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  • Angela Merkel, Teflon No Longer    (Doug Bandow, 2018-06-22)
    Doug Bandow German Chancellor Angela Merkel could be out of a job and her country headed towards elections barely 100 days after the formation of her new government, which took six months to form. It would be a performance worthy of, well, Italy, and all because the stolid, reliable Bavarian conservatives who spent years acting as a doormat for her chancellorship turned into raging populists. They now demand that Berlin bar entry of foreign migrants from other European Union states. A majority of Germans are in agreement. That makes even less realistic French President Emmanuel Macron’s proposed “reforms” that would shift even more power to Brussels. Berlin had already largely demurred from Macron’s plan, offering a basket of half-measures in response. “Solidarity must never lead to a debt union,” Merkel explained. Now Macron, who vanquished the National Front’s Marine Le Pen in last year’s presidential race, will have to adapt to a Europe that is moving sharply away from him. For instance, the United Kingdom continues to stagger towards Brexit, under Theresa May’s desultory premiership. The EU remains a populist foil in Greece, which, under the left-wing Syriza government, is imposing another round of pension cuts to satisfy EU creditors. Hungary’s populist Viktor Orbán, a former liberal, was reelected two months ago with an overwhelming parliamentary majority. The Czech Republic’s Andrej Babis finally forged a coalition with the Social Democrats. A billionaire businessman sometimes compared to Donald Trump, Babis publicly curbed his Euroskepticism, but he is obviously no friend to the EU. His government will receive tacit backing from the small Communist Party, which is favorable toward Russia (as is President Milos Zeman). Poland’s Law and Justice Party, meanwhile, continues to battle the EU, which scheduled a formal hearing on whether the traditionalist/nationalist government is violating the rule of law. Konrad Szymanski, Poland’s Minister for European Affairs, has denounced this as a “massive power grab.” Europe’s populist wave is still building-and it could claim the German chancellor next. Austria’s young, telegenic Sebastian Kurz, a critic of the established order, completed his transformation from liberal minister to populist chancellor by allying with the more extreme Freedom Party. Kurz spoke of creating “an axis of the willing” to combat illegal immigration, looking to both Italy and Germany (and evoking unfortunate historical memories). He hosted Russian President Vladimir Putin last month. In July, the Austrian government will take over the EU’s rotating presidency. Kurz says his agenda will be “a Europe that protects.” Slovenia held elections in early June, and the Slovenian Democratic Party, headed by another former liberal, took clear first place. Known as the SDS, the party combines liberal economic views with antagonism towards immigration. The SDS will struggle to form a coalition, but worth noting is that the former ruling Modern Centre Party collapsed, coming in only fourth. Hungary’s Viktor Orbán offered his support at an SDS campaign rally. What most threatens Eurocratic dominance in Brussels, however, is not the rise of a Central and Eastern European right, but the transformation of “Old Europe’s” governments. For instance, Italy just inaugurated a populist left-right coalition hostile to the continuing shift of authority to Brussels and open to leaving the Euro. Indeed, the new administration is “peppered with figures who” threaten “the EU order,” according to David Charter of The Times of London. In Italy, Interior Minister Matteo Salvini, head of the right-leaning League, dramatically turned away a rescue ship with 629 North Africans last week, saying “The nice life is over for illegal migrants.” Rome also indicated that it will try to block an EU trade deal with Canada. The coalition opposes sanctions on Russia and Prime Minister Guiseppe Conte has backed President Trump’s call for Russia’s inclusion in the G-7. Germany’s politics is shifting in a similar direction. The political center continues to shrink dramatically. Merkel’s Christian Democratic Union and Horst Seehofer’s Christian Social Union (the latter runs only in Bavaria and aligns with the CDU) along with the Social Democratic Party hemorrhaged votes in last fall’s election. The Alternative for Germany (AfD), created in 2013 to oppose immigration and the European Union, made its Bundestag debut last fall as the largest opposition party. The historically liberal Free Democrats also campaigned against Merkel’s migration policy and reentered parliament last year. The CSU blames Merkel for its decline. Most of the refugees, 1.6 million since 2015, entered through Bavaria, and the CSU faces a difficult provincial election in October. Seehofer, both CSU leader and interior minister, is desperate to prevent even more losses in Bavaria to the AfD. In March he declared that “Islam does not belong to Germany.” In the midst of the immigration dispute, he skipped a meeting with Merkel to huddle with Austria’s Chancellor Kurz. If the CSU withdrew or was forced from her coalition, Merkel might turn to another party. But the Free Democrats are no less hostile to migration (and to Merkel herself), and including the Greens would trigger a sharp leftward lurch in government. If Merkel’s chancellorship collapsed, those hostile to the three-member ruling party likely would continue to move to more radical parties. To avoid a political apocalypse, Seehofer plans to hold off imposing new border rules until Merkel can try to strike a deal at the EU summit at the end of the month. But agreement will not come easily. Said Bavaria’s CSU Minister-President Martin Soeder Soeder: “Of course it would be good if there were European solutions, but in three years a European solution hasn’t been achieved.” Bilateral pacts would be equally difficult politically. Yet neither Seehofer nor Merkel can afford to retreat. The populist right does not have a common program other than opposing the status quo, yet that’s proving to be enough. Italy’s coalition, made up of Salvini’s right-leaning League and the leftish Five Stars movement, and headed by Luigi Di Maio who serves as labor and industry minister, is badly divided. However, the two parties dislike immigration, like Russia, and have accepted each other’s most expansive fiscal demands. Italy has a largely stagnant economy, a huge debt of nearly $2.7 trillion (132 percent of GDP), and expansive social benefits and rigid economic controls. The populist government in place now will exacerbate all these problems. The coalition’s official promises, a moderate version of the two parties’ electoral programs, could cost as much as $146 billion annually, or 6 percent of GDP. Rome is almost certain to fall out of compliance with EU fiscal rules. Economists Olivier Blanchard, Silvia Merler, and Jeromin Zettelmeyer call the government’s agenda “a recipe for a debt crisis.” Coalition members talk hopefully but futilely about changing EU rules and getting money from Europe. With the Eurozone’s third largest economy, Italy is too big to fail or bail out, which could make leaving the Euro an economic necessity. However, criticism does not scare the coalition. When Italy’s establishment president sought to block the new government, Salvini said the resulting election “will be a referendum between Italy and those on the outside who want us to be a servile, enslaved nation on our knees.” Many Italians believe that in 2011 the French and German governments conspired to trigger a financial crisis in order to oust Prime Minister Silvio Berlusconi. Said Five Stars Minister of Infrastructure and Transports Danilo Toninelli: a “government that wants an ethical state, an ethical economy, and equality between citizens is obviously frightening.” Notable are the parties’ slogans: “Thieving Rome” for the League and “F*ck Off!” for Five Stars. Like Italy’s coalition, most of the populist governments are big spenders and comfortable intervening in the economy. Some are fans of authoritarian democracy; several want better relations with Russia. Most are comfortable with EU membership but not with further transfers of authority to Brussels; several are critical of the Euro. They unite more in what they are against than what they are for. There are three major areas of agreement between them. The first is hostility to the political elites who have long dominated governments across the continent. This has resulted in the mass slaughter of traditional center-right and center-left ruling parties. Voters are punishing politicians who fail to represent their concerns and finding other candidates who at least claim to do so. Second, the so-called European Project is kaput. Eurocrats, well-represented by the indefatigable Macron, continue to campaign for a centralized continental super-state. However, there never was much grassroots support for handing more control over people’s lives to a supranational organization noted for its “democratic deficit.” This idea is even less popular now even among once-pliable member governments. Finally, public opposition to mass immigration is overwhelming. The concern isn’t new, but the 2015 human tsunami that hit Europe convinced many voters that their governments could not be trusted. Populists have taken the lead in demanding that borders be shut, with even the governments of Denmark and the Netherlands trending against accepting foreign migrants. Proposals for the free movement of people, however attractive in theory, are dead in Europe. Creation of a more cooperative and united Europe over the last six decades was an exceptional good, helping to repair a devastated continent, generating widespread prosperity, and making another continental war unthinkable. But the campaign for a United States of Europe without borders ignored not just history, culture, and tradition, but human nature. Macron overstates the threat when he worries about a “civil war” within the EU, but political hubris across the continent has generated a brutal populist response, which only continues to grow. That wave now threatens even the most redoubtable of European leaders: Germany’s Angela Merkel. Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is author of Foreign Follies: America’s New Global Empire.
