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Julian Sanchez

Back when I was the editor of the school paper at my affluent public high school, a bunch of the paper’s staff took a trip to a much poorer high school in Patterson, New Jersey, to meet and talk with some of our counterparts.  The gap in resources between the two schools was, as you might guess, pretty striking.  But so was this: During a break between meetings, one of my fellow editors casually mentioned to an adult employee of the Patterson schools her college plans—the schools she was applying to, the majors she was considering; unremarkable stuff we discussed with peers and teachers all the time.  The adult’s response was something along the lines of: “Oh, that’s great sweetie; it’s wonderful to have dreams” — as though my friend had declared her goal of becoming president, or the next Madonna.  This was meant to be an “encouraging” response, of course, but my friend and I were both taken aback at the (presumably unintended) implication that something she’d regarded as a simply the obvious next step in her life—because of course you graduate high school and then go on to college—was a kind of childish fantasy to be indulged, but not taken terribly seriously.

Statistically, the adult’s attitude was, of course, perfectly realistic: The odds of a student at that Patterson school making it into the elite colleges my friend was considering (she ultimately went to Wellesley) were slim indeed.  But we both sensed intuitively that this “realistic” attitude, even couched in words of “encouragement,” had to make the odds longer still. Surely some of those students were capable of succeeding in higher education, despite all the barriers we were lucky enough not to face. But if this was the default attitude they imbibed from the adults around them, even at school, how many of them would be too demoralized to really try?

This little anecdote popped into my head as I read a story in The Atlantic’s CityLab, reporting on research that shows Americans believe class mobility in our society is far more common than it really is.  Moreover, belief in mobility appears to vary across classes, and the researchers think they know why:

The most interesting group effect occurred on self-reported social status: the higher a participant’s social class, the more that participant tended to overestimate the prospect of social mobility. In other words, a wealthy American appears more likely to believe social status is the direct product of hard work and not an artifact of, say, birth or luck. Or, as Kraus and Tan put it, the finding may reflect a hope that “elevated positions in society are achieved fairly by individuals.”

Clearly there is at least something to this: Plenty of research confirms that everyone likes to attribute their successes in life to their own virtues, and their disappointments to misfortune.  Only at the end of the article does it float the possibility that the causality may, at least in part, run in the other direction: That believing it’s a matter of luck how one fares in life may lead one to do less well, while believing (even somewhat unrealistically) that your fate is in your own hands is a prerequisite for having the motivation to do as well as you can.  Perhaps—and there’s a whiff of paradox here—a belief in that kind of personal responsibility for outcomes is one of the lucky advantages that affluent parents pass on to their children.

This is not mere speculation: There’s abundant empirical research around what psychologists call “locus of control” suggesting that this is precisely the case.   If students are primed to think that one’s performance on a math test, say, is largely a matter of how hard they work, they will do better on a subequent test than students primed with the suggestion that some students simply have a natural aptitude that others lack.  (This is related to another much-discussed phenomenon called “stereotype threat”: Reminding students that members of their demographic group are expected to perform less well on a certain type of test decreases their measured performance on such tests.)  It remains true, of course, that a great deal is down to luck—time and chance, as Ecclesiastes memorably put it, happeneth to all—and factors ranging from natural endowments to early childhood environment and nutrition to the quality of schooling all exert a powerful influence on life outcomes. But holding those factors constant, someone who focuses on the power of those factors is likely to do worse than someone similarly situated who believes—even to an unrealistic degree—that effort and determination can overcome those circumstances.  In other words, Han Solo’s famous line from The Empire Strikes Back—”Never tell me the odds!”—may contain some genuine psychological wisdom.

I remember pointing out a similar paradox to the great social scientist Philip Zimbardo when he came to Cato a few years back.  Zimbardo’s famous “Stanford Prison Experiment” showed how powerfully social circumstances and expectations (in that case, whether subjects were randomly assigned to the role of “prisoner” or “guard”) could determine behavior, overwhelming the effects of individual character and disposition for many of the subjects.  Yet as Zimbardo himself noted, it was only when his then-girlfriend held him personally responsible for the mental anguish he was visiting on his student volunteers that he broke out of the “detatched scientist” script he’d been following and halted the experiment. His experiment showed that social circumstance was a powerful determinant of individual behavior—but a norm that said each individual is responsible for his conduct turned out to be a critical component of the determining circumstances.

That isn’t to say that we should ignore empirical data about class mobility or perpetuate a “noble lie” that luck and unchosen environmental factors are irrelevant to life chances.  In our capacity as citizens thinking about policy, we should certainly be clear-eyed about the myriad barriers to upward mobility faced by those at the bottom, and how to reduce them. But it does call into question the CityLab article’s conclusion that “Americans could stand to be quite a bit more cynical about how often upwardly mobile class shifts actually occur.”  We should also consider whether, as a broader cultural attitude, cynicism about mobility might prove a self fulfilling prophecy—and whether, for those already starting from a position of disadvantage, the sense that it’s futile to strive for more is yet another disadvantage to overcome.

Roger Pilon

With Gov. Chris Christie and Sen. Rand Paul now having weighed in on the growing compulsory vaccination debate—Paul telling a radio host yesterday that most vaccines “ought to be voluntary”—the question arises whether there’s a “libertarian” position on the question. Rightly suspicious of government compulsion, a libertarian’s first instinct is to say that this is a question for individual parents to decide. But second thoughts suggest that the matter is more complicated. After all, it isn’t simply a matter of assessing the risk to one’s own child, about which the state is not entirely disinterested—enforceable parental obligations to one’s children come with becoming a parent. It’s also a question of how much risk one can impose, even through one’s children, on others. And on the matter of risk, the rights analyses that easily sort out so many other human conflicts start to break down—or, more precisely, require turning to values as well, about which reasonable people can have reasonable differences. Some people are risk averse, after all, others are risk takers, and between the two there is no principled line, which is why we often have to turn to public solutions through public line-drawing.

