusion.

The most alarming aspect of this whole spectacle—for the GOP and for the nation—has been the aftermath. In Politico’s story discussing the consequences of the letter, author Burgess Everett noted that Cotton was failing upward: “Cotton has rocketed to the top of TV bookers’ lists, and fellow Republican senators are suddenly flocking to him for counsel on foreign policy.” This is despite the fact that the letter was an embarrassment on its own terms, and perhaps even dangerous on reality-based terms.

In a world where the GOP donor class cared about the party’s stewardship on sensitive national security matters, people who dreamed up these sorts of pranks would be defenestrated. Say what you will about Jim Baker or Brent Scowcroft, they wouldn’t have put up with this sort of nonsense. But in a party where the entire foreign policy apparatus has been taken over by neoconservatives, there’s no consequence for this sort of statesmanship, if one can even call it that. Until the GOP donor class decides it’s had enough of this sort of thing and pushes for change, expect more of it.

K. William Watson

Lego’s patent for the “Toy Building Brick” expired in 1988, but the company still aggressively tries to claim monopoly privileges over its products.  Ten years ago, Lego tried unsuccessfully to claim trademark protection for blocks with circles on top.  Now they are going after competitors for making products that look similar to the new “Lego Friends” line of blocks marketed toward girls.  For example, Lego complains that its competitors have infringed its copyright in “Figure with Skirt”.

Of immediate interest is the fact that Lego has filed a complaint at the U.S. International Trade Commission seeking to bar importation of certain Mega Bloks, Lite Brix, and Best-Lock products.  There are a number of reasons why the ITC should not be adjudicating patent or other intellectual property disputes, and if you’re interested in the full story, you should read my Cato Policy Analysis on the subject from 2012.

The Lego case, in particular, raises an important question about the ITC’s proper role in enforcing intellectual property rights.  Because the ITC is a protectionist agency, and its IP litigation power was created to protect U.S. industries from “unfair competition,” there must be a “domestic industry” to protect before the ITC can act. 

The complainant in this case is a Danish company that manufactures its products in Europe and Mexico.  The respondents include two U.S. companies and one Canadian company that manufacture their products in China and Canada. 

So there’s a strong possibility that Lego’s ITC complaint will fail due to lack of a domestic industry.  That’s good news if you’re a consumer of children’s toys.  But it’s also an irrational impediment to effective patent enforcement.

Supporters of the ITC’s patent power consistently point out that the agency is good at enforcing patents.  Cases take less time and cost less money than court trials.  But this is merely an argument for reforming how district courts handle patent cases, not a justification for a specialized patent court for imports.  The domestic industry requirement, which certainly doesn’t apply in federal district court, just emphasizes how inappropriate it is to mix patent enforcement and trade protection.

And it’s always worth mentioning that bringing patent infringement lawsuits in court against importers is not difficult.  The vast majority of ITC cases, including the Lego case, are simultaneously litigated in district court.

Tim Lynch

Professor James Jacobs of New York University School of Law has written a new book, The Eternal Criminal Record, just published by Harvard University Press.  From the dust jacket:

For over sixty million Americans, possessing a criminal record overshadows everything else about their public identity. A rap sheet, or even a court appearance or background report that reveals a run-in with the law, can have fateful consequences for a person’s interactions with just about everyone else. The Eternal Criminal Record makes transparent a pervasive system of police databases and identity screening that has become a routine feature of American life.

The United States is unique in making criminal information easy to obtain by employers, landlords, neighbors, even cyberstalkers. Its nationally integrated rap-sheet system is second to none as an effective law enforcement tool, but it has also facilitated the transfer of ever more sensitive information into the public domain. While there are good reasons for a person’s criminal past to be public knowledge, records of arrests that fail to result in convictions are of questionable benefit. Simply by placing someone under arrest, a police officer has the power to tag a person with a legal history that effectively incriminates him or her for life.

In James Jacobs’s view, law-abiding citizens have a right to know when individuals in their community or workplace represent a potential threat. But convicted persons have rights, too. Jacobs closely examines the problems created by erroneous record keeping, critiques the way the records of individuals who go years without a new conviction are expunged, and proposes strategies for eliminating discrimination based on criminal history, such as certifying the records of those who have demonstrated their rehabilitation.

A few days ago, I sat down with Professor Jacobs for a podcast interview.  More info on his book here.

Simon Lester

Paul Krugman has a blog post on the Trans Pacific Partnership (TPP) today.  Overall, he is skeptical of the need for it.  He refers to a recent op-ed by Larry Summers, and notes that Summers appears to support “an idealized TPP that could have been,” but is “against the TPP that actually seems to be on the table.”  Krugman says he feels similarly.

Tyler Cowen responds as follows:

I agree with much of the economics in his post, though I would frame the points with a different kind of rhetoric.  But I think Krugman is nonetheless wrong to oppose TPP.  You will notice the word “China” does not appear in his argument.  He closes with a question: “Why, exactly, should the Obama administration spend any political capital – alienating labor, disillusioning progressive activists – over such a deal?”  The answer is simple: this deal either happens on American terms, or an alternative deal arises on Chinese terms without our participation.  For rather significant foreign policy reasons we prefer the former, and the pragmatic side of President Obama understands this pretty well.

Cowen is one of my favorite bloggers, both for style and substance, but I want to push back a little bit here.  The alternative deal he is referring to is the Regional Comprehensive Economic Partnership (RCEP), a negotiation among 16 countries, including China and India, in the Pacific region.  There is a good deal of overlap, in terms of participating countries, with the 12 TPP parties.  I think he is making two points here: (1) If there is no TPP, there will be an RCEP, and that will be bad for the United States; and (2) the RCEP will reflect Chinese priorities, not U.S. priorities, and that will be bad for the United States.