  • Angry Mexico    (Juan Carlos Hidalgo, Ian Vásquez, 2018-06-21)
    Juan Carlos Hidalgo and Ian Vásquez “Screw everybody.” That sentiment is propelling Andrés Manuel López Obrador (known as AMLO) to the top of the polls by a wide margin in Mexico’s July 1st presidential election. Mexicans are fed up with the grotesque corruption of the governing Institutional Revolutionary Party (PRI), the nightmarish levels of violence related to organized crime, and a mediocre growth rate that is among the lowest in Latin America. But instead of voting for a candidate with concrete policy proposals to improve things, many Mexican voters seem to ready to throw caution to the wind and say, “screw the system—and everything else along with it.” Mexico is not doing well, but it could end up much worse with AMLO. Mexico is not doing well, but it could end up much worse with Andrés Manuel López Obrador. How much damage an AMLO presidency could bring is anybody’s guess. Nobody knows exactly what to expect from an AMLO administration. His proposals are a collection of notions with few details and plenty of contradictions. Among them is the goal of reaching national self-sufficiency in the energy sector. This would imply a reversal of the reform that recently opened the oil and gas industry to foreign investment, as well as expanding the failed state-owned oil company in a country that imports 70% of the gasoline it consumes. He also promises to pursue agricultural self-sufficiency, without explaining how to achieve such a goal without increasing the cost of living for Mexicans or conflicting with Mexico’s trade agreements. As for the epidemic of drug violence, he plans to invite Pope Francis to chair a committee to look for solutions. Although AMLO’s platform is nebulous, his personality is well known: he is nationalist, revanchist, and messianic. There are reasons to fear that an AMLO administration would be authoritarian in nature. “I think López Obrador doesn’t value liberty,” states historian Enrique Krauze. He observes how AMLO “mocks, insults, offends, and discredits the members of the media, the journalists, or the intellectuals who criticize him.” To paraphrase the celebrated Mexican writer, Octavio Paz, Mexico under AMLO would be ruled “according to the prince’s mood and the whims of the hour;” one day he behaves like Brazil’s moderate former president Lula da Silva, and the next he acts like Venezuela’s radical socialist leader Hugo Chávez. AMLO insists he is a moderate, but he has also made it clear that he wants to transform his country, not just keep the presidential seat warm. President Donald Trump’s anti-Mexican rhetoric has only exacerbated AMLO’s nationalist agenda. The worldview of this “tropical Messiah”—to use Krauze’s term—is quite simple. All of Mexico’s problems are the result of corruption, which is represented by the “power mafia” and “the influence peddlers.” Anyone who criticizes him almost certainly fits into either one of these categories. Only he can liberate Mexico from this scourge. Once he is in power, his virtue and honesty will permeate the entire political system, and all the problems facing the country—the economy, national security, infrastructure, the fight against poverty—will be fixed. When asked how he would finance his expensive campaign promises, AMLO pointed to a study by the World Bank that found that corruption costs Mexico “more than one billion pesos annually”—equivalent to 9% of the country’s GDP. Since he would eradicate corruption completely, he would therefore fund his social programs with the ensuing public savings. It was later revealed that such a study doesn’t even exist. Mexico’s precious macroeconomic stability would be at risk with AMLO’s budget-busting agenda. The country doesn’t suffer from large fiscal deficits; the independence of the Central Bank has guaranteed a single-digit inflation rate for nearly 20 years; and the country has not suffered an economic crisis since 1995. While not enough to spur high economic growth, responsible monetary policy and openness to trade and foreign investment have helped turn Mexico into a middle-class country. Those gains could easily be reversed if AMLO’s populism brings about big fiscal deficits, high inflation, financial instability and capital flight. The frustration of Mexican voters is understandable. After six years of the PRI’s widespread corruption and impunity, as well as twelve years of a war on drugs that has now cost more than 120,000 lives, no-one can blame Mexicans for being under the impression that they have little to lose by voting for a firebrand populist. But this is a miscalculation that we have seen in other Latin American nations, and one that has terrible long-term consequences. If the most recent polls are any guide, Mexican voters are set to learn this lesson by themselves. Juan Carlos Hidalgo is policy analyst on Latin America and Ian Vásquez is director at the Cato Institute’s Center for Global Liberty and Prosperity.
  • Trump Wants to Merge the Education and Labor Departments -- It's a Small Start    (Neal McCluskey, 2018-06-21)
    Neal McCluskey So the Trump administration wants to merge the Education and Labor Departments, which would, at least officially, end the U.S. Department of Education. Should we be celebrating and preparing for an all-out blitz to get this done? After all, isn’t it what Constitution- and local-control-loving Americans have been calling for since the Education Department was created to appease the National Education Association back in 1979? The public must come to understand that all that money-spending, service-providing, and rule-making that sounds so good is actually either ineffective, or often straight-up damaging. Sort of. The good news, were a merger to occur, would be that education would become just a part of a bigger Cabinet-level agency, lowering its profile in the federal bureaucracy. In that regard, it would return to something of the pre-department days when it was a chunk of the U.S. Department of Health, Education, and Welfare, diluting its presence on the national stage and in the White House. A standalone cabinet-level agency was the sort of presence that the National Education Association (both in its union and non-union manifestations) wanted — more influence can be pedaled from your own agency than one you’ve got to share with other interests. So, merging the Education Department with the Labor Department would be a good thing, but hardly transformative. Unless a whole lot of programs are eliminated — inflation and waste-fueling college student aid programs, micromanagement-driving federal funding for K-12 education— most of the unconstitutional, expensive problems will continue. And the administration’s plan says it “would merge all of the existing DOL and ED programs into a single department.” So bad programs may not grow quite as quickly with education-interest influence slightly reduced, and they might be a bit easier to trim, but most of the damage will still be inflicted. If we want powerful change to happen, we cannot be satisfied with some reshufflings, on the off-chance that it even gets done (there’s no sign that Congress wants to take on reorganizations that will launch blistering bureaucratic turf wars). No, the public must come to understand that all that money-spending, service-providing, and rule-making that sounds so good — who could be against “investing” and “doing” more for children and education? — is actually either ineffective, or often straight-up damaging. And that means continuing to do the hard, persistent work of letting the public know that all this great-sounding stuff isn’t so great after all. Indeed, it’s often pretty bad and needs to be completely eliminated. Neal McCluskey is a contributor to the Washington Examiner’s Beltway Confidential blog. He is the director of the Cato Institute’s Center for Educational Freedom and maintains Cato’s Public Schooling Battle Map.
  • Here's a Plan to Fight High Drug Prices That Could Unite Libertarians and Socialists    (Charles Silver, David A. Hyman, 2018-06-21)
    Charles Silver and David A. Hyman President Donald Trump and Secretary of Health and Human Services Alex Azar recently introduced American Patients First, a complicated plan intended to make prescription drugs more affordable. It includes many ideas and suggestions, such as requiring drug makers to put the list prices of their products in their advertisements and “working across the administration to assess the problem of foreign free-riding.” A few commentators think the plan will materially reduce prices, but we are skeptical. The plan is a response to bipartisan outrage over drug prices, which have risen dramatically in recent years. The stories about Daraprim, the drug that made Martin Shkreli infamous when he jacked its per-pill price from $13.50 to $750, and the EpiPen, which put Mylan Pharmaceutical in the spotlight when it raised the price of a two-pack from $100 to $600, are probably the best known. But prices have increased for hundreds or thousands of drugs at rates far exceeding the pace of inflation. Consider Xyrem, a drug for narcolepsy made by Jazz Pharmaceuticals, whose price rose 841 percent over seven years. The price for a twin-pack of Evzio, the naloxone injectors made by Kaleo Pharmaceuticals that are used to treat opioid overdoses, went from $690 to $4,500 in a year. Price hikes for insulin have caused a nationwide panic among diabetics. The list of examples is seemingly endless. Rising prices mean, of course, that we’re spending more on drugs. Americans handed over $457 billion for prescription drugs in 2015 and are on pace to increase that amount by 6.7 percent every year through 2025 — far, far faster than salaries will rise. Is it any wonder the pharma sector regularly outperforms the broader stock market? First, attack monopolies. Second, replace patents with prizes. Some conservatives defend this system on free-market grounds, arguing that any measure that reduces drug company profits will necessarily reduce innovation. But we are firm believers in the free market, and we think the system is a mess. It is deformed by monopolies and by misguided incentives tied to the payment system. Because it is such an obviously ungainly monster, the goal of reforming this system has the potential to break down some political walls: Although we are affiliated with the libertarian Cato Institute, we find ourselves agreeing with Sen. Bernie Sanders, for instance, that the government should experiment with a prize system instead of awarding patents to drug companies. Monopolies are at the heart of the problem Why do drug prices keep going up? For branded drugs, the short answer is that patents give drug companies monopolies, which they exploit to the fullest. An added factor is that our payment system often allows manufacturers to charge whatever they want. Let’s start with monopolies. Give a business, any business, a monopoly and it will extract wealth from consumers by charging monopoly prices. And that is precisely what patents for drugs do: They give drug companies monopolies on the sales of new medications. Even when the original patents have long-since expired, drug companies use various contrivances to keep prices high. The most common tactic is to obtain extensions on marketing exclusivity by means of secondary patents on superficial characteristics, such as pills’ coatings or formulas for timed-release. Consider Lipitor, a cholesterol-fighting statin. An extension of its patent term and a second extension for pediatric testing gave Pfizer, Lipitor’s manufacturer, an additional 1,393 days of marketing exclusivity, during which it took in $24 billion more than if the drug had entered the generic category when originally scheduled. Lockstep pricing — made possible because only a small number of manufacturers compete in many drug categories — is a problem too. Companies don’t compete for customers by undercutting other makers’ prices; rather, when one raises its prices, the others follow suit. Economic theory suggests we shouldn’t see this kind of behavior, but we do. What can we do about these problems? Let’s start with generic drugs, because the problem in that category is the most straightforward. Many of the pricing problems in the generic drug market are directly attributable to insufficient competition. Substantial price hikes occur and stick because only one company makes a drug, or because manufacturers raise prices in lockstep. Illegal, anti-competitive conduct may underlie some of these problems, in which case aggressive antitrust enforcement is the answer. But the US Food and Drug Administration also bears part of the blame. There is a backlog of pending applications from generic drug manufacturers that want to enter the market. Congress should give the FDA the resources it needs to process these applications more quickly. But until that happens, the FDA should give priority to applications for generics that have experienced price hikes. Currently, the FDA follows a first-in, first-out approach to applications. A more consumer-friendly arrangement would move applications for drugs that have experienced significant price spikes to the head of the line. A bonus: Once incumbents realize that price hikes will result in fresh competition, they may be deterred from jacking up prices to begin with. More broadly, policymakers should liberalize access to the US generic drug market by relaxing the FDA’s