Fortunately, there comes just this morning a splendid essay by NYU Prof. and Cato Adjunct Scholar Richard Epstein that sorts out the competing claims on this question in a principled and fairly detailed way. To those reluctant to see any government role, for example, he says:

Even in a free state, quarantines are the only reliable remedy to protect the health of the public at large from the spread of disease. It is sheer fantasy to think that individuals made ill could bring private lawsuits for damages against the parties that infected them, or that persons exposed to imminent risk could obtain injunctive relief against the scores of persons who threaten to transmit disease. The transmission of disease involves hidden and complex interconnections between persons that could not be detected in litigation, even assuming that it could be brought in time, which it cannot. Public oversight should be able to achieve the desired end at a far lower cost.

Yet he adds: “That said, the categorical defense of compulsory vaccination statutes raises serious questions of its own,” which he goes on to illuminate. Read the whole piece. It brings reason to issues too often fraught with and driven by emotion, understandably when it’s our children who are at risk.

Nicole Kaeding

The president released his budget request this morning. As expected, his plan is heavy on new spending and new taxes, and very light on structural reforms.

Overall, the president says that he would collect $2.994 trillion more in revenue from 2016 to 2025 than the Congressional Budget Office (CBO) baseline projections. He would also spend $1.028 trillion more during that same time frame.

The excess revenue would result in slightly smaller deficits than the CBO projected during this period. The president’s budget predicts that debt held by the public will equal 73.3 percent of gross domestic product in 2025, compared to 78.7 percent projected by the CBO.

However, the president’s budget assumes faster economic growth than the CBO does, which makes the president’s budget numbers look rosier. If GDP was constant between the two proposals, the president’s debt-to-GDP ratio in 2025 would increase to 74.2 percent. This is still less than the CBO’s projections, but it comes at the expense of higher taxes.

Here are some of the president’s proposals:

Spending

  • Spending Caps: The president proposes lifting the bipartisan Budget Control Act spending caps passed in 2011. He suggests increasing discretionary spending by $75 billion in fiscal 2016. The increase would be split evenly between defense and non-defense spending categories.
  • Infrastructure: The budget includes a $478 billion surface transportation proposal. The money would be spent over six years on highways, mass transit, and freight networks.
  • Entitlement Reform: The budget request does not include any meaningful plans to reform spending for Social Security, Medicare, or Medicaid. The president includes $400 billion in health savings, but a large share of the savings comes from cuts to providers and increased drug costs for pharmaceutical companies. That does not represent real reform of these programs.

Taxes

  • Foreign Earnings: To pay for his large infrastructure proposal, the president proposes a 14 percent one-time tax on the accumulated foreign earnings of U.S. corporations. Currently, multinational corporations are subject to U.S. taxes when their earnings are repatriated to the United States. President Obama would hit companies first with this 14 percent tax, then subject them to an ongoing 19 percent tax on foreign earnings. These proposals would burden U.S. companies with an uncompetitive tax regime compared to the lower-rate territorial systems nearly all our trading partners have.
  • Bank tax: Previewed in the State of the Union, President Obama would assess a new tax on banks with greater than $50 billion in assets.
  • New tax credits: The proposal includes an expanded child tax credit for families making less than $120,000 annually. It also creates a new tax credit of $500 for families where both parents work outside of the home.
  • High-income individuals: The president includes a “Buffett Rule” proposal called a “Fair Share Tax.” He also proposes limiting itemized deductions for high-income earners.
  • Other tax proposals: The president proposes a large expansion of the estate or “death” tax. He also proposes raising the top capital gains tax rate from 23.8 percent to 28 percent for high-income households.

David Boaz

Ayn Rand, the Russian refugee who became America’s bestselling novelist of ideas, was born 110 years ago today in St. Petersburg. I reflect on her life and impact at Townhall.com:

George Gilder called Atlas Shrugged “the most important novel of ideas since War and Peace.” Writing in the Washington Post, he explained her impact on the world of ideas and especially the world of capitalist ideas: “Rand flung her gigantic books into the teeth of an intelligentsia still intoxicated by state power, during an era when even Dwight Eisenhower maintained tax rates of 90 percent and confessed his inability to answer Nikita Khrushchev’s assertion that capitalism was immoral because it was based on greed.”

Rand’s books first appeared when no one seemed to support freedom and capitalism, and when even capitalism’s greatest defenders seemed to emphasize its utility, not its morality. It was often said at the time that socialism is a good idea in theory, but human beings just aren’t good enough for socialism. It was Ayn Rand who said that socialism is not good enough for human beings….

The financial crisis and Wall Street bailouts gave Atlas Shrugged a huge push. A Facebook group titled “Read the news today? It’s like ‘Atlas Shrugged’ is happening in real life” was formed. More than 50 years after publication, the book had its best sales year ever. And sales have remained high – more than a million copies of Rand’s books were sold in 2012.

Whole thing here.

Find my exchange on Objectivism and libertarianism here. Watch two biographers of Ayn Rand talk about her at a Cato forum here. Scholars debate Rand’s moral and political thought at Cato Unbound.

Walter Olson

Don’t believe minimum wage hikes hurt real people? After March 31, a famed sci-fi bookstore on Valencia St. in San Francisco’s Mission District will no longer be able to cater to your taste in fantasy:

The change in minimum wage will mean our payroll will increase roughly 39%.  That increase will in turn bring up our total operating expenses by 18%.  To make up for that expense, we would need to increase our sales by a minimum of 20%.  We do not believe that is a realistic possibility for a bookstore in San Francisco at this time.