Just briefly, let me comment on both points.  First, the RCEP may be, to some extent, a response to the TPP.  If the TPP fails, the motivation for the RCEP might also diminish.  Furthermore, regardless of what happens with the TPP, it will not be easy to complete the RCEP.  Getting India, China, and 14 other countries to agree will not be easy.  So there may never be an RCEP.

Second, the reference to Chinese terms makes it sound like this will be an agreement that establishes state-owned companies as the norm.  In reality, if you look at the topics covered, I’m not sure this agreement would be much different than any other trade agreement, except perhaps less emphasis on labor rights and intellectual property protection than in U.S. agreements.  There will be tariff lowering, services liberalization, and all the usual issues.

In my view, then, we should consider the TPP on its own merits and not worry so much about what other countries do.  If they want to liberalize amongst themselves, that’s great.  But that’s not a threat, just an incentive to do a better job with trade negotiations ourselves.

George Selgin

As if to get my work week off to rotten start, my otherwise good pal Don Boudreaux greeted me first thing Monday morning with a link to Robert Samuelson’s Sunday evening Washington Post op-ed on “The Folly of Fed Bashing.” In it, Samuelson takes the Fed’s conservative critics to task for their “misinformed” attacks on the Fed, faulting them for failing to appreciate how much more transparent the Fed’s operations are today than they were some decades ago, and for not understanding that its actions, however undesirable they may seem, are generally “necessary for the nation’s long-term economic health.” As for the perception that “the Fed is a large and aloof agency that needs to be tamed,” it rests, Samuelson says, on a “simplistic” view of the Fed’s history.

Well I can’t speak for others, but I know something about the Fed’s history. And I’ve come to the conclusion, informed by careful consideration, over the course of several decades, of that history, and the history of numerous other monetary arrangements in the U.S. and elsewhere, that the Fed is actually…a large and aloof agency that needs to be tamed.

True, the Fed is in some respects more transparent than it used to be. But it has also been doing things that it never used to do. The ordinary Fed publications and disclosures to which Mr. Samuelson refers shed no light at all on many of these novelties. Not for nothing did Dodd-Frank provide for a special, one-time audit of the Fed’s crisis-related undertakings. Among other things, that audit pointed to some serious conflicts of interest that might otherwise have escaped censure. Yet according to Mr. Samuelson’s supposedly up-to-date Fed history, it should have been just as unnecessary as the recurring audits Fed “bashers” have been calling for.

Would such recurring audits themselves be otiose? The Dodd-Frank audit covers the Fed’s actions up to July 21, 2010. Consequently the GAO isn’t allowed to look into any of the Fed’s unorthodox measures since then, including later rounds of Quantitative Easing, Operation Twist, and its enhanced overnight reverse repo program, not to mention its stress tests and other financial-regulatory measures. More importantly, under existing law it can’t be asked to look into any “emergency” steps the Fed might take in the future. Should we always have to rely on special legislation after the fact to allow Congress to scrutinize unusual Fed actions?

Mr. Samuelson complains about simplistic history. Allow me to complain instead about simplistic conjectures about the future–conjectures to the effect that the Fed will never again engage in the sorts of activities that warranted the Dodd-Frank audit. Such conjectures are after all implicit in claims, like his, to the effect that a permanent enhancement of the GAO’s Fed-auditing powers would only serve to “fulfill conservatives’ political agenda” by allowing Congress to “harass” the Fed and to otherwise undermine its ability to do its job.* Does Mr. Samuelson believe that the GAO “harasses” the other government departments and agencies over which it has unlimited auditing powers? If not, why does he worry that it would harass the Fed? Conservative agenda? Does he think that only conservatives (or conservatives and libertarians) distrust the Fed, and welcome GAO scrutiny of its unusual activities? If GAO officials themselves argue for relaxing present limits on their agency’s Fed-auditing powers, must they be part of a conservative plot?

Samuelson also sees “no obvious advantage” in a measure that would compel the Fed to choose and stick to a monetary rule, such as a Taylor Rule or NGDP growth rule. But while the advantage of such a rule may not be obvious to him, others may find it obvious enough. Either a Taylor or a Sumner-style NGDP growth rule would have called for less expansionary monetary policy in the mid-2000s, and for more expansionary policy in late 2009–reason enough to wonder whether, in complaining (in Samuelson’s words) that a rule “might make policy too inflexible,” Janet Yellen bothered to consider how in practice policy tends to “flex” the wrong way.

Finally, although he recognizes that the Fed isn’t infallible, and even suggests that the recent financial crisis was proof of its fallibility, Samuelson remains convinced that the Fed’s unhindered exercise of almost unlimited discretionary powers has contributed more than rule-based arrangements might to “the nation’s long-term economic health.” On what, I wonder, is this judgment based? Certainly not on recent experience. But a longer view is just as hard to square with the assertion, as Milton Friedman and Anna Schwartz went to great lengths to demonstrate. Mr. Samuelson worries that Fed “bashing”–by which he seems to mean any criticism of the Fed that seeks to justify a reduction of its considerable power–“adds to uncertainty and subtracts from confidence” upon which economic growth depends. In truth, the Fed’s actions are themselves often unpredictable, and especially so when it comes to their influence on the long-run course of prices and spending. Were the Fed really a sort of Ambrose Light of financial markets, as Mr. Samuelson imagines it to be, Fed watching, instead of being a growth industry, would be about as useful–and as boring–as watching paint dry.

But the Fed needs more than mere watching. It needs scrutiny. It needs criticism. Above all, it needs to be reined in–not for conservatives’ sake, but for everyone’s. Mr. Samuelson may not like it. But I, for one, intend to keep bashing away.

*Like many commentators who take the Fed’s side in the “audit the Fed” debate, Samuelson suggests that there only two possible kinds of GAO audits to which the Fed might be subject: simple “do the books balance” audits, as are already provided for, and ones by which the GAO would “second guess” the Fed’s conduct of ordinary monetary policy. In fact, the Fed does a lot more than engage in ordinary monetary policy, and, as the special audit provided for in Dodd-Frank illustrates, there are correspondingly many ways in which the GAO might scrutinize it’s conduct. The real debate is about these other sorts of scrutiny. To represent it as a debate about whether the GAO (or “Congress”) should be allowed to interfere with the Fed’s conduct of monetary policy is missing the point, if it isn’t something rather worse than that.