grip on entry. Currently, the FDA requires that it, and it alone, approve the safety of generic drugs. But why not let a company that qualifies to sell a generic drug in Canada, England, France, Israel, or other developed country sell the same drug in the United States — at least so long as a generic equivalent has already been approved by the FDA, and the 180 days of marketing exclusivity provided to that generic by the Hatch-Waxman Act has expired. These countries have the expertise needed to protect their citizens from excessive risks and the desire to do so. Sen. Bill Cassidy (R-LA) recently came out in support of a similar idea. If such a policy had been in effect, Martin Shkreli wouldn’t have been able to price-gouge anyone. For branded drugs, financial prizes for discoveries might be the answer — as Bernie Sanders has proposed What about branded drugs? Here, monopoly is also a problem. Fixing it will be a particular challenge because it requires Congress to undertake patent reform — and the pharma sector is adept at blocking any legislation that would take money out of its pockets. Consider the fate met by Sen. Sanders’s proposals to use prizes instead of patents to encourage pharmaceutical innovation. In 2005, Sanders filed the Medical Innovation Prize Act, which went nowhere, as did the similar bills that he introduced every two years thereafter. But Sanders is onto something. A well-designed prize regime would lower drug prices by eliminating drug monopolies, yet it would also create the necessary incentives for innovation, including incentives to develop so-called “orphan” drugs (for diseases that afflict relatively few people). The prize system could also be tailored to encourage drug companies to test the efficacy of old drugs for new uses. Finally, a prize regime would place the costs of drug innovation on-budget, where they would be borne by all taxpayers rather than just by consumers who happen to need drugs (and their insurers). A prize system might take many forms. One model that we like would link the size of the prize to actual, documented R&D costs — including clinical trials. Companies hoping to obtain FDA approval for new drugs would submit confidential periodic filings outlining all of the drugs they are studying and the associated R&D outlays. After the FDA approval for a particular drug was granted, a company would apply for a prize and submit an accompanying final statement of its research costs. The company would then receive a check from the US government, the size of which would be a predetermined multiple of the approved research costs, with a larger multiplier in areas where new drugs are especially needed. This proposal has several important strengths, including transparency. Final cost statements for approved drugs will be audited and available for public inspection. Everyone would know why the government cut the check that it did. The prize regime would also create clear and focused incentives. Once the multipliers were fixed, innovators would know what they stood to gain before investing in R&D. Incentives could also be periodically retuned. If experience showed that certain types of drugs were needed but not being pursued, multipliers in that space could be increased. Conservatives may object that regulators are unlikely to size prizes correctly. We agree. A reward system based on prizes will not work perfectly. Nothing does. A prize system just has to work better than the existing system of patent monopolies, and there are good reasons to think that it would. For starters, it would keep manufacturers from taking advantage of the inability of the current insurance system to impose meaningful limits on the amounts manufacturers can charge. Second, it would ensure that drug companies are compensated only for the R&D costs and risks they actually bear. Of course, a prize system will cost taxpayers money; the dollars needed to fund the prizes would come from them. But in light of the many problems existing arrangements generate, it seems better to use the tax system to fund prizes than to use the patent system to impose costs. Today, those costs (and drug-related tax preferences) fall on consumers, insured populations, and taxpayers. Taxing people to fund prizes is simpler, more straightforward, and fair. Most importantly, a prize system ensures that prices for new drugs are set competitively. Once the FDA approved a new drug or a new use for an old drug, all companies would be free to make it. Competition will force prices down to manufacturers’ production costs, which is the efficient, pro-consumer price that emerges naturally when markets are competitive. That will make drugs more affordable for the people that need them. The fundamental economic problem in the pharma sector is that it costs an enormous amount to create a safe, effective new drug but only pennies to manufacture the actual pills. Pharmaceuticals are not unique in this regard; computer software and blockbuster movies share these characteristics. If drug companies sold pills at their marginal cost, they’d never recoup the billions they spend on R&D. Our current patent-based regime allows inventors to capture profit by using the power of the government to prevent competitors from duplicating their creations and undercutting their prices. It’s a coercive and messy process. It spawns litigation over the validity of patents and their scope. It ties drug companies’ returns to their sales, not to the risks and costs they incur. By comparison, even a flawed prize-based system starts to look pretty good. To create good incentives, we should treat drug companies like trial lawyers who work on contingency. When they produce winners, they should be rewarded lavishly. When they don’t, they should get nothing. There are many other problems with our prescription-drug system — notably insurance systems that insulate people from the cost of the medicines that they purchase. So long as insurance will pay for any medicine, no matter the price, we will not get drug costs under control. But that is a topic for another day. On the supply side, aggressive antitrust enforcement, revisions to the FDA approval process for generics, and prizes instead of patents provide a solid start for a reform agenda. As a bonus, it may be one that conservatives and liberals alike can rally behind. Charles Silver s an adjunct scholar at the Cato Institute and a law professor at the University of Texas at Austin. David A. Hyman is an adjunct scholar at Cato and a professor at the Georgetown University Law Center.
  • Why the Left Overlooks the Trump-Kim Summit Positives    (Ted Galen Carpenter, 2018-06-21)
    Ted Galen Carpenter There should be a pervasive sense of relief that tensions on the Korean Peninsula have eased dramatically, culminating in the surprisingly cordial atmosphere of the Singapore summit between Donald Trump and North Korean leader Kim Jong-un. Instead, much of the reaction among Trump’s liberal critics has consisted of sneering and sniping at the results of that meeting. It is another unfortunate manifestation of America’s increasingly dysfunctional political culture. Worse, such a knee-jerk, ideological response can undermine prospects for a lasting, beneficial change in the acrimonious relationship between the United States and North Korea that has plagued the international community for decades. Critics level various dubious objections regarding the summit. One is that Kim emerged as the clear winner from the talks. Some of the same people who denounced Trump just a few months ago as an unhinged warmonger who would plunge the Korean Peninsula into unimaginable bloodshed now depict him as an ill-prepared amateur that the wily North Korean easily conned. The United States afforded Kim a huge boost in prestige, the argument goes, by affording him a face-to-face meeting with the president and treating him as an equal. “In his haste to reach an agreement, President Trump elevated North Korea to the level of the United States while preserving the regime’s status quo,” intoned House minority leader Nancy Pelosi. Other congressional Democrats were equally caustic. “What the United States has gained is vague and unverifiable at best,” Senate Minority Leader Chuck Schumer groused. What North Korea has gained “is tangible and lasting.” Such a knee-jerk, ideological response can undermine prospects for a lasting, beneficial change in the acrimonious relationship between the United States and North Korea that has plagued the international community for decades.[/pullquote Progressives seemed at least as upset as conservative hawks that Trump promised to suspend the annual joint U.S.-South Korean military exercises—a major objective of Pyongyang for decades—and indicated that Washington hoped to withdraw its forces someday. Regarding the war games, MSNBC’s Rachel Maddow typified the left-of-center press reaction, accusing the president of a “ giveaway to North Korea.” Washington supposedly received nothing of substance for such appeasement. North Korea made no concessions on its nuclear and missile programs or much of anything else, critics allege. Trump, they contend, should have insisted on meaningful policy changes from Pyongyang even before agreeing to the meeting, or at the very least, as provisions in the joint statement that emerged from the summit. Such objections are wrong on two counts. First, Pyongyang did make some significant concessions. Not only did Kim explicitly reiterate that the ultimate result of negotiations would be the complete denuclearization of the Korean Peninsula, but North Korea offered specific gestures of good faith in response to the improved bilateral relationship. Once the United States dialed back the threatening rhetoric in the lead-up to the summit, Pyongyang suspended its nuclear and ballistic missile tests. The North Korean regime also released three American detainees and agreed to return the remains of U.S. soldiers killed in the Korean War. Second, the summit was designed to be merely the opening phase of a long diplomatic process to address the nuclear issue and other areas of disagreement. It accomplished that purpose, altering the atmospherics of the bilateral relationship in a positive way. For the first time, U.S. and North Korean leaders engaged in a cordial dialogue. Regardless of the substantive results of the talks, that was a welcome, long-overdue change. The notion that the many entrenched quarrels between Washington and Pyongyang could be resolved at one summit meeting is inherently unrealistic. Likewise, expecting North Korea preemptively to capitulate regarding its nuclear program is naive. Perhaps the most unfair objection, though, is that Trump did not press the issue of Pyongyang’s dreadful human-rights record. That criticism fails to appreciate the difference between desirable aspirations and attainable objectives. Demanding that Kim negotiate regarding that issue would have torpedoed the summit at the outset. Quixotic goals have no place in meaningful diplomatic negotiations. When Nixon held his summit meeting with Mao Zedong in 1972, he did not demand that the Chinese strongman end the Cultural Revolution or free the PRC’s political prisoners. He refrained from doing so for a very good reason. Insisting on such reforms would have strangled the U.S.-China rapprochement in its cradle. Likewise, Washington signed important, but limited, agreements with the totalitarian Soviet Union without demanding that Moscow abolish its gulags. Such achievements included the Partial Nuclear Test Ban Treaty, barring atmospheric nuclear tests, the Strategic Arms Reduction Treaty (START), and the Intermediate-Range Nuclear Forces Treaty. U.S. negotiators wisely did not let the perfect become the enemy of the good. Trump’s critics apparently have forgotten that lesson. Indeed, there is a striking contrast between the reaction of leading liberals to Nixon’s opening to China (including the signing of Shanghai Communique) and the reaction of today’s prominent liberals to Trump’s rapprochement with North Korea. The New York Times correctly predicted that Nixon would receive strong bipartisan support in Congress for his diplomatic breakthrough. Leading congressional Democrats, including Ted Kennedy and Mike Mansfield, praised the president for easing tensions with China. Liberal columnist James Reston stated that it was Nixon’s finest hour. There was very little comparable praise for Trump’s dialogue with Kim from the left side of the political aisle. A few progressives, such as the Atlantic’s Peter Beinart, spoke favorably of the effort, but they constituted a distinct minority. The negative liberal reaction to Trump’s initiative is most unfortunate, and it is a measure of the corrosive impact of ultra-partisanship on U.S. foreign policy. Donald Trump may deserve criticism for many of his foreign-policy actions, including insulting allies such as Canada’s Justin Trudeau, conveying inconsistent messages on crucial issues, and sabotaging the nuclear agreement with Iran. But taking steps to ease dangerous tensions on the Korean Peninsula is a good development, no matter who is the architect of that badly needed policy change. Ted Galen Carpenter, a senior fellow in defense and foreign-policy studies at the Cato Institute, is the author of ten books on international affairs, including (with Doug Bandow), The Korean Conundrum: America’s Troubled Relations with North and South Korea (Palgrave Macmillan).
