Steve H. Hanke
Following U.S. Secretary of State John Kerry’s saber-rattling statements on the 26th of August, the value of the Syrian pound (SYP) has zigged and zagged. Indeed, the SYP lost 24.7% of its value against the U.S. dollar in the two days following Kerry’s announcement (moving from 225 to 270 SYP/USD). Then, yesterday, we saw a sharp reversal in the course of the pound. Over the past two days, the SYP regained 25.58% of its value, bringing the black-market exchange rate back down to 215 SYP/USD. At this rate, the implied annual inflation rate is 209.85% (see the charts below the jump).
So, what caused the recent strengthening of the Syrian pound? We have to look no further than the eroding support for a U.S.-led strike against Syria. Yes, the United States has lost support from important allies, the United Kingdom, Canada, and Italy.
In addition, Syrian authorities have cracked down again on black-market currency trading. In the past week, the authorities have shut down a number of currency traders; made “friendly” reminders to the public of the penalties of trading on the black market—imprisonment of 10 years and a hefty fine; and warned Syrians to stay away from “counterfeit” dollars that have supposedly been circulating. The authorities’ “get tough” policy followed speculation that the SYP/USD rate would surpass the 300 mark.
I have established a page to track current black-market exchange-rate and implied inflation data for the Syrian pound, as well as for troubled currencies in Iran, Argentina, North Korea, and Venezuela. For more, see: The Troubled Currencies Project.
With friends and allies backing away from war with Syria, President Obama has been reduced to threatening unilateral military action—just enough so the administration won’t be “mocked,” said one unnamed official. But that’s also enough to violate the Constitution’s requirement for a congressional declaration of war.
The nation’s Founders feared just such a moment. John Jay pointed to the dubious motives that caused kings “to engage in wars not sanctified by justice or the voice and interests of his people.” So the Framers gave most military powers to Congress. Under Article 1, sec. 8 (11), “Congress shall have the power … to declare war.”
Future president James Madison explained the “fundamental doctrine of the Constitution that the power to declare war is fully and exclusively vested in the legislature.” The Founders did recognize that the president might have to respond to attack; however, this was a very limited grant of authority. George Mason favored “clogging rather than facilitating war.” James Wilson observed: “It will not be in the power of a single man, or a single body of men, to involve us in such distress; for the important power of declaring war is in the legislature at large.” Thomas Jefferson approved the “effectual check to the dog of war by transferring the power of letting him loose.”
No surprise, many presidents have pushed against the Constitution’s restrictions, unilaterally employing the military for different operations. However, most such deployments have been limited and temporary and many had colorable legislative authority.
Even strong presidents acknowledged the limits on their power. George Washington explained,“The Constitution vests the power of declaring war with Congress; therefore no offensive expedition of importance can be undertaken until after they shall have deliberated upon the subject, and authorized such a measure.” Similarly, said Dwight Eisenhower, “I am not going to order any troops into anything that can be interpreted as war, until Congress directs it.”
Barack Obama once agreed with his predecessors. In December 2007 candidate Obama acknowledged, “The president does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation.”
The Founders’ reasons apply even more today. War-making is the most extensive and most abused executive power.
Wrote James Madison: “Of all the enemies of true liberty, war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instrument for bringing the many under the domination of the few.”
So if President Obama wants to attack Syria, he must go to Congress. It doesn’t matter if he only envisions limited bombing raids. There is no plausible claim that Syria is preparing to attack America.
Nor are there constitutional exceptions for chemical weapons, bad dictators, or Mideast crises. President Obama must go to Congress.
The experience of Great Britain is instructive. Prime Minister David Cameron joined President Obama in demanding war. However, the House of Commons voted no. Asked whether he accepted parliament’s decision, the prime minister responded: “[I]t is clear to me that the British parliament, reflecting the views of the British people, does not want to see British military action. I get that and the government will act accordingly.”
It is equally clear that the American people do not want to see American military action and members of the U.S. Congress both desire to vote on war and likely would vote against war. There will be no United Nations Security Council resolution and the administration is being deserted by America’s European allies. When will the president “get that”?
If President Obama is intent on war, he must go to Congress. Going to war against Syria is not his decision to make.
Michael D. Tanner
On August 19, the Cato Institute released a study by me and Charles Hughes, The Work vs. Welfare Trade-Off, 2013: An Analysis of the Total Level of Welfare Benefits by State, showing that a family collecting welfare benefits from seven common programs – Temporary assistance for Needy Families (TANF), food stamps, Medicaid, WIC, public housing assistance, utilities assistance (LIHEAP) and free commodities – could receive more than what a minimum wage job would pay in 35 states. Critics responded: so raise the minimum wage.
Making work pay better, including the sort of entry level jobs that people leaving welfare can expect to find, is a terrific goal. Unfortunately, government has very little ability to force such increases. Attempts to simply mandate that businesses pay more, through increased minimum wages or living wage laws, as well as attempts to mandate employee benefits like health insurance (see Obamacare), primarily result in fewer jobs.
The amount of compensation a worker receives is more or less a function of his or her productivity. As Greg Mankiw, Chairman and Professor of Economics at Harvard University explains, “Economic theory says that the wage a worker earns, measured in units of output, equals the amount of output the worker can produce.” This somewhat oversimplifies, of course. There are other factors involved. But one can’t just arbitrarily declare a worker’s value.
The academic evidence on this point is pretty clear. A comprehensive review of more than 100 studies on the minimum wage by David Neumark and William Wascher for the National Bureau of Economic Research found that 85 percent of the studies they reviewed found negative employment effects. Newmark and Wascher concluded, “the preponderance of the evidence points to disemployment effects… [and] studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.”
Indeed, evidence of employment losses goes all the way back to 1938 and first federally imposed minimum wage. The U.S. Department of Labor concluded that that first 25-cent minimum wage resulted in the loss of 30,000 to 50,000 jobs, or 10 to 13 percent of the 300,000 workers effected by the increase.