Randal O'Toole

The American Public Transportation Association (APTA) has issued its annual press release trumpeting the growth in transit ridership. Naturally, it selectively uses the data in order to get the best media attention.

For example, it claims that 2014 ridership set a record, which is true only if you don’t count any year between 1912 and 1957, during all of which transit carried far more people than it does today with almost no subsidies. Transit carried just under 10.8 billion trips in 2014, an increase of 101 million trips over 2013 but less than the 11.0 billion trips carried in 1956 (which doesn’t even include commuter rail and several other forms of transit that APTA counts today).

Second, APTA fails to note that all of the growth in ridership can be accounted for by increased usage of the New York City subway system. While national ridership grew by 101 million trips, APTA’s own ridership report shows that New York subway ridership grew by 107 million trips, or nearly 6 million more than the national gain. Without New York subways, whose ridership grew because of New York City’s rapid job growth, APTA would have had to report a national decline in ridership. Transit ridership grew in some cities, but it declined in many others, including Albuquerque, Austin, Charlotte, Chicago, Cincinnati, Honolulu, Los Angeles, Miami, Nashville, Norfolk, Pittsburgh, Sacramento, San Antonio, San Francisco (Muni), San Jose, and St. Louis, to name a few.

Most importantly, APTA fails to note that, in order increase transit ridership, subsidies to transit have grown to truly record levels. We don’t have all the data from 2014 yet, but transit subsidies exceeded $42 billion, or more than $4 per transit trip, in 2013. This is a staggering amount considering the industry was profitable overall before Congress began subsidizing transit in 1965 and subsidies remained relatively small until recent years.

APTA’s historic data shows capital subsidies only as far back as 1988. In the 25 years between 1988 and 2013, total inflation-adjusted subsidies grew by more than 90 percent, with the subsidy per transit trip growing from $2.12 to $4.08. In return for these subsidies, transit service (measured in vehicle miles) grew by 40 percent, while ridership grew by just 20 percent. Worse, America’s urban population grew by 40 percent, so per capita transit ridership shrank by 14 percent from 47 to 41 trips per urban resident per year.

I compare 2013 numbers with 1988 because that’s as far back as the data go. Transit advocates, however, like to compare with 1995, a year in which the transit industry bottomed out due to low gasoline prices. Things look better when compared with that year, but not by much. Since 1995, inflation-adjusted subsidies have grown nearly twice as fast as ridership: a 64 percent increase in subsidies compared with a 34 percent increase in ridership. Per capita ridership grew by just 7 percent.

Thanks to APTA’s hard work, American taxpayers are spending more and more on transit, but not getting much back. APTA would like Congress to believe that funneling more tax dollars to transit agencies will increase transit ridership and be good for cities. In fact, the data show that transit ridership is much more heavily influenced by fuel prices than by subsidies. 

The problem with transit subsidies is that the subsidies go where they do the most political good, not where transit riders need them. Transit systems in Boston, Washington, and other cities are falling apart due to lack of maintenance. Rather than repair the systems, politicians are spending billions of dollars on new rail transit lines–the Silver Line in DC; the Green Line extension to Medford in Boston–that the transit agencies can’t afford to maintain. The result is a disaster for transit riders and taxpayers alike.

Jason Bedrick

In a recent blog post, Andy Smarick of the Fordham Institute declares: “School Choice Technocrats Wanted.” Smarick argues “if civil society and families are to make more decisions and the government is to make fewer,” then “reform-oriented technocrats” will have to play a greater role.

For a century, we relied on the district system to deliver urban public education. There was a single government provider, it controlled all aspects of its schools, and students’ school assignments were based on home addresses. Countless policies and practices (related to facilities, transportation, accountability, and much more) evolved with that particular system in mind.

But as that system is slowly replaced by one marked by an array of nongovernmental school providers, parental choice, and the “portfolio management” mindset, new policies (undergirded by a new understanding of the government’s role in public schooling) are needed. That requires new government activity, much like the transition from a state-controlled to a private enterprise economy requires new rules related to property rights, lending, contracts, and currency.

Smarick is surely right that the transition from the monopolistic system of geographically assigned district schools to a market in education will require “new policies” and “a new understanding of the government’s role” in education. However, Smarick is murky on who will be making those policies or what exactly government’s role should be. As University of Arkansas Professor Jay P. Greene recently cautioned, education reformers must avoid “pursuing reforms that are likely to re-create the same dysfunctional system they oppose.” Unfortunately, though, some are succumbing to the technocratic temptation:

When they observe a problem their inclination is to fix it by prohibiting or regulating it.  If parents might pick bad schools in a choice system, the solution is to  impose regulations that prevent schools from being bad and prohibit those that are nevertheless bad from participating.  The regulations impose paperwork burdens on schools.  And so that officials can judge school quality, some reformers favor requiring participating private schools to take the state test based on the state curriculum.

If regulating schools to success were the solution, our public school system would be wonderful.  They have no shortage of regulations and prohibitions, all designed by well-meaning people to make those schools perform well.  So, why do some reformers believe it will turn out differently with heavily regulated choice systems?  Well, because they’ll be in charge and they are smarter.  They’ll design the regulations more appropriately.  They’ll implement them more judiciously.  They’ll only impose the regulations we really need. […]

If we impose public-system-like regulations on choice programs we will end up with choice programs that look a lot like the public system, including their dysfunction.  As Orwell warned us, “The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”

Smarick himself appears to recognize this danger. After outlining several areas where he believes government should play a role–supporting “high-performing” charter schools, addressing transportation needs, disseminating information, and “creating bodies to hold schools accountable; clarify school eligibility rules; develop central application, placement, and enrollment systems; and ensure the highest-need students are served”–Smarick notes: “If the above is done poorly, it could lead to the replacement of one inflexible, ineffective bureaucracy by another.” Indeed.

