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Daniel J. Mitchell

Since I’ve accused the Congressional Budget Office of “witch doctor economics and gypsy forecasting,” it’s obvious I’m not a big fan of the organization’s approach to fiscal analysis.

I’ve even argued that Republicans shouldn’t cite CBO when the bureaucrats reach correct conclusions on policy (at least when such findings are based on bad Keynesian methodology).

So nobody should be surprised that I think the incoming Republican majority should install new leadership at CBO (and the Joint Committee on Taxation as well).

So why, then, are some advocates of smaller government - such as Greg Mankiw, Keith Hennessey, Alan Viard, and Michael Strain - arguing that Republicans should keep the current Director, Doug Elmendorf, who was appointed by the Democrats back in 2009?

Before answering that question, let’s look at some of what was written today for the Washington Post’s Wonkblog.

After a series of highly-regarded conservatives voiced their support for Doug Elmendorf, the director of the Congressional Budget Office whose term is up in January, Elmendorf haters fired back on Friday, urging Republicans to jettison the Democratic appointee as soon as possible. …This argument is advanced most forcefully in an open letter to GOP congressional leaders by Grover Norquist of Americans for Tax Reform, who…is most famous as the author of the anti-tax pledge that binds virtually every Republican in Congress never to vote to raise taxes. So why is Norquist against Elmendorf? For one thing, because CBO, under Elmendorf, has not demonized higher taxes. Instead, the agency promotes a “Failed Keynesian Economic Analysis,” Norquist says, that asserts that “higher taxes are good for the economy, even to the point of implying that growth is maximized when tax rates are 100 percent.”

And where did Grover get the idea that CBO believes that ever-higher taxes lead to more growth?

Umm…well, from something I wrote.

As evidence, Norquist points to a 2010 post by the Cato Institute’s Dan Mitchell, titled “Congressional Budget Office Says We Can Maximize Long-Run Economic Output with 100 Percent Tax Rates.” “I hope the title of this post is an exaggeration,” Mitchell writes, “but it’s certainly a logical conclusion based on” CBO’s claim that paying down the national debt – regardless of whether it’s through higher taxes or lower government spending – would be a good thing for the economy. “There’s nothing necessarily wrong with CBO’s concern about deficits,” Mitchell goes on. But “what’s missing from CBO’s analysis is any recognition or understanding that the real problem is excessive government spending.” In other words, what’s missing is conservative ideology about fiscal policy.

I have two reactions, one minor and one major.

My minor point is that the author of the piece is supposed to be a neutral, even-handed reporter, yet she refers to opponents of Elmendorf as “haters” and she implies that we’re simply upset because CBO’s analysis is missing “conservative ideology about fiscal policy.”  Given that she was writing for Wonkblog, which is more akin to an editorial page, there’s nothing wrong with being opinionated. But ask yourself whether someone with such hostility can be impartial when doing straight news stories.

My major point is about policy. Why is my concern about the size of government characterized as “ideology” while we’re supposed to believe CBO’s analysis is “scrupulously impartial” even though it produced analysis which implies you maximize growth with 100 percent tax rates?!?

If my views are blind ideology, then why is there research showing the economic damage of excessive government from international bureaucracies such as the World Bank and European Central Bank? And why are there studies about the harmful economic impact of government spending from the International Monetary Fund and the Organization for Economic Cooperation and Development? Nobody has ever accused these institutions of being hotbeds of libertarian thought.

But perhaps I’m not being fair to CBO. Did the bureaucrats really imply, as part of their analysis on what would happen to the economy if the Bush tax cuts were allowed to expire, that you maximize growth with 100 percent tax rates?

You can read my original post, which holds up very well four years later. And here’s some of what I wrote yesterday to someone who asked me to justify my views on the issue.

…let’s focus on the “subsequent years,” when CBO projectst that GDP would be lower with extended tax cuts. …I’m happy to be corrected, but my reading is that CBO was stating that fiscal balance is the tail that wags the economic dog. The extended tax cuts cause larger deficits, and CBO says that these larger deficits will divert national saving from productive investment and lead to lower output. But if the tax burden is higher, as in the baseline forecast, then deficits are lower and more saving is available for productive investment and output is higher. As far as I’m aware, CBO didn’t have any limiting language back then to suggest that higher tax rates led to growth, but only up to X point. So I think I was on solid ground in asserting the CBO’s analysis implied that ever-higher tax rates led to ever-higher growth.

Seems reasonable. Moreover, I strongly suspect the Wonkblog reporter would have found several people to condemn me had I over-stated the implications of CBO’s analysis.

Now let’s return to the issue of whether Mr. Elmendorf should be re-appointed. Which fiscal conservatives are correct, the ones who want to keep him or the ones who want him replaced?

I’m in the latter category, as explained here, but Elmendorf’s defenders make plenty of good points.

The bottom line is that he is a nice guy (based on my limited interactions), a thoughtful economist, and he has been a big improvement over his predecessor. Indeed, he’s almost certainly the best CBO Director ever appointed by Democrats.

Here’s an analogy that may help make sense of this issue. Elmendorf’s predecessor was a doctrinaire leftist named Peter Orszag. If Orszag’s policy views were a country, they would be France or Greece. By contrast, I’m guessing that Elmendorf would be like Sweden or Germany.

In other words, he wants more government than I do, but at least Elmendorf basically understands that there’s no such thing as a free lunch. He realizes 2+2=4, and he’s aware that there are tradeoffs. And since his arrival, CBO has been much better on issues such as the adverse impact of higher marginal tax rates and the debilitating effect of higher transfer payments.

That being said, while it’s much better to be Sweden rather than Greece, I obviously would prefer to be Hong Kong (or, even better, pre-1913 America).

Though, to continue the analogy, the best I can probably hope for is that Republicans appoint someone akin to Australia or Switzerland.

P.S. For more information about the economics of deficits and fiscal balance, here’s a video I narrated for the Center for Freedom and Prosperity.

Deficits are Bad, but the Real Problem is Spending

P.P.S. The Congressional Research Service made the same argument about higher taxes being pro-growth, asserting in 2010 that “The expiration of the tax cuts would nevertheless reduce the budget deficit, absent other policy changes, which economic theory predicts would have a positive effect on the economy in the long run.”

Neal McCluskey

Walk around a random college campus, and the odds are good the first student you’ll run into will be female. 57 percent of college students are women, versus 43 percent men, a 14 point gap. Look at Advanced Placement exams – those College Board tests that enable high-scoring takers to get college credit – and you’ll find that 56 percent of students taking the exams are girls, creating a 13 percent gap favoring women. But fear not! University of Miami president Donna Shalala assures us that the Common Core national curriculum standards will help address the “gender-based inequities” crushing female students.