More recently, Michael Hicks of Ball State University looked at the impact of the July 2008 minimum wage increase on unemployment rates in the United States and concluded that a 10 percent increase in the minimum wage results in a roughly 0.19 percent increase in unemployment, meaning the loss of about 160,000 jobs.
And, a study by Joseph Sabia and Richard Burkhauser for the Employment Policy Institute concluded that an increase in the federal minimum wage to $9.50 would result in the loss of 1.3 million jobs, primarily low-skilled jobs. Moreover, Sabia and Burjhauser concluded that there would be very little gain in exchange for this pain. According to their research, state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates.
Or simply look at how Obamacare’s employer mandate is causing businesses to shift workers to part time or to reduce hiring in response to higher labor costs.
We should understand that for most low skilled workers, such as the hypothetical mother in our welfare study, a minimum wage job is a starting point, not a destination. Nearly two-thirds of minimum wage workers receive a raise within one year, with the median hike for full-time workers about 14 percent. Indeed, we know that just 2.6 percent of full-time workers (including minimum wage workers) live in poverty.
That is not to say we shouldn’t try to increase entry level wages. But the best way to accomplish that goal is to create a climate that leads to greater economic growth overall. Greater prosperity eventually finds its way into higher wages for workers, including those at the bottom of the ladder. That means reducing taxes and regulations to encourage people to invest and expand their businesses.
Somehow, I don’t think that is what most critics of our study have in mind.
The United States faces no serious military threats today, yet is constantly at war. Syria is the latest target.
Traditionally Washington did not look for wars to fight. The government’s duty was to protect the American people from conflict.
Measured on this scale there is no cause for intervening in the Syrian imbroglio. The regime has little capacity to harm the U.S. or resist the overwhelming retaliation that would occur in response to any attack. Syria’s chemical weapons have little more utility than high explosives and nothing close to the killing capacity of America’s many nuclear weapons.
The possibility of radical Islamist insurgents gaining control over territory is more worrisome, but is most likely in the event of U.S. intervention against the Assad government. The conflict is destabilizing, but friendly states should deal with the consequences.
Of course, the Syrian civil war is a tragedy, like many others throughout history. Civil wars may be the worst, often with few genuine good guys.
The rebels are united only by their opposition to Assad. The strongest factions appear least interested in a liberal, democratic future for Syria and most interested in using Syria to attack Americans.
Nor is the contest likely to end after the first extended round. If Assad survives, he still may never reestablish his control over the entire country. If the rebels win, they are likely to engage in a new round of fighting for dominance. Moreover, there is likely to be even more score-settling with those who backed the regime.
The last argument for intervening in Syria is the regime’s apparent use of chemical weapons. Apparent because while Damascus has no moral compunctions about killing, it has no obvious reason to use such small quantities of chemical agents—enough to spark international intervention, but too little to achieve any useful military purpose. In contrast, insurgents have an incentive to use captured supplies in an attempt to draw in the West.
Assume, however, that the Assad regime used chemical weapons. The best U.S. response would be no response. First, President Barack Obama has no legal authority to strike Syria, absent an imminent threat, without congressional approval.
Second, the use of chemical weapons does not justify war. Syria is not a party to the claimed “international consensus” against chemical weapons, having never joined the Chemical Weapons Convention. Although classed as a weapon of mass destruction, chemical agents are difficult to deploy and not uniquely deadly. At least 99 percent of the battlefield deaths in World War I were caused by other means.
The last argument for war is credibility. If the president doesn’t back up his threat, who will take him seriously in the future? It’s a fair contention, except that American presidents routinely make threats on which they don’t make good. To take military action on behalf of peripheral interests would be irresponsible even if doing so marginally enhanced U.S. credibility. Washington should erase the chemical “red line” and in the future put U.S. credibility on the line only when substantial U.S. interests are at stake.
“The case for nonintervention remains compelling. It is not in America’s interest to get involved in a conflict that looks to be a toxic mix of Lebanon, Somalia, Iraq, and Libya at their worst. Washington will make far more enemies than friends, and will find it hard to exit, no matter how gingerly it enters.”
The American people oppose intervention. Nor is it in the president’s political interest to drag the country into war. George W. Bush’s presidency will forever be defined by the Iraq War, which sucked the life out of his domestic policy agenda. So, too, it will be for President Obama if he embarks upon another unnecessary war against a Muslim country in the Middle East.
The administration should draw only one red line: against involvement in the Syrian civil war.
Patrick J. Michaels
Richard Lindzen, Professor Emeritus at MIT, and now a Distinguished Senior Fellow in the Center for the Study of Science here at Cato, has just published a paper called “Science in the Public Square: Global Climate Alarmism and Historical Precedents.” The paper is in the Journal of American Physicians and Surgeons.
Lindzen begins with what he calls “The Iron Triangle,” an analog to a very popular aphorism coined by Ronald Reagan, that describes the generic and mutually beneficial relationship between Congress, the media, and special interest groups. Lindzen’s version is between scientists who make “meaningless or ambiguous statements” on climate change, which are translated into alarmist declarations by the global warming lobby, to which politicians respond by shoveling more money to the scientists. Dr. Lindzen cheekily calls this version the Iron Rice Bowl, the same phrase coined by Mao Zedong to describe lifetime employment in exchange for support of the communist state.
Lindzen, whose article is available here, notes this type of symbiosis supported two other particularly bad ideas. One was early 20th Century eugenics, which was enshrined by law in the United States, politically very useful in 1920s Germany, and institutionalized into the holocaust in the succeeding decade. For an exhausting and exhaustive insight on this process in Germany, you still can’t beat Robert J. Lifton’s 1986 book, The Nazi Doctors.