Given the government’s track record thus far, why should we have any confidence that these policies will be implemented well? Smarick doesn’t say.

Smarick concludes by arguing that we need more reform-minded technocrats to fight technocracy:

But in a terrific chapter in the new Room to Grow, “A Conservative Governing Vision,” Yuval Levin makes a “reform conservatism” argument that’s highly applicable here. “Conservatives today need to pay more attention to the means by which our vision of government should be advanced—more attention, that is, to the details of public policy.” That requires developing “some technical policy expertise precisely to combat” the technocratic bent of existing arrangements.

In other words: school choice technocrats wanted.

I don’t see how Smarick can draw that conclusion from Levin’s anti-technocratic treatise. Levin argued that “some technical policy expertise” was required “to advance an anti-technocratic, genuinely constitutionalist vision of American government.” Levin is not proposing that conservative reformers should become technocrats themselves, or that they should fight leftwing technocracy only to replace it with rightwing technocracy–i.e. rule by “experts.” Rather, Levin proposes expanding the “space between the individual and the state” that our constitutional system was designed to protect, and “restraining government from invading or collapsing that space.” To do that, advocates of liberty work harder to understand how the existing technocratic system invades that space, and how to peel it back. Essentially, Levin is making the same case that Friedrich Hayek made in Constitutional of Liberty, which Levin cites:

“Liberty in practice depends on very prosaic matters, and those anxious to preserve it must prove their devotion by their attention to the mundane concerns of public life and by the efforts they are prepared to give to the understanding of issues that the idealist is often inclined to treat as common, if not sordid.”

But perhaps I’m reading too much into Smarick’s use of the term “technocrat.” Perhaps Smarick only means that education reformers should pay attention to the details of public policy in order to expand educational freedom. If so, great. But if he means the of right-of-center technocratic tinkering that has crippled school choice programs in Louisiana and Wisconsin, then school choice advocates should be very wary.

In other words: school choice technocrats not wanted.

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

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

Over the past couple of weeks, prominent members of the climate science/climate policy community have come under attack for not toeing the (Presidential) party line when it comes to how human-caused climate change is being billed and sold via the President’ Climate Action Plan.

The attacks began with Harvard Smithsonian Center for Astrophysics researcher Willie Soon, and thanks to the attention afforded by Justin Gillis in the New York Times, were expanded by Representative Raul Grijalva (D-AZ), to include Richard Lindzen, David Legates, John Christy, Judith Curry, Robert Balling, Roger Pielke Jr., and Steven Hayward.

In this You Ought to Have a Look, we provide links to the subsequent public comments from those researchers under question (who have made them available) in response to this line of investigation—one which many have termed a “witch hunt.”

Here they are:

Dr. Willie Soon, Harvard Smithsonian Center for Astrophysics
Statement by Dr. Willie Soon

Dr. Richard Lindzen, professor emeritus of atmospheric sciences at MIT and a distinguished senior fellow of the Cato Institute
The Political Assault on Climate Skeptics

Dr. Steven Hayward, Ronald Reagan Professor of Public Policy 2014-2016, School of Pubic Policy, Pepperdine University
Are You Now, or Have You Ever Been, a Climate Skeptic?
The Climate Beclowning Continues

Roger Pielke Jr., Professor in the Environmental Studies, Center for Science & Technology Policy Research, University of Colorado
I am Under “Investigation”
Running Updates on the “Witch Hunt”

Judith Curry, School of Earth and Atmospheric Sciences, Georgia Institute of Technology
Conflicts of Interest in Climate Science

 

Additionally, there are other comments out there, almost all negatively inclined to Rep. Grijalva’s investigation and its assault on academic freedom.

Here are a few of the more prominent:

American Meteorological Society
Letter to Grijalva

Nature Magazine
Gone Fishing

American Geophysical Union
Protecting Academic Freedom and Holding Ourselves Accountable

It is well-worth looking through these responses to see just how ill-advised this campaign is widely-considered to be.

 

Trevor Burrus

When Marvin Horne told the United States Raisin Administrative Committee (yes, there’s a raisin administrative committee) that he wasn’t going to turn over nearly 30 percent of his crop to the government in exchange for nothing, he probably didn’t expect his case would go to the Supreme Court—twice. That little act of civil disobedience was thirteen years ago, and the Hornes now stand on the precipice of vindicating an important constitutional right—the Fifth Amendment right not to have your property taken without just compensation—as well as putting a wrench in the gears of what Justice Elena Kagan called “the world’s most outdated law.”

Like much of our agricultural policy, the Raisin Administrative Committee (RAC) is a relic of New Deal-era cartelization schemes. Trying to understand the logic behind American agricultural policy is like trying to find the logic in a Marx Brothers movie—it can’t be done and you’re better off just sitting back and laughing at the antics. Yet our agricultural policy has real-world effects on farmers like the Hornes, who are subject to the whims of the RAC as it tries to stabilize the price and supply of raisins. Sometimes the RAC pays for the raisins it takes, and sometimes not. In 2002-2003, the RAC offered far less than the cost of production for 47 percent of the Hornes’ raisins, and in 2003-2004 they offered nothing for 30 percent of the raisins. The Hornes had had enough, and they refused the order, arguing the seemingly simple point that the confiscation would be a taking without just compensation under the Fifth Amendment.

On their first trip to the Court (in which Cato filed a brief), the Hornes had to establish that they could bring their takings claim in federal district court without first paying the fines (now about $650,000). A unanimous Court held that the Hornes could bring their claim and then remanded the case to the U.S. Court of Appeals for the Ninth Circuit to determine if a taking occurred. In a frankly stunning opinion, the Ninth Circuit held that the Takings Clause affords more protection to real property (land) than it does to personal property. The Ninth Circuit also held that, because there is a possibility that the government might decide to pay money for the raisins it takes, the Hornes had not been fully deprived of their property.

