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Government Officials Praising Unilateral Trade Liberalization

Cato Op-Eds - Thu, 07/17/2014 - 11:32

Simon Lester

It doesn’t happen often, so I like to highlight it when it does.  Here is Australian trade minister Andrew Robb:

We’ve seen over the last thirty years in Australia that tariffs are down on average 2.7 per cent across the economy.  A lot of that was done unilaterally – we didn’t wait for the rest of the world and it’s one of the reasons that we’ve had uninterrupted growth for 23 years, because we are a very open economy. We’ve got to drive it further, we’ve got to be more competitive but so does the rest of the world.

Categories: Policy Institutes

U.S. Trade Policy Attacks U.S. Energy Policy, Both Hurting

Cato Op-Eds - Thu, 07/17/2014 - 11:15

Daniel J. Ikenson

First there were oil and gas export restrictions, then pipeline injunctions, now import restrictions on the steel needed for exploration and extraction.  Washington is coming from all angles to kneecap the energy boom sparked by the horizontal drilling and fracking revolutions – a once in a generation supply-side shock, which otherwise promises to attract a flood of foreign investment and serve as a wellspring of economic growth and job creation.   The most recent assault on our “All of the Above” energy policy comes via our fantastically self-destructive trade policy. Last Friday, in a final antidumping determination, the U.S. Department of Commerce found exporters from nine countries to be dumping “Oil Country Tubular Goods” (OCTG) – a class of steel products used primarily in oil and gas well projects – in the U.S. market. The most important foreign source of OCTG in the case was South Korea, whose exporters were found NOT to be dumping in the preliminary determination issued back in February.   But in the intervening months, the U.S. steel industry and the Congressional Steel Caucus impressed upon the bean counters at Commerce that the methodology they used for the Korean preliminary determination was inferior to an alterative they favored.  Without getting too into the weeds here, as tends to happen when exposing the dishonesty of the antidumping regime, suffice it to say that the revision from 0% dumping margins to 10%-16% for Korean exporters was primarily the result of Commerce changing its estimate of what the home market profit rate “should be.”   For the preliminary determination, that estimate was based on Korean OCTG producers’ experiences (with OCTG and other products).  For the final determination, Commerce changed its estimate to one based on a University of Iowa graduate student’s estimation of the profit experience of a single Argentine OCTG producer named Tenaris.  That’s right!  The cost of steel for U.S. oil well projects will rise – maybe 16% – because some student was messing around with @functions on Microsoft Excel.  

In its preliminary determination, Commerce expressed reservations about using that estimate: While the Tenaris profit information reflects predominantly OCTG sales, it represents neither production nor sales in the market under consideration. In addition, it is based on a research paper containing a disclaimer statement regarding its accuracy. Commerce then elaborated: The Tenaris profit information is based on a research paper prepared by a student at the University of Iowa School of Management. And the footnote associated with that comment was more illuminating still: This report was created by a student enrolled in the Applied Securities Management (Henry Fund) program at the University of Iowa’s Tippie School of Management and contains several disclaimers. The intent of the report is to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers, or officially licensed financial professionals. The investment opinion contained in the report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts, and figures included in this report are from publicly available sources. The report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold a financial interest in the companies mentioned in this report. Antidumping calculation – like the law itself – is farcical and driven mostly by political considerations.  U.S. abuse of its antidumping law and the government’s growing reputation for flaunting the rules of trade hurt most Americans now and threaten worse in the future.   I elaborate on the OCTG case, steel industry capture of the antidumping levers, and U.S. trade offenses in this piece in Forbes today.

Categories: Policy Institutes

Pennsylvania Lawmaker Portraits Now Come With Conviction Footnotes

Cato Op-Eds - Thu, 07/17/2014 - 10:39

Walter Olson

Truth in legislative portraiture from the Pennsylvania State Capitol, as reported by Kris Maher in the Wall Street Journal: “On Tuesday, officials in the capital, Harrisburg, placed plaques beneath the portraits of three former state House speakers and a former Senate president pro tempore listing when the lawmakers left office—and when they were sentenced to prison.” The idea was a compromise between those who felt the portraits should be taken down entirely and those who favored keeping them on display with no mentions of criminality. The plaques cost $63.75 each, and if their shaming presence even slightly improves lawmakers’ incentives to avoid corruption, they could prove a good investment: 

Pennsylvania was ranked the fifth most corrupt state in a recent study that analyzed federal data from 1997 to 2008. During that time, malfeasance among state officials appeared to boost per capita spending by about 5% in the 10 states with the highest levels of corruption, the study published in Public Administration Review found.

Categories: Policy Institutes

Paul Light on Government Failure

Cato Op-Eds - Wed, 07/16/2014 - 16:32

Chris Edwards

Paul Light of Brookings and NYU is a top expert on the federal bureaucracy. He has a new study on federal government failures over the 2001 to 2014 period.

Light’s paper is useful. He identifies 41 major federal failures, examines the reports completed on each, and classifies the types of mistakes that took place. From the 9/11 terrorist attacks to the recent veterans health care scandal, Light points to failures in both “operations” and “oversight.”

Certainly, government operations and oversight fail frequently. But I look at many of Light’s 41 events and see more fundamental failures than he does. Federal policies, for example, often distort the economy in ways that are bound to cause problems. Federal interventions based on coercion are generally worse than solutions developed in the private, voluntary sphere of society.  

Light classifies the 2008 financial collapse as a failure of federal “oversight.” He says, “after years of risky investments and with little regulation, the banking system collapsed under the weight of toxic assets created by risky mortgage loans, poorly understood financial instruments, and a credit crisis that froze the economy.”

But it was government policies—such as Federal Reserve interest rate policies and federal housing subsidies—that incentivized the bad behavior on Wall Street. Federal oversight may have been poor, but the main problem was that government-created distortions cascaded and undermined markets.

On Hurricane Katrina, Light notes that the federal emergency response was a failure in operations, and it is true that FEMA officials were mired in confusion and indecision when the storm hit. However, it was decades of misguided policies that encouraged many people to live in low-lying and dangerous areas in New Orleans in the first place, which made the disaster much worse.

After an initial coding of failures between “operations” and “oversight,” Light does proceed to look more deeply into why the government failed in each of the events. He finds multiple causes behind all of the failures, with the most common factor being poorly designed policies.

Still, there are deeper reasons why the government fails than the potentially fixable problems that Light identifies. Superficially, the veterans health care scandal is just a failure of “operations,” but the fundamental problem is the federal attempt to centrally plan an industry rather than relying on markets.

Light’s study is a thoughtful piece that will hopefully generate a broader discussion about government failure. The 15 factors in this recent testimony are my initial stab at identifying some of the more fundamental reasons for government failure.

Categories: Policy Institutes

Politicians Befriend Big Business, Undermine Free Market

Cato Op-Eds - Wed, 07/16/2014 - 13:41

Doug Bandow

The recent primary defeat of House Majority Leader Eric Cantor was one of the bigger shocks to American politics in some time. Congressional leaders, known to bring home the bacon for local folks, usually are handily reelected.

But Cantor’s loss will do more than simply reshuffle the biggest offices on Capitol Hill. He gave lip service to fiscal responsibility but was, argued Nick Gillespie of Reason, “atrocious and hypocritical in all the ways that a Republican can be,” constantly voting to grow government.

Indeed, Cantor’s constituency was as much corporate America as it was Virginia voters. Business was counting on him to help reauthorize the Export-Import Bank, known as “Boeing’s Bank” for lavishing extensive benefits on one company; extend terrorism risk insurance, which transfers financial liability for loss from firms to taxpayers; and preserve Fannie Mae and Freddie Mac, which nearly wrecked the economy while subsidizing homeowners, builders, and lenders. 