A similar dynamic surrounded the institutionalization of the obviously incorrect paradigm of “the inheritance of acquired characteristics,” championed by Soviet agronomist Trofim Lysenko, under the enthusiastic support of Josef Stalin, who thought it would help bring about “The New Soviet Man,” by changing human nature genetically through physical experiences of the organism. The logic is as simple as this: if one, say, pumped iron incessantly with just the left arm, your children would be born with muscular left arms. Hogwash, but effective for a public that both feared its government and was scientifically illiterate.
“The Situation in Biological Science,” published (and translated) by the Lenin Academy of Agricultural Sciences of the U.S.S.R. in 1949 sits very close to Lifton’s book on my shelf at Cato. It is an exhaustive compendium on Lysenko’s “new genetics.” It claims authority, and if you spoke against it as a scientist, a trip to Siberia (or worse) wasn’t far away. With global warming alarmism, we are much more humane. Speak against it, and you will lose your government funding and maybe your job, but not your life.
Lindzen finishes with a bit of optimism, noting that the eugenics and Lysenkoism lasted about thirty years, which would mean that the Iron Triangle of climate alarmism is getting a little long in the tooth (it started in1988).
Methinks Professor Lindzen is a bit optimistic. After all, most regulation of ionizing radiation and carcinogens is based upon the obviously wrong notion that a single photon or a single molecule can induce cancer. That was enshrined in the 1950s and lives on today.
An issue with my paper on corporate welfare in the federal budget is that cases can be made for other expenditures not on the list. A prime example would be Pentagon weapons procurement. I’ll simply say that deciding what counts and what doesn’t is complicated.
The New York Times has another example of what could be considered a form of corporate welfare: excessive federal reimbursement rates for anti-anemia drugs used by dialysis centers. This snippet provides the background:
The multibillion-dollar dialysis industry has been accused by medical researchers and former employees of putting a higher priority on profits than on care before, giving patients for many years too many doses of the expensive anti-anemia drug Epogen to collect higher reimbursements — allegations the companies have strongly disputed.
The excessive payments to the companies since 2011 came about, in fact, as the federal government tried to create a single bundled payment for each patient visit. The idea was to eliminate the incentive to prescribe too many doses of Epogen, which medical research showed was harming patients.
With the profit incentive gone, use of Epogen dropped even more than the federal government expected. So the amount of money set aside in the new bundle exceeded the cost of the drugs, two separate federal audits in the last year have shown.
The industry, as a result, has collected an extra $530 million to $880 million a year in federal payments since 2011, compared with the actual use of Epogen and other dialysis drugs. That is the windfall that Congress ordered Health and Human Services to eliminate in January.
Thanks to a massive lobbying campaign from the dialysis industry ($8 million since 2009), Congress is now considering giving back the taxpayer-financed windfall. According to the Times, “more than 100 of the same members of Congress who voted in January to impose the cut are now trying to push the Obama administration to reverse it or water it down.” Leading the charge to reverse the cuts are “lawmakers who are among the top recipients of campaign contributions from the industry, including Representatives John Lewis, a Georgia Democrat, and John M. Shimkus, an Illinois Republican, as well as Mr. [Ben] Lujan [D-NM].”
And, surprise, the effort is bipartisan:
The full-court press has energized Congress. A broad coalition, including conservative Republicans and liberal Democrats and many in between, has joined the industry appeal, with 205 members of the House alone signing a letter this month to the Medicare administrator asking her to reconsider the proposed cut. Half of those signers voted in favor of the cut in January.
In sum, Republicans are teaming up with Democrats to keep the taxpayer dollars flowing to a special interest.
Today, the Dept. of Justice finally announced its first official response to the dramatic changes underway at the state level with respect to legalizing marijuana.
As a matter of law, a direct legal challenge to the state initiatives approved by voters in Colorado and Washington would have failed. A basic principle of constitutional law is that the federal government cannot “commandeer” the state legislatures and tell them what laws they should pass and what laws they can repeal. The state laws that legalize marijuana are not obstructing the FBI or DEA from enforcing federal law – and that’s the key test.
As a matter of policy, if the Obama administration is not yet ready to admit that the drug war is a failed policy, it should at least respect the prerogatives of the states that are choosing to legalize marijuana in their respective jurisdictions. Today’s announcement is an important step in that direction.
Juan Carlos Hidalgo
Colombian farmers have staged widespread and sometimes violent protests over the past week demanding a change in economic policies. One of their main complaints is over the Free Trade Agreement with the United States.
The farmers complain that cheap imports from the United States are crippling their sector. In particular, they complain about three specific products: poultry, dairy and potatoes. Is it the case that freer trade with the United States is responsible for the difficulties of Colombian farmers?
The U.S.-Colombia Free Trade Agreement went into effect on May 15, 2012, which means its prerogatives have been in place for over a year. As in the case with all the other agreements negotiated in the last decade, the FTA with Colombia got rid of most—but not all—tariffs immediately. In the case of some “sensitive” products there is a phasing out of tariffs that can take up to almost 20 years. Let’s take a look at the tariff elimination schedule of the three specific products that draw the loudest complains from Colombian farmers:
Potatoes: Prior to the FTA, Colombia applied tariffs on U.S. potatoes that ranged from 5 to 20 percent. Upon implementation of the agreement, those duties were abolished. According to data from the International Trade Comission, U.S. potato exports to Colombia did increase in 2012 by approximately 25 percent. However, in 2011 (when there was no FTA) potato exports went up by 77 percent. Still, U.S. potato exports to Colombia totaled just $5.6 million in 2012. As a comparison, Panamá (also a potato producer with 1/13th of the population of Colombia) imported more potatoes from the United States in 2012 (almost $7 million).
Poultry: Unlike the case of potatoes, Colombian tariffs on U.S. poultry imports (which range from 5 to over 160 percent) will be phased out over an 18-year period. Moreover, there is a 6-year grace period after the implementation of the FTA. That is, there will be no tariff reduction in poultry products until 2018.