Um, what?

As the data make obvious, there is no college-readiness gap unfavorable to women. Yet Shalala proclaims that, “These uniform, more rigorous K-12 education standards have the potential to reduce gender-based inequities by ensuring that every young woman receives the educational foundation she needs to be successful in college and career.”

Okay, maybe Shalala doesn’t really mean to suggest – as the quote does – that the Core will fix overall gaps. Maybe she only means differences in subjects like computer science and engineering that, as she writes, do lean male. But as Core proponents will point out if you assert the standards are too broad, the Core only furnishes math and English guidelines, not engineering or computer science. More important, of the two areas the Core tackles, AP-taking suggests women dominate one and hold their own in the other. 62 percent of students taking the AP English exams in 2014 were female, while 48 percent of Calculus AB takers were girls. At the very least, these figures belie any accusations of systematic efforts to exclude women from college-prep courses, even if girls tend to choose different courses than boys.

Sadly, superficial argumentation for the Core is widespread, if rarely quite so egregious as this. More common is proclaiming that “higher standards” will, simply by virtue of being higher, drive greater achievement and make the country economically triumphant.  This despite what the research actually says about national standards.

Ironically, Core supporters love to take opponents to task for being misinformed, and they are sometimes right: Core opponents do too often ascribe curricula they don’t like, or malevolent motives, to the Core and its creators. But supporters have been just as untethered to reality despite, often, having been involved with the Core for years, unlike lots of parents forced to scramble for information after the standards suddenly showed up at their doors demanding their children.  In the case of Shalala, at the very least she signed the Shanker Institute’s “manifesto” applauding the Core – and calling for an explicit national curriculum – in 2011.

Defense of the Common Core has too often come in the form of platitudes and ungrounded assertions. This latest effort hasn’t improved upon that.

Doug Bandow

MOSCOW—Red Square remains one of the globe’s most iconic locales. Next to the Kremlin wall is a small, squat, pyramidal building:  Vladimir Ilyich Ulyanov Lenin’s mausoleum.

Lenin is preserved within, dressed in a black suit, his face is grim and his right fist is clenched, as if he was ready to smite the capitalists who now dominate even his own nation’s economy.  He is one of history’s most consequential individuals. Without him there likely would have been no Bolshevik Revolution, Joseph Stalin, Cold War, and Berlin Wall.

Of course, without Lenin there still would have been a Bolshevik movement. But it would have lacked his intellect, tactical skills, and, most important, determination. So feared was he by his enemies that he became Germany’s secret weapon against Russia, sent back to Russia to spread the bacillus of radical revolution.

Lenin pushed the Bolsheviks toward power as the authority of the moderate Provisional Government, which had ousted the Czar, bled away. Lenin was no humanitarian whose dream was perverted by his successors. He insisted on solitary Bolshevik rule, brooked no dissent even within the party, established the Cheka secret police, and employed terror against opponents.

Lenin was left helpless by three strokes.  He died on January 21, 1924, just 53 years old. His body lay in state for four days, during which nearly a million people passed by.

Within a week of his passing the idea of preserving his body was broached. The mausoleum started as wood and turned into the current granite and marble structure in 1929.

Communist imagery, including Lenin’s mummy, came under attack with the dissolution of the Soviet Union. Moscow’s anti-communist mayor backed burying the corpse and restoring Red Square to its pre-revolutionary state. Boris Yeltsin, the first president of non-Communist Russia, also proposed to bury Lenin. But Yeltsin’s health faltered and political strength weakened.

In 2001 Yeltsin’s successor, Vladimir Putin, expressed fear that burial would suggest the Russian people had lived under “false values” all those years. He concluded in 2011 that the decision would be made when the time was right.

Yet the same year Vladimir Medinsky, then a leading member of Putin’s United Russia Party, proposed burying the corpse next to Lenin’s mother in St. Petersburg and turning the mausoleum into a museum. In 2012 Putin appointed Medinsky Minister of Culture, suggesting support for removing Lenin’s body. However, Putin failed to act and since has ignored the issue.

While Russia cannot escape its history, it should stop glorifying the country’s turn down one of humanity’s great deadends. Although an unjust despotism, Imperial Russia could have been transformed into some form of constitutional rule.

But by entering World War I the Czarist autocracy sacrificed that opportunity. The Provisional Government, led by liberal constitutionalists and democratic socialists, put the previous regime’s commitment to war before the Russian people’s interests.

Unfortunately, the victorious Bolsheviks suppressed free markets, stole private property, crushed political dissent, murdered political opponents, imposed materialist ethics, and exalted ruthless dictatorship. The result was a sustained assault on the history, traditions, ethics, and very essence of the Russian people. Although Russians finally were able to turn back from this deadly detour, the same old authoritarianism has been born again, repackaged to make it more palatable to Russians today.

As I point out on Forbes online, “Burying Vladimir Lenin would be a powerful symbolic gesture to close an era. That still might not help the West understand what Vladimir Putin is, but it would emphatically show what he is not. And that would be no small feat at a time of dangerously rising tensions between Russia and the West.”

Someday Russians will be free. Liberation will come only through the Russian people’s own efforts, however, not from the West. Only they can make their own future. The day liberty arrives will be the real Russian Revolution.

Doug Bandow

As U.S. relations with Russia go from bad to worse, even old agreements seem at risk.  Such as the INF (Intermediate-Range Nuclear Forces) Treaty.

The 1987 pact essentially cleared Europe of mid-range missiles (between 500 and 5500 kilometers).  But the State Department recently charged Moscow with violating the treaty.

The INF treaty has been to America’s advantage, since it does not cover U.S. military allies, such as Britain and France.  Even more important, the U.S. has no potentially hostile neighbors with such a capability, while Russia faces China, India, Iran, North Korea, and Pakistan.

Moscow officials have suggested that they may leave the agreement at some point.  To forestall that possibility the U.S. and Moscow should seek to include China and other regional powers in the pact.   

Although relations between Moscow and Washington obviously are strained, the U.S. should approach Russia about amending the INF Treaty to allow deployments in Asia, unless otherwise agreed.  The two governments should simultaneously propose that Beijing and its neighbors accede to the pact. 

Admittedly, winning signatures from other nations, especially China, would not be easy. The PRC believes its short- and medium-range missiles serve a significant security role. 

However, the PRC’s more aggressive approach to Asia-Pacific territorial issues has antagonized neighboring states.  Japan, South Korea, and Taiwan, in particular, are likely to become increasingly interested in developing countervailing missile capabilities. 