The New York Times observed that Cantor was “a powerful ally of business big and small, from giants like Boeing to the many independently owned manufacturers and wholesalers that rely on the federal government for financial support.”  He also was “one of Wall Street’s most reliable benefactors in Congress.”  His opponent, an economics professor, targeted Cantor’s crony politics.

Sen. Thad Cochran (R-Miss.) faced a similar political challenge, trailing a Tea Party-backed state senator in the initial primary vote and before narrowly winning the runoff. Widely viewed as the “king of pork,” Cochran relied on his ability to raid the Treasury to pay off fellow Mississippians. 

Cochran also has been a regular supporter of business subsidies, which is why corporate America returned the favor. Economic elites surprised by Cantor’s loss “are moving quickly to ensure that Mr. Cochran does not meet the same fate,” reported the Times

It long has been evident that the greatest enemies of capitalism are the capitalists. Even Adam Smith, the famed author of The Wealth of Nations and great proponent of free markets, warned that businessmen oft gathered together to conspire against the public. 

Of course, business is not alone in shoving its snout into the federal trough.  Big Labor and many other influential interests do so as well.  However, the disjunction of simultaneously praising and undermining the free market is particularly jarring when coming from businessmen.

Alas, our entire political system has been corrupted. In April, Sen. Mike Lee (R-Utah) gave a thoughtful speech warning of “America’s crisis of crony capitalism, corporate welfare, and political privilege.”  The victims are every day folks, “the poor and middle class” excluded by government “from earning their success on a level playing field.”

Which helps explain Americans’ ever greater frustration with politics.  Moreover, as Cantor discovered, discontent with the politics of privilege may be as strong on the right as on the left. 

Who is the better candidate in any particular race is up to the voters in that district or state, but citizens everywhere should be angry when businessmen and politicians together subvert the market economy.

The problem is not just the money–roughly $100 billion a year for corporate welfare, for instance–but also the disturbing is the message government is sending to all Americans. As I point out in my latest article at Fee.org:  “The way to rise and prosper, to expand one’s business and increase one’s income, is to seize control of state to loot your neighbors.  Gaining wealth by working hard is, well, hard work.  It is so much better to hire a lobbyist and whisper sweet nothings in legislators’ ears.  No heavy lifting there.”

Moreover, the illusion of consent cannot hide the dubious moral principles relied upon. The purpose of government is to advance particularly important and genuinely collective interests which cannot be achieved privately. Taking people’s earnings for anything less differs little from theft. 

Eric Cantor’s defeat is a useful reminder that even the political class is ultimately accountable to the people, but only by sharing that message widely do we have any chance of rolling back the rampant political privilege and cronyism which dominates Washington today.

Categories: Policy Institutes

Hold Pakistan Accountable For Blasphemous Oppression

Cato Op-Eds - Wed, 07/16/2014 - 12:12

Doug Bandow

In a world aflame, religious minorities are among those who suffer most.  Pakistan is notable for its failure to protect religious liberty, the most basic right of conscience.

The State Department recently reported on Pakistan that “The constitution and other laws and policies officially restrict religious freedom and, in practice, the government enforced many of these restrictions.  The government’s respect for and protection of the right to religious freedom continued to be poor.”

Minority faiths frequently face violent attack.  Although Islamabad does not launch these assaults, it does little to prevent or redress them.  This failure, the State Department explained, “allowed the climate of impunity to continue.”

The most common tool of persecution may be the charge of blasphemy which, explained the U.S. Commission on International Religious Freedom, is used to “target members of religious minority communities and dissenting Muslims and frequently result in imprisonment.”  The blasphemy laws are made for abuse:  “The so-called crime carries the death penalty or life in prison, does not require proof of intent or evidence to be presented after allegations are made, and does not include penalties for false allegations.”

With evidence unnecessary, the charge is routinely used in personal and business disputes.  Penalties are not limited to the law.  Since 1990, at least 52 people charged with blasphemy have been killed before reaching trial.

Judges who acquitted defendants and politicians who talked of reforming the blasphemy laws also have been assassinated.  In May, gunmen killed a human rights lawyer who was defending a professor accused of blasphemy.

Although Pakistan is not alone in punishing religious free speech, it has jailed more people for blasphemy than any other nation.  The group Freedom House published a detailed report on the detrimental impact of blasphemy laws: these measures “impose undue restrictions on freedom of expression” and are “prone to arbitrary or overly broad application, particularly in settings where there are no checks and balances in place to prevent abuses.”

Pakistan originally respected religious liberty.  Alas, the government of dictator Mohammed Zia ul-Haq not only criminalized blasphemy, but, as Freedom House noted, also imposed “harsh Shari’a punishments for extramarital sex, theft, and violations of the prohibition of alcohol.” 

The impact of such laws fell most heavily on religious minorities and liberals.  Again, Freedom House:  “it is clear that Pakistan’s blasphemy laws are used politically and applied disproportionately to non-Muslims.  Although many other countries have laws against blasphemy, the situation in Pakistan is unique in its severity and its particular effects on religious minorities.” 

Unfortunately, there are spillover impacts from abusive blasphemy prosecutions.  Freedom House warned:  “Pakistan’s blasphemy laws foster an environment of intolerance and impunity, and lead to violations of a broad range of human rights, including the obvious rights to freedom of expression and freedom of religion, as well as freedom from arbitrary arrest and detention; the right to due process and a fair trial; freedom from torture and cruel, inhuman, and degrading treatment; and the right to life and security of the person.”

Obviously, there is little the United States can do directly about policy in Pakistan.  However, the International Religious Freedom Act empowers the State Department to designate countries as Countries of Particular Concern. 

As I noted in my latest Forbes online column:  “A state which fails to protect the right of individuals to respond to their belief (or unbelief) in God is more likely to leave other essential liberties unprotected.  And a society in which life and dignity of the human person is not respected is more likely to become a hothouse to hostile ideas and beliefs, ” which we see in Pakistan today.  Rising religious extremism, exemplified by abusive blasphemy prosecutions, threatens the integrity of the Pakistani state and thus the security of its nuclear program. 

Although Americans cannot control policy in Pakistan, they can help highlight a problem that threatens people in that nation and ultimately others around the world.

Categories: Policy Institutes

CBO Long-Term Spending Projections

Cato Op-Eds - Tue, 07/15/2014 - 16:02

Chris Edwards

The Congressional Budget Office has released new long-term projections of federal spending and debt. Without reforms, spending is expected to rise steadily and dangerously as a share of the economy in coming decades. The chart below shows spending under CBO’s “extended alternative” scenario, which assumes that politicians keep current policies in place. Spending would rise from 17.6 percent of GDP in 2000, to 20.4 percent this year, to 31.8 percent by 2040.

Under that scenario, federal debt held by the public would rise from 74 percent of GDP this year to a giant 170 percent by 2040. But if spending and debt were to rise along that trajectory, we would surely have a major financial and economic meltdown long before we got to 2040.

Our fiscal outlook is actually much worse than reflected in this scenario. That’s because under the basic extended alternative, CBO does not take into account the negative effects of rising spending and debt on GDP over the long term. CBO does have a special chapter in their report looking at some of these negative effects—but only some of them. In this testimony, I mention reasons why the outlook is worse than under the CBO baseline.

    

Categories: Policy Institutes

Bulgaria Wins Balkan Prize

Cato Op-Eds - Tue, 07/15/2014 - 14:15

Steve H. Hanke

Every country aims to lower inflation, unemployment, and lending rates, while increasing gross domestic product (GDP) per capita. Through a simple sum of the former three rates, minus year-on-year per capita GDP growth, I constructed a misery index that comprehensively ranks 89 countries based on misery. The table below is a sub-ranking of all Balkan states presented in the full index.

