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Andrew J. Coulson

A week ago, the Atlanta Journal Constitution published an on-line op-ed critiquing Chile’s nationwide public-and-private school choice program. In a letter to the editor, I objected to several of the op-ed’s central claims. The authors responded, and the AJC has now published the entire exchange. A follow-up is warranted, which I offer here:

Comment on the Gaete, Jones response to my critique:

Their response consists chiefly of “moving the goalposts”—changing the issue under debate rather than responding to the critique of the original point. The first claim in their original op-ed to which I objected was that “there is no clear evidence that [Chilean] students have significantly improved their performance on standardized tests.” In contradiction of this claim I cited the study “Achievement Growth” by top education economists and political scientists from Harvard and Stanford Universities. That study discovered that Chile is one of the fastest-improving nations in the world on international tests such as PISA and TIMSS—which were specifically designed to allow the observation of national trends over time. It is hard to conceive of clearer evidence that Chilean students “have significantly improved their performance”, contrary to the claim of Gaete and Jones.

To the extent that Gaete and Jones address this evidence at all it is by saying: “it is true that Chile has shown a certain improvement in [its] relative position in PISA scores. But (1) this may say less about Chilean improvements and more about other countries’ relapse.” That is an empirically testable claim. It has been tested, and it is false. As I pointed out in my original letter, prof. Gregory Elacqua has shown that the same pattern of improvement in academic performance is visible on Chile’s own national SIMCE test, which is entirely unaffected by the performance of foreign nations (see chart 1). Moreover, the improvement in Chilean academic achievement noted in the “Achievement Growth” study is not purely relative to other countries but is an objective gain compared to Chile’s own earlier performance.

Chart 1:  Same trend in national tests (SIMCE language and math, 4th grade)

Source: Gregory Elacqua, “Factors contributing to achievement growth in Chile.”

Even if that were not the case and Chile were only improving relative to the entire rest of the world because the whole rest of the world was suffering a decline, it would beg the question: what is Chile’s secret that is allowing it to buck this worldwide slump? Certainly it would be wrong to dismiss Chile’s education system out of hand as part of the explanation.

But rather than spending much time trying to dispute this evidence that contradicts their original claim, the authors try to change the subject, proposing that “testing is neither the only nor the best way or criterion to determine the quality of an educational system, it is simply the way favoured by market-oriented systems.” It was also, recall, the very first way in which Gaete and Jones themselves proposed to evaluate Chilean education in their op-ed, with their mistaken claim about a lack of test score improvement. But rather than seriously confronting the evidence that refutes them, the authors choose to change the subject, asserting that: “there are no big differences between the private and public system in the [domestic Chilean] SIMCE [test].” This new claim is entirely beside their original point, which was the trend in academic performance for the nation’s students as a whole.

But, having addressed the authors’ original claim, I have no objection to addressing this new one. The effects of a competitive education system are not limited to—or even chiefly comprised by—differences in performance between the sectors. One the contrary, it is the overall performance of all schools and children that is of interest. Alas, Gaete and Jones seem unaware that increased competition from private voucher schools improves the performance of nearby government schools. This has been shown empirically by Francisco Gallego in his study “When does Inter-School Competition Matter? Evidence from the Chilean `Voucher’ System.”

Next, Gaete and Jones attack Chile’s education system on the grounds that it suffers from an educational gap between its wealthier and poorer students. That it does, but so do other nations. It is more meaningful to ask how Chile compares in this respect to its peer Latin American nations. Inequality can be measured using several different metrics, one of which is to look at differences in test scores between wealthier and poorer students. These results vary somewhat by subject, grade, and test, but as an example we can look at the PISA test of reading among 15-year-olds. Here, Chile’s achievement gap is statistically indistinguishable from the overall average of all participating countries and significantly smaller than the gaps in most other Latin American countries. Chile’s achievement gap is also significantly smaller than the gaps in the United States, France, Belgium, and several other rich nations (“PISA 2009 Results: Learning to Learn,” Vol. III, Table III A, 2010).

Another way of measuring educational inequality is the average number of years of schooling completed by the wealthiest versus the poorest students. On this point, professor Claudio Sapelli summarizes the evidence for El Mercurio: “Chile has the lowest average educational inequality in Latin America. To measure inequality using the education gap between quintile 5 (richest) and 1 (poorest). In terms of change in this gap in the last 20 years, Chile is among the few countries in Latin America to decrease it.” So, here again, the data on Chile’s education system seem encouraging.

Looking beyond the education system to the broader economy, income inequality has also been falling in recent decades, as has poverty. “The fraction of the population living under the poverty line in Chile fell from 45.1% to 13.7% between 1987 and 2006” (Eberhard & Engel, 2008). Meanwhile, “from 1990 onwards the wage of the 10th percentile [poorest] and the median wage [middle class] grew faster than [that of the] the 90th percentile [the wealthy]” (Eberhard & Engel, 2008).

As for public sentiment toward the program, to which Gaete and Jones make reference, I leave explaining that to the political scientists and sociologists.

Steve H. Hanke

Charles W. Calomiris and Peter Ireland, two distinguished economists and friends, wrote an edifying piece in The Wall Street Journal on 19 February 2015. That said, their article contains a great inflation canard.

They write that “Fed officials should remind markets that monetary policy takes time to work its way through the economy—what Milton Friedman famously referred to as “long and variable lags”—and on inflation.” That’s now a canard.

For recent evidence, we have to look no further than the price changes that followed the bursting of multiple asset bubbles in 2008. The price changes that occurred in the second half of 2008 were truly breathtaking. The most important price in the world — the U.S. dollar-euro exchange rate — moved from 1.60 to 1.25. Yes, the greenback soared by 28% against the euro in three short months. During that period, gold plunged from $975/oz to $735/oz and crude oil fell from $139/bbl to $67/bbl.

What was most remarkable was the fantastic change in the inflation picture. In the U.S., for example, the year-over-year consumer price index (CPI) was increasing at an alarming 5.6% rate in July 2008. By February 2009, that rate had dropped into negative territory, and by July 2009, the CPI was contracting at a -2.1% rate. This blew a hole in a well-learned dogma: that changes in inflation follow changes in policy, with long and variable lags.

Milton Friedman was certainly correct about the period covered in the classic, which he co-authored with Anna J. Schwartz: A Monetary History of the United States, 1867-1960. Recall that the world of that era was one in which the fixed exchange rates ruled the roost. That’s not today’s world. Indeed, many important currencies now float. Since the world adopted a flexible exchange-rate “non-system”, changes in inflation can strike like a lightning bolt.