Cato, joined by the National Federation of Independent Business, the National Association of Home Builders, the Reason Foundation, and the Southeastern Legal Foundation, argues that the Ninth Circuit’s reasoning ignores the text of the Takings Clause, which makes no distinction between real and personal property (“nor shall private property be taken for public use without just compensation”), and ignores Supreme Court precedent. We also argue that the Ninth Circuit’s argument that the mere possibility of future compensation can nullify a takings claim sets an extremely dangerous precedent. After all, as Judge Alex Kozinski wrote in dissent to the Ninth Circuit’s opinion, “if the city wants to display your Renoir in its museum, it can’t just take it and compensate you with the joy of viewing it during visiting hours.” Yet, for raisin farmers in California, the deal is even worse. If the Ninth Circuit is right, the government can take your Renoir, send it back to France, and, after pocketing the change to cover its own budget, give you absolutely nothing. It’s time for the “world’s most outdated law” to shrivel up and go the way of the California Raisins.

For more on the Hornes’ plight, see Reason.tv’s video below. 

Feds vs. Raisins: Small Farmers Stand Up to the USDA

Alex Nowrasteh

The Center for Immigration Studies (CIS) has released a number of reports purporting to show that all employment growth since the year 2000 has gone to immigrants.  The CIS report does not include econometrics. However, the report includes a few references to the economic literature (those few references present have little to do with native job displacement caused by immigration, which is the topic of the CIS report).  Nonetheless, the CIS report has gained significant attention.

The CIS method of measuring job displacement caused by immigration is not used by professional economists to study this issue.  Fundamentally, they assume a static number of jobs that is unchanging based on immigration and do not consider what the job market would look like with fewer immigrant workers, entrepreneurs, and consumers – estimates essential for understanding the actual labor market impact of immigrants.  I discuss those actual effects here, here, and here

Regardless of their flawed methods, I decided to recreate CIS’ research in order to exactly understand how they got their results.  The CIS study did not find any evidence of immigrants pushing natives out of the job market.  After spending hours recreating their data and checking it, all I can conclude is that immigrants hold about a percentage of jobs in the economy that is roughly equal to their percent of the population.  I am underwhelmed by that finding. 

Below I will present the academic literature on immigration-induced job displacement, explain how CIS got its results, and detail why their analysis of the data does not prove that “All Job Growth Since 2000 Went to Immigrants.”  (If you just want the meat, scroll down to “CIS’ Three Big Conclusions are False”).

Brief Literature Survey

The academic literature finds very little native job displacement caused by immigration. 

David Card and John DiNardo looked at native responses to immigration in American cities to test the so-called “skating rink” model of native location decisions, a model that assumes each new immigrant knocks an American out of the workforce.  If the skating rink model is correct, natives with skills similar to immigrants should vacate areas where immigrants move to and not move to areas where immigrants are residing.  Instead, Card and DiNardo found that an increases of the immigrant population in specific skill groups leads to small increases in the population of native-born individuals in the same skill group.  Changes in the local economy, such as the creation of new businesses and types of industries affected by an increase in immigrants, made up for any displacement of native workers. 

Another paper by David Card did not find any offsetting native mobility responses to immigrants in the same skill level but did find negative wage effects for some skills sets as a result of immigration.  However, Card also found that in the very short-run at least, inflows “of new immigrants in the 1985-90 period reduced the relative employment rates of natives and earlier immigrants in laborer and low-skilled service occupations by up to 1 percentage point, and by up to 3 percentage points in very high-immigrant cities like Los Angeles or Miami” (emphasis added). 

Card’s findings in his second paper are consistent with the later findings of economists Gianmarco Ottaviano and Giovanni Peri that newer immigrants compete with the immigrants who preceded them, not with native-born Americans who have similar skills.  The labor market effects of new immigrants appear to fall most heavily on immigrants who preceded them, not Americans, which would seem to cut against the theory that immigrants have a large negative effect on American workers. 

Even then, David Card and Ethan Lewis in another paper looked specifically at how new Mexican immigrants displaced older Mexican immigrants and found decidedly small effects.  Only in Los Angeles and El Paso did new Mexicans push out older Mexicans.  In all of the other cities they examined, new Mexican immigrants complemented the existing Mexican immigrant workforce rather than displaced it.  To a remarkable degree, the U.S. economy is very good at attracting Mexican immigrants, providing incentives for them to settle in areas where they are most demanded, and responding in ways that increase net production and employment.

A paper by George Borjas seems to find the greatest effect of immigration on the wages of native-born American workers – a wage elasticity of -0.39.  Borjas’ finding has been criticized by many, including in this recent paper that extended his period of analysis by 10 years but found only a -.2 wage elasticity as well as other potential problems with Borjas’ methods.  Another paper by Giovanni Peri and Chad Sparber also questioned Borjas’ paper, finding that less educated immigrant workers and native born workers specialize in different tasks, thus inducing natives to reallocate their task supply, thereby reducing downward wage pressure.  Foreign born workers specialized in occupations that required manual labor and physical skills while natives pursued jobs that required more intensive communication and language skills.  Immigration induces natives to specialize accordingly, reducing the negative wage impact of immigration by roughly 75 percent.  In other words, natives do not react to immigration by leaving the workforce or moving to different areas, but by changing their skill sets and occupations. 