In the future the PRC may face a plethora of countervailing weapons deployed by several states. Then Beijing might view a ban as more to its liking. 

Negotiations over expanding the INF Treaty would make Beijing a full global partner on arms control, recognizing the country’s rising international status.  Although the PRC has tended to view such limits as a means of maintaining U.S. “hegemony,” Washington could suggest accession as the best means to forestall any further increase in U.S. military presence in the region as part of the famed “pivot” or “rebalance.” 

Some analysts instead advocate responding to the PRC’s military build-up by withdrawing from the pact and introducing comparable missiles.  As an alternative, David W. Kearn, Jr. of St. John’s University suggested enhancing U.S. offensive capabilities in the region and defensive responses to missile attacks. 

However, as I point out in China-US focus, “nearby nations should be responsible for maintaining regional security.  American policymakers should use expansion of the INF Treaty as a means to reduce U.S. defense obligations.”

China’s growing missile force challenges America’s dominance in Asia—most directly the ability to project power—not America’s survival at home.  The most likely contingency is an attack on Taiwan, which is quite different from a strike on the U.S.  The Cold War justification for America’s extensive military presence in the region has disappeared.

America’s friends and neighbors, no less than China, have prospered and are able to defend themselves.  That obviously is best for the U.S., since Beijing will always have an incentive to spend and risk more in its own neighborhood than will America. 

Restricting Washington’s role also would reduce the potential for a superpower confrontation over less than vital interests.  Ironically, America’s conventional superiority inflates the danger of a great power confrontation.  Explained Kearn:  “in a crisis or a conflict, regional adversaries may have incentives to escalate (or threaten escalation) against U.S. forces in the region or U.S. allies to de-escalate the crisis and ensure regime survival once the United States has become involved.”

Expanding the INF Treaty to Asia would help reduce growing military tensions and dampen geopolitical competition, especially over territorial issues.  Achieving this end won’t be easy, but it is an area where the U.S. and Russia can cooperate.  While China might initially be wary of joining such an effort, a new arms control regime would ultimately offer Beijing significant benefits as well.

Brink Lindsey

There are five new essays today in the Cato Institute’s online growth forum:

1. Ryan Avent argues against restrictive zoning.

2. Jagadeesh Gokhale makes the case for tax and entitlement reforms.

3. Michael Strain wants to put America back to work.

4. Karl Smith thinks about how to counter slowing labor force growth.

5. Robin Hanson calls for the meta-policy of decision markets.

Chelsea German

The state of the world is improving. Child mortality, poverty, and violence are declining, while life expectancy, incomes, and education are increasing. While many problems remain, most indicators of human well-being are trending in the right direction—especially in the developing world.

If you are interested in a realistic look at the state of humanity, then I highly recommend that you watch this video:

The Fate of Our World

Learn more.

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.

Patrick J. Michaels and Paul C. Knappenberger

One of the planet’s most prolific weather and climate Tweeters is Florida State PhD and WeatherBell wizard Dr. Ryan Maue (rhymes with zowie). Ryan’s initial claim to fame was his analysis of tropical cyclone (e.g., hurricane) activity that shows, over the past 45 years, lots of variability but no overall change.  Originally published in 2009, it flies in the face of global warming doomsayers who predict increases in all manner of extreme weather events including hurricanes and their tropical brethren. As a young scientist, going against the grain is not typically a good career move (which is why the global warming establishment is self-perpetuating), but Ryan is driven more by the truth than by political correctness. In fact, political correctness is an antonym of Ryan.

He has risen to prominence as the creator of the amazing analyses and graphics produced by the private weather forecasting firm WeatherBell Analytics. Many of these products find their way onto Ryan’s Twitter page along with some insightful (and often witty) commentary. His analysis of current weather events is unparalleled. If you’ve heard of the “polar vortex,” you can thank (or blame) Ryan: he first popularized this arcane professional term last winter.

This past week he has been active, covering the humongous lake-effect snows burying parts of greater Buffalo, the cold outbreak setting all-time monthly low temperature records in the Eastern United States, and pushing back against the growing tide of media that so desperately wants to link it all to global warming.

From our standpoint, Ryan is one of the best young weather/climate guys out there. If you don’t want to limit yourself to only encountering  Ryan’s analysis on the Drudge Report (which actually isn’t too limiting since his work is frequently featured there), then you ought to have a look for him on Twitter and become another of his more than 13,000 followers. To tune in to Ryan telling it like it is, check out @RyanMaue.

Also worth noting is that the deadline for the public to comment on the Environmental Protection Agency’s proposal to regulate carbon dioxide emissions from existing power plants is December 1 (yes, that’s the Monday after Thanksgiving). This legislation is the crème-de-le-crème of President Obama’s Climate Action Plan and seeks to reduce carbon dioxide emissions from existing power plants to 30% below the emission level in 2005 by the year 2030.  According to the EPA, that will result in a reduction of 730 million metric tons of carbon dioxide, equivalent to taking 150 million cars off the road.

While that sounds like a lot, it really is a very little, especially when it comes to the climate impact. In public comments we are about to submit, we calculated that these emissions reductions would avert only 0.02°C of projected global warming by the end of the century—a value too little to care about (and assuming a warming that is way too much). That is, unless you care about the price. Then you come to realize just how much  pain this insignificant gain costs.

Just this week, an economic analysis from Energy Venture Analysis was released examining the impact of the proposed EPA regulations on energy prices. From the report’s press release:

The U.S. Environmental Protection Agency’s (EPA) proposed carbon rule is the latest in a series of regulations alongside rising natural gas prices that will increase the cost of electricity and natural gas by nearly $300 billion in 2020 compared with 2012, according to a study released today by Energy Ventures Analysis, Inc. The study, “Energy Market Impacts of Recent Federal Regulations on the Electric Power Sector,” demonstrates the heavy financial burden the EPA’s collection of regulations will force on American families, businesses and manufacturers through soaring energy costs.

The study found the typical household’s annual electricity and natural gas bills would increase by $680, or 35 percent, from 2012 compared to 2020, escalating each year thereafter as EPA regulations grow more stringent. The cost of electricity would increase the most in states that have implemented deregulation of wholesale electric power markets, where the price of electricity will rise to the marginal cost to support new generating capacity.

The full report, including an online tool to examine the impacts on a state-by-state basis, is available here.

If you wish to point out any of this to the EPA, or if you have other details (pro or con) that you feel worth mentioning, you can submit your comments at the website Regulations.gov. We are currently busy putting the final touches on ours!