And this, which speaks for itself:

In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018.  Although all of us at Borderlands support the concept of a living wage in [principle] and we believe that it’s possible that the new law will be good for San Francisco – Borderlands Books as it exists is not a financially viable business if subject to that minimum wage.  Consequently we will be closing our doors no later than March 31st.  The cafe will continue to operate until at least the end of this year.

Early reactions from customers online run heavily to two themes: 1) anguish that a beloved cultural institution is passing from the scene and 2) reflections that they, the fans and customers, had supported the minimum wage hike too when it was on the ballot. (It might restrict businesses’ rights, but who cares about that?) But in this world – as in so many of the well-crafted alternative worlds of science fiction – the link between actions and their logical consequences, foreseen and intended or otherwise, is not to be broken.

Ilya Shapiro

I’ve previously written about the way that the existing case law regarding voting-rights protections requires the very kind of odious racialization of politics that Congress wrote the Voting Rights Act to forbid.  Specifically, courts have read the law in a way that essentially requires racial gerrymandering, which also racializes political differences between the parties. (The Supreme Court this term is considering one of the bizarre consequences of this line of precedent.)

Well, a couple of weeks ago an interesting lawsuit was filed by the Equal Voting Rights Institute (a Texas nonprofit run by Dan Morenoff, who is a friend of mine from law school) that illustrates where this jurisprudence leads when paired with the most basic notions of equal protection.

EVRI has brought exactly the same kind of suit long used by traditional voting-rights activists but this time on behalf of non-Hispanic-white voters in Dallas – where they constitute a racial minority that has seen its “preferred candidate” (a term of art in this arcane legal field) win only two county-wide races contested by the major parties over four election cycles, which is 2 out of about 150 elections. EVRI asks the courts to apply the same measuring sticks they’ve used for decades to require the drawing of districts for other groups in the new context of a “minority-majority” jurisdiction whose governing coalition still votes on ethnic lines and uses its political power to strip an out-of-step race of any chance to fairly participate in elections.

It’s hard to imagine a case where equal protection provisions are more starkly implicated: either the VRA protects the out-voted white voters of Dallas exactly as it protects the outvoted African American and Hispanic voters of Texas, or the Voting Rights Act – as construed by the courts – provides unequal protections to different races in flagrant violation of the Fourteenth Amendment.

But this means that a constitutional reading of the VRA would broaden the scope of its case law (and the odious racial gerrymandering it requires) to apply to every minority-majority jurisdiction in the country. In fact, as America becomes more diverse, it makes sense that judges would need to look at actual demographic facts on the ground to determine who needs their protection from racial disenfranchisement. That development may wake up the communities that have long viewed the Voting Rights Act as their proprietary cudgel to the need to return to the original understanding of the legislation: to police against actual instances of discrimination rather than maintain some sort of statistical parity akin to the “disparate impact” theories running rampant in other contexts. 

In other words, and to paraphrase Chief Justice John Roberts’s famous dictum, the way to stop racialized interpretations of the Voting Rights Act is to highlight the way that race-based decision-making has been used to interpret parts of that law. It’s a strange world where a classical liberal is required to root for more racially informed lawmaking in order to recover the core ban on racist voting laws that made the VRA the cornerstone of civil rights movement. But that is the world we live in.

For more on the case of Harding v. County of Dallas, Texas, see the complaint and EVRI’s press release.

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.

Apart from the Northeast blizzard, its global warming hype, and postmortem analysis, climate talk during the past week has been dominated by polls … and poles … and Poles.

First off is a Pew Research Center poll that found there was a growing difference between what scientists think about some “science” issues and what the general public thinks about them. One take—an overly worried one—on the “gulf” in opinions is presented by reformed genetically modified organism (GMO) activist Mark Lynas in his article “Even in 2015, the Public Doesn’t Trust Scientists” in the Washington Post. On issues such as vaccine effectiveness, evolution, GMO food safety, and causes of climate change, the level of agreement between the general public and scientific consensus is much less than Lynas is comfortable with and he worries that this growing divide—that he largely lays at the feet of “lobbyists and activists”—has “serious implications for democratic governance.”

This seems a bit overly dramatic.

What is the “correct” level of public agreement with the prevailing scientific consensus? Just as skepticism is a valuable trait for scientists, so too is it for the general public. In many cases, policy and personal decisions are based on much more than simple (known) science alone.

We suggest that the situation would be worse if the general public swallowed everything scientists say—even in the form of the prevailing “scientific consensus”—hook, line, and sinker.

After all, what was once prevailing thought often turns out not to have been true.

In essence, lagging public opinions acts to steady and slow federal policy decisions that would, if based only on the current scientific consensus, prove to be rather herky-jerky.  We have enough of that already.

While this may prove frustrating for scientists working in policy-relevant fields, we don’t see the future with 20-20 vision, so a degree of caution is preferable to full speed ahead. And that, on a general level, is what the divide between public opinion and scientific opinion provides.

That brings us to the results of a New York Times/Stanford University poll on public attitudes on federal actions directed at climate change. The Times’ headline screamed, “Most Americans Support Government Action on Climate Change, Poll Finds.”

Of course, the pollsters didn’t ask the most important question: How much are you willing to spend in an attempt to mitigate future global warming? In previous polls, when such a question was asked, the answer was always “not much.”

And like previous Stanford polls, the respondents seemed to show a lack of understanding about how the U.S. system of taxes works. (But who can really blame them for that?) While they largely were opposed, or shied away from, imposing a tax on their own greenhouse gas-generating activities (like using electricity or gasoline), they largely were in favor of giving corporate tax breaks for renewable energy deployment and development, and for less greenhouse gas–emitting fossil fuel use. But what goes around, comes around.