Roger Pilon

Continuing the media firestorm of the last few days, George Stephanopoulos spent over 11 minutes today on ABC’s “This Week” browbeating Indiana Gov. Mike Pence over the meaning of the Religious Freedom Restoration Act the governor had just signed, and the governor spent the entire 11 minutes refusing to say what the Act plainly says, that individuals and businesses, in the name of religious liberty, may discriminate against members of the LGBT community by, for example, declining to provide bakery or florist services for gay weddings.

Such today is the dishonesty of our politics, on both sides, that those who defend religious liberty cannot or will not speak plainly, while those who defend anti-discrimination measures—like Bill Clinton, who signed the federal Religious Freedom Restoration Act, and Barack Obama, who was an Illinois state senator when that state’s religious freedom act was passed unanimously—cannot bring themselves to say that they are limiting religious liberty—assuming the media would ever ask them to say that.

Doubtless spurred by the upcoming NCAA “Final Four” games in Indianapolis, we have here, of course, the continuation of the hysteria that followed the Supreme Court’s Hobby Lobby decision last year, which upheld the right of the deeply religious owners of that chain of stores to refrain from paying for abortifacients for their employees, as was required under the administration’s interpretation of Obamacare. (See Cato’s brief in that case, and some of my thoughts on the issue here and here.) “Hysterical” is no overstatement: ABC News reports today that Seattle’s mayor wants to prohibit city employees from traveling to Indiana. Why stop there? Prohibit travel across the U.S., where the federal law is in force.

In truth, we have in this Act the analogue of what we see every day in the area of free speech, which the left assiduously and rightly defends—but this is religion, and for the left, that’s another matter. Just as we defend a person’s right to say what he pleases, which is not the same as defending what he says, so too here we can defend a person’s right to discriminate on the basis of his religious beliefs without defending those beliefs or the actions they may require of a believer. As one more sign of how modern liberals have turned the Constitution on its head, they would have the statutory rights created by our anti-discrimination law trump the constitutional rights the First Amendment was ratified to protect. I discuss those issues in much greater depth here.

Ilya Shapiro

Mdicaid, the entitlement program for low-income Americans jointly funded by the state and federal government, represents about 25 percent of state budgets. Federal funding represents more than half (57 percent) of that amount, and that funding is now being threatened by Obamacare.

In what seems like déjà-vu all over again, Maine’s Department of Health and Human Services (DHHS) is pursuing a lawsuit to prevent this sort of federal coercion.

Here’s the scoop: In 2009, the American Recovery & Reinvestment Act (ARRA) offered states stimulus funds if they agreed to a maintenance-of-effort (“MOE”) provision that required them to maintain Medicaid-eligibility standards at July 2008 levels through December 2010. MaineCare, Maine’s Medicaid program, accepted those funds and the accompanying MOE provision. In relevant part, MaineCare covered low-income individuals ages 18 to 20 in 2008 — even though Medicaid doesn’t require states to include non-pregnant, non-disabled 18- to 20-year olds — so that MOE provision required Maine to continue to do so through 2010. Then the Affordable Care Act came along and added its own MOE provision, which required states to “freeze” eligibility levels until 2019 or risk losing all federal Medicaid funding.

When the ACA took effect on March 23, 2010, Maine was still bound by the ARRA’s MOE requirements, and thus had to continue to cover 18- to 20-year olds for an additional nine years. In August 2012, however, the Maine DHHS sought to drop this coverage. The federal Center for Medicare and Medicaid Services (CMS) rejected Maine’s position regarding alleged inconsistencies between the MOE provisions.

On appeal, Maine argued that the ACA’s MOE provision is unconstitutionally coercive under the Spending Clause, that it unconstitutionally applies retroactively to ARRA MOE provisions, and that it violates Maine’s right to equal sovereignty. Nevertheless, the U.S. Court of Appeals for the First Circuit affirmed the CMS decision, so Maine now seeks Supreme Court review.

Cato has filed a brief supporting that petition. We outline the significance of the case and reiterate concerns over the executive branch’s interpretations of NFIB v. Sebelius (the previous Obamacare case at the Supreme Court). The issues presented here need to be resolved so states can decide whether to establish exchanges — regardless of how King v. Burwell is decided — or expand their Medicaid programs. In enforcing the eligibility freeze, the ACA creates inequality among states in administering their Medicaid programs and threatens state sovereignty.

After NFIB struck down mandatory Medicaid expansion, U.S. HHS Secretary Sebelius suggested that the Court’s ruling didn’t apply to populations covered under MOE requirements. Yet the Supreme Court majority clearly stated that expanding mandatory Medicaid eligibility beyond “discrete categories of needy individuals” represented a dramatic increase of state obligations. All 34 states that have chosen not to establish exchanges are still responsible for the populations under the MOE provision, however, and most states that haven’t expanded Medicaid are facing budget shortfalls.

Aside from clear federalism issues, this case therefore has a huge impact on state budgets. The Court must grant cert. in order to address federalism issues and provide clarity so that the states can make informed decisions about ACA implementation.

The Supreme Court will decide whether to take up Mayhew v. Burwell later this spring.

Ilya Shapiro

The Supreme Court heard arguments on Wednesday in Michigan v. EPA, asking whether it was unreasonable for the Environmental Protection Agency to ignore costs in determining the appropriateness of regulating mercury emissions from power plants. The EPA’s proposed regulations are expected to cost the coal industry a whopping $9.6 billion, but only offer a meager $500,000 to $6 million in public health benefits. 

Cato filed an amicus brief in the case that focuses on why the EPA chose to ignore costs in developing these regulations. It turns out that EPA could achieve its goal of comprehensively regulating utility emissions only if it ignores the costs. That in turn allowed the EPA to single out power plants – which it couldn’t do under other programs, and to avoid working through the states – as the other programs require. This strategy amounts to little more than a clever trick to circumvent statutory limits on the EPA’s own authority.

In effect, the EPA is exploiting nearly harmless levels of mercury emissions as a Trojan horse – an excuse to regulate all power plant emissions, even ones that are covered by other programs that deny EPA the ability to regulate in this fashion.

Chief Justice Roberts picked up on this point from our brief when he questioned the Solicitor General extensively as to the radical disparity between costs and benefits (see discussion starting p.59 here). He also asked pointed questions regarding the EPA’s attempt at making an “end run” around restrictions on the Clean Air Act.

As Roberts explained, this “end run” works by the EPA first finding a hazardous air pollutant (HAP) that is suitable for regulation—in this case mercury. In the government’s view, this then opens the door for the EPA to “regulate all hazardous pollutants that the source emits,” even if those pollutants – this time particulate matter – are not covered by the applicable sections of the Clean Air Act. The Chief Justice scoffed at the government’s argument, remarking that “I understand how the end run works … I’m just questioning the legitimacy of it.”

The EPA is attempting to offset the admitted disparity between the costs and benefits of regulating mercury emissions by claiming that regulating “co-pollutants” like particulate matter would deliver “$30 to $90 billion” in benefits, far outweighing the $6 million in benefits from mercury regulation and allegedly justifying the tremendous costs to the coal industry. 