And finally, a bit of a departure. While typically our focus here is on global warming, the bigger view of the Center for the Study of Science is examining how federal control of research dollars influences science. Global warming is a prominent (and popular) example, but it is by no means the only science topic that is co-opted by the government. 

We just came across this example even though it was reported on earlier this year: “Feds Accused of Steering Funding to Anti-pot Researchers.” As drug legalization is a major libertarian emphasis, we thought it was worth dusting off this article and mentioning it here. That the feds are apparently meddling in the scientific research process and favoring those researchers who will produce results that support the federal stance (in this case, that marijuana is bad) should hardly be surprising for anyone who follows us at the Center for the Study of Science.

From the article’s lead:

As the nation’s only truly legal supplier of marijuana, the U.S. government keeps tight control of its stash, which is grown in a 12-acre fenced garden on the campus of the University of Mississippi in Oxford.

From there, part of the crop is shipped to Research Triangle Institute in North Carolina, where it’s rolled into cigarettes, all at taxpayer expense.

Even though Congress has long banned marijuana, the operation is legitimate. It’s run by the National Institute on Drug Abuse, part of the U.S. Department of Health and Human Services, which doles out the pot for federally approved research projects.

While U.S. officials defend their monopoly, critics say the government is hogging all the pot and giving it mainly to researchers who want to find harms linked to the drug.

For the rest of the story of the government bogarting the weed, be sure to check out the full piece.

That’s it for this week. We’ll be off for Thanksgiving next week, but we’ll be back with other interesting tidbits that you ought to have a look at come the first week of December.

Caleb O. Brown

This morning I sat down for a live online discusssion with Alex Nowrasteh to discuss the policy implications of President Obama’s plan to delay deportations for potentially millions of undocumented immigrants.

Cato Connects: Executive Action on Immigration

Patrick J. Michaels

So who hasn’t seen one of the bajillion recent stories saying 2014 is going to set the instrumental record for the highest average global surface temperature? May we throw a teense of cold water on that hot news?

Annual temperatures are calculated by averaging up monthly readings, so the last data point that we have is October. The National Climatic Data Center, a part of the Department of Commerce, estimates that global average temperature was a record high of 58.46°F. The previous record was 58.45°.

The key word is “estimates.” When a scientist measures something—with a ruler, a scale, or a thermometer, for example—there’s always a measurement error owing to properties of the measuring device or even the skill of the scientist. When it comes to global temperature, scientists are averaging data from over a thousand thermometers scattered about the planet. Some are well-taken care of, and some are not. Some may have traces of urban warming in them. Nor is the number of readings exactly the same from year to year, or even from month to month.

The result is that there is a central estimate (58.46°) and a 95% confidence range as to where the “true” value lies. 

The most recent and most transparent error analysis of global temperatures has been done by a group called Berkeley Earth. For October, they find that the 95% confidence range is 0.10°F, or +/- 0.05°.

So, using the normal rules of science, is 58.46° then distinguishable from 58.45°? In a word, “NO.”

Steve H. Hanke and Dr. Garbis Iradian

The haggling between Iran and the so-called P5+1—the permanent members of the United Nations Security Council, plus Germany—is scheduled to come to a close on Monday, November 24th. The two parties each want different things. One thing that Iran would like is the removal of the economic sanctions imposed on it by the United States and its allies.

After decades of wrongheaded economic policies, Iran’s economy is in terrible shape. The authoritative Economic Freedom of the World: 2014 Annual Report puts Iran near the bottom of the barrel: 147th out of the 152 countries ranked. And the “World Misery Index Scores” rank Iran as the fourth most miserable economy in the world. In addition to economic mismanagement, economic sanctions and now-plunging oil prices are dragging Iran’s structurally distorted economy down. So, it’s no surprise that Iran would like one of the weights (read: sanctions) on its economy lifted.

Just how important would the removal of sanctions be? To answer that question, we use the Institute of International Finance’s detailed macroeconomic framework. The results of our analysis are shown in the table and charts below the jump.

 

The trade and financial sanctions imposed since early 2012 have inflicted heavy damage on Iran’s economy. Indeed, we estimate that Iran’s real gross domestic product has contracted by a cumulative 8.6 percent during the past two fiscal years (2012/13–2013/14). We estimate the forgone annual economic output to be a whopping $79 billion. That is slightly more than twice the size of the Jordanian annual GDP of $36 billion.

Without an agreement, the Iranian economy will remain weak. On the other hand, a comprehensive agreement—one in which existing sanctions would be lifted gradually—would allow for steady increases in oil exports to their pre-sanction levels by the end of 2017 and a possible restoration of access to the global financial system. The economy would boom: indeed, the real GDP growth rates during the fiscal year 2015/16 and 2016/17 would jump by 4.1 and 4.6 percentage points, respectively. And for those two fiscal years alone, the cumulative GDP would be $125 billion greater than if the painstaking sanctions were left in place.

So, the economic benefits dangling in front of the Iranians are enormous. The unanswered question remains: what are the costs of coming to an agreement, as seen by the Iranians? The answer will be revealed on November 24th.

 

Chelsea German

With the media frenzy over Ebola now thankfully fading, let us view the outbreak within the context of humanity’s continually improving ability to solve new problems.

Today, the world is better prepared than it has ever been to respond to an outbreak of an infectious disease. For example, there are more skilled medical professionals available to tend to the sick and conduct research on effective treatment. The number of physicians per person is rising globally.

While there is not yet a cure for Ebola, many people are hard at work coming up with one. Countless maladies that once were death sentences can now be treated. The development of effective antiretroviral drugs for HIV/AIDS, for example, serves as one of the great medical accomplishments of the past two decades.

Today, the tools to prevent transmission of disease are more accessible than ever. Ebola and many other diseases are partly spread through poor access to sanitation. Thankfully, more people are gaining access to improved sanitation facilities.

The Ebola threat should be viewed in the context of human ingenuity. As Princeton University professor and HumanProgress.org advisory board member Angus Deaton writes in his book The Great Escape, “Need, fear, and, in some circumstances, greed are great drivers of discovery and invention.”

Ilya Shapiro

In an excellent speech combining reasoned policy arguments, appeals to American ideals, touching anecdotes, and well-selected Scripture, President Obama launched significant positive reforms to an immigration (non-)system that I’ve long called the worst part of the U.S. government (at least before Obamacare). Unfortunately, the centerpiece of this action, the legalization of around five million people who are in the country illegally—mostly the parents of U.S. citizens and green-card holders—is beyond the powers of the president acting alone.