What we found interesting was what seemed like a lessening of the extreme position that human greenhouse emissions are in no way affecting the climate. This position is being replaced by a realization that climate change is occurring and we are playing some role in it. This seems like another example of the acceptance of the “lukewarmers” stance on global warming: that it is happening, that humans are in part responsible, but that the result will be manageable more so through adaptation and innovation than through government policies aimed at mitigation.

And a word to the wise: before any politician (mis)takes the poll results as reason to pursue, say, a carbon tax, recall that support of past greenhouse gas emission limiting measures affected subsequent elections in big ways: in 2010 after the House passage of cap and trade, and again in 2014 in Kentucky and West Virginia (a result of EPA  regulations). So tread lightly.

The past week was not just dominated by talk of opinion polls, but also by talk of polarized opinions.  

U.K. economist Richard Tol posted a somewhat disturbing blog piece on the polarization of climate policy, highlighting the role of “radical greens”—a group that is becoming increasingly, well, radical.

Tol begins:

The debate on climate policy has long been polarized. Asking an utterly sensible question—which of the many options is the best course of action—is met with howls of derision from both sides. Some protest the idea of taking climate change at all serious. Others are convinced that the maximum action is not enough.

Polarization is not conducive to sound policy.

According to Tol, things have recently turned nasty:

There are now elements in the environmental movement who are so worried about the state of the planet that they have lost all sense of proportion. This is alarming for those at the receiving end of their mindless wrath. It does not help to protect the environment either. Just like Boko Haram does not endear anyone to Muslims, green radicals taint all environmentalists. But whereas Islamic leaders immediately distance themselves from any new outrage, environmental leaders pretend nothing happened.

Tol concludes:

Environmental protection has come a long way since the early 1970s. Pollution is much reduced, and care for the environment is widely shared and supported—at least in Europe. Sensible policies and respectable pressure groups are the best way forward to solve the remaining environmental problems. Green radicals risk throwing that away.

Have a look at Tol’s article for an example of how radical things have become—it’s kind of frightening.

And finally, on a lighter note, comes news from a research team led by a group of Polish scientists that calving icebergs make different sounds depending on whether they fall into the water from above or whether they slide into the water from below. According to Oskar Glowacki, a researcher from the Institute of Geophysics at the Polish Academy of Sciences, “We just place the hydrophones—underwater microphones—in the water and listen to the sounds.”

They produced an audiovisual to illustrate their finding. You can check it out here (if you dare). Sometimes it’s little wonder why the public isn’t always engaged with scientists!

Adam Bates

Referring to the federal government’s forfeiture regime as “an important tool” in fighting crime, attorney general nominee Loretta Lynch staunchly defended the concept of civil asset forfeiture during the first day of her confirmation hearings.

After Sen. Mike Lee (R-UT) questioned the “fundamental fairness” of Americans having their property taken by the government without any proof (or often even suspicion) of criminal wrongdoing, Lynch asserted that there are “safeguards at every step of the process” to protect innocent people, “certainly implemented by [her] office … as well as an opportunity to be heard.”

Even setting aside the litany of federal civil asset forfeiture abuses that have come to light recently across the country, Lynch’s reference to her own office’s handling of civil forfeiture is particularly concerning.

Lynch is currently the U.S. attorney for the Eastern District of New York, and her office, despite its safeguards, is responsible for one of the more publicized and questionable uses of the asset forfeiture program.  In May of 2012 the Hirsch brothers, joint owners of Bi-County Distributors in Long Island, had their entire bank account drained by the Internal Revenue Service working in conjunction with Lynch’s office. Many of Bi-County’s customers paid in cash, and when the brothers made several deposits under $10,000, federal agents accused them of “structuring” their deposits in order to avoid the reporting requirements of the Bank Secrecy Act. Without so much as a criminal charge, the federal government emptied the account, totaling $446,651.11.

For more than two years, and in defiance of the 60-day deadline for the initiation of proceedings included in the Civil Asset Forfeiture Reform Act of 2000, Lynch’s office simply sat on the money while the Hirsch brothers survived off the goodwill their business had engendered with its vendors over the decades.

That case, which was handled by the Institute for Justice, finally ended just days ago when Lynch’s office quietly returned the money, having found no evidence of any wrongdoing. The Hirsch brothers and their business survived, but just how many law-abiding small businesses can afford to give the government a 33-month, interest-free loan of nearly half a million dollars?

Civil asset forfeiture is rife with government abuse. The tales of lost livelihoods and predatory government agencies are legion. The data support the indignation. A bipartisan coalition of congressmen and even the current attorney general himself have acknowledged the need for reform.

Unfortunately, Lynch’s comments and her history as a champion of civil forfeiture inspire little hope that major and much-needed reform is imminent at the Department of Justice.

Chris Edwards

Republicans say they favor cutting regulations to spur growth and create jobs. And they generally favor expanding international trade. They can attain those goals by reforming labor union laws.

America’s West Coast seaports are getting hammered by aggressive unionism. The damage spreads out across the economy during these labor disputes, affecting billions of dollars worth of trade. It’s an economically absurd situation, and it’s hugely unfair to the millions of workers whose jobs depend on trade. It should not be happening in America in the 21th century.

In her official response to President Obama’s SOTU, new GOP senator Joni Ernst (Iowa) said, “Let’s tear down trade barriers in places like Europe and the Pacific. Let’s sell more of what we make and grow in America over there so we can boost manufacturing, wages, and jobs right here, at home.”

She’s right, and she should use her prestige and tough-gal credentials to push for change. In the 1980s, Margaret Thatcher challenged the militant unions in Britain and she privatized most of that nation’s seaports. Senator Ernst has an opportunity to push for the same reforms here.  