But what we’re really witnessing here is a heavy-handed power grab. The federal government is grasping at straws to target coal-fired power plants in ways that Congress denied to it. As explained in Cato’s brief, “by refusing to consider costs when deeming it ‘appropriate and necessary’ to regulate power plant’s HAP emissions, the EPA was able to circumvent the Clean Air Act’s statutory bar on regulating criteria pollutants as hazardous air pollutants and aggrandize its authority at the expense of that of the states and their citizens.”

The Economist also recently highlighted many of the concerns we raised. In the end, it seems clear that the EPA’s reading of the law is, as Justice Scalia put it, “silly.” This is just another unacceptable power grab by the executive branch.

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.

More evidence this week that high-end forecasts of coming climate change are unsupportable and Americans’ worry about environmental threats, including global warming, is declining. Maybe the general public isn’t as out of touch with the science as has been advertised?

First up is a new paper by Bjorn Stevens from Germany’s Max Plank Institute for Meteorology that finds the magnitude of the cooling effect from anthropogenic aerosol emissions during the late 19th and 20th century was less than currently believed, which eliminates the support for the high-end negative estimates (such as those included in the latest assessment of the U.N.’s Intergovernmental Panel on Climate Change, IPCC). Or, as Stevens puts it “that aerosol radiative forcing is less negative and more certain than is commonly believed.”

This is important, because climate models rely on the cooling effects from aerosol emissions to offset a large part of the warming effect from greenhouse gas emissions. If you think climate models produce too much warming now, you ought to see how hot they become when they don’t include aerosol emissions. The IPCC sums up the role of aerosols this way:

Despite the large uncertainty range, there is a high confidence that aerosols have offset a substantial portion of [greenhouse gas] global mean forcing.

The new Stevens’ result—that the magnitude of the aerosol forcing is less—means the amount of greenhouse gas-induced warming must also be less; which means that going forward we should expect less warming from future greenhouse gas emissions than climate models are projecting.

Researcher Nic Lewis, who has done a lot of good recent work on climate sensitivity, was quick to realize the implications of the Stevens’ results. In a blog post over at Climate Audit, Lewis takes us through his calculations as to what the new aerosols cooling estimates mean for observational determinations of the earth’s climate sensitivity.

What he finds is simply astounding.

Instead of the IPCC’s estimate that the equilibrium climate sensitivity likely lies between  1.5°C and 4.5°C, Lewis finds the likely range to be 1.2°C to 1.8°C (with a best estimate of 1.45°C). Recall that the average equilibrium climate sensitivity from the climate models used by the IPCC to make future projections of climate change and its impacts is 3.2°C—some 120% greater than Lewis’ best estimate. But perhaps even more important than the best estimate is the estimate of the upper end of the range, which drops from the IPCC’s 4.5°C down to 1.8°C.

This basically eliminates the possibly of catastrophic climate change—that is, climate change that proceeds at a rate that exceeds our ability to keep up. Such a result will also necessarily drive down estimates of social cost of carbon thereby undermining a key argument use by federal agencies to support increasingly burdensome regulations which seek to reduce greenhouse gas emissions.

If this Stevens/Lewis result holds up, it is the death blow to global warming hysteria.

 

Which brings us to the last results of Gallup’s annual poll gauging the level of environmental concern among Americans—something the polling agency has been keeping track of since the late 1980s. 

Here’s Gallup’s summary of this year’s results:

Americans’ concern about several major environmental threats has eased after increasing last year. As in the past, Americans express the greatest worry about pollution of drinking water, and the least about global warming or climate change.

And Gallup’s full write-up includes this gem:

Importantly, even as global warming has received greater attention as an environmental problem from politicians and the media in recent years, Americans’ worry about it is no higher now than when Gallup first asked about it in 1989.

Says something about the effectiveness of the climate alarm campaign.

The full set of questions and results are available here. You ought to have a look!

Adam Bates

Over at the Washington Post, Radley Balko details a recent Fourth Circuit ruling overturning an award for a father whose son was shot and killed in a military-style SWAT raid after marijuana residue was found in an outside garbage bag. A jury awarded the father $250,000 after it was shown that the police failed to comply with their obligation to knock and announce their presence before barging in and that they lied about several aspects of the raid.

Without repeating the entirety of Balko’s excellent analysis, a particularly troubling aspect of the ruling is the nonchalant way in which the Fourth Circuit judges, even in dissent, treat the militarized raid over marijuana residue and dispense with any suggestion that such escalated violence is constitutionally questionable:

Let’s first start by noting one very important issue that is not in dispute—whether the massive amount of force the police brought to bear in this case was reasonable under the Fourth Amendment. As far as the federal courts are concerned, it was. As Judge Pamela Harris points out in her dissent, “The point here, to be clear, is not to take issue with the Officers’ decision to execute a search warrant based on marijuana traces by way of a military-style nighttime raid.”

Harris is correct. The courts long ago decided that dangerous, punishing SWAT-style raids to search for pot—even when there is no evidence of distribution—are reasonable under the Fourth Amendment. A lawsuit arguing otherwise will be promptly tossed.

Balko then points out that such behavior is precisely what the Fourth Amendment was designed to prevent:

But it’s worth considering the absurdity of that position. In the 20 or so years leading up to the American Revolution, the British crown began stationing troops in the streets of Boston to enforce England’s tax and import laws. The British troops and enforcement officers were armed with writs of assistance, or general warrants that gave them broad powers to search colonists’ homes. They didn’t need to establish probable cause, or even specificity as to a person or residence. The abuse that came with those warrants made Boston a hub of revolutionary fervor, and memories of that abuse are why the Founders created a Fourth Amendment after the war.

But while today’s search warrants require both specificity and some evidence of wrongdoing, in many ways the colonists had more protections than we do today. For example, the British soldiers could serve warrants only during the day. And they were always required to knock, announce themselves, announce their purpose and give the resident time and opportunity to come to the door to let them in peacefully. This was all in observance of the Castle Doctrine, or the idea that the home should be a place of peace and sanctuary and that it should be violated only in the most extreme circumstances. Even then, the Castle Doctrine had a rich history in English common law, a tradition that carried over in the United States until the Supreme Court began chipping away at it in drug cases, beginning in about the 1960s.

Today, of course, authorities can break into homes without knocking. They can conduct raids at night. In theory, we’re today protected by the requirement that authorities show probable cause before serving a warrant, but given the deference judges give to police and prosecutors in much of the country and the boilerplate language you’ll often find on warrant affidavits, you could make a good argument that in many jurisdictions the probable cause protection is little more than a formality. In any case, if the Fourth Amendment is due to the Founders’ offense at British soldiers forcibly entering homes in daylight hours after knocking and announcing to search for contraband, it seems safe to say that the Founders would be appalled by the fact that today, dozens of times each day, heavily armed government officials break into homes, often at night, without first knocking and announcing, in order to conduct searches for contraband.