To be sure, the relevant statutes give executive branch officials very broad discretion in how they enforce immigration laws. For example, Section 212(d)(5)(A) gives the Secretary of Homeland Security the “case-by-case” discretion to “parole” for “urgent humanitarian reasons or significant public benefit” an alien applying for admission. The authorization for “deferred action”—a decision not to seek deportation and concomittant authorization to reside and work legally, which was the basis for Obama’s 2012 Deferred Action for Childhood Arrivals program—is similarly broad.

And all modern presidents, from both parties, have used such discretionary powers. President Ronald Reagan’s Justice Department issued regulations to comport with the family-unity provisions of the 1986 Immigration Reform and Control Act. President George H.W. Bush temporarily expanded the category of undocumented children and spouses eligible to stay in the country before Congress formalized their status. President Bill Clinton deferred action on illegal immigrants from Haiti during that country’s convulsions in the 1990s—one example of many relating to executive discretion regarding nationals of war-torn nations—while President George W. Bush took various actions regarding illegal aliens in areas affected by Hurricane Katrina. These are just a few examples, but they’re all different from what President Obama is doing, both qualitatively—discrete and temporary versus open-ended and potentially timeless—and quantitatively. (See here and here for contrasts between Reagan/Bush and Obama.)

But don’t take it from me. Here are a few solid arguments that were made by a noted constitutional lawyer over the last several years:

  • “Comprehensive reform, that’s how we’re going to solve this problem…. Anybody who tells you it’s going to be easy or that [the president] can wave a magic wand and make it happen hasn’t been paying attention to how this town works.” (March 10, 2010)
  • “America is a nation of laws, which means [the President is] obligated to enforce the law…. With respect to the notion that [the president] can just suspend deportations through executive order, that’s just not the case, because there are laws on the books that Congress has passed…. [W]e’ve got three branches of government. Congress passes the law. The executive branch’s job is to enforce and implement those laws. And then the judiciary has to interpret the laws. There are enough laws on the books by Congress that are very clear in terms of how we have to enforce our immigration system that for me to simply through executive order ignore those congressional mandates would not conform with [Obama’s] appropriate role as President.” (March 28, 2011)
  • “If this was an issue that [the president] could do unilaterally, [Obama] would have done it a long time ago…. The way our system works is Congress has to pass legislation. [The president] then get[s] an opportunity to sign it and implement it.” (Jan. 30, 2013)

These are but three examples of the 22 times that this particular analyst of executive power has argued that the president can’t do what he just announced. Who is this person with such strong feelings that he’s felt the need to opine so many times on this? Barack Obama.

There comes a time even under statutes that are ambiguous or open-ended that executive discretion ceases to be a lawful execution of the law and becomes a suspension or re-writing of it. It’s very difficult to articulate where that line is, but my view is that President Obama is on the other side of it. He’s set a dangerous precedent for executive action, one in which the president somehow gets more power when Congress isn’t acting (as if gridlock were a bug in our system of checks-and-balances, not a feature).

Accordingly, while the applicable immigration laws give the president discretion that’s quite broad, either (1) this executive action goes beyond even that broad grant of power, or (2) the laws themselves are an unconstitutional delegation of legislative power. After all, Congress could not constitutionally pass a law saying, “The president is now dictator and can make any laws he wishes”—even temporarily or regarding but one area of policy. So if the administration’s defenders are right that President Obama is toeing but not crossing the letter of the law, then that letter is invalid and the president’s actions are still unconstitutional.

Ultimately, more than enough blame goes to Congress for not fixing this mess of an immigration system that serves nobody’s interests—not big business or small, not skilled or unskilled workers, not the economy or national security—but that doesn’t justify what the president is doing. And in acting like he has, President Obama—who as a senator in 2007 voted against the guest-worker program that would have sealed the Bush-era compromise—has eviscerated any chance for real, legislated immigration reform.

I guess we’ll have to wait for President Ted Cruz to accomplish that in a latter-day Nixon-to-China moment.

For an excellent point-by-point analysis of the Office of Legal Counsel memo justifying the president’s action—OLC is the Justice Department’s elite unit responsible for advising the government on the legality of various actions—see Josh Blackman’s post from last night.

Ilya Shapiro and Gabriel Latner

Virtually every aspect of government’s work depends on contracts, whether they be with manufacturers of naval ships, civilian contractors, the companies that sell office supplies, or the landlords who lease the office space that houses the vast bureaucracy. These contracts, like any contract, only work when both parties have legal certainty; each must be able to depend on the promises made by the other.

That said, federal contractors do have to assume less certainty when dealing with the government because the Supreme Court has held that contracts can’t bind Congress from passing new legislation, or agencies from adopting new regulations. For example, while the government could enter into a contract promising to buy 100 widgets, Congress could pass a law making it illegal to manufacture or sell widgets—effectively voiding the agreement.

In the case of Century Exploration v. United States, an energy company leased the rights to an oil field in the Gulf of Mexico owned by the government for $23 million dollars up front, and $50,000 per year of the lease. Because oil drilling is a heavily regulated industry, Century only felt safe spending that kind of money because the lease contained a promise that Century wouldn’t be subject to any changes to the law that the government might make in the future, except for a specific class of regulations created under the authority of a single statute, the Outer Continental Shelf Lands Act (OSCLA). Without this promise, there would have been nothing to stop the government from taking Century Exploration’s money and then outlawing drilling in the Gulf of Mexico, or passing new regulations that would make it prohibitively expensive for Century to make use of the leased plot.

Unfortunately, the government did the very thing it promised not to. Under the Oil Pollution Act (OPA), drilling companies have to calculate the volume of oil that would be released in a “worst case scenario” and prove that they have the financial resources to fund cleanup efforts. The method for calculating the amount of oil, and the cost of cleanup, are governed by regulations issued under the OPA. Two years into Century’s lease, however, a civil servant in the Interior Department sent the company an email demanding a recalculation of the “worst case scenario” using a more extreme methodology contained in an attached FAQ. Using that new method, the cost of cleaning up a hypothetical spill increased from $4.5 million to $1.8 billion. Because Century couldn’t prove that it would have $1.8 billion on-hand in the event of a disaster, it could no longer operate on the leased plot.

Century appealed to the courts, relying on a 2000 case called Mobil Oil in which the Supreme Court interpreted a nearly identical lease to mean that the government would breach its contract if it tried to apply new laws or regulations to the leaseholders (except, again, for regulations under OSCLA). Under Mobil Oil, unilaterally changing the method of calculating the volume and cost of a spill would be just such a breach; the regulatory changes were made under the OPA, not OSCLA, and the changes were made by email, not by formal regulation. The government insisted it had done no wrong and, remarkably, the U.S. Court for the Federal Circuit agreed.