  • Rethinking Standardised Test Scores    (Corey A. DeAngelis, 2018-06-18)
    Corey A. DeAngelis Standardised test scores have long been treated as the end-all-be-all of education. Researchers and the public at large generally use math and reading test scores to gauge education quality across countries, schools, and interventions. But a growing body of empirical evidence suggests that we have probably gotten it all wrong. Here’s why. A study recently released by the American Enterprise Institute found that standardised test scores are weak predictors of long-term success. Specifically, the authors collected 34 studies that evaluated the effects of school choice programs on both test scores and high school graduation. The study found that 61 percent of the effects on math test scores — and 50 percent of the effects on reading test scores — did not successfully predict effects on high school graduation. Similarly large divergences were found between choice programs’ effects on student test scores and their effects on college enrollment. But that’s not all. Standardised test scores do not appear to be strong predictors of other long-term outcomes either. I have compiled more evidence of these divergences that exist in the most-rigorous private school choice literature. My search revealed 11 disconnects between private schools’ effects on test scores and their effects on other arguably more important educational outcomes. Focusing too much on test scores could compromise the character development necessary for true lifelong success. For example, an experimental evaluation of a private school voucher program in Washington, D.C. found that winning the lottery to attend a private school had mixed effects on test scores, but over a 50 percent increase on students’ tolerance of others. Another rigorous evaluation of a voucher program in Milwaukee found no effects on reading test scores after four years. On the other side of the equation, my coauthor and I followed the same sample of students until they were around 22 to 25 years old and found that the Milwaukee program reduced the likelihood that they committed crimes as adults by over 50 percent. Other studies found significant divergences between test scores and outcomes such as charitable giving, political participation, effort, and happiness in school. And divergences exist outside of the school choice literature as well. At least five studies that I know of using rigorous value-added methodology find disconnects between teachers’ effects on student test scores and their effects on student character skills such as behavior and effort. For example, Northwestern University professor Kirabo Jackson finds that teachers’ effects on student behavior are much stronger predictors of high school graduation than their effects on student test scores. Indeed, Jackson finds that teachers’ effects on student behavior are over 8 times as influential for high school graduation as effects on student test scores. Of course, we cannot ignore the fact that some studies do find a link between test scores and long-term outcomes. For instance, prominent education scholars - Chetty, Friedman, and Rockoff — found that teachers that improve student test scores also tend to have positive effects on earnings later on in life. But that does not at all mean that their effects on test scores caused the effects on earnings. It is more likely that — in their sample — teachers that were good at shaping test scores were also good at shaping the non-cognitive skills necessary for success in the long-run, on average. In other words, teachers that are good at improving standardised test scores can also be good at motivating students to work hard and to treat others with respect. Hard work and respect may be the skills that influence long-run outcomes such as earnings. But it is nearly impossible to accurately measure soft skills, which could be why we have found so many divergences in the literature. Either way, what appears clear is that focusing too much on test scores could compromise the character development necessary for true lifelong success. Corey DeAngelis is an education policy analyst at the Cato Institute’s Center for Educational Freedom, Washington DC.
  • How Trump Can End the Family-Separation Mess and Still Win    (Alex Nowrasteh, 2018-06-18)
    Alex Nowrasteh The separation of families on the border is a punishment grossly disproportionate to the offense. The Border Patrol keeps children in cages while their parents, charged with immigration offenses, are held elsewhere. The pictures have drawn outrage, and appropriately so. The good news is, the Trump administration can stop separating the families of asylum seekers today without backpedaling on its commitment to border security. Two recent Trump administration priorities prompted this crisis. The first comes from Border Patrol agents either rejecting asylum claims outright or telling many would-be asylum-seekers to wait for weeks in Mexico before being allowed to apply. In the meantime, Attorney General Jeff Sessions ruled that immigration judges should not consider gang violence or domestic abuse in asylum claims - undercutting many of their cases. Asylum seekers and those waiting in Mexico understandably believe they have to enter the United States now before Sessions removes any other grounds for claiming asylum. The Trump administration can stop separating the families of asylum seekers today without backpedaling on its commitment to border security. The second was ending the policy of catch-and-release, whereby asylum seekers are released with court dates but some fail to show up. The Departments of Justice and Homeland Security recently ordered zero-tolerance prosecution of all illegal border crossers, which guarantees that they’ll be detained, and to start separating families if they entered illegally. Separating families is a choice; it is not required by law. Turning asylum seekers back at the border and limiting their application options has incentivized some of them to cross into the United States unlawfully to ask for asylum. The government’s response is to prosecute asylum seekers who entered unlawfully for violating immigration law and, in many cases, ignoring their asylum claims. No previous administration has prioritized criminal immigration prosecutions over asylum claims. These actions are supposed to deter illegal entry, but — while it’s admittedly early — haven’t. According to Border Patrol, border crossings have jumped 5 percent since the policy was put into effect in April. CNN reports that, according to internal Homeland Security documents, officials expected the deterrence to work: “The full impact of policy initiatives are not fully realized for 2-3 weeks following public messaging — however, some migrants already underway may temporarily halt to determine the effects of the new policy,” one document reads. But deterrence can only work if the cost imposed on asylum seekers is great enough to make them stay in their home countries or settle in another one. Economist Michael Clemens found that the high murder rate and gang violence in Central America is driving the exodus. No matter how painful family separation is, the violence many of these migrants are escaping from their home countries makes it worth the risk of separation. Yet officials should’ve known this wouldn’t deter migrants. Last year, the administration experimented with mandatory prosecution and family separation in the El Paso border sector but it didn’t deter families from entering. As noted by Dara Lind at Vox, the number of families apprehended actually increased by 64 percent over the course of the experiment. Three other border sectors — which didn’t take the zero-tolerance approach — had a lower rate of increase during that time than El Paso did. But even if President Trump doesn’t want to go back to catch-and-release, there are three things that can be done to end family separations for asylum seekers. The first is to allow Central American asylum seekers to make their claims at a port of entry on the Southwest border, instead of telling many of them to postpone their asylum applications, as is the current Border Patrol practice. This will keep families together and incentivize them to enter legally rather than illegally. The second is to extend the Family Case Management Program to all asylum seekers. This program, which the government recently closed, kept families together in shelters, not separated in cages, while they awaited their asylum hearings. Furthermore, 100 percent of the people in that program attended their court appearances, and only 2 percent disappeared into the US after their hearing — addressing Sessions’ concern of skipping hearings. The third option is to allow those fleeing gang violence to apply for asylum. This will take some of the pressure off the border by removing the fear that the government could shut down the entire asylum system in the near future. These three policies aren’t a panacea, but they end catch-and-release while preserving the asylum system and curtailing child separation. Violations of immigration law by themselves are not a good enough reason to separate families, but these three policy changes are preferable to the current administration-made border tragedy. Alex Nowrasteh is the senior immigration policy analyst at the Cato Institute.
  • Is Romney a Free Trader? or Trump’s Rubber Stamp?    (Colin Grabow, 2018-06-18)
    Colin Grabow In recent weeks President Trump has invoked his power to impose tariffs on national security grounds to launch a trade war with several U.S. allies. In response to the reckless abuse of this authority, a number of senators are attempting to apply a much-needed course correction by demanding that such tariffs be subject to congressional authority. The effort to pass such a bill, however, appears to face an uphill climb, underscoring the need for senators who grasp the importance of free trade. While Mitt Romney has not weighed in on this dispute between Congress and the executive branch, previous rhetoric from the candidate suggests an unsettling alignment with the White House’s overall trade stance. During the launch of his campaign Romney stated that Utah had a lot to teach the politicians in Washington, with the former Massachusetts governor and 2012 Republican presidential nominee crowing that the Beehive State “exports more abroad than it imports” — something he said that those in the nation’s capital had “backwards.” The last thing Washington needs is another politician who subscribes to discredited theories about trade. This message is mistaken in several respects, not least of which is the implication that his mercantilist views constitute a fresh approach in Washington. Such thinking certainly mirrors that of Trump, who regularly blasts bilateral U.S. trade deficits with various countries and claims that the overall trade imbalance “hurt[s] the economy very badly.” Regrettably, too many U.S. political leaders misinterpret the trade account as an income statement, mistaking exports for earnings and imports for spending. The story of international trade, however, is much more complex. Rather than driving Americans into debt, dollars sent abroad to purchase imports and foreign assets return to the United States as purchases of U.S. goods, services, and assets. China, blasted by Romney during the 2012 presidential campaign as a trade bogeyman, serves as a useful example. The third-largest market for U.S. exports, China uses the dollars received from American imports to purchase vast amounts of goods, from Boeing airplanes to soybeans to over $54 billion worth of services in 2016 alone. Dollars also find their way back from China through a variety of other means including foreign direct investment . This dynamic is repeated across the range of U.S. trading partners, with foreigners consuming over $2.2 trillion of U.S. goods and services and injecting over $373 billion worth of FDI into the United States in 2016 alone. Beyond the jobs provided by exports, such investment is estimated to provide employment for 6.8 million U.S. workers including over 42,000 Utahns. That trade deficits and imports do not detract from the economy is also evidenced by the lack of a correlation between the trade balance and economic performance. The current economic expansion, for example, has correlated with an expanding trade deficit. In contrast, the trade gap dramatically tightened during the country’s last recession as the sputtering economy led to a severe drop in U.S. demand for imports. While on the campaign trail, Romney should consider visiting auto parts manufacturer Autoliv. Employing over four thousand Utahns, the Sweden-headquartered company’s ability to invest millions in Utah is in large part made possible by the dollars it has obtained through Americans’ purchase of its products. The company’s ability to stay competitive, meanwhile, is no doubt bolstered by the approximately $600 million worth of intermediate goods it imports produce its finished products. If Romney truly wishes to distinguish himself from the rest of the political pack he should start by discarding his misguided rhetoric and touting the virtues of international trade in all its dimensions — imports as well as exports. The last thing Washington needs is another politician who subscribes to discredited theories about trade and sees salvation in the imposition of new tariffs. Of such legislators the nation’s capital is already running a large surplus. Colin Grabow s an analyst at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.