The United States did secure a 27,040-ton quota at zero duties for chicken leg quarters which will increase 4 percent every year. However, that quota only represents 2.5 percent of Colombia’s annual chicken consumption. That’s hardly a massive flood of cheap U.S. chicken imports.
Dairy: As in the case with poultry, most diary imports from the United States will still face tariffs in the early years of the FTA. Some diary products will enjoy tariff protection until 2027. However, several duty-free quotas were secured. One of those is a 5,500-ton quota for milk powder that will increase by 10 percent every year. For 2013 that quota would represent less than 230 grams of powdered milk for every Colombian (that is 1.7 liters of milk). According to the local Federation of Livestock Farmers, each Colombian drinks on average 141 liters of milk every year, which means that duty-free milk powder imports from the United States represent just 1.2 percent of milk consumption in Colombia.
The impact of U.S. milk imports might be even lower given the fact that powdered milk is commonly used as an input for the processed food industry rather than a final consumption product.
As we can see, the FTA is not responsible for the troubles of Colombian farmers. The amount of duty free imports due to the agreement is still quite small. However, it is a fact that U.S. agricultural imports will increase once remaining tariffs barriers are effectively removed and U.S. farmers realize the potential of Latin America’s third largest market. Colombian farmers will then face stiff competition if they don’t adjust. Colombian consumers, 32.7 percent of whom still remain in poverty, would greatly benefit from cheaper food. Ironically, Colombian farmers themselves realize the benefits of free trade since one of their demands is to eliminate tariffs on fertilizers.
If Colombian farmers are hurting, it is not because of freer trade with the United States.
I’m reluctant to give more attention to the steaming pile of dreck that Slate is using as linkbait this morning, but someone should point out how incredibly asinine it is. The author argues that anyone who sends their child to a private school is a “bad person” because, well, see for yourself:
I am not an education policy wonk: I’m just judgmental. But it seems to me that if every single parent sent every single child to public school, public schools would improve. This would not happen immediately. It could take generations. Your children and grandchildren might get mediocre educations in the meantime, but it will be worth it, for the eventual common good.
The first sentence is clearly true but it’s downhill from there. There’s a lot of economic illiteracy to unpack there as well as some rather frightening assumptions about the duty of individuals to sacrifice themselves for some ill-defined “common good” (on Twitter, the New York Times’s Ross Douthat notes that this argument has an eerie resemblence to the Italian fascist motto, “Everything for the state, nothing outside the state, nothing against the state”).
I’ll let others heap on the mocking and scorn that this argument so richly deserves. What I want to focus on is the evidence.
Had this self-declared non-education wonk bothered to take even a cursory look at the research literature, she’d find that competition actually improves the public schools. Of 23 studies of the impact of school choice programs on public school performance, 22 studies find a small but statistically significant positive effect and one finds no visible effect. None find any harm.
The reason that competition works is because it makes schools responsive to the needs of parents. What’s so astounding is that the author wants schools to be responsive to parents, but thinks that the best way to do it is to have a government monopoly, as though Ma Bell would’ve eventually produced an iPhone.
Many of my (morally bankrupt) colleagues send their children to private schools. I asked them to tell me why. Here is the response that most stuck with me: “In our upper-middle-class world, it is hard not to pay for something if you can and you think it will be good for your kid.” I get it: You want an exceptional arts program and computer animation and maybe even Mandarin. You want a cohesive educational philosophy. You want creativity, not teaching to the test. You want great outdoor space and small classrooms and personal attention. You know who else wants those things? Everyone.
Whatever you think your children need—deserve—from their school experience, assume that the parents at the nearby public housing complex want the same. No, don’t just assume it. Do something about it. Send your kids to school with their kids. Use the energy you have otherwise directed at fighting to get your daughter a slot at the competitive private school to fight for more computers at the public school. Use your connections to power and money and innovation to make your local school—the one you are now sending your child to—better. Don’t just acknowledge your liberal guilt—listen to it.
Scratch away the economic ignorance and smug self-righteousness and you find a compelling argument for school choice. Yes, low-income families also want access to good quality schools that meet their kids’ individual needs. But forcing everyone into the same school isn’t going to help. The author correctly identifies the problem but fails to arrive at the right solution. If we want true equality of opportunity, we should expand the educational options available to low- and middle-income families, not restrict the choices of everyone.
Remember all the hand-wringing about how the Supreme Court in Wal-Mart v. Dukes had choked off the chance for lawyers to file company-wide class actions claiming workplace discrimination? Sen. Al Franken (D-Minn.), for example, in introducing a bill meant to overturn the decision, charged that it established an “impossible standard” for lawyers to meet.
Someone forgot to tell the plaintiff’s lawyers who just settled a race discrimination case against Bank of America’s Merrill Lynch brokerage for a reported $160 million. That’s being called the biggest-ever payout in a case charging race bias against a big corporation.
Under discrimination law’s disparate-impact theory, no actual intent to discriminate is needed to find liability; it is enough (to simplify) that a challenged policy results in worse outcomes for employees of one race and cannot be justified by business necessity.
As Alison Frankel points out at Reuters, the named plaintiffs claimed “a disparate racial impact from Merrill’s policies of permitting brokers to form their own teams and of permitting managers to distribute client accounts to brokers based on past successes and failures.” Black brokers on average tended to be poor producers at Merrill, a problem the company’s CEO conceded might in part be owing to the industry practice of letting clients (who at Merrill, as at most firms, are predominantly white) pick their own brokers.
Plaintiff’s lawyers charged that Merrill’s management unlawfully ignored chances to address these disparities by adopting different company policies. Part of the high court’s Wal-Mart holding was that company-wide class actions are generally suitable only when a company-wide policy is being challenged, but in a ruling by Judge Posner, the Seventh Circuit agreed that the Merrill Lynch case fit that pattern.