The key to union reform is repealing the 1935 National Labor Relations Act, also called the Wagner Act. That act imposed “collective bargaining,” which is a euphemism for monopoly unionism. Monopoly unionism is incompatible with individual rights and it encourages unions to disrupt workplaces. The private-sector unionization rate is down to just 7 percent in the United States, but where it persists it causes major damage.

That brings us to the West Coast seaports. The Wall Street Journal reports:

The labor dispute that has magnified snarls at U.S. West Coast ports may be on the brink of a settlement, but it will take months to end the widespread pain, freight disruptions, and losses caused by the massive cargo traffic jam.

The near-paralysis at the ports is rippling through the economy. Railroads are reducing service to the West Coast. Cargo ships have slowed down—and even turned around—as containers have stacked up at the ports. And an official of a meat-industry trade group said last week that port gridlock was costing meat and poultry companies more than $30 million a week.

… Neely Mallory III, president of Mallory Alexander International Logistics in Memphis … is having trouble getting railroads to take loads west from Memphis, Dallas or Chicago, because they are reducing service to the ports until the congestion clears. He can’t arrange to export more than 10,500 containers of cotton. Last Friday, a ship due in with imports for his customers gave up, he said. It will avoid the U.S. for 30 days. “It’s devastating,” he added.

Manufacturers also are feeling the pain. The National Association of Manufacturers has heard from members that container shipments through the West Coast ports in recent months have become “incredibly erratic,” said Robyn Boerstling, director of transportation and infrastructure policy for the trade group. “Everyone is feeling extremely uneasy and frustrated,” she said. Companies fear that if they can’t deliver on orders it will be very hard to win business back, she said.

NAM said a small U.S. maker of pulp and paper told it that the company had lost about $1 million of pulp exports to China in the past few months because it couldn’t meet shipment deadlines or customers feared it might not deliver on time. FastenalCo., a distributor of industrial and construction supplies based in Winona, Minn., said some deliveries of screws, nails and other fasteners from Asia are delayed by a week or two, forcing it and some customers to hold larger inventories.

For more on the West Coast seaports, see here.

Nicole Kaeding

On Monday, the White House will release President Obama’s budget proposal for Fiscal Year 2016. The president is expected to reemphasize his previous fiscal approach of higher spending coupled with higher taxes, while completely ignoring the country’s long-term fiscal problems.

A new study published by the National Bureau of Economic Research (NBER) provides evidence of the best way to solve those problems, should the president decide to tackle the nation’s fiscal mess. The study, by Alberto Alesina, Omar Barbiero, and others, tries to answer one central question: What is the best way for a country to rebalance policy to solve a fiscal crisis?  

The study looked at Organization of Economic Cooperation and Development member countries and their response to the financial crisis from 2009 to 2013. Following the crisis, many of those countries became burdened by large amounts of debt and deficit as a result of rising spending and falling revenues. Government spending grew to an average of 43 percent of gross domestic product (GDP) within the European Union.

With a fiscal crisis on the horizon, many of the countries turned to so-called “austerity” measures in order to promote economic growth. Some countries adopted policies that focused on increasing revenue to close budget gaps, while others focused spending cuts. Researchers distinguished between fiscal plans based on spending cuts and those based upon tax increases.

The researchers found that spending cuts, not tax increases, are the best way to resolve a fiscal crisis. According to the researchers, “Fiscal adjustments based upon cuts in spending appear to have been much less costly, in terms of output losses, than those based upon tax increases.” Tax-based fiscal plans are an inefficient solution to fiscal problems in the long-term. An average tax-based plan with a size of 1 percent of total GDP was shown to shrink the economy by almost twice that amount over the next three years.

The NBER study provides valuable insight regarding the effectiveness of different types of fiscal adjustment plans. Fiscal plans emphasizing cuts in spending are more successful in promoting economic growth in the long term.

Thanks to Kristina Pepe for her excellent research assistance on this piece.

David Boaz

The new Spanish leftist party Podemos takes great inspiration from the victory of Syriza in Greece. As NPR reports:

Much of Europe is watching Greece closely after an anti-austerity party won elections there last weekend. And Spaniards are paying particular attention because Greece may be influential. A similar new political party–left-wing, anti-establishment–has formed in Spain over the past year. And polls show that it could win power in elections this fall.

If Podemos is elected, Spaniards may be disappointed in the results. Consider the cognitive dissonance here:

Many Spaniards are … frustrated that while the economy here is growing, unemployment still tops 23 percent and double that for youth. Polls show voters are switching to Podemos. It promises to raise the minimum wage, hike taxes on the rich and re-evaluate whether Spain should pay its debts.

Making it more expensive to hire workers and reducing the return on investment don’t seem like policies designed to deal with Spain’s appalling unemployment problem. Europe has had higher unemployment than the United States for most of the past two decades. In 2004, economist William B. Conerly suggested some reasons for that: longer and more generous unemployment benefits, reducing the incentive to find a job; inflexible wages; and job protections that make businesses reluctant to hire workers whom they won’t be able to let go. The economist Mark Perry reports that the unemployment rate in European countries with a minimum wage is twice as high as in countries with no minimum wage. And minimum wage laws certainly seem to reduce youth employment.

Alas, as I noted after the State of the Union, President Obama also

wants more and better jobs. And yet he wants to raise taxes on the savings and investment that produce economic growth and better jobs. And he proposes a higher minimum wage, which would cost some low-skilled workers their jobs. 

Perhaps if we copy enough European policies, we can achieve European unemployment rates. In the meantime, the Spaniards seem likely to worsen their dire economic situation. 