 

All of the Balkan states in my index suffer from high unemployment and relatively high levels of misery.

That said, the least miserable Balkan country is Bulgaria. For all of its problems, including a recent bank run, the country’s currency board system provides monetary and fiscal discipline, which produces positive results in a region plagued with problems. 

Categories: Policy Institutes

Should Boehner Sue Obama?

Cato Op-Eds - Tue, 07/15/2014 - 12:12

Roger Pilon

Well into our sixth year with this president, we’re long past the point of having to demonstrate his indifference to the rule of law—the unconstitutional appointments, the Obamacare rewrites, the IRS and VA scandals, the list goes on.  In fact, it’s Obama’s indifference simply to doing his job that lately has drawn attention. “The bear is loose”—on the golf course, in the pool hall, dining late with athletes and entertainers. It’s driven House Republicans to talk of impeachment and of a House suit against him for his failure to faithfully execute the laws.

Both would be a mistake, Thomas Sowell tells us this morning, and he’s right. As November’s mid-term elections loom just ahead, either course would shift public attention from Obama to his critics, just as happened when the House impeached President Clinton. Not that there isn’t a case to be made for both impeachment and a suit. But impeachment, at the end of the day, is less a legal than a political matter, as we saw in the Clinton episode. So too is the suit that Speaker Boehner is now considering. Both proposals, therefore, have to be looked at through that lens.

To a good many in the House, however, a suit against the president seems like the lesser but wiser course. And contrary to first impressions, including my own, such a move is not as far-fetched as it might seem. In fact, if one takes the time to wade through the dense testimony that our good friend Elizabeth Price Foley presented to the House Judiciary Committee last February, it soon becomes clear that the standing objection that arises immediately with such a suit could likely be overcome in this case.

But even if a suit could get off the ground, would one be wise? True, unlike with impeachment, where the House is the “grand jury” and the Senate the “court,” in this case it wouldn’t be the other political branch attacking the president. Rather, attention would be directed to the third, non-political branch of government, where the action would be happening, and that would soften the attack to some extent, making it seem less a political than a legal charge. But those are subtleties. In the hands of the media, they’d likely pass over most heads as we move toward November.

And what turns on November? Nothing less than the courts themselves, as Sowell points out. To elaborate just a bit on the point, after November, Obama will have two more years in office. He got off to a slow start exercising the most long-lasting of a president’s powers, the power to nominate judges for lifetime appointments on our federal courts. But he’s catching up. We saw just last month how his two Supreme Court appointments have read the Constitution on some of the most important cases of the Court’s just-concluded term.

Well it’s no different below, especially in the courts of appeal, except that it’s less noticed. We tend to focus on the Supreme Court, which blinds us too often to the fact that the Court decides only 70 or so cases a year while the 13 federal appellate courts terminate some 60,000 cases—and they don’t always follow the guidance of the Supreme Court in doing so. It’s crucial, therefore, given the inclination of this president to see his view of the Constitution reflected in the people he nominates for seats on those courts, to have a Senate over the next two years that will carry out its advice and consent responsibilities more responsibly than has been done under the leadership of Harry Reid. Anything that distracts from that focus should be avoided.   

Categories: Policy Institutes

How to Lie with Statistics: Florida School Spending Edition

Cato Op-Eds - Tue, 07/15/2014 - 11:57

Jason Bedrick

Activists in Florida found a way to torture the state’s education spending data to make appear as though Florida is 50th in education spending. The only catch is that their rather unconventional method ranks Washington D.C. as 51st, despite the fact that D.C. spends nearly $30,000 per pupil, putting it in first place for spending per pupil according to the U.S. Census Bureau (page 11, table 11). 

How did they accomplish this literally unbelievable statistical feat? As Patrick Gibbons explains at RedefinED, the activists have inappropriately seized on the U.S. Census Bureau’s “education revenues per $1,000 of personal income” figure. Holding all else constant, Florida could improve its ranking using that figure either by spending more on education or by its citizens becoming poorer. Gibbons crunched the numbers to see what it would take to put Florida in 24th place, just above the median, without increasing spending:

To reach the “above average” point on the spending-per-income statistic, Florida would need education revenues of $49.15 per $1,000 of personal income. Without spending a dime more, or less, on education, Florida could boost its ranking to 24th in the nation if its collective income simply shrank by 26 percent.

Florida would become THE POOREST state in the U.S., but we would have above-average education spending – at least according to this misleading metric. Something tells me nobody will be happy with those results.

Embedded in the activists’ use of this figure is the odd notion that it costs more to educate students from wealthier states than students from poorer states. Indeed, if every state had exactly the same “education revenues per $1,000 of personal income” then rich states would far outspend poor states, yet I suspect that the activists citing this figure would not be pleased.

The organization peddling this nonsense is not alone. A group clamoring for more education spending in Colorado used the same deceptive tactic in 2012. In just the last year, numerous groups have claimed that their state is 50th in education spending, including the NEA in Arizona, Public Advocates Inc. in California (citing Education Week), an academic in Idaho (citing the U.S. Census Bureau), and a media outlet in Utah (citing the National Center for Education Statistics). Most of these organizations at least have respectable sources upon which to rely. Since the rankers employ varying methods of accounting for spending, groups in numerous states can plausibly claim that they are at the bottom in education spending (unlike the groups in Florida and Colorado). One year, groups in eight states claimed that their state was second-to-last in spending. Many of these groups, including the one in Florida, have sued their respective states in an effort to persuade the courts to force the state legislatures to spend more.

These groups assume that spending more will lead to improved student outcomes, but there is no strong correlation between education spending and performance. Moreover, increasing spending has not consistently yielded improved outcomes, as Harvard University’s Paul E. Peterson, Stanford University’s Eric Hanushek, and the University of Munich’s Ludgar Woessmann found in a 2012 study: 

Just about as many high-spending states showed relatively small gains as showed large ones. Maryland, Massachusetts, and New Jersey enjoyed substantial gains in student performance after committing substantial new fiscal resources. But other states with large spending increments—New York, Wyoming, and West Virginia, for example—had only marginal test-score gains to show for all that additional expenditure. And many states defied the theory by showing gains even when they did not commit much in the way of additional resources. It is true that on average, an additional $1000 in per-pupil spending is associated with an annual gain in achievement of one-tenth of 1 percent of a standard deviation. But that trivial amount is of no statistical or substantive significance. Overall, the 0.12 correlation between new expenditure and test-score gain is just barely positive.

 

Torture the data long and hard enough and they’ll confess to almost anything. The statistical Torquemadas in Florida found a way to make Washington D.C. look like the lowest spender instead of the highest. But as D.C. illustrates, what matters most is not how much is spent but how it is spent.

Categories: Policy Institutes

Nicaraguan Unaccompanied Child Migrants - Where Are They?

Cato Op-Eds - Tue, 07/15/2014 - 10:25

Alex Nowrasteh

U.S. policy is equally generous to unaccompanied children (UAC) from El Salvador, Guatemala, Honduras, and Nicaragua – but today’s child migrants are not coming from Nicaragua.  Explaining why Nicaraguan UAC are not part of the recent surge may help explain why so many are coming from El Salvador, Guatemala, and Honduras - the so-called Northern Triangle. 

Nicaragua has low rates of violent crime, gang membership, and fewer family connections to the United States than the Northern Triangle.  If U.S. policy was the main reason why there is a sudden surge of UAC, it should also pull UAC from Nicaragua.  This suggests that other factors like the high levels of violence and strong family connections are the main reasons why UAC from the Northern Triangle are coming and why Nicaraguan UAC are absent.        

Nicaragua has a much lower homicide rate than El Salvador, Honduras, and Guatemala.  According to the United Nations, there has been a dramatic increase in murder rates across Central America since 2006 – except in Nicaragua.    