A paper by Christopher L. Smith found that for every 10 percent rise in employed immigrants with at least a high school degree, high school students worked about 3 percent fewer hours and adults decreased their number of hours worked by 1 percent.  A Chicago Fed Letter and research paper authored by Daniel Aaronson, Kyung-Hong Park, and Daniel Sullivan discovered that teens are less likely to work for reasons other than immigration.  They found that an increase in the relative benefits of education versus work, government financial incentives for schooling, merit based scholarships with minimum grade requirements, and education grants were the primary causes of a decline in teen labor force participation.  In other words, teens allocated their scarce time to education and away from work to increase their investment in acquiring human capital and, hence, a higher future income.  Low-skilled immigration and stiffer labor market competition was not a compelling explanation for their decline in labor force participation.  Another report by the Bureau of Labor Statistics in 2002 echoed the findings of Aaronson, Park, and Sullivan when it concluded:

“In summary, the increasing proportion of teens enrolled in school during the summer and a drop in students’ labor force participation rates contributed to the overall decline in teen summer labor force participation during the recent expansion.  Data for October each year indicate that labor force participation among high school students also dropped during the school year, although nonstudents were increasingly likely to participate in the labor force.  Together, these facts suggest that, among teens, an increased emphasis was placed on school rather than work during the summer and school year.”

Patricia Cortes does find some displacement effects across cities.  These effects are not large enough to equalize wages across the country, and thus not large enough to induce the displacement of one American worker for each immigrant worker.  Cortes found that three natives move out of a city for every ten immigrants who move in. 

These academic papers do not produce a compelling reason to believe that immigrants displace native-born workers in large numbers.  There is likely some job displacement caused by immigration but the effect is small and does not produce a scenario where all job growth goes to immigrants.  

Reproducing CIS’ Study

I reproduced CIS’ entire study and data set to properly understand how they reached their conclusions. 

Data and Methodology

The data for this investigation was collected through the U.S. Census Bureau’s Consumer Population Survey, and then further transformed using the DataFerrett mining program.  Monthly data on employment, citizenship, and population is available through these sources for the period 1994-2014. For some points of analysis, I chose a start year of 1994 as opposed to CIS’ start date of 2000 because their choice of that year and its very low historical unemployment rate added bias to their results. 

Findings

Each subsection below details the findings. 

Immigrant Share of Employment

There is a proportional relationship between growth in the immigrant share of the total population and the immigrant share of employment.  Unsurprisingly, as immigrants grow as a proportion of the population, they occupy more jobs as a percentage of total employment.  The immigrant share of employment has increased over the period 1994-2014 but this increase corresponds with an increase in the share of immigrants as a percentage of the population.  The proportionality between the two variables was confirmed by a statistical test, which showed a correlation between the immigrant share of employment and the immigrant share of the population of 96.4 percent.  Over the entire 20-year period (1994-2014), the immigrant share of employment has grown a paltry 2.53 percent.

Extending this analysis back to 1994 revealed an interesting pattern.  Since 2000, immigrant share of employment has been slightly higher by less than a percentage point than the immigrant share of the population would predict.  Prior to the year 2000, the immigrant share of the population was higher than their respective share of jobs.  In that sense, during the period 1994-2000, the percentage of jobs given to immigrants was lower than the respective percentage of the population.  It is only after 2000 that the percentage of immigrants in the population is less than the immigrant share of employment – again by less than a percentage point.  This could be another reason why CIS picked the year 2000 as the start date for their study.      

The Effect of Immigrant Employment on Native Employment

Immigration restrictionists claim that an increase in employment among immigrants has a detrimental effect on native employment.  The CIS study did not produce an economic model, any econometrics, or a single regression to support that claim.  Instead, I ran a few regressions to see if there is any relationship between immigrant job gains and native job losses.  

There is an 86.75 percent correlation between native employment and immigrant employment.  A regression was then performed on the data to discern the relationship between the variation in native employment and non-citizen employment, which resulted in a statistically significant positive relationship between the variables.  The variation in native employment represents the change in the number of jobs held by natives, while the variation in immigrant employment represents the change in the number of immigrant jobs.  According to the results of the regression, an increase in immigrant employment by one is correlated with an increase in native employment by approximately 1.614.  Basically, every additional job performed by an immigrant is associated with more than one additional native working.  This relationship indicates that increases in immigrant employment are not damaging to natives but instead could produce a net benefit.  Correlation does not prove causation in this situation but the preliminary findings of this regression show that immigrant job gains are not correlated with net-job losses for natives.  It is likely that both immigrants and natives get jobs when the job market is growing – hardly a controversial result.

Additionally, a negative linear relationship was found between the native share of employment and the foreign-born share of employment (see Figure 1).  The negative slope indicates that an increase in the share of immigrants with jobs correlate with a decrease in the share of natives with jobs.  Although this may seem as though immigrant employment growth is injurious to native employment growth, this is not the case when compared with the immigrant share of population (see Figure 2).  If immigrants are a larger share of the population, we would expect them to occupy a larger share of jobs.  Since there is no fixed number of jobs in the economy, this finding does not suggest that immigrants take jobs from natives.   

Figures 1 and 2 are almost identical.  Taken together, the figures demonstrate the proportionality between the share of the immigration population and the share of jobs occupied by immigrants.  CIS’ main finding appears to be that the immigrant share of all jobs is about the same as their share of the entire U.S. population. 

 

Figure 1: Immigrant and Native Shares of Total Employment 1994-2014

 

Figure 2: Immigrant and Native Shares of Total Population 1994-2014

 

 

Employment and Unemployment Rates by Nativity

Employment and unemployment rates are not significantly different between native and immigrant workers.  The unemployment rate for immigrant workers aged 16-65 is higher than that for native workers of the same age (see Figure 3).  The employment rate for immigrant workers aged 16-65 is lower than for native workers of the same age (see Figure 4).  The findings show that, on average, an immigrant worker is less likely to be employed than a native worker, and this trend has held true for the 16-65 age bracket from 1994 to 2000.

CIS limited its analysis to natives and immigrants in the 16-65 age range.  However, when all persons over age 16 are analyzed, the employment rate for immigrants is slightly higher than the employment rate for natives (see Figure 5).  Despite the lower employment rate for natives in this case, the percentage difference between the two groups is small; for example, in December 2014, immigrants were only 4.6 percent more likely to be employed than natives.  