It’s a persuasive point. Whether the issue is civil asset forfeiture, warrantless surveillance, or armed government agents barreling through your front door at 4:30 in the morning, there is a strong case to be made that the drug war has mangled the Fourth Amendment beyond recognition. That federal courts can observe as much with so little concern is a testament to the institutional nature of this problem.

The entire ruling can be found here.

Adam Bates

A new report from the Drug Policy Alliance details a steep decline in the number of marijuana arrests in Colorado and remarks on the beneficial effects.

The key points:

  • Since 2010, marijuana possession charges are down by more than 90%, marijuana cultivation charges are down by 96%, and marijuana distribution charges are down by 99%.
  • The number of marijuana possession charges in Colorado courts has decreased by more than 25,000 since 2010—from 30,428 in 2010 to just 1,922 in 2014.
  • According to raw data from the National Incident-Based Reporting System, drug-related incidents are down 23% since 2010, based on a 53% drop in marijuana-related incidents.
  • In 2010 the top five Colorado counties for marijuana possession cases were El Paso, Jefferson, Adams, Larimer, and Boulder.  Marijuana possession cases in those counties all dropped by at least 83% from 2010 to 2014.
  • Marijuana distribution charges for young men of color did not increase, to the relief of racial justice advocates wary of a “net-widening” effect following legalization. The black rate for distribution incidents dropped from 87 per 100,000 in 2012 to 25 per 100,000 in 2014.
  • Racial disparities for still-illegal and mostly petty charges persist for black people when compared to white people, primarily because of the specific increase of charges for public use combined with the disproportionate rates of police contact in communities of color. The marijuana arrest rate for black people in 2014 was 2.4 times higher than the arrest rates for white people, just as it was in 2010.
  • The report also reveals a decline in synthetic marijuana arrests, presumably because people are less likely to use synthetic marijuana when marijuana itself is no longer criminalized.

According to Art Way, Colorado state director of the Drug Policy Alliance:

It’s heartening to see that tens of thousands of otherwise law-abiding Coloradans have been spared the travesty of getting handcuffed or being charged for small amounts of marijuana. By focusing on public health rather than criminalization, Colorado is better positioned to address the potential harms of marijuana use, while diminishing many of the worst aspects of the war on drugs.

Daniel J. Mitchell

This is a column I never expected to write. That’s because I’m going to applaud Presidents Franklin Roosevelt and Harry Truman.

This won’t be unconstrained applause, to be sure. Roosevelt, after all, pursued awful policies that lengthened and deepened the economic misery of the 1930s. And, as you can see from this video, the “economic bill of rights” that he wanted after WWII was downright malicious.

Truman, meanwhile, was a less consequential figure, but it’s worth noting that he wanted a restoration of the New Deal after WWII, which almost certainly would have hindered and perhaps even sabotaged the recovery.

But just as very few policymakers are completely good, it’s also true that very few policymakers are totally bad. And a review of fiscal history reveals that FDR and Truman both deserve credit for restraining domestic spending during wartime.

In a new column I wrote for The Hill, I specifically responded to the cranky notion, pursued by Bernie Sanders, the openly socialist U.S. senator from Vermont, that there should be tax hikes on the rich to finance military operations overseas.

The idea has a certain perverse appeal to libertarians. We don’t like nation-building and we don’t like punitive tax policy, so perhaps mixing them together would encourage Republicans to think twice (or thrice) before trying to remake the world.

But “perverse appeal” isn’t the same as “good policy.”

That’s why I suggest another approach, one that used to exist in our nation.

Lawmakers would be well served to instead look on the spending side of the budget. …This may seem like a foreign concept in today’s Washington, but it actually was standard procedure at times in our history.

Consider, for instance, what happened to domestic spending when the nation entered World War II.

As you see from this chart, these outlays fell significantly as a share of GDP. And this was while Roosevelt was in the White House!

I note in the article that much of this improvement was the result of rising GDP, but the raw numbers from the Office of Management & Budget Historical Tables also show that nominal spending was constrained.

The same thing happened during the Korean War. Once the conflict began and policymakers began funding the troops, they also put the brakes on domestic spending.

Unfortunately, restraining domestic spending when military spending is rising is no longer the standard practice in Washington. I point out in the article that we got across-the-board profligacy under President Johnson. Reagan, by contrast, did reduce the burden of domestic spending when he boosted defense outlays to win the Cold War. But then we had a return to guns-and-butter spending last decade during the Bush years.

That led me to write this surreal passage:

We have two odd collections of bedfellows, with Presidents Franklin Roosevelt, Truman, and Reagan in one camp vs. LBJ and Bush in the other camp.

Though I would argue there’s only one good president mentioned in that excerpt if we’re grading overall records.

K. William Watson

Senate Democratic Leader Harry Reid (NV) has announced that he will not seek reelection in 2016, and his most likely successor is Chuck Schumer (D-NY). No doubt a lot will be said by journalists and commentators about what this transition means for policy and politics.

If you want to get an idea of what that change might mean for U.S. trade policy in the long run, you should take a look at Cato’s congressional trade votes database—Free Trade, Free Markets: Rating the Congress.

Throughout his career, Reid has been a staunch opponent of trade liberalization. He has voted in favor of market-distorting subsidies and tariffs at almost every opportunity:

 

For instance, Reid thwarted President Obama’s attempt to secure trade promotion authority last year when Reid was still majority leader.

Schumer has a less drastic voting record:

Though hardly inspiring, Schumer’s record is better than Reid’s.

It can be useful to see more specifically where the senators differ. Unlike Reid, Schumer has voted in favor of free trade agreements from time to time; he has supported lifting and loosening the Cuba embargo, and–at least in his earlier years in the Senate–voted to reform the sugar program.

Should he take the helm next term, Schumer’s less rigid resistance to trade liberalization may help Senate Democrats better represent their base, which is less opposed to trade and globalization than most people realize.

Jason Bedrick

Mississippi is poised to become the third state, behind Arizona and Florida, to enact an education savings account (ESA) law. Yesterday, the Mississippi Senate voted to concur with the state House’s version of the bill, which would provide ESAs for students with special needs to cover numerous education expenses, including private school tuition and fees, tutoring, textbooks, educational therapy, assistive technology, and higher education expenses. Gov. Phil Bryant has indicated that he will sign the legislation.

The Friedman Foundation for Educational Choice provides a useful breakdown of the ESA legislation. While about 63,000 Magnolia State students would be eligible for an ESA next year, “this opportunity is limited to 500 students in year one, with an additional 500 students added to the program each year during a ‘pilot’ period of five years.”