Cato has filed an amicus brief urging the Supreme Court to review this case and make clear that the government can’t violate contractual obligations with impunity. We make two key points:

First, it is vital to the smooth operation of the government and the health of the economy that private entities are confident that the government will honor its contractual promises. Federal spending on contracts has totaled roughly $500 billion annually since 2008—or 15% of the federal budget. If businesses and individuals have no reason to believe that the government will live up to its business obligations, they’ll have no reason to work with it. The Federal Circuit’s decision, which condoned the government’s flagrant breach of its contract with Century, sets a bad example and must be reversed.

Second, and quite simply, words have meaning—in the Constitution, in statutes, and yes, in contracts. A “regulation” is a formal rule adopted and issued by an authorized agency, in accordance with strict procedural protocols. It’s not a casual email. Giving informal government policy documents created by civil servants the full weight of the law is unconstitutional, undemocratic, and unsustainable.

In the end, this case is about following the law: the Federal Circuit needs to abide by Supreme Court precedent and the government needs to abide by its own word.

Ilya Shapiro and Julio Colomba

Not many people know that there’s a clause in the Constitution that charges Congress with guaranteeing every state a “republican form of government.” Even fewer people are aware of exactly what that means.

Historically, the Guarantee Clause is considered to have been a measure the Framers included to ensure that the governments of the states—which used to have far greater autonomy—didn’t devolve into monarchies or other despotic forms. But the clause’s legal effect has never been fully fleshed out. Not that there haven’t been opportunities; claims based on the Guarantee Clause are peppered throughout U.S. history. Courts have typically disposed of them by invoking the political question doctrine, which they use to avoid deciding an issue they believe is more appropriately left to the elected branches. Since there’s no legally binding definition of “republican,” a court applying the Guarantee Clause has little to work with, also contributing to the tendency to treat such cases as non-justiciable.

Accordingly, when a group of legislators and citizens groups supporting big government banded together to attack Colorado’s Taxpayer Bill of Rights (TABOR) based on a Guarantee Clause claim, it seemed like a longshot. Their theory was that the state no longer had a republican form of government because the TABOR—a voter-approved state constitutional amendment—restricts the legislature’s ability to raise taxes without approval from the people of Colorado.

Colorado Gov. John Hickenlooper (D), defending the state’s constitution, moved to dismiss the case in federal district court but, surprisingly, lost the motion. Even more surprisingly, a panel of the U.S. Court of Appeals for the Tenth Circuit affirmed that denial, which meant that the plaintiffs’ claims could go to trial and jeopardize the continued existence of the state’s popular anti-tax measure. Colorado has one more chance, however, to prevent poorly constructed Guarantee Clause claims from being heard in federal courts and thus jeopardizing the dozens of state constitutional measures that use popular input: the Supreme Court.

Governor Hickenlooper has filed a petition for certiorari requesting that the Supreme Court, among other things, put to bed the erroneous notion that elements of direct popular participation and direct democracy can’t exist in a republican government. Joined by the Independence Institute, Reason Foundation, and Individual Rights Foundation, Cato has filed a brief supporting Colorado’s petition. We argue that the Court should hear the case so it can inform the lower courts that pretextual Guarantee Clause claims don’t belong in federal courts.

We give three reasons for this position. First, the plaintiffs’ complaint fails to provide a court with legal standards coherent enough to decide the case under the Guarantee Clause. Second, under Supreme Court precedent, the idea that initiatives and referenda are incompatible with republican government was resolved (and rejected) when Congress admitted states that used these popular procedures into the union. Third, even a brief look at the history of the Founding Era’s understanding of the words “republic” and “republican” dispels the myth on which the plaintiffs base their claim: that direct popular participation is incompatible with the republican form. Our brief provides that historical context.

In sum, the suggestion that the Guarantee Clause—meant to ensure that state governments would remain governments “of the people” and wouldn’t revert to despotic monarchies—could be used to wrest greater control of the taxing power from the people makes the plaintiffs’ claims risible. The Supreme Court should take this opportunity to hear Hickenlooper v. Kerr and put an end to this case.

Brink Lindsey

Cato’s online forum on reviving growth features the following new essays today:

1. Steven Teles takes aim at regressive rent-seeking.

2. Alex Nowrasteh explains the benefits of high-skill immigration.

3. Eric Toder argues for corporate tax reform.

4. Derek Khanna wants to unleash entrepreneurs.

 

Walter Olson

To the extent America has made progress in recent years in rolling back the extreme litigiousness of earlier years, one main reason has been the courts’ increased willingness to respect the libertarian and classical liberal principle of freedom of contract. Most legal disputes arise between parties with prior dealings, and if they have been left free in those dealings to specify who bears the risks when things go wrong, the result will often be to cut off the need for expensive and open-ended litigation afterward. Thus the courts’ willingness to enforce agreements to arbitrate disputes, rather than run to court, has played a major role in curbing what once looked like an ever-rising tide of workplace and consumer class action litigation. “Shrinkwrap” or “clickwrap” disclaimers of liability, despite their occasional absurdities, serve the very practical function of ensuring that when information technology or online services go wrong the result is not to sink providers in limitless liability over the consequences of data loss to buyers. And recognizing libertarian principles of free contract would be among the most promising ways to reduce the glaring costs and injustices of medical liability litigation, as Richard Epstein argued in his very early (1976!) paper, Medical Malpractice: The Case for Contract.  

In May, in a case named ATP Tour v. Deutscher Tennis Bund, the Delaware Supreme Court decided to enforce as written a corporate bylaw adopted by an enterprise incorporated in Delaware providing for a loser-pays rule in cases of claims against it by shareholders. Almost at once, the community of practicing Delaware corporate litigators, as well as plaintiff’s class action lawyers across the country, protested loudly: such a rule, by putting claimants at risk of their own money, would discourage all but the strongest claims (and, not incidentally, cut into counsels’ own livelihood of prosecuting and defending such claims). They demanded that the Delaware legislature step in to ban such bylaws and restore the legal status quo ante, along with its accompanying flow of litigation. Within weeks, the legislature was on the verge of passing such a ban, only to pull back when the national business community raised an uproar of its own to defend letting the bylaw experiment go forward

Prof. Steve Bainbridge, a leading corporate law expert at UCLA, has now published a two-part post on why lawmakers and regulators should leave freedom of contract alone when it comes to such bylaws. In Part One, he recounts the evidence for believing that the business of private class-action shareholder litigation generally serves the interests of the lawyers who run it and not that of investors, transferring money from corporate treasuries (ultimately, from investors themselves) to an essentially identical class of investors following a large haircut of legal fees and costs. Deterrence of fraud, self-dealing, and managerial shirking, while an important objective, is poorly served by the class-action mechanism both because guilty individuals seldom pay and because transactions such as mergers and businesses in volatile markets are routinely sued, and made to pay legal toll, whether their managers have misbehaved or not. The result is a less competitive capital market from which internationally mobile companies and investors are increasingly retreating to more predictable legal regimes in other countries.