  • Contra University of California, Higher Ed Needs Less Federal Money    (Neal McCluskey, 2018-06-18)
    Neal McCluskey “Millions of American college students will walk across the graduation stage this spring cheered on by family and friends,” wrote University of California President Janet Napolitano in an op-ed yesterday. “But seemingly oblivious to the joy and promise of graduation season, members of Congress are pushing a bill that would undermine college access and affordability and increase college costs for students and their families.” Napolitano was referring to the PROSPER Act, currently sitting in the U.S. House of Representatives, which she fears would cut federal student aid such as Pell Grants and student loans, rendering college less affordable. Setting aside disagreement about what PROSPER would actually do, it was a pretty rich statement, because the University of California has been a bit of a poster child for questionable financial management. It was little more than a year ago that the state’s auditor released a report cataloguing significant, dubious financial practices by the university president’s office, including: Failing to disclose more than $175 million in discretionary and restricted reserves Getting $32 million of that reserve from campus allocations that could have been used for student services Not disclosing plans to spend some of those funds ranging from $77 million to $114 million Compensating employees with “generous salaries and atypical benefits” Poor tracking of university administrative expenses To top it off, State Auditor Elaine Howle reported that the Office of the President “intentionally interfered” with her office’s “efforts to assess the types and quality of services [the office of the president] provides to campuses.” And this is not the first financial black eye for the system. The flagship Berkeley campus has run massive athletics debts for years, and paid for them with tens-of-millions of dollars in campus subsidies and debt forgiveness. In light of this, it seems a bit brash to decry the potential curbing of subsidies that are forced from federal taxpayers, which tallied almost $154 billion in the 2016-17 academic year. Why should people from, say, New York or Nevada be forced to help make up for poor financial practices and decisions in another state? Do you want states—not to mention students and schools—to think hard and be efficient about higher education spending? Stop looking to Washington to provide so much of the money. Of course, this is likely not a problem restricted to the Golden State. Whenever involuntary third-parties—people required to provide money who are neither the consumers nor providers of the good or service—are involved in a transaction, the incentive is to waste. Consumers will tend to think less intensely about prices and what they get for them, and providers will have less incentive to function efficiently, because major funders have to pony up cash no matter what. We see the tip of this iceberg all around. It is also likely that the presence of federal aid encourages states to spend less of their own money on higher ed. If state policymakers know that federal taxpayer dollars will make sure college stays affordable, they have strong incentives to put state dollars elsewhere and let college prices—which aid can cover—increase to compensate. The ability to do this is why college, in the words of the State Higher Education Executive Officers, is often the state budget “balance wheel.” Do you want states—not to mention students and schools—to think hard and be efficient about higher education spending? Stop looking to Washington to provide so much of the money. Neal McCluskey is a contributor to the Washington Examiner’s Beltway Confidential blog. He is the director of the Cato Institute’s Center for Educational Freedom and maintains Cato’s Public Schooling Battle Map.
  • Singapore, Inc. -- Entrepreneurial, Not Parasitical    (Steve H. Hanke, 2018-06-15)
    Steve H. Hanke Singapore pulled off a brilliant Trump-Kim summit in all respects, including the bottom line. Indeed, the government of Singapore spent $15 (USD) million, and according to estimates by Meltwater, that expenditure generated $568 (USD) million for the city-state. Not a bad return for a few days’ work. But, it’s not surprising. Singapore is run like a business. Singapore, Inc. is entrepreneurial, not parasitical. Singapore validates Adam Smith’s counsel on economic development: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice.” To understand the Singapore Strategy (read: Singapore, Inc.), we must examine two systems of public finance: entrepreneurial and parasitical. The parasitical system is the familiar system whereby political entities derive revenues by attaching legally enforceable tax claims to the private economic activities of market-based entities. In contrast, under the entrepreneurial system of public finance, political entities derive revenues directly from the provision of services. To trace the development of the entrepreneurial and parasitical public finance systems from economic theory to institutional arrangements, it is necessary to sketch the historical development of public finance. The origins of public finance, as a field of scholarly inquiry, can be traced to the cameralists who arose in the German speaking lands in the 16th century. The cameralists’ proto-entrepreneurial conception of the state and public finance viewed the prince as a business person. As a business person, the prince managed his various lands and estates to generate the revenues required to finance the provision of public services. In cameralist thought, the main instruments of public finance were fees and charges, not taxes. With respect to leagues of city-states and city-states specifically, the Hanseatic League and the Italian city-states provide historical illustrations of the entrepreneurial, commerce-centered character of those regimes. These cooperative, multi-state systems arose largely out of a desire to protect and facilitate commerce, and reduce trade frictions. Contemporarily speaking, Singapore, Hong Kong, and even the Cayman Islands exemplify commerce-oriented city-states. How can such a small player, like Singapore, achieve prominence on the world’s stage? Since the projection of military power is not an option, prominence must be secured through commerce. States, like Singapore, face a choice between following the lead of the imperialist powers and embracing parasitical public finance, or acting as a commercial republic and embracing a regime of entrepreneurial public finance. The table below depicts the main differences between these two frameworks of state organization. Two Frameworks of State Organization It is clear that the culture of an entrepreneurial inclined city-state — like Singapore — differs significantly from that of a parasitical state that feeds on tax extractions. No wonder the organization of the Trump-Kim Summit went so smoothly and generated such outsized benefits.
  • Questioning the Case for War    (Christopher A. Preble, 2018-06-15)
    Christopher A. Preble While much of the world is focused on the war avoided (temporarily at least) on the Korean Peninsula, I’ve been thinking about the one in Iraq that we failed to stop fifteen years ago—and the one that some still want to fight in neighboring Iran. The occasion for this reflection is the upcoming release of Rob Reiner’s “Shock and Awe,” a film about Knight Ridder’s Washington Bureau, one of the very few American news organizations that got the Iraq story right. Knight Ridder’s Washington Bureau was one of the very few American news organizations that got the Iraq story right. McClatchy, which acquired Knight Ridder in 2006, hosted an advanced screening this week at the Newseum. A discussion with Reiner and the four real-life characters who are the film’s main characters followed: DC Bureau Chief John Walcott, and reporters Jonathan Landay, Warren Strobel, and Joe Galloway. (McClatchy has compiled several of the stories featured in the film here). I’ll have more to say about the movie closer to its official release (scheduled for July 13; it will be available on DirecTV starting on June 14), but two things from the movie and ensuing discussion particularly resonated with me: one, the deliberate and often deceptive way that hawks divulge information to build the case for war; and, two, the pressure that is exerted upon those willing to question it. One of the touchstones of Knight Ridder’s journalism was the inclination of its reporters to challenge conventional wisdom and to seek out alternative explanations. In the post-screening discussion, Walcott explained that too many reporters rely on the statements of senior government officials, serving more like stenographers than thoughtful individuals attempting to uncover the truth. News organizations tend to assess the quality of information based on the seniority of the persons doling it out. In fact, the inverse may be closer to true: mid-level personnel with comparable access, but who are less invested in a particular course of action, are likely to divulge information that strays from the official narrative. Such skepticism is particularly important in the run-up to war. The typical technique for discrediting the opposition often hinges on the claim that outsiders, lacking access to classified information, don’t have sufficient grounds to question the war advocates’ claims. Instead, we are all expected to defer to the judgement of a select few who purportedly have all the relevant facts. But the hawks often determine what is “relevant.” In his reporting at the time, Landay noted that many within the U.S. intelligence community were highly skeptical of Bush administration officials’ claims. Whereas Secretary of Defense Donald Rumsfeld was dismissing the need for “concrete evidence” of Saddam Hussein’s WMD plans or ties to terrorists, “U.S. intelligence officials,” Landay wrote, “said evidence actually suggested that Saddam had been careful to keep al Qaida at arms’ length to avoid giving Bush an excuse to invade Iraq.” Landay’s story, dated September 12, 2002, countered Bush’s claims of an incipient Iraqi nuclear weapons program in the lead paragraph: President Bush said…that Iraq could make a nuclear bomb within a year after getting enriched uranium or plutonium. But Saddam Hussein has been unable to get that nuclear fuel for more than a decade. Later in the story, Landay observes: In fact, Bush’s charge … that Iraq has attempted to buy high-strength aluminum tubes for enriching uranium indicates that the country has only begun the years of work needed to reach production. The evidence of a concerted campaign by the Bush administration to shape—and indeed, misshape—public attitudes on the nature of the Iraqi threat was equally apparent to Warren Strobel. “The administration squelches dissenting views,” he wrote, and: intelligence analysts are under intense pressure to produce reports supporting the White House’s argument that Saddam poses such an immediate threat to the United States that preemptive military action is necessary. “Analysts at the working level in the intelligence community are feeling very strong pressure from the Pentagon to cook the intelligence books,” said one official, speaking on condition of anonymity. A dozen other officials echoed his views in interviews with Knight Ridder. No one who was interviewed disagreed. Some of the more pernicious attempts to build the case for war with Iraq capitalized on Americans’ understandable post-9/11 anxiety. For example, President Bush said that a senior Al Qaeda leader received medical treatment in Baghdad this year—implying larger cooperation—but he offered no evidence of complicity in any plot between the terrorist and Saddam’s regime. Rumsfeld also suggested that the Iraqi regime has offered safe haven to Osama bin Laden and Taliban leader Mullah Mohammed Omar. Strobel remained unconvinced: While technically true, that too is misleading. Intelligence reports said the Iraqi ambassador to Turkey, a longtime Iraqi intelligence officer, made the offer during a visit to Afghanistan in late 1998. In fact, U.S. officials said, that there is no ironclad evidence that the Iraqi regime and the terrorist network are working together, or that Saddam has ever contemplated giving chemical or biological weapons to Al Qaeda, with whom he has deep ideological differences. Such skepticism is often unwelcome, however. The film portrays instances in which Knight Ridder papers refused to run the Washington bureau’s dissenting stories, opting instead to follow the lead of the New York Times, which mostly repeated the Bush administration’s line. The movie singles out the Philadelphia Inquirer, but Walcott admitted that other papers were equally reluctant to go against the grain. The American people wanted blood after 9/11, and Afghanistan wasn’t sufficient. Someone else had to pay, too. Those who pointed out that Saddam Hussein’s Iraq had nothing to do with 9/11 were, in effect, siding with a brutal dictator who terrorized his own people. In another poignant moment, Strobel (played by James Marsden) is confronted by family members at a weekend cookout. They note that Knight Ridder was practically alone in questioning the Bush administration’s case for war with Iraq, and thinly suggested that he was both unpatriotic and naïve. You were born at the time of the Cuban missile crisis, his father reminds him. Do you want Saddam Hussein to threaten us today, as the Soviet Union threatened us then? Those who tried to stop the United States’ march to war in 2003 can no doubt recall many similar incidents, when friends and spouses doubted our judgement, and even our motives. One would hope—given what we now know about that war and its phony pretexts—that Americans will be more skeptical of those now making the case for “regime change” in Iran. Christopher Preble is vice president for defense and foreign-policy studies at the Cato Institute and the author of The Power Problem: How American Military Dominance Makes Us Less Safe, Less Prosperous, and Less Free.