 

Source: United Nations Office on Drugs and Crime https://www.unodc.org/gsh/en/data.htm.

Nicaraguan gang membership is low compared to other nations in Latin America.  The numbers are so low they don’t merit close recording and only one major Central American gang even has a substantial presence there: Los Perrones

 

 

Source: United Nations Office on Drugs and Crime, http://www.unodc.org/documents/data-and-analysis/Studies/TOC_Central_America_and_the_Caribbean_english.pdf#page=29.     

Only about one percent of Nicaraguans in 2010 said that crime was the most important issue facing their country.  By contrast, 44 percent of El Salvadorans, 35 percent of Guatemalans, and 25 percent of Hondurans said crime was the most important issue facing their respective countries.  Lower homicide rates and gang membership have made Nicaraguans feel much safer than citizens of the Northern Triangle.  This also explains the recent large percentage increase in asylum seekers in non-Northern Triangle Central American countries, although their numbers remain low.    

Nicaragua is also a destination for migrants from El Salvador, Guatemala, and Honduras.  In 2012, there were 14,597 Hondurans, 3,291 El Salvadorans, and 1,387 Guatemalans living in Nicaragua. 

There is not a history of Nicaraguan unlawful immigration to the United States – it’s not even on the top ten list.  There are more Ecuadorian unlawful immigrants to the United States than unlawful Nicaraguan immigrants.  As I explained here, the timing and flow of UAC from El Salvador, Honduras, and Guatemala is consistent with the theory of stage migration – one or both parents migrate first and then send for their children later.  After an increase in unlawful immigrant adults from Central America and the destruction of circular migration because of more effective border enforcement in the United States, their children coming up to reunite with them. 

Of all immigrants in the United States, both legal and illegal, there are about 1.3 million from El Salvador, 900,000 from Guatemala, and 500,000 from Honduras.  By contrast, there are only about 260,000 immigrants from Nicaragua.  The few family connections between Nicaraguans and Americans have helped to keep the UAC numbers small.

Nicaragua is part of the Central America-4 Border Control Agreement that allows nationals from El Salvador, Honduras, Guatemala, and Nicaragua to move freely across those four nations. Border controls between those nations do not constrain Nicaraguan migration to the United States.  Liberalized Mexican immigration laws have also lowered the costs of all migration from Central America.   

Those seeking to blame U.S. policy for the surge of UAC can claim, at best, that U.S. policy is partially to blame for such a surge, but they cannot justfiably claim that it is the sole or most important explanation.  As the absence of Nicaraguan UAC indicates, violence and family reunification seem to be much bigger factors in explaining the surge in UAC than any recent change in U.S. policy.    

Categories: Policy Institutes

Government Infrastructure and Political Enthusiasm

Cato Op-Eds - Mon, 07/14/2014 - 15:00

Chris Edwards

Most politicians are optimistic about the government’s ability to intervene and solve problems. That’s one reason why they run for office. Neocons, for example, have excessive faith that foreign intervention can fix the world, while liberals embrace the misguided idea that subsidies and regulations can boost the economy.

On infrastructure, we’ve seen political enthusiasm leading to overpromised and underdelivered projects since the founding of the nation. The construction the National Road—funded by Congress beginning in 1806—was fraught with problems. The Army Corps of Engineers has been known for boondoggles since the 19th century. In recent decades, government infrastructure has become so notorious for waste that The Simpsons had an episode about a failed monorail scheme.

Chapter 1 of Burton and Anita Folsoms’ book, Uncle Sam Can’t Count, examined the inefficiency of the government’s fur-trading infrastructure from 1795 to 1825. Chapter 2 of the book looked at how 19th century subsidies for steamship transportation were wasteful and damaging.

Chapter 3 of the book looks at the orgy of state government canal building from the 1820s to the 1840s. Here is the basic story:

  • New York State funds construction of the Erie Canal, which opens in 1825.
  • The Erie Canal is a big success, which spurs canal fever across the nation and encourages other state governments to hand out subsidies. Government canal schemes are launched in Michigan, Pennsylvania, Ohio, Indiana, Maryland, and Illinois. There is particular excitement about subsidized “internal improvements” among Whig politicians, including Abraham Lincoln.
  • However, politicians overestimate the demand for canals in their states and underestimate the costs and difficulty of construction. They do not recognize that the Erie Canal is uniquely practical and economic as it traverses relatively flat land and connects the Great Lakes with the Atlantic.
  • Some of the state-sponsored canals are huge boondoggles and are abandoned. And other than the Erie Canal, all of the state canals sustain heavy losses, including other subsidized canals in New York.
  • After the failures, numerous states privatize their infrastructure and change their constitutions to prevent politicians from wasting further money on such schemes.

Thomas DiLorenzo writes about these issues here. And Clifford Thies goes into detail about the canal follies in this Cato Journal article. As these authors discuss, governments unfortunately made similar mistakes subsidizing railroads in the 19th century.

Perhaps our current political leaders are not funding escalators to nowhere—as they did on The Simpsons monorail episode—but today’s uneconomic streetcars and high-speed rail schemes are not that much different.

Categories: Policy Institutes

Trevor Ariza: NBA Champion, Tax Refugee

Cato Op-Eds - Mon, 07/14/2014 - 14:52

David Boaz

Do some people think taxes don’t affect economic choices? If so, they should talk to Trevor Ariza and the Washington Wizards. Ariza, a member of the Los Angeles Lakers’ 2009 NBA championship team and “a key part of the Wizards’ playoff run,” has decided to leave Washington and join the Houston Rockets. Why?

Washington was disappointed but hardly shaken when Ariza chose to accept the same four-year, $32 million contract offer in Houston, where the 29-year-old could pocket more money because the state doesn’t tax income.

Yes, a $32 million salary – or indeed a $32,000 salary – goes further in Texas than in the District of Columbia. What economists call the “tax wedge” is the gap between what an employer pays for an employee’s services and what the employee receives after taxes. It causes some jobs to disappear entirely, as employees and employers may not be able to agree on a wage once taxes are taken out of the paycheck. It causes some employees to flee to lower-tax countries, states, or cities. The Beatles, the Rolling Stones, Bono, and Gerard Depardieu are some of the better-known “tax exiles.” Now Trevor Ariza has joined their ranks.

Categories: Policy Institutes

Liberalism and the French Revolution

Cato Op-Eds - Mon, 07/14/2014 - 09:13

David Boaz

Twenty-five years ago today I stood on the Champs-Elysees and watched a parade celebrating the bicentennial of the French Revolution, capped off with Jessye Norman singing “La Marseillaise.”

Of course, the French Revolution is controversial, especially among my conservative friends. How should libertarians see it? Three years ago I discussed that topic at FreedomFest and on the Britannica Blog. Here’s some of what I wrote then:

The Chinese premier Zhou Enlai is famously (but apparently inaccurately) quoted as saying, “It is too soon to tell.” I like to draw on the wisdom of another deep thinker of the mid 20thcentury, Henny Youngman, who when asked “How’s your wife?” answered, “Compared to what?” Compared to the American Revolution, the French Revolution is very disappointing to libertarians. Compared to the Russian Revolution, it looks pretty good. And it also looks good, at least in the long view, compared to the ancien regime that preceded it.

Conservatives typically follow Edmund Burke‘s critical view in his Reflections on the Revolution in France. They may even quote John Adams: ”Helvetius and Rousseau preached to the French nation liberty, till they made them the most mechanical slaves; equality, till they destroyed all equity; humanity, till they became weasels and African panthers; and fraternity, till they cut one another’s throats like Roman gladiators.”