Paul C. "Chip" Knappenberger

Today, in a 62-38 vote, the U.S. Senate passed a bill to approve the Keystone XL pipeline. The House passed a similar measure a few weeks ago. These actions come more than 6 years after TransCanada Corp originally submitted its application to the State Department to build a pipeline linking the Alberta oil sands to refineries along the U.S. Gulf Coast.

Did I say State Department?

Yep, in matters involving the crossing of an international border (in this case the one with Canada) the State Department must make a determination as to whether or not the project is in the “national interest.” Two-thousand, three hundred and twenty-three days later, the ultimate head of the State Department still hasn’t made up his mind.

So Congress has attempted to make the decision for him.

But it probably won’t work.

President Obama has already advertised that he plans on vetoing the measure, because, well, because the State Department already has a procedure in place to handle cross border pipeline projects like this one.

In fact, this procedure has worked flawlessly up until the Keystone XL pipeline.  The previous cross-border pipeline that was proposed—the Alberta Clipper in 2007—was approved in just over two years. At the time, the State Department wrote in glowing terms about the project praising it for advancing “strategic interests,” being a “positive economic signal” and adding that “reduction of greenhouse gas emissions are best addressed through each country’s robust domestic policies.”

In the intervening years, Obama has come to view climate change as a matter of utmost urgency and as a defining issue of his legacy as president. And leading environmentalists have planted it in his head that the Keystone XL pipeline is make or break when it comes to climate change.

It is not.

Keystone XL will have virtually no impact on the global climate now or in the future.

But that doesn’t matter any longer. Instead, the pipeline has become a symbol of climate action, a line in the sand that can’t be crossed if you are truly concerned about climate change and the fate of humanity.

I have repeatedly pointed out that it is in President Obama’s best interest to keep the pipeline in limbo. This way, climate change stays front page news. And with a left-leaning press, this means more coverage playing up the pipeline protests and playing down needless government meddling in private economics.

President Obama has asked interested federal agencies to comment on the Keystone XL pipeline proposal. These comments are due February 2nd.  The State Department will then sift through them and consider them and ponder what to do next.

This is what the President will say when he vetos the bill.

The stalling will continue.

And so will the conversation.

Ted Galen Carpenter

The recent dramatic drop in global oil prices has significant geopolitical as well as economic implications.  Consumers in the United States and other countries enjoy substantial savings, while marginal producers, both here and abroad, find their profit margins severely squeezed.  As I discuss in an article at Aspenia Online, some of the oil-producing states that have been especially hard hit include Russia, Venezuela, and Iran.  All of those countries are governed by regimes that are on bad terms with the United States, so there is a temptation among American political leaders and pundits to relish the current discomfort of those governments.

Greater restraint is warranted.  The geopolitical benefits to the United States from the current depressed pricing environment are not trivial.  Increased economic constraints appear to be one factor making Iran’s clerical regime more willing to negotiate seriously about that country’s nuclear program.  Venezuela’s already substantial financial woes, caused by the leftist government’s chronic economic mismanagement since the late 1990s, has made that country a less appealing political model for the rest of Latin America.  Washington’s worries about a leftist “Bolivarian” revolution sweeping the region, which were prominent just a few years ago, have faded considerably.

The Obama administration is especially pleased about how lower oil prices are putting pressure on Vladimir Putin’s government.  Although Western economic sanctions, imposed after Russia’s annexation of Crimea, account for some of the country’s distress, the precipitous drop in oil prices (with Brent crude now selling for well under $50 per barrel) is a more important factor.  Not only has the value of the Ruble shrunk by more than 50 percent, the Russian government faces a budgetary squeeze verging on a crisis.  U.S. officials hope that the growing financial and economic discomfort will compel Putin to make major foreign policy concessions.

Washington’s expectations of drastic concessions, much less outright capitulation, from Iran and Russia are likely to prove illusory.  Tehran’s behavior over the past two decades indicates that gaining international acceptance of the country’s nuclear program is a high policy priority.  Increased economic pain resulting from depressed oil prices is unlikely to alter that calculation.

Likewise, Moscow will probably stay the course regarding its foreign policy, despite the ongoing financial and economic turmoil.  It is difficult to imagine any Russian government agreeing to disgorge Crimea or to tolerate Ukraine joining NATO.  Both the Russian leadership and the Russian population are prepared to endure considerable hardship before surrendering to Western demands. 

Indeed, U.S. leaders need to exercise caution.  Lower oil prices may provide some geopolitical benefits to the United States and its Western allies, but officials must guard against unrealistic expectations.  Pressing economically stressed countries too far could even backfire, making incumbent regimes more recalcitrant. U.S. policymakers need to carefully consider whether the onset of severe economic instability in Iran and Russia would really benefit American interests or the cause of peace.  Such a scenario might instead strengthen extremist forces and produce a surge of public hostility toward the United States, as angry populations make America the scapegoat for their problems.  At a minimum, we must recognize that the oil price crash does not provide geopolitical benefits for Washington without some worrisome potential drawbacks. 

Chelsea German

Journalists know that alarmism attracts readers. Just yesterday, an article in the British newspaper The Independent titled, “Have we reached ‘peak food’? Shortages loom as global production rates slow” claimed humanity will soon face mass starvation. Just as Paul Ehrlich’s 1968 bestseller The Population Bomb  predicted that millions would die due to food shortages in the 1970s and 1980s, the article from yesterday tried to capture readers’ interest through unfounded fear. Let’s take a look at the actual state of global food production.