The state will fund the ESAs at $6,500 annually in the form of reimbursements for eligible expenses. The reimbursement model may make it difficult for lower-income families to participate—something policymakers should monitor and address if necessary. Arizona provides ESA parents with restricted-use debit cards that allow parents to conveniently access ESA funds while minimizing the potential for fraud.

In a 2013 survey, parents of students with special needs in Arizona overwhelmingly reported being satisfied with the education they purchased for their children with ESAs. ESAs empower parents to completely customize their child’s education based on his or her unique learning needs. As Lindsey Burke of the Heritage Foundation and I explained in a recent article:

Parents can also save unused funds from year to year and roll the funds into a college savings account. These two features of ESAs—the ability of parents to completely customize their child’s education and save for future educational expenses—make them distinct from and improvements upon traditional school vouchers. ESAs empower parents with the ability to maximize the value their children get from their education services. And because they control how and when the money is spent, parents also have a greater incentive to control costs.

Whether or not 2015 ends up being the Year of Educational Choice, Mississippi has taken an important step toward educational freedom.

Emma Ashford

Since the Arab Spring, many Middle Eastern countries have fallen into political chaos like dominoes. This week’s explosion of conflict in Yemen is just the most recent example. Though many of these conflicts are based on local grievances, they are being exacerbated by the involvement of the region’s larger states, and by the United States.

America’s leaders denounce intervention by unfriendly states like Iran. Yet the United States ignores or even enables such actions by U.S. allies like Saudi Arabia. In doing so, America is simply contributing to the mess in the Middle East. Washington should back off and refuse to get more deeply involved in further Middle Eastern conflicts.

Yemen’s conflict is nothing new; the Houthi rebels have been active in Yemen for more than a decade, and captured the capital in January, forcing President Hadi to flee south. This week, as the rebels finally reached the southern city of Aden, Hadi fled, and apparently appealed to Saudi Arabia for help in combatting the Iranian-backed insurgency.

Yesterday evening, that help arrived in the form of a massive Saudi air campaign and a reported 150,000 troops. The Saudi efforts are supported by a number of other GCC and Arab states, as well as U.S. logistical and intelligence support.

But like everything in the Middle East today, this conflict isn’t as clear cut as it seems. The Houthis are indeed aligned with Iran, and probably receive monetary support. But they also represent a sizeable fraction of the Yemeni population, and many of their policies – such as opposition to U.S. drone strikes in Yemen – are widely popular. Even more confusing, the Houthis are also adamantly opposed to Al Qaeda, and have spent substantial time and resources fighting AQAP fighters inside Yemen.

This conflict fits with a broader pattern of post-Arab Spring clashes in the Middle East, conflicts which are complex and local in nature, but which are treated as simply proxy wars or sectarian conflicts. The fear that Iran might make gains in Syria, in Iraq, in Libya and elsewhere drives Saudi Arabia and other Gulf states to respond militarily, increasing tensions and conflict.

The U.S. response to this complex reality has been to reflexively back traditional U.S. allies. But in doing so, American policy has become confused, contradictory and overleveraged. We’re working towards similar goals as Iran inside Iraq, opposing them in Syria and Yemen, all while trying to reach a nuclear deal before the March 31st deadline. How this mess of policy contradictions is supposed to produce viable results is anybody’s guess.

Yemen has a long history of instability, and any military solution to the crisis will likely fail to produce a long-term solution; it will just paper over the problem. It’s not even clear whether the reinstallation of the Hadi government would be best for U.S. interests: though a Houthi government is unlikely to allow U.S. drone strikes against al Qaeda, they might prove more effective at fighting the group than the government has.

America should stop reflexively backing traditional U.S. allies in the region, and refrain from deeper involvement in these conflicts. Instead, we should think more clearly about when (and whether) the United States should be involved in Middle Eastern conflicts, and about how such actions fit our overall strategic goals. Because one thing is certain: further U.S. intervention in the Middle East would be an exceedingly bad choice.   

Thaya Knight

Tuesday, the SEC approved final rules for so-called Reg A+, a new and revitalized version of the Regulation A exemption, created by the JOBS Act of 2012.  While the new rules remove barriers for issuers seeking a raise near the top of the $50 million cap, they fail to remove the greatest barrier – state registration – for the smaller issuers, effectively leaving them out in the cold. 

Reg A has been essentially unusable for years.  The exemption allows a company to sell securities to the public without full registration, provided the issuer raises no more than $5 million and provided the offering complies with all applicable state securities (“blue sky”) laws.  Because of the low $5 million cap and, more importantly, the heavy burden of complying with at least two regulatory regimes – federal and one or more states – this exemption has become almost entirely obsolete.  Hoping to make a new, workable version, Title IV of the JOBS Act directs the SEC to create an additional class of securities under the exemption.  In addition to raising the cap to at least $50 million, Title IV left the door open for state preemption.

Surprising no one, the state regulators objected.  Although Reg A had languished for years even as small business clamored for better capital access, the North American Securities Administrators Association (NASAA), a group representing state regulators, only very recently announced it had “solved” the Reg A problem.  NASAA’s solution is a program of coordinated review whereby participating states agree to use uniform review standards and a streamlined filing process.  While this process may be a little less cumbersome, it still requires that the issuer complete two separate filings, under two separate regulatory regimes.  For the small companies likely to use Reg A, that is an expensive undertaking.  Moreover, NASAA has insisted that state-level review is important for investor protection, but it’s unclear what additional protection the state regulators provide.  NASAA President William Beatty has argued that small, local offerings require local regulators.  But, as Mr. Beatty himself has said, Reg A offerings that involve local issuers typically involve local investors who are familiar with the issuer.  Also, to the extent there is a benefit from review by a local regulator, that benefit would seem to be lost under coordinated review.  It’s also unclear how any one state regulator is “local” to a company doing a multi-state offering.

In the end, the SEC split the baby.  Reg A+, the Commission announced, will have a two-tier structure.  Offerings under Tier 1 may raise up to $20 million and will be subject to blue sky laws.  Offerings under Tier 2 may raise up to $50 million and will not be subject to blue sky laws.  Tier 2 offerings will have additional requirements not applicable to Tier 1 offerings, however, such as a cap on the amount a non-accredited investor may invest (10% of income or assets), periodic filing requirements (annual, semi-annual, and current event), and the obligation to file audited financials.  Given the expense and demands of blue sky compliance, it’s unlikely many issuers will use Tier 1.  That means that companies seeking less than $20 million will either choose a Tier 2 raise or, more likely, find that the new Reg A+ is as unusuable as the old one.  

Peter Van Doren

This week, Cato released the Spring issue of Regulation.