This isn’t the only instance in which the Supreme Court’s supposed abolition of some class of employment lawsuits turns out to be nothing of the sort. On Tuesday the Times suggested that the 2009 high court decision of Gross v. FBL Financial Services has made it nearly impossible to pursue age-bias lawsuits — even though, as employment-law blogger Daniel Schwartz points out, the number of age bias charges at the Equal Employment Opportunity Commission (EEOC) has in fact gone up since 2009, not down.
Mark A. Calabria
Earlier this week, the Los Angeles Times ran a column repeating the simplistic notion that since homeownership is “good” then subsidies for homeownership must therefore also be “good.” Never asked, or apparently even contemplated, is the question of whether all our various homeownership subsidies actually deliver homeownership. Let’s start with the ever popular mortgage interest deduction (MID). The chart below, reproduced from Glaeser and Shapiro, shows the value of the MID and the homeownership rate. Hard to see any relationship there, probably because there isn’t one. I discuss the MID in more detail here.
Next would be Fannie Mae and Freddie Mac. The chart below shows the homeownership rate and the Fannie/Freddie share of the mortgage market. What should be immediately obvious is that the long run homeownership rate steadied out in the mid-60 percents when Fannie & Freddie were bit players, having a market share in the single digits. In no way can we say that Fannie & Freddie have increased the long-run trend rate of homeownership. So even if one believes homeownership is worthy of subsidy, a questionable proposition on its own, it should be beyond question that our current system of homeownership subsidies has not delivered long run gains in the homeownership rate.
British territorial disputes with Argentina and Spain are heating up, leading to demands that Washington support its foremost ally. However, George Washington was correct when he warned the U.S. against permanent foreign entanglements.
In 1982, the Argentine military junta failed in its attempt to seize the Falkland Islands from Great Britain. Three years ago, the prospect of energy development triggered renewed claims from Buenos Aires and a campaign of commercial harassment.
Tensions between Britain and Spain over Gibraltar, a peninsula, also have flared. Last year, Spanish Prime Minister Mariano Rajoy urged talks over the island’s sovereignty. In July, the Gibraltar authorities blocked access by Spanish fishermen to surrounding waters, leading Spain to initiate lengthy border inspections and threaten other retaliatory measures.
London’s control of the two territories may not be logical or fair, but that’s international relations. History can’t be easily “fixed,” at least at reasonable cost to everyone involved.
So far Washington has avoided taking sides in either dispute. The Obama administration has ignored the Gibraltar contretemps while opining that the Falklands are “a bilateral issue that needs to be worked out directly between Argentina and the United Kingdom,” in the words of State Department spokeswoman Victoria Nuland.
However, some analysts have criticized such “neutrality” as being the equivalent of surrender, and demanded that Washington ostentatiously back the U.K.
Why should Washington, with a full international plate, meddle in other nations’ peripheral but emotional controversies?
One argument is self-determination, since both sets of residents have voted to remain British. However, America and Britain believe in self-determination—except when they don’t, which is often. Self-determination has never been a controlling factor in international relations.
London and its backers also have pushed the line that Washington should stand by its ally. But Spain is a fellow member of NATO and, like Britain, sent troops to both Iraq and Afghanistan. Argentina has been designated as a Major Non-NATO Ally by Washington.
Nevertheless, when Argentina began pressing its claim three years ago, the Daily Telegraph’s Con Coughlin reported that “British officials are angry at what they regard as a cavalier disregard for Britain’s interests at a time when Britain is the only major European power committed significant numbers of combat troops to fight in Afghanistan.”
However, British involvement in Afghanistan and Iraq resulted from London’s conviction that the wars were in the U.K.’s interest, not because of the “Special Relationship” with America. During World War II it might have made sense to unreservedly back London in marginal territorial disputes. However, nothing today justifies a similar “my ally, right or wrong” approach.
Moreover, as I warn in my latest article on National Interest online:
“the U.K. is not the only important ally who could make a claim for American support in complicated territorial disputes. Both Japan and South Korea are long-standing military allies. The U.S. rescued the latter from North Korean aggression, which provided combat troops in Vietnam as well as in Afghanistan and Iraq. Tokyo has island disputes with China and Russia, as well as with South Korea. The Philippines, a former colony rescued by Washington from Japanese aggression, also has confronted Beijing over conflicting island claims. Should the U.S. automatically stand by these allies?”
George Washington warned in his famed Farewell Address: “a passionate attachment of one nation for another produces a variety of evils. Sympathy for the favorite nation, facilitating the illusion of an imaginary common interest in cases where no real common interest exists, and infusing into one the enmities of the other, betrays the former into a participation in the quarrels and wars of the latter without adequate inducement or justification.”
Alliances should be a means to an end, not an end in themselves. The Obama administration should stay out of the Falklands and Gibraltar disputes.
Last fall, I reported that the Obama administration lagged the House of Representatives on transparency. The conclusion was driven by a study of the quality of data publication regarding key elements of budgeting, appropriating, spending, and the legislative process. (Along with monitoring progress in these area, we’ve been producing data to show that it can be done, to produce a cadre of users, and to simply deliver government transparency at a less plodding pace.)
There are signs that the administration may make a run at improving its transparency record. Buried deep in the FY 2014 budget justification for the Treasury Department’s Bureau of the Fiscal Service, it says that funds will support “government-wide data standardization efforts to increase accuracy and transparency of Federal financial reporting.” That means the public may get better access to where the money goes – outlays – in formats that permit computer-aided oversight.
In parallel, a Performance.gov effort called the Federal Program Inventory says that, in May of 2014, it will publish a Unique Federal Program Inventory number (pg. 4-5) for each federal program, along with agency IDs and bureau IDs. This may be the machine-readable federal government organization chart whose non-existence I have lamented for some time.
If this sounds jargon-y, you’re normal. Think of federal spending as happening on a remote jungle island, where all the inhabitants speak their own language. On Federal Spending Island, no visitor from the U.S. mainland can understand where things are there, or who is saying what to whom.
True machine-readable data will turn Federal Spending Island into a place where English is spoken, or at least a some kind of Federal Spending-English dialect that makes the movement of our tax dollars easier to track.