  • The DACA 'Compromise' Bill Is the Worst Immigration Legislation in a Century    (Alex Nowrasteh, 2018-06-15)
    Alex Nowrasteh Ever since President Trump set in motion the gradual termination of the Deferred Action for Childhood Arrivals program, which gave work permits to young immigrants brought here illegally when they were children, Congress has been stalled on solving the situation of these 700,000 so-called Dreamers. After much Republican intraparty wrangling, Speaker Paul D. Ryan just agreed to bring two bills to the floor of the House of Representatives. He released one of those bills Thursday. The other has been kicking around Washington for a while: the Securing America’s Future Act. The White House supported an earlier version of it, stating that it “would accomplish the President’s core priorities for the American people.” The problem is that even if the SAF Act doesn’t pass, its draconian cuts to immigration will be the Republican starting point for all future negotiations. It’s misleading to even call the SAF Act an immigration bill. As a matter of rhetoric, it an anti-immigration piece of legislation. The primary outrage is this: SAF won’t give Dreamers green cards. Instead it grants renewable residency permits — with no pathway to citizenship — to some DACA recipients. Worse, the restrictions are so onerous that few Dreamers could ever spend a year as a stay-at-home mother, risk starting a small business or even become a priest. That’s because this bill would make it a crime for anyone holding a SAF permit to have an income below 125% of poverty level. The House sponsors of the SAF Act claim it will cut only about a quarter of all green cards, but they are significantly understating its effect. SAF cuts the number of legal immigrants by about 40% initially, and that number could reach 50% over 10 years. It cancels the diversity green card lottery, eliminates all family-sponsored immigration categories except for the most immediate relatives of U.S. citizens, and cuts to the bone the number of asylum seekers who will be admitted. The SAF Act also purports to increase the number of highly skilled immigrants allowed into the U.S., and allocates 55,000 additional green cards toward that. But of adults who immigrated on a family or diversity visa in 2015, 47% had a college degree. The impact of any cuts to those programs will far outweigh the added employment visas. This bill also poses major trouble for the families of legal immigrants. Under SAF, legal immigrants who already have a green card would be mostly unable to bring their foreign-born spouses or children to the U.S. Additionally, immigrants who have waited for decades for a type of green card that would be eliminated by the SAF bill would suddenly have their applications canceled and their fees confiscated. So much for respecting immigrants who played by the rules. Republicans have for years claimed that they oppose only illegal immigration, and President Trump, as a candidate said he wanted immigrants “to come in, but they’ve got to come in like you: legally.” The SAF’s sponsors are clearly not on the same page. It’s misleading to even call the SAF Act an immigration bill. As a matter of rhetoric, it’s an anti-immigration piece of legislation. If a Democratic politician sponsored a bill to cut legal gun ownership by 40%, Republicans would rightly call it an anti-gun bill. The same rules ought to apply here. In addition, even though the number of illegal border crossings is at a 46-year low, the bill would spend about $124 billion over the next five years on border security. That’s about seven times what it cost to fund the Border Patrol for the five years from 2012 to 2017. Congress hasn’t considered an immigration bill this bad since the 1920s, when it passed the Emergency Quota Act in 1921 and the National Origins Act in 1924. Those laws ended most immigration from Europe, slashing it by about 75%. The Great Depression followed soon after, leading to further tightening of immigration laws. Those shameful bills ended the United States’ traditional role as a refuge for the oppressed peoples of the world just as communism, fascism and Nazism began to rise in Europe. And their effect endured. It wasn’t until this century that the number of new green cards issued annually consistently matched the decade before World War I — about 1 million a year. Even if that sorry history doesn’t repeat itself, the SAF Act is still the worst immigration bill introduced in almost a century. Republican hardliners say it’s a compromise — helping out Dreamers in return for more border security. It’s not. It’s a strategy for deporting Dreamers over a longer period of time while cutting legal immigration in half, canceling the applications of those who have patiently waited for a green card, and wasting $124 billion. Alex Nowrasteh is the senior immigration policy analyst at the Cato Institute.
  • Trump May Well Have a Point over Trade but It Doesn't Mean He's Right    (Ryan Bourne, 2018-06-15)
    Ryan Bourne ‘Well, he’s got a point.” One hears that phrase a lot about President Trump. It explains his appeal. Highlighting self-evident truths others gloss over — that some illegal immigrants commit gruesome crimes, for example — he gives voice to fears usually left unsaid. Those who reactively deny it look stupid. Those who describe it in broader context? Well, “if you’re explaining, you’re losing”, as President Reagan once said. Before and after the G7 summit,the President faced righteous criticism from international leaders for deciding not to renew exemptions for the EU, Canada and Mexico from his steel and aluminium tariffs. He responded by pointing out how heavily protected Canadian dairy and EU car markets are. “We have put up with Trade Abuse for many decades — and that is long enough,” he tweeted. His tariffs, and consideration of extending them to cars were, he claimed, really a response to this protectionism. Ideally, all countries would eliminate tariff and non-tariff barriers, he mused. But in the absence of that, he just wants reciprocity and a level playing field. Who can argue with that? It all sounds reasonable. And, importantly, he does have a point! Canada’s dairy market is heavily insulated, with a “supply management” system incorporating tariff rates of near 300pc on dairy imports beyond their quota of 10pc market share. The European Union does impose 10pc tariffs on imports of American cars while the US charges only 2.5pc the other way (though truck tariffs are higher in the US than EU). Trump, therefore, gives voice to the US car and dairy industries who want more freedom to export. These facts also allow him to take the moral high ground, creating space for Republican free-traders to justify new US trade barriers as a short-term price to pay for a freer future global trading environment. But should we really believe that is what Trump desires? There’s not much evidence to suggest so. Remember, his steel and aluminium tariffs have been legally justified on “national security” grounds, not tit-for-tat protection. Why Canada and the EU opening up their dairy and car markets would resolve national security concerns about importing steel and aluminum inputs from allies is anybody’s guess. If Trump were actually concerned with reciprocity, he wouldn’t cherry-pick individual sectors, but look at the bigger picture. This shows international tariffs have been falling worldwide over the past three decades as a result of painstaking multilateral negotiations and free trade deals. According to World Bank data, the overall weighted mean applied tariff rate for the US and EU are near identical at 1.6pc, and even lower in Canada at 0.8pc. Mexico is higher at 4.4pc, but given this has tumbled from 15.5pc just 15 years ago, and many goods are traded tariff-free with the US due to Nafta, focusing on these countries seems an odd place to start to free up global markets. True, the EU’s variance in tariffs is higher, meaning it imposes much higher tariffs in certain areas. But if Trump really had free-trade ambitions, would he not also bring some protected US sectors to the bargaining table to trade-off for liberalisation elsewhere? Why not the US sugar industry, where interventions, tariffs and quotas raise the American sugar price to almost double the world price, and significantly block imports from the Caribbean? Or how about reducing clothes tariffs, currently kept high so the US textiles sector gets leverage in US free trade agreements to insist other countries can export their clothes tariff-free only provided they use US inputs? No, Trump sees the vested interests in other countries as a problem, but domestically they are just fine. This, I’m afraid, is the Trump trade world-view personified. His focus on economically-meaningless bilateral trade deficits, and on producers, rather than consumers, represents the “exports good, imports bad” mercantilist mindset. The President really does not see trade as mutually beneficial exchange, but a game played between nations where some win and others lose, depending on how much you sell and how much you buy as a country. Perhaps the best insight that deep down his administration does not believe in the free trade ideal was his adviser Peter Navarro’s recent defense of the tariffs. Rather dubiously, he claimed that they had already encouraged a new aluminum mill in Kentucky and restarted steelmaking facilities in Illinois. But what was absent from his analysis was the real eye-opener, with no mention at all of the impact raising the steel price will have for the 6.5m workers in steel-consuming industries. Those looking for evidence the administration saw tariffs as a short-term necessary evil in Navarro’s musings would be disappointed. By and large, of course, the economic case for free trade applies whatever other countries decide to do. Tariffs harm domestic economies by generating investment-sapping uncertainty, raising prices for consumers, and undermining overall efficiency (by insulating producers from global competition and raising input costs). As damaging as it is to European steel and aluminum exporters to see new US tariffs then, the EU should not have reacted by jacking up tariffs on US products such as bourbon. This was a dumb move when Trump’s priors suggest he would love any opportunity to ramp up tariffs in other areas. Sadly though, politicians can’t resist tit-for-tat retaliation to avoid looking bullied. Sure, Trump is the clear aggressor here. But faced with the opportunity to call his bluff and take him up on eliminating more tariffs, EU and Canadian politicians seemingly lose the free trade mantras they eulogize and seek to act to protect their industries, not customers. Perhaps Trump has a point again that they aren’t the free traders they claim to be. But acting on that point now threatens a wholly unnecessary, full-blown trade war. Ryan Bourne is the R Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute.