But there’s another view. And visitors to Mount Vernon, the home of George Washington, get a glimpse of it when they see a key hanging in a place of honor. It’s one of the keys to the Bastille, sent to Washington by Lafayette by way of Thomas Paine. They understood, as the great historian A.V. Dicey put it, that “The Bastille was the outward visible sign of lawless power.” And thus keys to the Bastille were symbols of liberation from tyranny….

Liberals and libertarians admired the fundamental values [the French Revolution] represented. Ludwig von Mises and F. A. Hayek both hailed “the ideas of 1789” and contrasted them with “the ideas of 1914” — that is, liberty versus state-directed organization.

The Declaration of the Rights of Man, issued a month after the fall of the Bastille, enunciated libertarian principles similar to those of the Declaration of Independence:

1. Men are born and remain free and equal in rights… .

2. The aim of all political association is the preservation of the natural and imprescriptible rights of man. These rights are liberty, property, security, and resistance to oppression… .

4. Liberty consists in the freedom to do everything which injures no one else; hence the exercise of the natural rights of each man has no limits except those which assure to the other members of the society the enjoyment of the same rights… .

17. [P]roperty is an inviolable and sacred right.

But it also contained some dissonant notes, notably:

3. The principle of all sovereignty resides essentially in the nation. No body nor individual may exercise any authority which does not proceed directly from the nation… .

6. Law is the expression of the general will.

A liberal interpretation of those clauses would stress that sovereignty is now rested in the people (like “Governments are instituted among Men, deriving their just powers from the consent of the governed”), not in any individual, family, or class. But those phrases are also subject to illiberal interpretation and indeed can be traced to an illiberal provenance. The liberal Benjamin Constant blamed many of France’s ensuing problems on Jean-Jacques Rousseau, often very wrongly thought to be a liberal: “By transposing into our modern age an extent of social power, of collective sovereignty, which belonged to other centuries, this sublime genius, animated by the purest love of liberty, has nevertheless furnished deadly pretexts for more than one kind of tyranny.” That is, Rousseau and too many other Frenchmen thought that liberty consisted in being part of a self-governing community rather than the individual right to worship, trade, speak, and “come and go as we please.”

The results of that philosophical error—that the state is the embodiment of the “general will,” which is sovereign and thus unconstrained—have often been disastrous, and conservatives point to the Reign of Terror in 1793-94 as the precursor of similar terrors in totalitarian countries from the Soviet Union to Pol Pot’s Cambodia.

In Europe the results of creating democratic but essentially unconstrained governments have been far different but still disappointing to liberals. As Hayek wrote in The Constitution of Liberty:

The decisive factor which made the efforts of the Revolution toward the enhancement of individual liberty so abortive was that it created the belief that, since at last all power had been placed in the hands of the people, all safeguards against the abuse of this power had become unnecessary.

Governments could become vast, expensive, debt-ridden, intrusive, and burdensome even though they remained subject to periodic elections and largely respectful of civil and personal liberties. A century after the French Revolution Herbert Spencer worried that the divine right of kings had been replaced by “the divine right of parliaments.”

Still, as Constant celebrated in 1816, in England, France, and the United States, liberty

is the right to be subjected only to the laws, and to be neither arrested, detained, put to death or maltreated in any way by the arbitrary will of one or more individuals. It is the right of everyone to express their opinion, choose a profession and practice it, to dispose of property, and even to abuse it; to come and go without permission, and without having to account for their motives or undertakings. It is everyone’s right to associate with other individuals, either to discuss their interests, or to profess the religion which they and their associates prefer, or even simply to occupy their days or hours in a way which is most compatible with their inclinations or whims.

Compared to the ancien regime of monarchy, aristocracy, class, monopoly, mercantilism, religious uniformity, and arbitrary power, that’s the triumph of liberalism.

Mark Twain, in A Connecticut Yankee in King Arthur’s Court, reminded us of the reality of the ancien regime: 

There were two “Reigns of Terror,” if we would but remember it and consider it: the one wrought murder in hot passion, the other in heartless cold blood; the one lasted mere months, the other lasted a thousand years; the one inflicted death on ten thousand persons, the other upon a hundred millions; but our shudders are all for the horrors of the minor Terror, so to speak; whereas, what is the horror of swift death by the axe compared with lifelong death from hunger, cold, insult, cruelty and heartbreak? What is swift death by lightning compared with death by slow fire at the stake? A city cemetery could contain the coffins filled by that brief Terror, which we have all been so diligently taught to shiver at and mourn over, but all France could hardly contain the coffins filled by that older and real Terror which none of us has been taught to see in its vastness or pity as it deserves.

Categories: Policy Institutes

Smart Growth Facts vs. Ideology

Cato Op-Eds - Mon, 07/14/2014 - 08:46

Randal O'Toole

Debates over smart growth–sometimes known as new urbanism, compact cities, or sustainable urban planning, but always meaning higher urban densities and a higher share of people in multifamily housing–boil down to factual questions. But smart-growth supporters keep trying to twist the arguments into ideological issues.

The choice should be yours: suburbs, or …

For example, in response to my Minneapolis Star Tribune article about future housing demand, Thomas Fisher, the dean of the College of Design at the University of Minnesota, writes, “O’Toole, like many conservatives, equates low-density development with personal freedom.” In fact, I equate personal freedom with personal freedom.

Fisher adds, “we [meaning government] should promote density where it makes sense and prohibit it where it doesn’t”; in other words, restrict personal freedom whenever planners’ ideas of what “makes sense” differ from yours. Why? As long as people pay the costs of their choices, they should be allowed to choose high or low densities without interference from planners like Fisher.

… New Urbanism. Flickr photo by David Crummey.

Another writer who makes this ideological is Daily Caller contributor Matt Lewis, who believes that conservatives should endorse new urbanism. His weird logic is conservatives want people to love their country, high-density neighborhoods are prettier than low-density suburbs, and people who don’t have pretty places to live will stop loving their country. Nevermind that more than a century of suburbanization hasn’t caused people to stop loving their country; the truth is there are many beautiful suburbs and many ugly new urban developments.

Lewis adds, “Nobody I know is suggesting that big government–or the U.N.!–ought to mandate or impose these sorts of development policies.” He apparently doesn’t know many urban planners, and certainly none in Denver, Portland, San Francisco, Seattle, the Twin Cities, or other metropolitan areas where big government in the form of regional planning agencies (though not the U.N.) are doing just that. If new urbanism were simply a matter of personal choice, no one would criticize it.

The real issues are factual, not ideological.

Fact #1: Contrary to University of Utah planning professor Arthur Nelson, most people everywhere prefer low-density housing as soon as they have transport that is faster than walking. While a minority does prefer higher densities, the market will provide both as long as there is demand for them.

Fact #2: Contrary to Matt Lewis, American suburbanization did not result from a “post-World War II push for sprawl” coming from “the tax code, zoning, a federally financed highway system, and so on.” Suburbanization began before the Civil War when steam trains could move people faster than walking speed. Most American families abandoned transit and bought cars long before interstate highways–which, by the way, more than paid for themselves with the gas taxes collected from the people who drove on them. Nor did the tax code promote sprawl: Australians build bigger houses with higher homeownership rates in suburbs just as dispersed as America’s without a mortgage interest deduction.

Fact #3: Contrary to Thomas Fisher, low-density housing costs less, not more, than high-density. Without urban-growth boundaries or other artificial restraints, there is almost no urban area in America short of land for housing. Multifamily housing costs more to build, per square foot, than single-family, and compact development is expensive because the planners tend to locate it in areas with the highest land prices. The relative prices in my article–$375,000 for a 1,400-square-foot home in a New Urban neighborhood vs. $295,000 for a 2,400-square-foot home on a large suburban lot–are typical for many smart-growth cities: compare these eastside Portland condos with these single-family homes in a nearby Portland suburb.