The alarmists cite statistics showing that while we continue to produce more and more food every year, the rate of acceleration is slowing down slightly. The article then presumes that if the rate of food production growth slows, then widespread starvation is inevitable. This is misleading. Let us take a look at the global trend in net food production, per person, measured in 2004-2006 international dollars. Here you can see that even taking population growth into account, food production per person is actually increasing:

Food is becoming cheaper, too. As K. O. Fuglie and S. L. Wang showed in their 2012 article “New Evidence Points to Robust but Uneven Productivity Growth in Global Agriculture,” food prices have been declining for over a century, in spite of a recent uptick:

In fact, people are better nourished today than they ever have been, even in poor countries. Consider how caloric consumption in India increased despite population growth:

Given that food is more plentiful than ever, what perpetuates the mistaken idea that mass hunger is looming? The failure to realize that human innovation, through advancing technology and the free market, will continue to rise to meet the challenges of growing food demand. In the words of HumanProgress.org Advisory Board member Matt Ridley, “If 6.7 billion people continue to keep specializing and exchanging and innovating, there’s no reason at all why we can’t overcome whatever problems face us.”

Chris Edwards

There are major spending battles on the Washington agenda this year, including over the defense budget. Congress needs to decide whether to stick with capped spending levels agreed to in 2011, or allow its past restraint efforts to unravel.

Republican defense hawks want to bust the spending caps, while the small-government wing of the party wants to hold the line. Rep. Justin Amash (R-Mich.) told the Wall Street Journal, “We’ve been spending too much on defense for years because we have a lot of waste within the Department of Defense … There’s room to cut, and I think we are perfectly capable of staying within the sequester caps.” Sen. Rand Paul (R-Ky.) noted, “To defend ourselves, we need a lean, mean fighting machine that doesn’t waste money on a bloated civilian bureaucracy.”

Amash and Paul’s position is buttressed by a new GAO study on the management bloat in Department of Defense (DoD) headquarters.

It is also buttressed by looking at DoD civilian and uniformed employment levels. The chart below shows that civilian DoD employment has grown 105,000 since 2001, while uniformed employment has grown just 22,000. Based on numbers in the chart, the ratio of bureaucrats-to-soldiers has increased from 47 percent in 2001 to 54 percent in 2014. But with the advance of computer power and other technologies, one would think that the bureaucratic overhead costs of our fighting force would be falling over time, not increasing.

How much could we save by improving bureaucratic efficiencies, and cutting the number of Pentagon civilians by at least the apparent excess of about 100,000? Annual pay and benefits for federal civilians is about $120,000 a year, so we could save roughly $12 billion a year by trimming this aspect of Pentagon bloat.

All data from the “Analytical Perspectives” sections of the FY2003 and FY2015 federal budgets. Data for 2014 are OMB estimates.

Caleb O. Brown

For School Choice Week, Austin Bragg and I produced a short documentary that details the struggle to adopt and implement a scholarship tax credit program in New Hampshire. The program had to overcome a governor’s veto, a repeal fight and a lawsuit that went to the New Hampshire Supreme Court. We talked with three families that have benefitted from the scholarship program and people working to keep the program.

Live Free and Learn: Scholarship Tax Credits in New Hampshire

Cato’s Jason Bedrick has detailed the history of this program at length. He also played a key role in adopting and evaluating the results of the scholarship program in the face of sometimes less-than-civil opposition.

On Monday, we hosted an event featuring Jason and two other folks who played a key role keeping scholarships alive in New Hampshire where we discussed the potential for scholarship tax credits in other states with so-called “Blaine amendments.” And feel free to snag a free DVD of our short film while supplies last.

Andrew J. Coulson

Georgia has a schoalrship donation tax credit program that makes it easier for lower-income families to afford private schooling—if that’s what they think is best for their children. The program is so popular that the cap imposed upon it by the legislature was reached within the first few hours of January 1st, this year. Over at Education Next I argue today that raising the cap would do a lot of good for Georgia children.

Neal McCluskey

If you like feeling conflicted, you’ll love being a libertarian thinking about President Obama’s recent proposal – and even more recent rescinding of that proposal – to essentially end 529 college savings plans. The President proposed killing the ability to use funds saved under a 529 plan tax free to pay for college, which would have gutted the program’s real value.

On one side, a libertarian should be aggravated by such a proposal. The goal certainly seemed to be income redistribution, generating new revenues from relatively well-to-do Americans and giving it to (presumably) less well-to-do Americans with free community college and expanded “refundable” tax credits. It also seemed intended to support a divisive, rhetorical war of the “middle class” vs. “the rich” (though certainly many people who use 529s consider themselves middle class). And unlike federal grants, loans, and those refundable credits that are often essentially grants for people who don’t owe much in taxes, 529s are about people saving their own money to pay for college, not taking it from taxpayers.

On the other side, libertarians – heck, everyone – should want a simple tax code that isn’t riven with special breaks, loopholes, and encouragements to do things politicians decide are worthy but which have massive negative, unintended consequences. And when it comes to higher education, those consequences are huge, including rampant tuition inflation, awful completion rates, major underemployment, serious credential inflation, and a burgeoning academic water park industry. And where does the federal government get the authority to incentivize saving for college in the first place? Not in the Constitution.

So how should libertarians feel about the demise of the President’s 529 plan? I guess a little sad, because the Feds simply shouldn’t be in the business of encouraging college consumption. Even more, though, they should feel angry, because we are so deep in a federally driven, college-funding quagmire.

Doug Bandow

Ukraine’s military has lost control of the Donetsk airport and the rebels have launched another offensive. Fortune could yet smile upon Kiev, but as long as Russia is determined not to let the separatists fail, Ukraine’s efforts likely will be for naught.

As I point out on Forbes online:  “Only a negotiated settlement, no matter how unsatisfying, offers a possible resolution of the conflict. The alternative may be the collapse of the Ukrainian state and long-term confrontation between the West and Russia.”

Ukraine’s most fervent advocates assume anyone not ready to commit self-immolation on Kiev’s behalf must be a Russian agent. However, there are numerous good reasons for Washington to avoid the fight.