Looking at the over 65 age bracket for the years 1994-2000, the native employment rate was higher than the immigrant employment rate (see Figure 8).  The switchover occurred only in the years immediately after 2000.  Moreover, the recent employment rate difference seemingly favorable to immigrants can be explained by the demographic differences between native and immigrant populations.  The employment rate for workers over 65 is lower than that of other age groups, and immigrant populations tend to be younger than 65.  

 

Figure 3: Unemployment Rate by Nativity, 16-65

 

Figure 4: Employment Rate by Nativity, 16-65

 

 

Figure 5: Employment Rate by Nativity, All Ages

 

 

Figure 6: Unemployment Rate by Nativity All Foreign Born, 16-65

 

Figure 7:  Employment Rate by Nativity All Foreign Born, 16-65

 

 

Figure 8:  Employment Rate by Nativity All Foreign Born, All Ages

For those in the 16-65 age bracket, an increase in the unemployment rate of all foreign born by 1 corresponds with an increase in the unemployment rate of natives by 0.799.  The unemployment rates move in the same direction for both natives and the foreign born (see Figure 6).  An increase in the employment rate of all foreign born by 1 corresponds with an increase in the employment rate of natives by 0.345, again meaning that the two rates move in the same direction.  An increase in the employment rate for all foreign-born by 1 corresponds with an increase in the employment rate for natives by 0.279, again meaning that they move in the same direction.  If immigrants took the jobs of natives, we would not find that their levels of employment or unemployment move in the same direction.  

Different Time Periods and Populations

Below I make two major changes to augment the CIS results.  First, I compare CIS’ time period of 2000-2014 to the 20 year time period of 1994-2000. The year 2000 is a problematic year to begin this analysis because the unemployment rate was an abnormally low at 4 percent, the lowest over the 1994-2014 period when the CPS data is available and the lowest since 1969 when it stood at 3.5 percent.  Picking a year like 2000 with such a low unemployment rate will make subsequent years look bad by comparison.  Using 1994 as a start date for this analysis makes more sense because the unemployment rate in that year was 6.1 percent compared to 6.2 percent in 2014.  Using start and end years that have similar unemployment rates should allow an analysis to more easily judge the effect of immigration on native employment. 

Second, I include all workers who are 16 years old or older.  CIS excluded workers over the age of 65 who are now more likely to work than they were in the past.  To CIS’ credit, footnote 5 in their paper admits this omission but very few people reporting on these finding bothered to read the fine print – especially when the title of the paper is “All Employment Growth Since 2000 Went to Immigrants” (emphasis added).  CIS’ exclusion of the 65 year plus age portion of the American workforce biased their results against natives. 

The percentage of total jobs in the economy occupied by natives was 88.48 percent in 2000 and 83.25 percent in 2014.  For immigrants in 2000 and 2014 it was 12.17 percent and 16.90 percent, respectively.  That is a very small shift in the relative, not absolute, employment of these two big employment groups in the U.S. economy that is roughly parallel to their increase in the population.  When compared with each group’s share of the population, native-born Americans and immigrants maintain roughly proportional growth in shares of employment and population throughout the period (see figures 1 and 2).

Furthermore, the relative share of employment for the two groups reveals only a small shift in employment.  The native share of employment went from 90.03 percent in January 1994 to 83.25 percent in 2014 (see Figure 1), and the immigrant share of employment grew from 9.97 percent to 16.90 percent during the same time period.  Again, the change in the native and immigrant shares of employment corresponds with proportional changes in share of each group’s share of the population. 

The number of people older than 16 increased by 53.1 million between January 1994 and December 2014.  63.86 percent of this increase was native-born Americans, while 36.14 percent went to immigrants. Over that period, 53.3 percent of net job growth went to natives while 47.7 percent to immigrants.    

CIS’ Three Big Conclusions are False

CIS’ conclusions will be numbered.  My responses will follow.

1.  The long-term decline in employment for natives is a clear indication that there is no general labor shortage.

There is no evidence for a long-term decline in the number of natives employed.  The data indicates that between January 2000 and December 2014, there were two recession years (2009, 2010) that exhibited a significant decline in jobs. However, all other years saw increasing native employment.  Between January 2000 and December 2014, 5.19 million additional natives held jobs.  There is, however, strong evidence of declining labor force participation.  Between January 2000 and December 2014, native labor force participation saw a fairly steady decline from 64.01 percent to 58.46 percent, which was true both for recession and non-recession years.  So there isn’t a shortage of jobs, but there is a decreasing percentage of natives who want or are able to work.  CIS did not demonstrate that immigrants are the cause of that. 

14.4 million more natives held jobs in December 2014 than held jobs in January 1994.  From January 1994 to December 2014, native labor force participation steadily declined from 61.54 percent to 58.46 percent.

2.  The decline in work among natives over the last 14 years of high immigration is consistent with research showing that immigration reduces employment for natives.

The academic research about immigrant displacement of native born workers is thin and much of it demonstrates the opposite (see “Brief Literature Survey” above).  Interestingly, economist Robert Hall found much of the decrease in the U.S. labor force participation rate (LFPR) occurred for members of wealthier households while the LFPR increased for individuals in poorer households since 1999.  This directly contradicts CIS’ story that immigrant job competition is the cause of this decline in native employment opportunities and is consistent with the findings of the one of the few academic papers actually cited by CIS.  Lower-skilled immigrants can only really compete for jobs with young, uneducated, and low-skilled native-born workers (when there is any competition at all).  That younger, uneducated, and low-skilled native-workers in low-skilled households have increased their LFPRs in recent decades is evidence that little competition or job displacement even occurred. 

However, Salim Furth of the Heritage Foundation has challenged many of Hall’s findings.  Both Furth and Hall have found that teenagers in the lower half of the family income distribution have seen smaller declines in labor force participation compared to teenagers in the upper half of the family income distribution, excluding the effects of the Great Recession.  Furth rightly notes that more research is needed on this issue.      