Patrick J. Michaels and Paul C. "Chip" Knappenberger
Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
Come the cold season, whenever there is some type of strong storm system near the U.S. Eastern Seaboard—be it a Nor’easter, a blizzard, or ex-hurricane Sandy—you don’t have to look very hard to find someone who will tell you that this weather is “consistent with” expectations of climate change resulting from human greenhouse gas emissions. The worse the storm, the more “consistent” it becomes.
The complete collection of climate science describes just how complex the physical processes are governing such storm systems. Teasing out any anthropogenic influence, including even the direction of any influence, is darn near impossible. Claims to the contrary are usually based on a highly selective assessment of the science or the data.
A case in point:
The latest en vogue explanation linking human greenhouse gas emissions to strong winter-season East Coast storms involves changes in the characteristics of the jet stream—a river of fast moving air in the atmosphere that influences both the strength and the forward speed of extratropical storm systems. A prominent (in the media, anyway) research study last year by Rutgers’s Jennifer Francis and University of Wisconsin’s Stephen Vavrus suggests that the declining temperature difference between the Arctic and the lower latitudes (adding greenhouse gases into the atmosphere warms colder, drier regions more so than warmer, wetter ones—with the notable exception of Antarctica) has led to changes in the jet stream which result in slower moving, and potentially stronger East Coast winter storm systems.
Just Google “Jennifer Francis global warming” to see how this mechanism is supposedly tied to all sorts of extreme weather events.
Even before the Francis and Vavrus study made it to print, we noted that their findings ran afoul of other existing literature which painted a far murkier picture of the influence (if any) that anthropogenic global warming was having in extratropical cold-season storm systems. After reviewing the literature, we cautioned:
So where does this leave us? When the new paper by Francis and Vavrus comes to the attention of the mainstream press, it’ll play as if a warming Arctic and declining sea ice—an asserted consequence of human greenhouse gas emissions—has been definitively tied-in to all sorts of weather extremes across the U.S. No mention will be made to the fact that other research, which is many cases is more robust and detailed, has concluded nearly the opposite.
Conflicting research findings continue to be published.
One was published several months ago in Geophysical Research Letters by James Screen and Ian Simmonds, who looked for changes in jet stream characteristics using a different methodology than that of Francis and Vavrus. A robust signal should be apparent no matter how you look at it (within reason). But Screen and Simmonds found few statistically robust changes and what changes they did find were contrasting depending on the methodology they used. They noted that the changes they found were much smaller (and non-significant) than the large (and significant) changes reported by Francis and Vavrus. Screen and Simmonds concluded that their findings held “different and complex possible implications for midlatitude weather, and we encourage further work to better understand these.”
In other words, the picture is far less clear than that described by Francis and Vavrus.
This point is further driven home by a another paper just accepted in Geophysical Research Letters by Colorado State University’s Elizabeth Barnes. Barnes, too, examined the relative warming in the Arctic and its possible link to extreme weather events in the Northern Hemisphere mid-latitudes. In a nutshell, she found little if any definitive relationship—again in contrast to the Francis and Vavrus results. Barnes discussed this discrepancy directly:
We conclude that the mechanism put forth by previous studies (e.g. Francis and Vavrus [FV12]; Liu et al. ), that amplified polar warming has led to the increased occurrence of slow-moving weather patterns and blocking episodes, is unsupported by the observations….A recent study by Screen and Simmonds  also provides evidence that the trends in planetary waves suggested by FV12 may be an artifact of their methodology… The Arctic is changing rapidly, and these changes will likely have profound effects on the Northern Hemisphere. This study, however, highlights that the relationship between Arctic Amplification and midlatitude weather is complex.
The more folks look the less robust the popular global-warming-is-leading-to-more-extreme-winter-storms finding by Jennifer Francis and Stephen Vavrus seems to be.
It’ll be interesting to see during this upcoming winter season how often the press—which seems intent on seeking to relate all bad weather events to anthropogenic global warming—turns to the Francis and Vavrus explanation of winter weather events, and whether or not the growing body of new and conflicting science is ever brought up.
If you don’t see it in the morning paper, you will most certainly find it here!
Barnes, E., 2013. Revisiting the evidence linking Arctic Amplification to extreme weather in the midlatitude. Geophysical Research Letters, in press, doi: 10.1002/grl.50880.
Francis, J. A. and S. J. Vavrus, 2012: Evidence linking Arctic amplification to extreme weather in mid-latitudes. Geophysical Research Letters, 39 (6), L06 801, doi:10.1029/2012GL051000.
Screen, J. and I. Simmonds, 2013: Exploring links between Arctic amplification and midlatitude weather. Geophysical Research Letters, 40, 1–6, doi:10.1002/GRL.50174.
Steve H. Hanke
Syria: Since August 26, when U.S. Secretary of State John Kerry began laying the groundwork for military intervention in Syria, the Syrian pound (SYP) has taken a beating on the black market. Indeed, the SYP has lost 24.07 percent of its value against the U.S. dollar (USD) in the two days since Kerry’s announcement. Currently, the exchange rate sits at 270 SYP/USD, yielding an implied annual inflation rate of 291.88 percent. In countries with troubled currencies, there is no better measure of economic expectations than the black-market exchange rate. The recent deterioration in the SYP/USD exchange rate clearly indicates that Syrians are anticipating Western military intervention in the near term.
Iran: The initial weeks of the Rouhani presidency have seen renewed economic confidence, as reflected by the Iranian rial’s (IRR) black-market exchange rate. The new central bank governor, Valiollah Seif, has stated that his primary concerns are to rein in inflation and boost economic stability. Over the past few weeks, the rial has strengthened on the black-market, and inflation has moderated somewhat. That said, recent international saber-rattling over Syria clearly has spooked the Iranian public. In the two days since Secretary Kerry first made his case for intervention in Syria, the value of the Iranian rial has dropped 4.74 percent on the black market, to 32,700 IRR/USD. This yields an implied annual inflation rate of 52.10 percent, up from 44.89 percent, prior to Kerry’s announcement.