  • Is NATO Pushing Russia Towards Retaliation?    (Ted Galen Carpenter, 2018-06-15)
    Ted Galen Carpenter The United States and its NATO allies continue to find ways to antagonize Russia. The latest provocation is a request from Norway to more than double the number of U.S. troops stationed on its territory and deploy them even closer to the border with Russia. Granted, the numbers involved are not large. There are currently 330 American military personnel in the country on a “rotational” basis. Oslo’s new request would increase the number to seven hundred. If the Norwegian government gets its way, the new troops would be stationed in the far north, barely 260 miles from Russia, in contrast to the existing unit in central Norway, several hundred miles from Russian territory. The rotational aspect theoretically complies with Norway’s pledge to Moscow in 1949 when it joined NATO that Oslo would not allow U.S. bases on its territory. Indeed, Foreign Minister Ine Marie Eriksen Soriede reiterated that assurance in connection with the new troop request, contending that there would be “no American bases on Norwegian soil.” Making their official status rotational supposedly means that the troops are there only on a temporary basis. It is a cynical dodge that fools no one—least of all Vladimir Putin and his colleagues in the Kremlin. Norwegian officials also insisted that the new deployment was not directed against Russia. That assurance has even less credibility than the rotational rationale. Oslo’s request came just days after nine nations along NATO’s eastern flank, including Poland, the Baltic republics, and Romania called for a larger Alliance (meaning largely U.S.) military presence in their region. The United States and its NATO allies continue to find ways to antagonize Russia. In addition to the move to increase the number of U.S. troops in Norway, major NATO military exercises (war games), code-named Trident Juncture 18, are scheduled for October. The focus of those exercises will be central and northern Norway, and they will involve thirty-five thousand troops, seventy ships, and 130 aircraft. Nevertheless, Soriede insisted that she couldn’t see “any serious reason why Russia should react” to Oslo’s proposal for an enhanced U.S. military presence. She should perhaps receive credit for being able to make such a statement with a straight face. But such transparent dishonesty is a longstanding feature of NATO’s behavior toward Moscow. Even during the Cold War, Western officials routinely insisted that the Alliance was not directed against the Soviet Union. In their more candid moments, though, they conceded the obvious—that NATO was a military mechanism to contain Soviet power. Granted, it was not the sole purpose. Lord Hastings Ismay, NATO’s first secretary general, stated that NATO was created to “keep the Soviet Union out, the Americans in, and the Germans down.” The first objective, though, seemed to be the most important. Containment of the Soviet Union made sense to keep democratic Europe out of Moscow’s geopolitical orbit, and NATO was an important component of that strategy. But Western leaders continued to apply that model to a noncommunist Russia once the Cold War ended. Indeed, they intensified the containment rationale by adding new members throughout Eastern Europe and expanding the Alliance to Russia’s border. Those actions were taken despite verbal assurances from Secretary of State James Baker and West German foreign minister Hans-Dietrich Genscher at the time of German reunification that NATO would not expand beyond Germany’s eastern border. Throughout the Alliance’s inexorable move eastward, Western officials and pundits insisted that NATO enlargement was not directed against Russia. Indeed, some members of the Western foreign-policy community argued that the move would benefit Russia by erasing Cold War dividing lines and increasing Eastern Europe’s political and economic stability. One wonders whether Westerners thought that the Russians were gullible enough to believe such absurd arguments, or the proponents actually believed their own propaganda. NATO leaders continue to insist that the Alliance has no offensive intent against Russia or that the Alliance seeks to undermine Moscow’s interests. But NATO’s behavior belies such assurances. The interventions in Bosnia and Kosovo that weakened and eventually truncated Serbia, a longstanding Russian ally, was certainly not a friendly act. Stationing Alliance (most notably U.S.) forces and weapons systems in NATO’s easternmost members, (a process that has accelerated markedly since Russia’s annexation of Crimea in 2014) likewise is provocative. Yet Western leaders and publics act as through Russia has no legitimate reason to react negatively to such moves, as Soriede stated explicitly regarding the proposed increase in the U.S. troop presence in her country. NATO has conducted several large-scale military exercises in Poland and other member states, as well as naval maneuvers in the Black Sea near Russia’s important naval base at Sevastopol. Again, the Russians apparently are wrong to regard such actions as provocative and threatening. U.S. and NATO leaders need to adopt a much more realistic attitude. Any nation would regard NATO’s behavior as decidedly unfriendly, and even menacing, if conducted on its frontiers. Continuing such actions while cynically denying their hostile intent could easily lead to miscalculation and a catastrophic confrontation. As a first step toward mending ties with Moscow, the Trump administration should summarily reject Norway’s unnecessary request for more U.S. troops. Ted Galen Carpenter, a senior fellow in defense and foreign-policy studies at the Cato Institute and a contributing editor at the National Interest, is the author or contributing editor of twenty books on international affairs, including five books on NATO.
  • A Naval Race with China Is Unnecessary and Will Likely Backfire    (John Glaser, 2018-06-14)
    John Glaser WASHINGTON - Policymakers increasingly perceive China’s growing naval strength in Asia as an acute threat to American interests that must be met with a corresponding surge in U.S. naval power in the Pacific. However, precisely what tangible threat a few more Chinese frigates on the other side of the planet poses to U.S. national security interests is rather difficult to identify. And exactly what objective is supposed to be achieved by boosting the U.S. Navy’s presence in the region is something of a mystery. Hawks point to Chinese territorial claims and naval activity in the South China Sea as a signal of Beijing’s growing ability to undermine freedom of navigation. But capability does not equal intent. Indeed, any interruption in commercial shipping in the Pacific would be devastating for China’s own economic and security interests. China’s naval expansion threatens not so much America’s security, but its prestige. China is the largest trading nation in the world and relies on the South China Sea for almost 40 percent of all its trade, valued at roughly $1.5 trillion per year. If anything, Beijing’s more assertive posture suggests a determination not to close off vital sea lanes, but to keep them open. It is notable, in addition, that the United States perceives a grave threat from China’s naval expansion that China’s own neighbors seem to miss. Average defense spending as a percentage of GDP among the 11 East Asian states along China’s periphery has declined by almost half over the past 30 years. Moreover, none of them have engaged in their own freedom of navigation operations to directly challenge China, despite encouragement to do so from Washington. The Philippines had a major dispute with China over maritime and territorial claims, which led to multiple naval standoffs, but now Manila appears to be buddying up to Beijing, not balancing against it. If China’s own proximate rivals don’t see a major threat, why should we? Even stipulating that Chinese naval power is a problem, one is still left to wonder what effect beefing up the U.S. Pacific Fleet is expected to have on Beijing’s calculations. Are we to believe Beijing will respond to a proliferation of U.S. warships off its shore by slashing its naval budget, decommissioning scores of ships, and eagerly forfeiting its regional ambitions? There is a glaring logical contradiction in depicting China as a nascent peer competitor doggedly seeking to supplant America as the global juggernaut by whatever means necessary, but which will abruptly cower in response to a mild U.S. naval buildup in the Pacific Ocean. More likely, cranking up a Sino-American naval competition will generate heightened fear and suspicion in Beijing. Combined with President Trump’s threat of a trade war and his pugnacious foreign policy rhetoric, that is a recipe for inducing a more aggressive Chinese posture and locking the 21st century’s two major powers into a new cold war. The truth is that China’s naval expansion threatens not so much America’s security, but its prestige. China’s rise is a symbolic threat to America’s status as the world’s sole superpower, the indispensable nation. We would be well advised to curb such pretensions. China is most interested in continued economic growth and in gaining international status, respect, and recognition. It is far better to accommodate such benign objectives than to inflate the threat from China and ignite a bitter great power rivalry that neither country can win. John Glaser is director of foreign policy studies at the Cato Institute, a leading Washington think-tank.
  • AT&T Ruling Tells Government: It's Not 1948 Anymore    (Walter Olson, 2018-06-13)
    Walter Olson Judge to federal government: The entertainment business has moved on from the Truman era, and so has antitrust law. In 1948 the US Supreme Court ordered Hollywood studios to sell their movie theaters, following the then-popular idea that the government should police marketplace competition by restraining businesses’ vertical integration — or as we might put it these days, by ordering content kept separate from distribution. The surprise in 2018 is not so much that US District Judge Richard Leon rejected the government’s challenge to the $85 billion AT&T-Time Warner merger. That much was expected by most antitrust watchers. The shock came from the stinging way he rejected the government’s evidence — using language such as “gossamer thin” and “poppycock.” [pullquote[The entertainment business has moved on from the Truman era, and so has antitrust law.[/pullquote] That surprise wasn’t an unpleasant one for many. Media and telecom stocks rose on Wall Street, with the decision widely seen as green lighting further hookups of cable and wireless distributors with content providers, such asa potential Comcast deal for 21st Century Fox. While “horizontal” challenges to mergers between competitors who sell to the same group of customers are alive and well, the government hadn’t gone all the way to a court decision in a vertical merger case in 40 years (and it lost then, too). It’s been more than 30 years since the government successfully opposed a vertical merger, though it’s sometimes negotiated to attach strings in order to proceed. Until recently, media companies could do well at either the content end — like Time Warner, with its properties such as CNN, Turner and HBO — or at the distribution end, like AT&T with its vast consumer base including cell phone and satellite users. You could be good at making shows even if you weren’t good at getting to know individual customers and their data. Now, amid rapid technological change, the advantage has shifted to companies that can do both, commissioning original programming while also knowing a lot in real time about who is watching and how, making informed predictions about what they might want to watch tomorrow or next year. Netflix, Hulu and Amazon, for example — with Facebook, Google and others coming up fast — can do both. Enterprises of this sort, the judge wrote, “have driven much of the recent innovation in the video programming and distribution industry.” The government’s own merger guidelines describe vertical mergers as “not invariably innocuous,” a backhanded phrasing that points to the uphill legal burden of showing that the case at hand was in some way exceptional. And while the Department of Justice tried that, as with one theory about how existing distributors such as cable companies would be squeezed in negotiations, the judge found after a full trial it hadn’t come near to proving its case. Sample problem: It had analyzed as a market a slice of the TV business so narrowly defined that it excluded Netflix and the other new(ish) providers. Meanwhile, AT&T’s lawyers pointed to uncontested big savings the merger would yield for the company and its customers: The government’s own expert acknowledged that customers of AT&T’s DirecTV and U-verse services would “pay a total of about $350 million less per year for their video distribution services.” Perhaps bigger, the combination would promote innovation. To quote the opinion: “The merged entity could, for instance, gather and edit individual news clips from CNN throughout the day — all tailored to a given user’s interests — and deliver that news to the wireless customer for viewing on his or her fifteen-minute break.” The days of the Hollywood studio system are long gone, and so is the old antitrust law. It should be too late for Washington to block this deal at the altar; even trying would be as futile as attempting to separate Net from Flix or You from Tube. Walter Olson is senior fellow at the Cato Institute’s Robert A. Levy Center for Constitutional Studies.