Fact #4: Contrary to Fisher, the so-called costs of sprawl are nowhere near as high as the costs of density. Rutgers University’s Costs of Sprawl 2000 estimates that urban services to low-density development cost about $11,000 more per house than services to high-density development. This is trivial compared with the tens to hundreds of thousands of dollars added to home prices in regions whose policies promote compact development.

Fact #5: Contrary to University of Minnesota planning professor Richard Bolan, the best way to reduce externalities such as pollution and greenhouse gases is to treat the source, not try to change people’s lifestyles. For example, since 1970, pollution controls reduced total air pollution from cars by more than 80 percent, while efforts to entice people out of their cars and onto transit reduced pollution by 0 percent.

Fact #6: Contrary to Lewis, suburbs are not sterile, boring places. Suburbanites have a strong sense of community and are actually more likely to engage in community affairs than city dwellers.

Fact #7: Smart growth doesn’t even work. It doesn’t reduce driving: After taking self-selection into account, its effects on driving are “too small to be useful.” It doesn’t save money or energy: multifamily housing not only costs more, it uses more energy per square foot than single-family, while transit costs more and uses as much or more energy per passenger mile as driving. When planners say smart growth saves energy, what they mean is you’ll live in a smaller house and have less mobility.

Fact #8: If we end all subsidies and land-use regulation, I’ll happily accept whatever housing and transport outcomes result from people expressing their personal preferences. Too many planners want to control population densities and transport choices through prescriptive land-use regulation and huge subsidies to their preferred forms of transportation and housing.

These planners think only government can know what is truly right for other people. Even if you believe that, government failure is worse than market failure and results in subsidies to special interest groups for projects that produce negligible social or environmental benefits.

If urban planners have a role to play, it is to ensure people pay the costs of their choices. Instead, it is planners, rather than economists such as myself, who have become ideological, insisting density is the solution to all problems despite the preferences of 80 percent of Americans for low-density lifestyles.

Categories: Policy Institutes

PolitiFact Oregon "False" Rating of Wehby Claim ... Is False

Cato Op-Eds - Mon, 07/14/2014 - 08:35

Jim Harper

I was pleased to get an inquiry from PolitiFact Oregon recently about a controversy I knew nothing about. Alas, I must deny credit to Politifact’s use of the information I provided.

Monica Wehby, the Portland pediatric neurosurgeon challenging Senator Jeff Merkley (D), recently fired on the senator for his support of the Rebuild America Jobs Act (S. 1769 in the 112th Congress).

According to the Politfact Oregon write-up, Wehby described Merkley’s vote for the act as “typical of a Washington insider like Senator Merkley,” saying, “I would have voted no because this legislation would have cost the average American family $1,000 a year while making no significant impact to fix our infrastructure and roads.”

Is the cost figure true? My site WashingtonWatch.com was the source of the number that the Wehby camp used (actually $958.40).

I described the source of the number to the Politifact reporter in some detail:

WashingtonWatch.com does a net present value calculation on CBO scores, calculating as costs the amount that would have to be put in a bank account now to fund future taxes and spending, for example, and as savings the amount that would go into a bank account now based on expected tax reductions and spending cuts. We divide gross amounts by the number of people in the country (according to census figures) and then multiply by the size of the average U.S. family (3.14, if my memory serves). At the end of a Congress, we “freeze” the relevant figures, so the calculation for S. 1769 is based on a discount rate of 3.73%, a U.S. population of 315,085,045, and a national debt of $16,338,243,391,74.

The CBO score for S. 1769 (click “Read an analysis of the bill” on the bill’s page) shows revenues (taxes - a cost) of about $56.8 billion and outlays (spending - a cost) of $56.5 billion. That made S. 1769 a high-cost bill — it proposed increasing both taxes and spending — but it was fairly budget-neutral, increasing the average family’s share of the national debt by only about $40 per average family.

If Wehby claimed that the bill would have cost the average American family about $1,000 in new taxes, I think that is incorrect. It would have cost about $500 per family in new taxes and about $500 per family in new spending.

Wehby’s claim was not that it would cost $1,000 in new taxes, though, as the PolitiFact reporter said to me in his inquiry. It was that the bill “would have cost the average American family $1,000 a year.” That is a correct number, though the reporter did not catch or raise with me that the net present value calculation produces a one-time cost figure—not the cost per-year.

There are arguments against this methodology for calculating costs, which I noted to the reporter:

As the bulk of the revenues would have come from a surtax on people with a modified AGI above $1,000,000, I see an argument that this would not have come from “average families” in the “median” or “mode” sense. But our calculations are literal averages — the arithmetic mean — which is produced by dividing costs among all families in the U.S. That approach makes the most sense for outlays, as funds in the U.S. treasury can be thought of as “owned” by all the people, and expenses should be treated as falling on all of us. The average/arithmetic mean makes less sense when it comes to revenues because they often come from distinct sets of taxpayers, such as the relatively well off.

We use the method of calculating we do because there are upwards of 10,000 bills in every Congress and hundreds get CBO scores. We don’t know of a reliable or accurate way to calculate and report tax or spending incidence at scale — who actually pays and who actually receives tax dollars — in all these bills.

My conclusion: “The statement that the bill would have cost the average family $958.40 according to CBO figures is accurate because taxes and spending are each appropriately treated as costs and ‘average’ refers to the arithmetic mean.”

But that’s not what PolitiFact Oregon reported. To my surprise, I “faulted Wehby’s claim on two counts.”

The first involved the $958.40 figure itself. In reality, [Harper] said, only half of that would come in the form of new taxes. The remainder really doesn’t count since it’s in the form of new spending. And while it could be argued that new spending amounts to a long-term debit, the CBO’s own finding that the bill was budget-neutral negates that point.

I neither said nor implied that spending “really doesn’t count.” It counts. The methodology I use counts it. And, while I pointed out that the bill was relatively budget-neutral, candidate Wehby didn’t make any claim about the budgetary effects of the bill. A bill can cost a lot and be budget-neutral. This one did and was.

The second point that the Politifact report attributed to me “was that ‘average families’ would not have borne the burden of any new costs because language in the bill made clear that it would be financed by a 0.7 percent surtax on millionaires.”

That wasn’t my point at all. Here’s what I wrote to the reporter:

It’s important and relevant to many, though, that the incidence of the taxes would have been on relatively rich people. The $500 in taxes would not have hit the “typical” (median/mode) American or Oregonian family. It’s up to you whether you believe it’s expected in the context of Wehby’s statement to get into tax incidence. You can ding her for that omission if your judgment is that it’s something she should have included.

It’s not something I faulted Wehby for. I called the statement “accurate” and left the question of subtlety around tax incidence to the reporter (thinking to myself, “Yeah, right. A political campaign is supposed to get into ‘tax incidence’…”).

It turns out that what a bill “costs” is hard to figure out when the bill has both revenue and spending measures. I’ve given it a lot of thought over years and come up with a pretty good methodology (explained and caveated at WashingtonWatch.com’s “about” page.) It’s disappointing when this thinking, and the work you put in writing up an issue for a reporter, comes out this badly misunderstood, and your own views mischaracterized.

With regret, I rate Politifact Oregon’s rating of Wehby’s claim False.

Categories: Policy Institutes

Influencing Climate Policy on the Back of a Lame Horse

Cato Op-Eds - Fri, 07/11/2014 - 16:25

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

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

———-

While we hate to beat a dead horse, despite our best efforts, it’s apparently still alive and kicking.

It is a horse called “Global Warmed Causes Cold Winters and Therefore We Should Regulate Carbon Dioxide Emissions” and proudly jockeyed by White House science adviser John Holdren. (It is rumored that the horse was sired by “Comply or Die,” the winner of the 2008 Grand National Steeplechase and a favorite among the global warming alarmist crowd.)