Egypt: Since the fall of the Morsi government, public confidence and support for the military regime has boosted the value of the Egyptian pound (EGP). Prior to the military takeover, the black-market exchange rate sat at 7.6 EGP/USD. Since Morsi’s ouster, the pound has appreciated by 7.34 percent, to 7.08 EGP/USD. This yields a current implied annual inflation rate of 18.62 percent, down from 27.85 percent in the final days of the Morsi government. In recent weeks, the Central Bank has been auctioning off up to $40 million in foreign exchange, three times per week. This rather modest sum has adequately met the demand for foreign exchange at rates close to the official exchange rate of 6.99 EGP/USD.
For more information on troubled currencies in these countries and others, see The Troubled Currencies Project.
Matt Yglesias today cites data to the effect that, while the gap between blacks and whites in completing high school has been steadily closing in recent decades, racial gaps in income and wealth have remained stubbornly large. This discrepancy suggests that blacks have made real progress in raising their relative skill levels but for some reason they aren’t reaping the rewards of that progress in the workplace.
Alas, the solution to this puzzle is that the purported racial progress in the classroom is in fact a statistical mirage. The big problem is that the official stats on high school completion rates count GED holders as high school completers, despite the fact that both economic and social outcomes for GED holders much more closely resemble those for high school dropouts than those for people who actually earn a high school diploma. And it turns out that the GED program is used disproportionately by blacks – to a significant extent because black inmates are earning them in prison. So a big increase in GED certifications for blacks is portrayed as educational progress when in fact it is a byproduct of socially catastrophic mass incarceration.
Nobel Prize-winning economist James Heckman from the University of Chicago and coauthor Paul LaFontaine have found that only about 65 percent of blacks finish high school with a diploma, far below the level indicated by the official stats on high school completion. Furthermore, they find no evidence of black-white convergence in high school graduation rates over the past 35 years. Along similar lines, a study by Derek Neal of the University of Chicago found that the black-white gap in educational attainment stopped shrinking around 1990. Neal also looked at test scores and reached similar conclusions: convergence in black-white test score gaps came to a halt in the late 1980s.
The sad fact is that, after great progress through much of the 20th century, racial disparities in human capital levels have remained stuck for decades. The problem isn’t that the marketplace is shortchanging blacks for their rising job skills; the problem is that blacks’ job skills are still so low. This, in turn, is part of a much larger slowdown in human capital accumulation that I talk about in my most recent book.
When a business applies for a loan, the bank needs to know the business’s operating expenses and its overhead to make an informed decision about whether to grant the loan. A business that acquired a loan while understating or hiding some categories of its expenses would be in serious trouble. However, the government seems to operate by a different set of rules.
A new report from the Cato Institute, “Cracking the Books: How Well Do State Education Departments Report Public School Spending?“ finds that state departments of education routinely understate the cost of public schools and often fail to report key spending categories. Meanwhile, a Harvard survey finds that the public thinks that public schools cost half as much as they really do. Are state education departments contributing to the public’s vast underestimation of the true cost of public education?
Find out more at Education Next.
Kenneth Bae is a 44-year-old Christian missionary who was arrested last November while leading a tour of North Korea’s Rason special economic zone. He wanted to spread the Gospel, but the Democratic People’s Republic of Korea views religion as a particularly serious threat.
Bae was sentenced to 15 years of hard labor. His letters home, said his sister, Terri Chung, “contained the same message—Kenneth’s health is failing, and he asked us to seek help from our government to bring him home.” He urged Washington to send an envoy for him.
Bae’s mother was even more insistent: “I don’t see any action. I want to ask them, send an envoy or do something. As a mother, I am really getting angry, really getting angry. What do they do?”
It’s a tragic situation. But it isn’t the U.S. government’s responsibility to win the release American citizens who knowingly violate the laws of other nations. I say that even though I have traveled multiple times with ethnic Karen guerrillas in eastern Burma. I didn’t expect a rescue from Washington if something went wrong. After all, I’d chosen to enter a war zone.
The U.S. government has called for Bae’s humanitarian release. The DPRK almost certainly wants to use him to win one concession or another. In the past, that has meant a high-level visit to Pyongyang: Bill Clinton and Jimmy Carter both have played that role. But the administration is sending an envoy and Pyongyang might want more this time.
An unofficial visit would be a small price to pay. However, Washington shouldn’t get into the business of buying the release of official hostages. There’s a good argument for changing U.S. policy toward Pyongyang, but not under duress. As I point out in my latest article on American Spectator online:
In general, the more the U.S. invests in releasing prisoners in foreign lands, the more valuable they will come to be seen—thus creating a greater incentive to grab Americans in the future. The problem goes well beyond the North [Koreans]. It’s why Washington takes the tough but sensible position of refusing to ransom kidnap victims, unlike many other governments. Refusing to buy hostages’ freedom seems harsh, but groups ranging from the Taliban to Somali pirates have helped fund their activities with money earned by Westerners. Americans would be particularly vulnerable because of their government’s promiscuous intervention around the world.
A willingness to dicker also inevitably invites policy as well as financial demands. Changes, big or small, might be desirable—bombing, invading, and occupying other nations have proved to be far more costly than predicted—but Washington can’t change course every time a U.S. citizen is threatened. Officials should take the risk to Americans into account when designing policies around the world. However, Uncle Sam shouldn’t change those policies because Americans have been placed at risk.
Especially when prisoners, like Bae, are the authors of their own plight. One of the nation’s strengths is people’s willingness to risk their lives and freedom to help others. Often they are doing what the U.S. government cannot or does not want to do—act within other countries without official approval, back insurgents or human rights activists, proselytize their faith, and more. However, in challenging the local authorities when Washington is unwilling to do so, such people must understand that they are acting on their own. If the U.S. government doesn’t sponsor and oversee their activities, it cannot be expected to take responsibility for them if things go wrong.