1) Russia isn’t Serbia, Iraq, Afghanistan, or Libya.

While the Obama administration has resisted proposals for military confrontation with Moscow, a gaggle of ivory tower warriors has pushed to arm Ukraine, bring Kiev into NATO, and station U.S. men and planes in Ukraine. These steps could lead to war.

Americans have come to expect easy victories. However, Russia would be no pushover. In particular, Moscow has a full range of nuclear weapons, which it could use to respond to allied conventional superiority.

2) Moscow has more at stake than the West in Ukraine.

Ukraine matters far more to Moscow than to Washington. Thus, the former will devote far greater resources and take far greater risks than will the allies. The Putin government already has accepted financial losses, economic isolation, human casualties, and political hostility.

3) Alliances should enhance U.S. security, not provide foreign charity.

It’s impossible to blame Ukraine for wanting the West to protect it. But it makes no sense for the allies to do so. Adding Ukraine to NATO would dramatically degrade U.S. security by transforming a minor conflict irrelevant to Washington into a military dispute between America and Russia.

4) Security guarantees and alliance commitments often spread rather than deter conflict.

NATO advocates presume that membership would dissuade Russia from taking military action. Alas, deterrence often fails. In World War I alliances become transmission belts of war.

5) U.S. foreign policy should be based on the interest of America, not other nations.

The greatest distortion to U.S. foreign policy may come from ethnic lobbying. There’s nothing wrong with having affection for one’s ancestral homeland, like Ukraine. But U.S. foreign policy should be designed to benefit America, not other nations.

Some advocates for Kiev argue that Ukraine deserves support since France helped the American colonists win their independence. But France intervened in the American Revolution because Paris believed it was in France’s interest to weaken Britain. Going to war with Moscow would offer Americans no similar benefit.

6)  It’s Europe’s turn to act.

If Ukraine matters geopolitically, it is to Europe. But most NATO members continue to shrink their militaries. It is time Europe did the military heavy-lifting.

7)  A negotiated settlement is the only solution. 

Unfortunately, weaker parties often must make accommodations. During the Cold War Finland maintained its domestic liberties by not antagonizing the Soviet Union.

The world is similarly unfair to Ukraine today. Military victory is unlikely. Stalemate threatens Ukraine with economic crisis.

The allies hope that sanctions will force Russia to concede. But Putin won’t retreat voluntarily.

Massive public discontent could spark a popular revolution. However, foreign penalties more often cause people to rally around their governments. As of last month Putin’s popularity was at 85 percent.

Moreover, the prospect of Weimar Russia should cause Ukrainians and their friends in the West to be careful what they wish for. A Russia in crisis likely would not be democratic and docile.

Moscow could say no. If so, it is better to find out now than to do so only after suffering through an extended Cold War lite.

The Ukraine-Russia conflict is an unnecessary tragedy. Thankfully the ongoing battle doesn’t much threaten America. However, the only ending in something other than disaster is likely to come through negotiation. Instead of acting as a belligerent party, Washington should focus on shaping a diplomatic solution.

Ilya Shapiro and Julio Colomba

The Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws against employment discrimination. Along with enforcing these laws—most notably, Title VII of the Civil Rights Act, which outlaws discrimination on the basis of race, color, religion, sex, or national origin—the EEOC tells employers how not to discriminate. For example, the EEOC’s Best Practices for Eradicating Religious Discrimination in the Workplace instructs that an employer should “avoid assumptions or stereotypes about what constitutes a religious belief” and that managers “should be trained not to engage in stereotyping based on religious dress and grooming practices.” 

It’s passing strange, then, that the government is now arguing before the Supreme Court not only that employers can do these things, but that they must, or face liability under Title VII, in the context of reasonable accommodations that companies have to make for religious practice. Discerning when such accommodations are necessary can be difficult because people practice religion differently—and often in their own personal, non-obvious way. 

Title VII has thus traditionally been understood to leave it to the employee to determine when a company policy conflicts with his or her religious practice and then to request an accommodation. This interpretation leaves employers free to pursue neutral policies up to the point that they have actual knowledge of such a conflict. 

In the last several years, however, the EEOC has apparently taken the position that employers must pry into their employees’ religious practices whenever they have an inkling of suspicion that an accommodation may be needed. Abercrombie & Fitch is one company that has found out just how impossible a situation this puts employers into. When Abercrombie decided not to hire Samantha Elauf as a sales associate based on her violation of the company’s “Look Policy”—a branding guide that, among other things, prohibits the wearing of clothing generally not sold by the store, like Elauf’s black headscarf—the company found itself on the wrong end of a government lawsuit. 

A federal district court ruled for the EEOC even though Elauf never informed them that she would need a religious accommodation.  The U.S. Court of Appeals for the Tenth Circuit reversed, holding that an employer must actually know about a religious practice before it can be held liable for discriminating on that basis. The Supreme Court took the case at the EEOC’s request and Cato has now filed a brief in support of Abercrombie. 

We argue that employers must have actual knowledge of the potential need for a religious accommodation before they can be held liable for violating Title VII because the EEOC hasn’t offered any coherent alternative and because employers already know how to use this tried-and-true actual-knowledge standard. In addition, the burden of identifying the need for accommodations has to be on the employee because, after all, it’s their religion, and thus they are in a significantly better position to identify conflicts than employers—who aren’t mind-readers and shouldn’t have to rely on crude stereotypes or pry into employees’ personal lives. 

An opposite rule would create an awkward and uncomfortable scenario all-around. The EEOC’s position is short-sighted; if the agency somehow prevails, it will have done what federal agencies do best: turn minimal burdens for some people into heavy burdens for everyone.

The Supreme Court will hear argument in EEOC v. Abercrombie & Fitch Stores, Inc. on February 25.

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