The cover article, by economist Pierre Lemieux, argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil.  The increased supply allows the economy to produce more goods. This benefits some people, if not all of them.  Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole.

A related article examines the dramatic increase in crude oil transported by trains and whether additional safety regulation of tank car design should be enacted.  Economist Feler Bose argues that companies have an incentive to reduce accidents to reduce insurance rates.  Thus less-obvious ways to prevent accidents, like better track maintenance, may be more cost-effective and undertaken voluntarily to reduce insurance costs.

The issue has three articles on health policy.  Cal State Northridge professor Shirley Svorny describes how state medical licensure boards do very little to discipline doctors who cause medical errors.  Instead, medical quality is created by the private decisions of individual hospitals to grant privileges to doctors to treat patients and the decisions of specialty boards, such as those that govern cardiology, to certify members as qualified.  A second article concludes that the regulation of electronic cigarettes is likely, even though the evidence for adverse health effects is thin, because a powerful coalition of existing cigarette companies and anti-smoking activists would benefit. A third article examines questionable legal maneuvering by states to implement aspects of the Affordable Care Act (Obamacare).

Finally, two articles describe the regulation of emerging technologies. The first, by Oxford’s Pythagoras Petratos, examines nanotechnology and argues that both the Food and Drug Administration and the Environmental Protection Agency are ill-suited to regulate this complex technology. This bureaucratic burden could slow nanotech innovation in the United States. The second article, by Henry Miller of the Hoover Institution, describes the regulation of so-called “biosimilar” drugs.  Biosimilars are “generic” versions of patented biologic drugs, which are produced by living cells through genetic engineering rather than the chemical reactions used to produce traditional patented and generic prescription drugs.  He concludes that clinical trials will be necessary to prove biosimilarity and thus “biosimilar” drugs will not be cheap like traditional generic drugs.

Walter Olson

As I’ve had occasion to note in this space, pundits regularly complain that the current Supreme Court is somehow throttling job-bias lawsuits out of some concern for employers’ rights. However, the Court’s recent rulings on employment discrimination law in fact tend toward the cautious and centrist, and the caseload of discrimination claims filed with the Equal Employment Opportunity Commission (EEOC) remains near its all-time highs. (Thus the New York Times complained in 2013 that a Court decision four years previously had made it hopeless to file age-bias claims, omitting to mention that lawyers filed more such cases after the decision than before.)

Today’s decision in Young v. United Parcel Service, on the scope of pregnancy discrimination and accommodation law, will be hailed reflexively in some quarters on a which-side-are-you-on basis, since the pregnant employee won. Few non-lawyers are likely to stick around for its dry details, in which Justice Stephen Breyer laid out a balancing test mushy enough in its liberalism to win over Chief Justice Roberts and even Justice Alito. (Readers interested in such matters as McDonnell-Douglas burden-shifting and the selection of similarly situated co-worker “comparators” should follow up at the specialty employment-law blogs.) The practical impact of the case is also somewhat limited by Congress’s having further liberalized pregnancy accommodation law in plaintiffs’ favor after the events being sued over. 

Young v. UPS does, however, offer at least two bits of entertainment value. One is a fun Scalia dissent joined by Justices Thomas and Kennedy, charging the majority with adopting a “deliciously incoherent” standard based on a statutory reading “splendidly unconnected with the text.” The dissent, however, sounds a more serious note of alarm when Scalia accuses Breyer’s opinion of blurring together the distinct legal handling given to “disparate-treatment” and “disparate impact” cases, with potentially damaging results.  

My other favorite bit came when the majority opinion smacked down the EEOC and the U.S. Department of Justice over the EEOC’s maximally liberal guidelines on pregnancy discrimination, which the commission hurriedly came out with last summer and which DoJ, through the Solicitor General, insisted were entitled to special weight before the Court. Writing for his liberal colleagues, Breyer rejected the guidelines on grounds of “timing, ‘consistency,’ and ‘thoroughness’ of ‘consideration,’” pointing out that they ran “contrary to the litigation position the Government previously took,” that they offered no coherent reading of the statute, and, pointedly, that the EEOC had put them out “only after the Court had granted certiorari in this case” – almost as if it had been trying to influence the Court.

We’ve documented a pattern in recent years of how the intensely ideologized, left-tilting Obama EEOC gets little respect from either liberal or conservative federal judges. It looks as if that pattern continued today.

K. William Watson

The Obama administration wants us to believe that even while the Trans-Pacific Partnership is shaping the global economy in favor of U.S. interests, it is also furthering U.S. foreign policy by strengthening alliances and containing China’s influence in the Asia-Pacific region. 

Alan Beattie of the Financial Times has written a scathing rebuttal to this line of argument:

This is an appealing fall-back for those who don’t like the deal’s content, but is at best one of the weaker arguments in favour. Whether or not agreements help strategic alliances, the intrusive and one-sided nature of pacts negotiated with the US can arouse resentment as well as cooperation.

The participation of countries in the TPP has less to do with enthusiasm for importing the US economic model than a grudging acceptance that yet more tribute has to be paid in order to retain access to the US market. Negotiating a trade deal with the US is not a particularly pleasant business, and nor is it becoming happier over time. You are essentially presented with a US model agreement that contains a decreasing proportion of actual free trade and an increasing proportion of intellectual property protection, and invited to sign.

It’s not clear that a country’s affection for the US will increase after being required to rewrite its patent and copyright law every few years on a model dictated by, respectively, the Pharmaceutical Research and Manufacturers of America and the Recording Industry Association of America. The US itself does not offer much liberalisation. It is highly unlikely to substantially dismantle its agricultural subsidy and protection regime to allow Australian and New Zealand farmers abundant access to its dairy market or stop its rice subsidies disadvantaging Vietnamese rice exports in world markets. America’s trading partners are thus on a permanent treadmill of enforced policy change in order to keep their trade access to the US.

At the moment, the US is essentially using its huge domestic market as a tool to remake other economies in its image. It is likely to work for some time to come, given the prize on offer. But Washington should not delude itself that trade deals which inflict political pain on the US’s negotiating partners will necessarily function as durable and positive elements of a wider diplomatic relationship.

Of course, trade agreements can and should be a tool to build good foreign relations.  Protectionism breeds conflict while trade enables cooperative wealth creation.  Free trade is an eminently friendly policy, and to the extent trade agreements liberalize trade, they reduce the potential for conflict between governments. 

One of the most pressing problems in U.S. trade policy is that policymakers constantly misstate and misunderstand the purpose of trade agreements.  Trade agreements have the potential to overcome political barriers to trade liberalization in a win-win scenario for all countries involved.  Tariffs, quotas, subsidies, and protectionist regulations harm everyone except the cronies that lobbied for them.  Trade agreements reduce or eliminate these harmful policies.