Previously, on several occasions, we have pointed out that  Holdren’s view that greenhouse gas-induced climate changes lead to more frequent cold outbreaks (as espoused in this YouTube video produced by the White House during last winter’s frigid cold) is a (dwindling) minority viewpoint. Leading researchers on the topic have made a special point of declaring that the hypothesis is rather unlikely. 

In recent months, new research, in part inspired by last winter’s “polar vortex” excursion southward into the eastern United States,  and the White House-spurred speculation that it was caused by anthropogenic climate change, has hit the scientific press. In each case,  new research has found little evidence in support of Holdren’s contention and a rather lot of evidence to the contrary.

In fact, so much evidence has built up against Holdren that the good folks over at the Competitive Enterprise Institute (CEI) filed a formal request for correction with the White House Office of Science and Technology Policy under what’s known as the federal Data Quality Act.

The CEI petition was, predictably, denied, with the claim that the information in the video did not violate the Data Quality Act because the video only reflected Holdren’s “personal opinion,” not a “comprehensive review of the scientific literature.”

Amen to the latter! But the problem—and a troubling problem at that—is that Holdren’s “personal opinion” carries a lot of weight in the White House and influences federal policy.

For example, in announcing proposed regulations limiting carbon dioxide emissions from existing power plants, EPA Administrator Gina McCarthy said “I’m tired of people pointing to the Polar Vortex as a reason not to act on climate. It’s exactly the opposite. Climate change heightens risks from extreme cold that freezes power grids.”

More evidence of Holdren’s influence is found in this New York Times’ article from last week “Obama Adviser on Front Lines of Climate Fight: John Holdren’s Influence Seen in Obama’s Policies.” According to the Times’ article:

But it also acknowledged a truth: Mr. Holdren has this president’s ear, perhaps more than any White House science adviser in recent memory, at a time when climate change has been thrust to the forefront of national politics and could help shape Mr. Obama’s legacy.

Mr. Holdren’s influence can be seen in many of the administration’s policies, including its biggest on climate change—the plan to cut power plant emissions of carbon dioxide, the main contributor to global warming.

“John was right at the heart” of the deliberations, said the White House chief of staff, Denis R. McDonough.

The topic of Holdren’s views on  global warming, cold outbreaks, and the CEI petition was briefly raised in the article, with little concession by the White House.

In fact, among climate scientists the issue of a link between Arctic warming and cold spells is still far from resolved. The White House Office of Science and Technology Policy, which Holdren leads, said it stood by the accuracy of the video, but added, “there will be continuing debate about exactly what is happening.”

The “debate about exactly what is happening” is becoming decidedly more one-sided (and not in Holdren’s favor).

A prominent study on the topic appeared in the journal Nature Climate Change last month. The paper was written ny the University of Exeter’s James Screen, who  found that cold winter days were actually warming more than not-so cold winter days—with the net result that climate change was leading to less variability in winter temperatures, not more, as would occur under Holdren’s scenario.

[What was left out of Screen’s paper was acknowledgement that we—Knappenberger and Michaels—published nearly the same result 13 years ago! See here for details.]

Accompanying the Screen article was a piece by Eric Fischer and Reto Knutti that explained how the picture relating climate change to winter cold outbreaks was increasingly coming into focus—and showing that climate change should moderate winter weather, not make it more severe. 

The Fischer and Knutti article contains gems like these:

A number of studies proposed that strong Arctic warming and declining sea ice extent caused the jet stream to meander more, thereby making temperatures more volatile and causing more intense cold spells in mid-latitudes of the northern hemisphere. As he reports in Nature Climate Change, James Screen challenges this hypothesis and provides observational evidence for the opposite effect.

and,

In the end, the most powerful argument is the observational evidence and our quantitative physical understanding. Screen demonstrates that despite recent cold winters, cold days have become less, rather than more, extreme.

and our favorite:

What is robust, however, is that the popular picture of a general “global weirding”—of all kinds of weather becoming more extreme and volatile across the globe—is simplistic and misleading.

It’s long is past time for the White House to come clean on all of this and admit that the global warming/polar vortex horse is lame. Hiding this fact unfairly lowers its odds and risks the placement of misguided bets—for example, President Obama’s Climate Action Plan.

P.S.: Weather forecast models for next week—normally the second-hottest week of the year in the eastern United States—are predicting a jet stream orientation that looks a lot like what dominated last winter (i.e., a return of the dreaded “polar vortex”), and far, far below-normal temperatures, especially in the Midwest. We doubt people will mind as much as they did in January and therefore doubt that the White House will declare that the cool (and welcomed) summer weather is “consistent with” anthropogenic global warming.

References:

Fischer, E. amd R. Knutti, 2014. Heated debate on cold weather. Nature Climate Change, 4, 537-538.

Knappenberger, P.C., P.J. Michaels, and R.E. Davis, 2001. Nature of observed temperature changes across the United States during the 20th century. Climate Research, 17, 45-53.

Screen, J., 2014. Arctic amplification decreases temperature variance in northern mid- to high-latitudes.  Nature Climate Change, 4, 577–582.

Categories: Policy Institutes

UberX Launches in South Carolina

Cato Op-Eds - Fri, 07/11/2014 - 15:17

Matthew Feeney

Yesterday Uber launched its ridesharing service, UberX, in four cities in South Carolina, offering residents of Charleston, Greenville, Columbia, and Myrtle Beach five free UberX rides each until July 24th. Unfortunately, the San Francisco-based technology company’s move into South Carolina could lead to conflicts with Palmetto State regulators.

According to reporting from Charleston’s newspaper, The Post and Courier, the executive director of the SC Office of Regulatory Staff believes that the main issue is whether the Uber business model would fall under the jurisdiction of the Public Service Commission’s regulatory authority. The Post and Courier mentioned that a taxi company in Charleston has developed its own smartphone app to compete with Uber. However, instead of just trying to offer a better rival service, the company, Yellow Cab of Charleston, is one of several taxi companies in South Carolina that are reportedly discussing calling for legislative action against Uber.

Uber and Lyft, another ridesharing company, have run afoul of regulators in numerous jurisdictions, including Virginia, Pittsburgh, and Ann Arbor, MI.

Lyft, which does not currently operate in South Carolina, announced this week that it would begin operating in New York City despite not having permission from the city’s Taxi and Limo Commission (TLC). Uber is now licensed by the TLC, although like Lyft it did not have TLC approval when it launched in NYC.

Companies in the so-called “sharing economy” do not fit well into existing regulatory frameworks. While Uber and Lyft are competitors to traditional taxi services, they are not taxi companies. Rather, they are technology companies that reduce the transaction costs of a familiar task (giving rides for money). It should not be surprising that existing regulations cannot keep up with such changes in technology.

It remains to be seen how regulators and taxi companies respond to Uber’s expansion into South Carolina. Regulators and lawmakers should consider removing already existing regulations in order to allow for Uber and taxis to compete in a fair and free market. Unfortunately, the history of Uber’s expansion is full of examples of regulators favoring out-of-date legislation over the necessary pro-consumer reforms. 

Categories: Policy Institutes

Bloomberg: "I Don't Think There's Roads" Where Voters Backed Gun Rights

Cato Op-Eds - Fri, 07/11/2014 - 09:42

Walter Olson

Michael Bloomberg has now fully completed his transition from un-libertarian but arguably competent New York City mayor to abrasive, polarizing figure-of-fun on the national scene. Having dumped a sizable chunk of his billion-dollar fortune into gun control and nanny-state campaigns around the country, Bloomberg now grants an interview in the upcoming Rolling Stone, where he takes credit for Colorado’s passage of a law restricting firearms liberty and along the way casually insults substantial portions of that state’s population:

In Colorado, we got a law passed. The NRA went after two or three state Senators in a part of Colorado where I don’t think there’s roads. It’s as far rural as you can get. And, yes, they lost recall elections. I’m sorry for that. We tried to help ‘em.