In Part Two, Bainbridge brings public choice analysis to bear, noting that Delaware’s sought-after corporate law regime is heavily shaped by the interests of repeat-player lawyers, who want to keep Delaware law efficient enough to keep attracting national businesses to incorporate there, yet not so efficient that it does away with the litigation and advisory opportunities that make for their own livelihood. What constrains them from yielding entirely to self-interest is that there is competition between states. Legislators in Oklahoma have moved to authorize loser-pays bylaws for companies incorporated there, and although it would take a lot to get companies to consider departing Delaware as a preferred state of incorporation, a few episodes like this might do it. Inevitably, hints are now in the air of federal action to put Oklahoma in its place: Sen. Richard Blumenthal (D-CT), a frequent ally of plaintiff’s lawyers, has asked the federal Securities and Exchange Commission to step in to squash the option.

I agree with Bainbridge’s bottom line: approving fee shifting bylaws “is the right answer from a policy perspective.” It’s also the answer that is most respectful of contractual liberty.

Craig D. Idso

Climate model simulations generally predict a future with more frequent and more severe floods in response to carbon dioxide–induced global warming. Confirming such predictions with real world observations, however, has remained an elusive task.

The latest study to illustrate this point comes from the four-member research team of Anna P. Barros, Yajuan Duan, Julien Brun, and Miguel A. Medina Jr. (2014). Writing in the Journal of Hydrologic Engineering, they analyzed streamflow records at various locations throughout the southeast and mid-Atlantic United States over the past century.

In prefacing their work, the researchers note several challenges that must be overcome in order to properly assess and attribute streamflow trends to anthropogenic climate change. One key challenge pertains to “the lack of long enough observational records [that are necessary] to capture the full range of time scales of variability in hydroclimatic regimes as well as extreme events.” This is particularly true in the present case in which only about 3,000 of the 10,012 U.S. Geological Survey streamflow gauges that exist within the authors’ study region have data stretching beyond 25 years of record. In addition, there is often the added challenge of “intermittency in the spatial and temporal configuration of the observing system of stream gauges,” as different stations both enter into, and exit out of, existence over the course of the study period and within the study region.  

Another factor that must be considered are changes in land-use and land cover (LULC) that can significantly influence streamflow. This is especially apparent in regions that have undergone significant urban development, which creates impermeable surfaces and highly interconnected discharge networks that have been shown to contribute to what the authors refer to as “large flood peaks.” Nevertheless, despite the aforementioned challenges, Barros et al. proceeded to conduct various statistical analyses on streamflow data from within their region of study at various time intervals over the past century.

Among their list of findings, the authors report “an overwhelming majority of stations shows no trend” in annual peak streamflow. Quantitatively, for the period 1950–2010, 81.7% of all stations examined in this 61-year period showed no trend at the 98% confidence level, 11.4% experienced a negative trend toward decreasing streamflow, and 6.8% showed a positive trend. (See Table 1, after the jump.)

Similar trends were noticed over the shorter 31-year period of 1980–2010, albeit there is one important change that occurred: there were lower percentages of stations experiencing negative or positive trends. Thus, rather than trending toward more extreme conditions, annual peak streamflow throughout the southeastern and mid-Atlantic United States over the past 30 years has become less extreme and more representative of average conditions. Moreover, those stations exhibiting positive trends tended to be found in urban areas (affected by LULC change), while those exhibiting negative trends tended to reside downstream of reservoirs (also a LULC factor). 

Table 1.  Summary of the trend analyses performed by Barros et al. on annual peak streamflow time series from the southeastern and mid-Atlantic United States over two time intervals (1950–2010 and 1980–2010). Numbers represent the percentage of all stations examined experiencing a positive, negative, or no trend in the data at the 98% confidence level.

In discussing their findings, Barros et al. say they “are consistent with Villarini and Smith (2010) in their analysis restricted to stream gauges with at least 75 years of record, with Hirsch (2011) using 200 stream gauges, and Vogel et al. (2011) and Lins and Cohn (2011) for the [Conterminous United States].”  Given as much, it is extremely difficult to come to any conclusion other than the fact that the unanimous observations depicted in these studies do not support model-based claims that carbon dioxide–induced climate change is leading to more floods. In contrast, if anything, just the opposite appears to be the case, as annual peak streamflow has trended more toward average conditions.

References

Barros, A.P., Duan, Y., Brun, J. and Medina Jr., M.A. 2014. Flood nonstationarity in the southeast and mid-Atlantic regions of the United States. Journal of Hydrologic Engineering 19, 05014014. DOI: 10.1061/(ASCE)HE.1943-5584.0000955.

Hirsch, R. M. 2011. A perspective on nonstationarity and water management.  Journal of the American Water Resources Association 47: 436–446.

Lins, H. F. and Cohn, T. A. 2011. Stationarity: Wanted dead or alive? Journal of the American Water Resources Association 47: 475–480.

Villarini, G. and Smith, J. A. 2010. Flood peak distributions for the eastern United States. Water Resources Research 46: W06504.

Vogel, R. M., Yaindl, C. and Walter, M. 2011. Nonstationarity: Flood magnification and recurrence reduction factors in the United States.  Journal of the American Water Resources Association 47: 464–474.

Matthew Feeney

If taxi drivers want to endear themselves to consumers, they had better find another way of protesting ridesharing companies than deliberately congesting traffic. On Monday night, taxi drivers with the San Francisco Taxi Workers Alliance caused traffic jams at San Francisco International Airport in the wake of last month’s news that the airport would allow rideshare vehicles to pick up passengers as part of a pilot program. Unsurprisingly, airport visitors were not pleased. This kind of protest has a track record of failure, and in the coming years these protests may be remembered as being among the most frantic and ultimately unsuccessful attempts taxi drivers made to combat the rise of ridesharing companies such as Uber, Lyft, and Sidecar. 

Taxis have deliberately congested traffic in rideshare protests not only in American cities such as San Francisco and Washington, D.C., but also in London, where the protest earlier this year reportedly resulted in an explosion in British Uber sign-ups. In Washington, D.C., the city council passed a rideshare bill in a 12-1 vote despite the protest.