The CIS report suggests that 2000 to 2014 was a period of high immigration, although the Census reveals that immigration during that period had slowed down compared to the previous decade.  Between 1990 and 2000, the immigrant population grew from 19.8 million to 31.1 million, an 11.3 million person increase that grew the size of the immigrant population by 57 percent.  From 2000 to 2010, the immigrant population grew from 31.1 million to about 40 million, an 8.9 million person increase that grew the size of the population by 29 percent – half of the previous decade.  The increase in the absolute number and relative percentage of immigrants in the first 10 years of the millennium was smaller than in the last decade of the 20th century. 

From the beginning of the Great Recession in 2007 to 2010, the immigrant population increased by 3.2 million.  From 2010 to 2013 the immigrant population increased by only 1.3 million – far below the average for any three-year period in recent decades.  The growth in the immigrant population is slowing dramatically but the job market is still poor.  Unsurprisingly, immigration is not an entirely exogenous shock; rather, it ebbs and flows based on American demand for immigrant workers. 

3.  Trends since 2000 challenge the argument that immigration on balance increases job opportunities for natives.  Over 17 million immigrants have arrived in the last 14 years, and native employment has declined.

CIS didn’t run a regression for the period 2000-2014, but if they did they would have found that an increase in noncitizen employment by 1 is correlated with an increase in native employment by 0.696.  That is not the result that we would expect if CIS’ conclusion was correct.  CIS did not identify an actual correlation between native job losses and immigrant employment gains.  There is nothing in CIS’ backgrounder that demonstrates that immigration causes native unemployment.    

Conclusion

Immigrants’ share of jobs is very similar to their share of the U.S. population.  That is not a surprising finding and it certainly doesn’t show that they are “taking all the jobs.”  On a bigger level, labor markets in every country are changing.  Labor’s share of GDP is declining even in countries that accept very few immigrants like Japan.  This trend will not change by radically decreasing the number or share of immigrants.  

Walter Olson

Montgomery County, Md., the suburban D.C. jurisdiction known for bans on polystyrene take-out trays, e-cigarette vaping, free bags at retail checkouts, and other disapproved elements of the mass-market economy, is now considering a ban on many common lawn and turf pesticides used by homeowners and commercial landscapers. Critics point out that since the safety of particular pesticides and their application is already comprehensively regulated at the federal and state level, the measure would put county lawmakers in the position of second-guessing safety determinations made by other, more scientifically expert levels of government. My favorite bit of the story, however, is this from yesterday’s Washington Post:

Opponents have aligned with soccer moms and dads concerned that playing field grass — also covered by the measure — will be less safe if it isn’t thickened with the help of traditional chemicals. They have an ally in County Executive Isiah Leggett (D), who wants to see [county athletic] fields exempted from the measure.

More details in a January report at BethesdaNow:

Montgomery County officials would like to see the county’s nearly 300 athletic fields exempt from a proposed ban of “non-essential” lawn care pesticides….

“We would expect declines in field quality and turf cover, higher maintenance costs, frequent field closures for renovation and decreased support in revenue,” [Parks Director Mike] Riley said.

If all this is being done for the children — and in government nowadays, what isn’t done for them? — then it would seem relevant that county athletic fields are exactly where you find children congregating in large numbers through much of the year. But notice instead how the county government is perfectly prepared to look out for its own interests for a host of plausible reasons that include maintenance expense, convenience and usability, and even safety and lawsuit risk (well-maintained turf is thought to reduce trip/fall hazards for players and resulting injuries). But private property owners won’t be allowed to invoke the same logic because, well, if they wanted kids to practice fast running moves on their lawns they should have deeded them over to the authorities for use as public parks or something.

Libertarians often note that the state freely bans private conduct in which it’s happy to indulge itself — federal investigators can lie to you but it’s a crime if you lie to them, adopting federal accounting practices in your own business is a good way to get sent to prison, and so forth. But the double standard asked for here could wind up being — well, to coin a phrase, as bald as a Rockville lawn.

Nicole Kaeding

Federal outlays in 2014 topped $3.5 trillion. Over the next ten years, federal outlays are expected to climb to $6.1 trillion. The Government Accountability Office (GAO) tries to keep tabs on some of the obvious waste in the vast federal budget. One of its efforts is an annual report highlighting areas of duplication, improper payments, and other types of inefficient spending.

Last week, GAO released a report analyzing whether or not Congress and the executive branch have followed their past recommendations. GAO said that only 29 percent of its recommendations have been fully addressed.

The report discusses a number of themes within previous duplication reports, but devotes a large section on the increasing problem of improper payments by federal agencies. The federal government spent an estimated $125 billion in 2014 on improper payments across 124 programs, an increase of 18 percent from 2013.

Twelve programs exceeded $1 billion in improper payments in 2014. These twelve programs account for 93 percent of all improper payments, with the Earned Income Tax Credit (EITC), Medicare, and Medicaid comprising 76 percent.

GAO criticizes the Departments of Health and Human Services (HHS) and Treasury, which oversee Medicare and the EITC respectively, for failing to take the issue seriously enough. Both agencies were noncompliant with improper payment requirements for 2012, 2013, and 2014. The EITC’s error rate was greater than 10 percent in all three years. Medicare’s error rate exceeded 10 percent in 2013 and 2014.

The Congressional Budget Office predicts rapid growth in Medicare spending over the next decade, with spending increasing 89 percent from 2015 to 2025. HHS should do more to control improper payments.  Improper payments represented 10 percent of all Medicare spending in 2014. If HHS fails to control the problem and the error rate is constant, Medicare’s improper payments would be $118 billion in 2025.

GAO does not specify exact steps to reform these programs. It focuses its comments on “internal controls” and “auditor oversight.” Our solutions on DownsizingGovernment.org for Medicare and the EITC are more dramatic than what GAO endorses, but everyone should agree that reducing improper payments is an important way to save taxpayer money.

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