“Where I don’t think there’s roads.” The Colorado media has been having a lot of fun with that one. The two successful recalls were in Colorado Springs (pop. 430,000) and Pueblo (pop. 100,000). It took me about two minutes online to establish that Colorado Springs, best known as home to the Air Force Academy, in fact has a share of residents with graduate degrees that’s 40% above the national average, a figure I believe compares favorably to that of the combined five boroughs of NYC. It has roads, too, as does Pueblo.

Lesson of Mayor Bloomberg’s interview: when people show contempt for your liberty, it can be a sign that they have contempt for you, too.

Categories: Policy Institutes

Ignoring the Law of Supply and Demand

Cato Op-Eds - Thu, 07/10/2014 - 17:16

Randal O'Toole

A recent report from Fannie Mae finds that baby boomers are not leaving their comfortable suburban homes for lively inner-city communities with walkable streets. As a news article about the report observes, this challenges the “conventional wisdom that ‘empty nester’ baby boomers would eventually downsize from the homes where they raised families, flocking instead to apartments or condos.”

Rather than conventional wisdom, it would be more accurate to say that this notion was wishful thinking among urban planners who believe more Americans should be packed into high-density “compact cities” where they will get around by foot, bicycle, or transit rather than by automobile. In contrast, demographers have known that populations of virtually all age groups, whether millennials or empty nesters, are growing faster in the suburbs and exurbs than in the cities. After all, the baby boomers’ parents overwhelmingly preferred to “age in place” rather than move when their children left home; why should baby boomers be any different?

Despite this, regional planning agencies all over the country are writing plans that presume America will need no more single-family homes, especially on large lots, and instead will need lots of apartments, condos, or townhouses. Many of these plans effectively zone away the possibility of new single-family homes on large lots while they subsidize construction of high-density housing. For example, the San Francisco Metropolitan Transportation Commission’s Plan Bay Area mandates that 80 percent of all new housing be in high-density urban centers.

To justify these plans, the planning agencies often hire Arthur C. Nelson, the University of Utah urban planning professor who in 2006 predicted that the U.S. will soon have 22 million surplus single-family homes on large lots. Nelson wrote a 2011 report predicting that the Bay Area, which has one of the most acute housing shortages in America today, would have a surplus of nearly 572,000 single-family homes by 2040; Plan Bay Area relied heavily on this report to justify its strict land-use policies.

More recently, the Twin Cities Metropolitan Council hired Nelson to do a similar analysis for its Thrive 2040 plan. “Demand for attached and multifamily housing in the Twin Cities will continue to grow,” trumpets the council’s press release about Nelson’s report on Twin Cities housing. That, of course, is what the Met Council wanted Nelson to “prove,” which is why they hired him. However, his report can’t really justify the Met Council’s plans.

Nelson’s report predicts “a shifting mix of housing products demand for the next 30 years” such that the share of single-family homes on medium and large lots will decline from 37 percent to 26 percent; while homes on small lots will increase from 25 to 33 percent; and townhouses and multifamily will increase from 38 to 41 percent. Based on this, he says, “to meet housing demand by type in 2040 all new residential units will need to be attached options (apartment, townhouse, condominium) or small-lot detached homes.”

That sounds dramatic at first glance. But even if you believe his numbers, most of the change is from medium and large lot to small lot, not from single-family to multifamily, as the Met Council’s press release implies. Multifamily growing from 38 percent to 41 percent is not that big of an increase, and one that could easily be attributed to measurement error.

There are a lot of potential sources of measurement error in Nelson’s report. Most of the report is based on his interpretation of realtor surveys of people’s housing preferences in which lots of people said they wanted to live in “walkable neighborhoods.” Of course, if you ask people, “Would you like to live in a neighborhood where you can walk to shops?” a lot of people will say yes. But if you ask, “Would you prefer spending $400,000 on a 1,000-square-foot condo in a congested, noisy neighborhood or $200,000 on a 2,000-square-foot home on a large lot in a quiet suburb?” few people would pick the condo.

Nelson thinks housing demand is changing because of “sweeping demographic changes” including an aging population, increasing numbers of ethnic minorities, and declining numbers of households with children. Yet, as shown by other studies, his assumption that these groups will necessarily prefer apartments, townhouses, or houses on small lots is not well grounded.

The report’s biggest problem is that Nelson repeatedly uses the word “demand” but apparently does not know what this word means. Demand is not a point, like the 619,000 Twin Cities households that he predicts will want to live in attached homes in 2040. Demand is a relationship between price and quantity, and prices never enter into Nelson’s analysis.

One reason why Nelson may not understand demand is that he seems to be arithmetically challenged in the first place. Page 26 of the report admits that “in the near term, 2020, demand for more homes on larger lots may still seem robust. The overall demand for such lots will increase by about 25,000 between 2010 and 2030—nearly 1,000 units annually.” Whatever you make of this “demand analysis,” 25,000 divided by 20 years is 1,250, not “nearly 1,000.”

A second problem is that the big change that Nelson predicts–a decline in the share of homes on medium and large lots from 37 percent to 26 percent–isn’t carefully measured by most of the surveys Nelson cites. Page 28 of the report notes that, in the surveys that do distinguish between lot size, a “small lot” is a quarter acre or less. Yet when many urban planners talk about small lots in walkable neighborhoods, they typically mean 25’x50’ lots, nearly nine of which would fit on a quarter acre. Do the people who answer vague questions about their housing preferences really understand this difference?

A third problem is that a lot of the data cited in the report have one source: Arthur C. Nelson. The report includes ten figures and thirteen tables, five of each of which say, “Source: Arthur C. Nelson.” The citations don’t even say, “Arthur C. Nelson, [year],” which would allow readers to pick out which of the ten papers in the reference section by Arthur C. Nelson the tables or figures are from. This makes the report even less persuasive than it already is.

Perhaps the most important self-citation in Nelson’s reference section is a 2006 article in the Journal of the American Planning Association where Nelson first predicted the future surplus of single-family homes. The article issued a clarion call to planners to lead the way to prevent this by forcing builders to focus on apartments instead. The Journal was honest enough to attach a critique by University of North Carolina planning professor Emil Malizia that pointed out that Nelson’s predictions were based on unreliable surveys whose results could have been “heavily influenced by the data collection method.”

In sum, Nelson predict fairly small changes in housing preferences, especially between multifamily and single-family, and those predicted changes are based on specious data. Yet based on those predictions, the Metropolitan Council wants to make large changes in the Twin Cities’ housing mix, mainly a large increase in multifamily along its various rail lines. (Did I mention that the Met Council also wants to increase taxes so it can build more rail transit–which in 2012 carried all of 0.3 percent of Twin Cities commuters to work–thus providing rail stations near which it can locate high-density housing?)

The real question is: Just why should regional planning agencies such as the Bay Area Metropoltan Transportation Commission or Twin Cities Metropolitan Council, have anything to do with determining future housing supplies anyway? These agencies were created to hand out federal transportation and low-income housing grants to cities in each region, not to dictate housing choices to a region’s middle-class residents. As Malizia pointed out in his critique of Nelson’s 2006 paper, if people’s preferences change, and housing is left to the market, the market will respond to those changes.

Not satisfied with that, regional planners want to dictate future housing choices by restricting low-density housing and subsidizing high-density housing near rail stations. These policies will make housing less affordable which (perhaps deliberately) will make Nelson’s prediction of an increasing desire for multifamily housing a self-fulfilling prophecy.

Categories: Policy Institutes

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