Unfortunately, the Trans-Pacific Partnership has largely been conceived and shaped by a different set of motivations.  According to its architects, the TPP is supposed to be a “21st century” agreement that will set the rules of trade in ways favorable to the United States.  In other words, favorable to politically powerful U.S. constituencies.  What U.S. policymakers are touting as the great achievements and aims of the TPP are better understood as distortions—issues added to agreements to make them more politically appealing at the expense of the agreement’s core economic function of opening markets to competition.

If the United States truly wants to use the TPP to strengthen relations in the region, the agreement should look a lot different.  For starters, stop pushing for unpopular rules on intellectual property, investment arbitration, and labor and environmental protections.  The United States could also offer more meaningful liberalization of the U.S. market in textiles, sugar, and shipping.  A truly “ambitious” agreement would do a lot to improve U.S. international relations, but it would look very different from the TPP as it has been presented.

Jim Harper

There have been more than 2,700 bills introduced so far in the current Congress. That’s more than 30 bills per day, every day this year, weekends included. Ordinary Americans have a hard time keeping up, of course. Congress does, too.

The controversy around the anti-sex-trafficking bill in the Senate last week illustrates this well. Debate around the formerly non-controversial bill fell into disarray when Democrats discovered language in the bill that would apply the Hyde Amendment to fines collected and disbursed by the government. (The Hyde Amendment bars government spending on abortion. Democrats argue that it has only applied in the past to appropriated funds, not disbursement of fines.)

How is it that it took until late March for Democrats to discover controversial language in a bill that was introduced in January?

Well, Congress is awash in archaic practices. For one, bills are written in “cut and bite” style—change this line, change that word, change another—rather than in a form that lays out what the law would look like if the bill were passed. That makes bills unreadable—a situation Rep. Justin Amash (R-MI) has sought to remedy.

In this case, the bill just made an obscure reference to the Hyde Amendment in prior law. One staffer knew about it, but the information didn’t make its way up the food chain. Throughout the rest of the Democratic caucus, apparently, no one else checked it out because it’s hard to do. If the office that’s leading on the issue is OK with the bill, why look up the meaning of obscure bill language?

Derek Willis of the New York Times explains how Congress can do better:

There’s already an effort to modernize most congressional legislation drafting, but it isn’t coming from inside government. The Cato Institute, the libertarian-leaning research and policy organization, created the Deepbills Project, which takes legislation published by Congress and adds references, including to existing laws and government organizations like federal agencies and congressional committees.

Our work allows references to prior law in bills to be made into web links, which anyone could click to see what those references mean. If Congress did this, it would be a lot easier to read the bills.

Willis is is right that Congress, not Cato, should be in charge of this modernization.

It can take a lot of time to work through the thousands of bills that are written in every session. Making it a part of the official legislative drafting process, when the legal staff would already have the semantic information needed, could help staffers, lobbyists, citizens and, yes, members of Congress figure out what specific language means and what it refers to.

Paul C. "Chip" Knappenberger

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.”

On Sunday, in anticipation of Sen. Ted Cruz’s (R-TX) announcement that he intends to run for president, California governor Jerry Brown (D), declared to NBC’s Meet the Press Cruz was “absolutely unfit to be running for office.” Why? Because of Cruz’s stance on climate change—some of which Cruz laid out on late night TV last week.

But comparing Cruz’s comments on Late Night with Seth Meyers and Brown’s remarks on Meet the Press, it is pretty clear that it is Gov. Brown who needs to spend more time familiarizing himself with the scientific literature on climate change and especially its associations with extreme weather events.

Apparently Gov. Brown is convinced that climate change, or rather the apparently scarier-sounding “climate disruption” Brown prefers, is behind the ongoing drought in California, not to mention the East Coast’s cold and snowy winter.

Cruz, on the other hand, told a more restrained story—that data doesn’t support many alarmist claims and that satellites show no warming during the past 17 years while climate models expected warming—one which comports better with the science that he portrayed.

While there is certainly more to the story than Cruz went into in his brief appearance with Seth Meyers, he is right, that according to satellite observations of the earth’s lower atmosphere as compiled by researchers at Remote Sensing Systems, there has been no overall temperature increase during the past 17 years.

Gov. Brown, meanwhile, decided to elaborate on the climate change issue. Under general questioning from Meet the Press host Chuck Todd, Brown admitted that is was difficult to link specific events, like the California drought, to human-caused climate change. But then Todd played a snippet of Cruz’s Late Night interview where Cruz said:

And my view actually is simple. Debates on this should follow science and should follow data and many of the alarmists on global warming, they have a problem because the science doesn’t back them up.

Brown’s assertions then got much bolder:

What [Cruz] said is absolutely false. Over 90% of the scientists who deal with climate are absolutely convinced that the human activity, the industrial activity, the generation of CO2, methane, oxides of nitrogen and all the rest of those greenhouse gases are building up in the atmosphere, they are heat-trapping, and they are causing warming, not just drought in California, but severe storms and cold in the East Coast. So it’s climate disruption of many different kinds. And that man betokens such a level of ignorance and a direct falsification of existing scientific data. It is shocking, and I think that man has rendered himself absolutely unfit to be running for office.

Unfortunately for Brown, it is he that is speaking against “existing scientific data.”

Consider this new study by a team led by Geophysical Fluid Dynamic Laboratory’s (GFDL) Thomas Delworth that examined the association between the global warming hiatus and drought in western North America (including California). Turns out, according to these scientists, both stemmed from a similar cause—a change in the patterns of winds across the tropical Pacific Ocean. Further, they suggest this pattern was not overly consistent with expectations from human-caused climate change. Here is an excerpt from that paper:

The strong connection between the intensification of Pacific trades and the drying in western North America observed over the past decade suggests that this drying cannot be connected in a straightforward fashion to greenhouse gas increases. In most coupled [climate model] simulations anthropogenic forcing produces a long-term weakening of the Walker circulation and tropical Pacific trade winds, but with substantial intrinsically-generated variability on decadal scales (Vecchi et al. 2006). Therefore, unless it can be shown that the strengthened trade winds are a result of either natural or human-induced radiative forcing changes, the model results suggest that the observed drying over the western U.S. over the last decade may be primarily due to natural variability, and therefore not necessarily a harbinger of a secular drying trend (Hoerling et al. 2010; Seager and Naik 2012). These results highlight how vulnerable western North America is to severe decadal swings in hydroclimate arising from internal variations of the climate system.

Clearly, Gov. Brown is out of touch with these findings, just as he is with many findings on East Coast cold and snow (for example, here, here, and here). But this is typical of those who are intent on attacking those folks (politicians, scientists, writers, etc.) who take a dimmer view than themselves on the necessity for policy action aimed to combat climate change—policies which too often seek to limit energy choice.

If anyone is keeping score, this round of political squabbling over climate change should go to Sen. Cruz.