Taxi drivers are right to be worried about ridesharing. In San Francisco, there has been a dramatic drop in the number of taxi trips since the beginning of 2012, the year Uber’s ridesharing service and Lyft both launched. In September 2014, the general manager of a Washington, D.C., cab company said “what we are seeing is, year over year, an approximately 30 percent decrease in business.” A draft study from the Virginia Department of Motor Vehicles reportedly predicts that once rideshare regulations are permanently in place in the state, rideshare drivers will outnumber taxis.

Many consumers have demonstrated over the last few years that they prefer rideshare services to taxis. Market incumbents such as taxis have a number of options when competitors arrive on the scene, but it is hard to see if any will halt the growth of ridesharing. 

Taxi companies could try to innovate to keep up with the technology used by Uber, Lyft, and Sidecar. What many people like about ridesharing is the ease of use. All users have to do is press a button on their smartphone in order to get a ride that is paid for automatically without cash. Hailo, a company with an app similar to the apps offered by ridesharing companies, provides a way for passengers to hail a taxi via smartphones. However, Hailo recently announced that it would be leaving North America because of the competition from Uber and Lyft. Given that anyone who can download a taxi app also has the ability to download a ridesharing app, it is hard to see what a taxicab app would be able to offer that ridesharing companies don’t already provide. Of course, it is not inconceivable that the taxi industry will develop a competitive app, but it will be difficult for that app to succeed considering that rideshare companies already enjoy name recognition as well as a loyal customer base.

U.S. taxi drivers have been claiming that they provide a service safer than the services offered by rideshare drivers. Rideshare companies have been criticized for their insurance policies despite the fact that both Uber and Lyft provide coverage once a ride is taking place and when drivers are logged into a rideshare app but have yet to accept a ride request. The coverage for when a rideshare driver does not have a passenger is designed to kick in if a driver’s auto insurer declines a claim.

In California, which like Colorado has statewide rideshare insurance legislation on the books, insurance policies specifically designed for ridesharing can now be reviewed by the California Department of Insurance. As rideshare companies expand, we should expect more rideshare legislation to be passed at the state level and for the insurance industry to work toward developing products specifically designed for ridesharing. It won’t be surprising if more statewide legislation includes insurance requirements similar to those outlined in California’s and Colorado’s legislation, which is very similar to the coverage already provided by Uber and Lyft. The major difference between Uber’s and Lyft’s policies and the insurance requirements in the California and Colorado legislation is that the laws in California and Colorado require that the coverage be primary for the time when a driver is logged into a rideshare app but has yet to accept a ride request. These insurance requirements will go into effect on January 15 in Colorado and on July 1 in California.

Political influence is the best tool the taxi industry has at its disposal, but it will become less efficient as ridesharing companies expand and the number of taxi rides declines. Local lawmakers and regulators with connections to the taxi industry can certainly cause headaches for ridesharing companies. However, as the popularity of ridesharing grows, the taxi industry’s influence will decline and lawmakers will come under increased pressure to allow Uber, Lyft, and Sidecar drivers to work in their jurisdictions.  

* I have a forthcoming paper on the safety concerns related to ridesharing in the works and will announce its publication on this blog. 

Simon Lester

A couple years ago, I speculated about eventual free trade in marijuana. That was before legalization in Colorado and Washington state. The case for trade and globalization of this industry looks stronger now. 

The Economist had a good article recently, taking into account this legalization, and thinking about what the future of the industry looks like. Right now, it’s just a bunch of small companies searching for the right market strategy, but they see consolidation eventually:

As happened with alcohol after the end of Prohibition, and has also happened with tobacco, the pot industry would probably come to be dominated by a few giant corporations.

They note that the tobacco industry has looked into the marijuana sector in the past, and might be well-positioned to run things, although it really could be anyone.

Assuming the current trend of increased acceptance continues, it seems inevitable that the marijuana industry will begin to look like other industries. There will be a few major global players, possibly based in the countries where legalization first happened. There will also be trade and investment disputes, just as there are in industries such as steel, cotton, and aircraft. No doubt the industry will be highly regulated, and regulations often given rise to these complaints.

For example, as the article notes, “Both Colorado and Washington have imposed residency requirements on the owners of marijuana businesses—including anyone with an equity stake.” Why restrict investments from foreigners and others who are not residents of the jurisdiction? No doubt the regulators have some rationale for this, but whether it’s a good one or complies with the various international investment obligations that are now in effect is up for debate.

Chris Edwards

International trade boosts our economy, but U.S. seaports need major improvements to maximize the benefits of trade. Bloomberg reported a couple months ago that congestion at West Coast ports is so severe that shippers are diverting a growing share of traffic to Canada. The Wall Street Journal reports today that the problems are continuing.

One issue is the aggressive labor union that controls the West Coast ports:

For more than a month, a rotating cast of about a dozen container vessels, bulk ships and tankers has sat anchored just outside the ports of Los Angeles and Long Beach, some waiting as long as eight days to berth.

… Uncertainty over contract negotiations between terminal operators and the West Coast Longshoremen’s union has further aggravated the congestion, local officials and economists say.

Businesses up and down the West Coast that rely on the ports for importing and exporting goods have expressed concern over the protracted negotiations between the International Longshore and Warehouse Union, representing workers at West Coast ports, and the Pacific Maritime Association, which represents carriers and terminal operators. ILWU members have been working without a contract since a six-year pact expired July 1.

In recent weeks, the PMA has accused the union of slowdowns at the ports of Seattle and Tacoma, Wash., and withholding some critical workers in Los Angeles and Long Beach, contributing to the current congestion. Some longshoremen walked off the job Oakland, Calif., last week, aggravating concerns over a widespread labor disruption during the holiday shipping season.

Port employers as well as retailers and manufacturers say their greatest fear is the possibility of a total shutdown across West Coast ports—similar to a 10-day worker lockout in 2002 after labor talks failed. The shutdown cost the U.S. economy several billions of dollars, industry groups say. Mr. Louttit of the Marine Exchange said the disruption at one point left 65 ships sitting at anchor off the Southern California coast.

The solution to these labor problems is straightforward: Congress should repeal “collective bargaining,” which is a euphemism for monopoly unionism. In other words, it should repeal the National Labor Relations Act (NLRA), which confers unjustified powers on unions and encourages them to disrupt workplaces.

The share of the private-sector workforce that is unionized has plunged for decades because unions make no sense in the modern fast-paced economy. But the unions that hang on in some industries cause a lot of trouble, as we’ve long seen with the high-paid longshoremen on the West Coast. I don’t imagine that NLRA repeal is on President Obama’s agenda, but it is a reform that policymakers should pursue down the road.

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