In fact, government action on behalf of activists who violated other nations’ laws could be taken as evidence that the freelancers actually were official agents. Washington would get blamed and other governments might be more inclined in the future to grab American travelers to get Washington’s attention.
We should all hope Kenneth Bae returns home soon. But perhaps he should address Dennis Rodman rather than Barack Obama to arrange a special envoy. It isn’t Washington’s job to get him out of the Pyongyang Hilton.
In 2007, Facebook launched the controversial “Beacon” program, which automatically broadcast purchases made by Facebook users. The disclosures revealed embarrassing movie choices, indulgent spending habits, and even ruined the purchase of a young couple’s engagement ring.
In the subsequent class action lawsuit, a $9.5 million settlement was reached in which Facebook would pay $3 million to cover attorneys’ fees and a remaining $6.5 million would be used to set up a new charitable organization—controlled by Facebook—whose mission would be to educate the public about Internet privacy. The millions of class members, however, would get nothing.
This redistribution of settlement money from the victims to other uses is referred to as cy pres. “Cy pres” means “as near as possible,” and courts have typically used the cy pres doctrine to reform the terms of a charitable trust when the stated objective of the trust is impractical or unworkable. The use of cy pres in class action settlements—particularly those that enable the defendant to control the funds—is an emerging trend that violates the due process and free speech rights of class members.
Accordingly, class members objected to the Facebook settlement, arguing that the district court abused its discretion in approving the agreement and failed to engage in the required rigorous analysis to determine whether the settlement was “fair, reasonable, and adequate.” The San Francisco-based U.S. Court of Appeals for the Ninth Circuit affirmed the settlement, however, and expressed its unwillingness to inquire into the nature of the award because to do so would be “an intrusion into the parties’ negotiations.”
Now that the objecting class members have asked the Supreme Court to review the case, Cato filed an amicus brief arguing that the use of cy pres awards in class actions violates the Fifth Amendment’s Due Process Clause and the First Amendment’s Free Speech Clause. Specifically, due process requires—at a minimum—an opportunity for an absent plaintiff to remove himself, or “opt out,” from the class. Class members have little incentive or opportunity to learn of the existence of a class action in which they may have a legal interest, while class counsel is able to make settlement agreements that are unencumbered by an informed and participating class.
In addition, when a court approves a cy pres award as part of a class action settlement, it forces class members to endorse certain ideas, compelling speech in violation of the First Amendment. When Facebook receives money—essentially from itself—to create a privacy-oriented charity, the victim class members surrender the value of their legal claims in support of a charity controlled by the defendant. Class members are left uncompensated, while Facebook is shielded from any future claims of liability.
The Supreme Court will decide this fall whether to take the case of Marek v. Lane.
The Obama administration celebrated its “leverage” from foreign aid to Egypt, and then demonstrated Washington’s complete political impotence. Now the United Nations’ Millennium Development Goals have been found to have no effect on economic development.
Nations are poor because of bad policies, not inadequate cash balances. This makes economic reform, not foreign aid, the key to growth. Unfortunately, politicians continue to take money from poor people in rich countries and give it to rich people in poor countries in the name of development.
In 2000, the usual assemblage of global leaders adopted the United Nations Millennium Declaration. The Millennium Development Goals were supposed to reduce extreme poverty by 2015.
Alas, the record of more than six decades of government-to-government transfers is failure. Foreign “aid” turned into foreign hindrance, creating long-term dependency while reinforcing self-defeating collectivist economic strategies and subsidizing authoritarian political systems.
Aid agencies eventually claimed to have developed new, smarter approaches to uplift the poor. Since 2000, total assistance from industrialized states alone has more than doubled, going from $53.9 to $125.6 billion last year. The results, explained the UN, indicated “unprecedented progress” and “remarkable achievements.”
Nevertheless, the UN does not believe its work will finish in 2015. Last year, the UN established a 27-member “High-Level Panel of Eminent Persons on the Post-2015 Development Agenda.”
In May the group issued its report: “The Panel came together with a sense of optimism and a deep respect for the Millennium Development Goals (MDGs). The 13 years since the millennium have seen the fastest reduction in poverty in human history.” While economic growth and better policies also played a role, noted the group, “it would be a mistake to simply tear up the MDGs and start from scratch.” The goal now is to “finish the job that the MDGs started” by “eradicating extreme poverty from the face of the earth by 2030.”
That is a laudable objective. But it turns out the MDGs have not even reduced extreme poverty.
Columbia economist Howard Steven Friedman, also with the UN Population Fund, analyzed the impact of the MDGs. Earlier this month he published a working paper that concluded: “The general result was that there was no trend in statistically significant accelerations in the MDG indicators after 2000.”
Why are poor nations doing better? For this answer we must look the marketplace, not structural economists, central planning, aid bureaucracies, government-to-government transfers, or the MDGs.
As I point out in my latest Forbes Online column:
“Of course, grave injustices persist in many of these lands. Those with influence continue to manipulate political systems to win economic favors. However, more often than not, foreign aid turns into yet another resource for the well-connected to exploit. Aid encourages a further concentration of already dangerously centralized power.
Rather than hope more international communiqués and funds will eliminate poverty, Western states should reconsider policies which hinder developing countries from taking full advantage of the global marketplace. For example, protectionism, especially in agriculture, is an costly barrier. Trade agreements which attempt to impose unrealistically expensive environmental and labor standards on what remain poor societies is another. Political “aid” which strengthens regimes that, like Egypt, actively hinder economic and political reform also impedes development.”
The cup again will be passed to cash-strapped governments to fund the MDGs and whatever replaces them in 2015. But governments should stop wasting their citizens’ hard-earned cash when the only result will be to add to the fiscal tsunami threatening their children’s future.