Reference:

Delworth, T.L., et al., 2015. A link between the hiatus in global warming and North American drought. Journal of Climate, doi:10.1175/JCLI-D-14-00616.1, in press.

Doug Bandow

Iran has been one of Washington’s chief antagonists for nearly four decades. But a deal to keep Tehran from building nuclear weapons is in sight.

Tehran, though an ugly regime, does not threaten America. The United States is the globe’s greatest military power with the most sophisticated nuclear arsenal and finest conventional force.

Tehran’s leaders are malign actors, but nevertheless have reason to feel insecure. In 1953 Washington helped overthrow the democratically elected prime minister. Presidents George W. Bush and Barack Obama regularly declared military action to be “on the table.”

Israel is concerned over a possible Iranian nuclear weapon, but when asked in 2011 whether Iran would drop a nuke on Israel, former Defense Minister Ehud Barak responded “Not on us and not on any other neighbor.” Israeli Defense Force’s Lt.-Gen. Benny Gantz observed: “I think the Iranian leadership is comprised of very rational people.” Who recognize Israel’s overwhelming retaliatory capacity.

Washington’s ally the Shah started the Iranian program. Tehran’s motive, noted former Mossad head and national security adviser Efraim Halevy, “is not the confrontation with Israel, but the desire to restore to Iran the greatness of which it was long deprived.”

Tehran does not appear to have an active weapons program. Instead, it is hedging, putting off any decision.

Negotiations began to move seriously after the 2013 election of Hassan Rouhani as Iran’s president. The interim Joint Plan of Action limited Iran’s nuclear program and increased international surveillance.

More needs to be done. But only negotiation is likely to yield additional restrictions and oversight.

For years hawks erroneously predicted that Iran was about to build nuclear weapons. Instead, negotiations have reduced Tehran’s “breakout” capacity, the time necessary to enrich enough uranium to make one bomb. Before the JPOA Iran’s breakout time was a month or so. The U.S. hopes to push that up to a year.

The basic dispute is whether the West demands complete termination of Iran’s nuclear activities or agrees to program limits backed by intrusive oversight.

Iran is unlikely to surrender:  there is broad domestic support for Iran’s nuclear program. In contrast, a more limited pact would discourage development of a nuclear bomb.

Uranium enrichment may be the most important area of dispute since it is as much political as technical. A compromise deal likely is the best the West can expect. Having endured years of escalating penalties, Tehran isn’t likely to accept less. U.S. military action would set the stage for another extended Middle Eastern disaster.

Compromise also is the best that Tehran can expect. Iran needs an agreement to meet its economic and security needs. The alternative is persistent economic crisis, geopolitical isolation, and military threat.

There are other issues between the West and Iran, including the latter’s regional role. But resolving the nuclear controversy would improve the chances of addressing other disputes.

Nevertheless, negotiation critics promise a better deal if the administration stands firm. Hard-line Republican senators believe Iran should essentially surrender.

Alas, Tehran did not respond to prior pressure by crawling to Washington. Instead, Tehran added centrifuges and increased reprocessing capabilities. As I warn on Forbes online, “Demanding capitulation would risk restarting Iranian efforts, ending enhanced inspections, and encouraging Tehran to follow North Korea in leaving the NPT entirely.”

Having blown up the negotiations, the U.S. then might find war the only alternative to a nuclear Iran. A military strike likely would only delay rather than stop the program. The prospects for democracy in Iran would die, while the impact in the Middle East could be catastrophic.

Thus, negotiations remain the only realistic option to prevent an Iranian bomb. They also could dramatically reduce tensions in the Middle East.

Tehran is an ugly regime, but that only makes a reasonable and enforceable nuclear agreement more critical. For the people of America and Iran, failure is not an option.

Jim Harper

When New York’s Superintendent of Financial Services first encountered Bitcoin, he evidently thought it was a way to build his reputation as a hangin’ superintendent of financial services. (Doesn’t quite roll off the tongue like “hangin’ judge,” does it…) He sent subpoenas to everyone in the Bitcoin world and went on TV talking about “narcoterrorists.” That was foolishness.

Unfortunately, he also hatched the idea of creating a thing called a “BitLicense” for firms wanting to provide Bitcoin-based financial services in New York. That program is now hanging like an albatross around his neck.

I know nothing of the details, but a couple of decades in public policy make the probable outlines of what happened pretty clear. The press seized on the “BitLicense” idea. Lobbyists and business people came around to fawn over the “BitLicense” idea with Superintendent Lawsky, each hoping not to get cut too deeply by its inartful sharp edges. And Lawsky, having come around to favoring Bitcoin (it’s fairly evident from his speeches) found himself committed to coming up with this “BitLicense” thing.

When the first draft came out in July of last year, it was pretty universally panned. The Bitcoin community savaged it. Bitcoin businesses said they would not do business in New York. The idea of a second round of proposal and comment was quickly on offer.

But the second draft isn’t that much better. When comments close at the end of this week (how to comment), the “BitLicense” will again have received strong criticism. There’s always that contingent whose stock in trade is always—always—to play ball. And to others the “BitLicense” saga has gotten boring…

But the outcome is very probably set. In order to avoid backtracking, which would look foolish, the Department of Financial Services will probably continue forward on the errant path of creating a peculiar special license for Bitcoin-based financial services providers in New York.

Today I filed comments with the New York Deparment of Financial Services (NYDFS) focusing mostly on the procedural failures of the rule-writing process. The department claimed that the “BitLicense” is backed by “[e]xtensive research and analysis,” but has for six months declined to release that research.

New York’s regulatory process requires an assessment of impacts on employment in the state. The NYDFS found there would be none. Since then more than $200 million has been invested in Bitcoin companies outside of New York.

On the merits, the “BitLicense” fails because it is a technology-specific regulation rather than function-based. Two firms supplying identical services from the consumer’s perspective will be regulated differently. If finalized, the “BitLicense” would Balkanize New York’s financial services marketplace, suppressing head-to-head competition between new entrants and existing financial services providers. That’s the typical role of regulation—raising barriers to entry and protecting incumbent firms—and it’s almost certainly not what Superintendent Lawsky wants.

The “BitLicense” requires intolerable financial surveillance, forcing firms to collect detailed information on every last transaction in which their customers engage. This is at odds with the responsibility of consumer protection agencies to protect privacy, and it’s out of step with the direction of Fourth Amendment jurisprudence, which will soon revitalize the idea that people maintain a Fourth Amendment interest in data they share with service providers such as ISPs, phone companies, and Bitcoin companies.

I would delight to be proven wrong in my assumption that New York’s financial regulator will push through a bad regulation in order to avoid the negative impression that woud be created by backtracking. Suspending this proceeding would be the better course, though, than carrying on with this “BitLicense” foolishness.

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