  • Afghan Ceasefire an Opportunity to Improve U.S.–Pakistan Relations    (Sahar Khan, 2018-06-13)
    Sahar Khan On June 7, Afghan President Ashraf Ghani announced a unilateral ceasefire with the Taliban from June 12 to 20, which the U.S. said it would honor. The Taliban followed suit, announcing a 3-day ceasefire coinciding with the Afghan government’s. Why it matters: The ceasefire’s outcome will almost certainly impact the Afghan-led and Afghan-owned peace process: As the Taliban’s first ceasefire since the Afghanistan War’s inception in 2001, it indicates a strategic shift for how the group might engage in talks with the Afghan government. But the ceasefire also presents an opportunity for the U.S. and Pakistan to improve their bilateral relationship, which has hit a nadir. Since 2001, U.S. administrations have repeatedly asked Pakistan to use its leverage against the Taliban to get them to the negotiating table, even as its influence over the Taliban has waned over the past decade. This time around, Pakistan, along with UNSC members, helped persuade the Taliban to reciprocate Ghani’s temporary truce. That’s a positive sign for Pakistan, which has always sought a prominent role in U.S.-Afghan peace talks. While the Trump administration refuses to hold direct negotiations with the Taliban, U.S. officials are still asking Pakistan to facilitate Afghan-Taliban peace talks, as part of the administration’s support for an Afghan-led and Afghan-owned peace process. Pakistan may not be the most reliable partner for U.S. efforts in Afghanistan, but it is a key regional player. The bottom line: If the U.S. hopes to end its war in Afghanistan with a lasting political settlement, it needs to improve its relationship with Pakistan — and hold direct talks with the Taliban, which is part of Afghanistan’s political fabric. Sahar Khan is a visiting research fellow in the Cato Institute’s Defense and Foreign Policy Department.
  • A New Framework for Assessing the Risks from U.S. Arms Sales    (A. Trevor Thrall, Caroline Dorminey, 2018-06-13)
    A. Trevor Thrall and Caroline Dorminey In the past two years, Congress has tried (and failed) twice to halt American arms sales to Saudi Arabia in response to that country’s intervention in Yemen’s civil war. This level of concern is historically unusual. Arms sales rarely spur much debate in Washington, where they are viewed as a critical tool of American foreign policy. The traditional refrain holds that arms sales promise leverage over recipient countries, help the United States support allies and manage regional balances of power, and generate economic benefits to boot. With some exceptions, few have challenged the wisdom of American arms sales practices. In a recent study for the Cato Institute, however, we argue that the government’s approach to arms sales is misguided. The United States accepts as given the potential benefits of selling weapons while underestimating or simply ignoring the potential risks. The result has been too many arms sales to too many countries where the risks are likely to outweigh the benefits. Between 2002 and 2016, America delivered $197 billion worth of major conventional weapons, equipment, and training through its Foreign Military Sales program to 167 states worldwide. It is difficult to imagine what sort of process would rate so many of the world’s roughly 200 countries as safe bets to receive American weapons. Indeed, using a “risk index” we created to assess U.S. arms sales, we found that in this time period, the average dollar value of U.S. arms sales per nation to the riskiest states was higher than to the least risky states. Even more disturbing was our finding that 32 of the 167 recipients had risk index scores higherthan the average score of the 16 nations currently banned from purchasing American weapons. For the United States to make more responsible use of arms sales, the approval process needs to change. And though our initial study focused on arms sales, the logic is the same for arms transfers (where the United States provides weapons to states or groups at no cost). There are often compelling reasons to consider providing weapons even (and sometimes especially) to risky clients, but the United States should account more carefully for both the benefits and the costs. The easiest place to start is cases of sales and transfers to nations engaged in conflict, fragile states, or states with poor human rights records, as well as in cases that do not directly enhance American national security. In these cases, the approval process should be more transparent, the bar for approval should be higher, and the government should do more to monitor weapons after they are sold to better understand unintended consequences that may blunt the benefits of arms sales and undermine U.S. security. The Arms Sales Approval Process On paper, the United States appears to have a robust procedure in place to assess arms sales. Since 1976, the Arms Export Control Act has required that the executive branch conduct a risk assessment for large government-to-government sales of major conventional weapons (commercial sales of many small and light weapons are covered by different rules). Once a foreign government decides it would like to buy an American system, it submits a letter of request. The request kicks off an extensive process that runs through a variety of offices at the Departments of Defense and State, as well as other agencies. The Country Team Assessment is the American government’s official risk assessment and is intended to determine: how the [weapon] will be used, how it contributes to the defense and security goals of the partner nation and of the US, how it will change the partner country’s military capabilities, how the partner country will protect and safeguard sensitive technology, and the partner nation’s human rights record. Once approved, the matter is turned over to Congress, which serves as an emergency brake for this process. Absent sufficient congressional opposition in the form of a veto-proof resolution of disapproval, the sale is made. For the United States to make more responsible use of arms sales, the approval process needs to change. In reality, the outcome of this process is almost inevitably the same: approval. Though the United States won’t sell its latest technology to everyone, it will sell most things to just about anyone. Although a full explanation of this is beyond the scope of our work, three possible reasons are worth noting. First, the benefits of arms sales are obvious and immediate, while the negative consequences are often less obvious, tend to emerge much later, and often receive little media coverage. Second, there is no constituency in Washington opposing arms sales. Presidents see them as a foreign policy tool, Congress sees them as economically beneficial benefiting its constituents economically, and the defense industry provides financial encouragement all around through campaign donations. Finally, the United States has been the world’s leading arms exporter for so long that the presumption that arms sales work seems to have become ingrained in the national security bureaucracy. The Risks of Arms Sales Arms sales are attractive for many reasons. They offer a low-cost, flexible way to help allies and partners wage wars, deter adversaries, and fight terrorism. Moreover, arms sales and transfers certainly pose less political danger for presidents than sending American troops into harm’s way. But just because the United States has good reasons to sell weapons in a specific instance does not mean the benefits are a sure thing — nor does it ensure that the benefits will outweigh the costs. The negative side effects of arms sales take many forms. One extreme example is blowback — when Americans weapons end up being used against American interests. After the Iranian Revolution in 1979, the revolutionary government took possession of billions of dollars’ worth of American fighter jets and other weapons, an arsenal that Iran has used to exert itself ever since. A more common example is when American troops end up fighting other forces armed with American-made weapons that the United States had willingly provided, as happened in Somalia in 1991 with weapons provided during the Cold War. Arms sales and transfers can also harm the regions into which American weapons flow. Another danger is dispersion — when weapons sold to a foreign government end up in the hands of criminal groups or adversaries. This risk is highest with sales or transfers to fragile states that are unprepared, unwilling, or too corrupt to protect their stockpiles adequately. For instance, despite America’s efforts to train and equip the Iraqi army, ISIL fighters in 2014 captured three Iraqi army divisions’ worth of American equipment, including tanks, armored vehicles, and infantry weapons. American arms sales can also prolong and intensify interstate conflicts. Although the goal might be to alter the military balance of a conflict to facilitate a speedy end, sending weapons can also encourage the recipients to continue fighting even with no chance of success, leading to more casualties. Finally, U.S. weapons sales in the name of battling terrorism and insurgency undermine U.S. national security when they are made to corrupt regimes and to nations with a history of human right violations. American firepower can enhance regime security and enable oppressive governments to mistreat minority groups and wage inhumane actions against insurgents or terrorist groups. Currently, Saudi Arabia is waging war in Yemen using primarily American weapons, which the United States has continued to provide even though the Saudis have been cited repeatedly for human rights violations and targeting civilian populations. In countries where serious corruption is endemic, American weapons can be diverted from their intended recipients and wind up in the wrong hands. For example, as a result of military and police corruption, the small arms and light weapons that the United States sends to Mexico and to several other Latin American countries in support of the war on drugs often facilitate the very crimes they were meant to stop. Assessing the Risk To provide a better accounting of the risks of arms sales and transfers, we developed a risk index based on five indicators that previous research suggests correlate strongly with negative outcomes. We know of no previous efforts to categorize recipients with respect to the risks of negative outcomes. Indeed, there is very little historical data available on the outcomes, positive or negative, of arms sales: There is no database to tell us how frequent various negative outcomes are, which makes it difficult to identify the causes of those outcomes with much precision. As a result, the risk index remains a work in progress. For each of the 167 recipients of American weapons between 2002 and 2016, we compiled the scores from five existing metrics: The Fragile State Index. Fragile governments are at greater risk for having weapons stolen or sold to third parties and are also more likely to collapse, raising the possibility that a friendly customer could turn into a national security threat. The Freedom House Index and the S. State Department’s Political Terror Scale. Measures of oppression and political terrorism are a proxy for the risk that a recipient will misuse the weapons against its own people. The Global Terrorism Index and UCDP/PRIO Armed Conflict Dataset. Civil and interstate conflicts create the conditions for all sorts of risks, including weapons dispersion, the misuse of weapons against a state’s own population, the amplification and intensification of conflict, and blowback. To create a single risk index from these sources, all of which use different scales, we sorted the nations into three categories for each risk factor: 1 (low risk), 2 (medium risk), or 3 (high risk). This was straightforward for two of the measures. The Freedom House Index codes nations as “Free,” “Partly Free,” and “Not Free,” while the UCDP/Prio dataset codes nations as being involved in “High Intensity” conflict, “Low Intensity” conflict, or not involved in conflict. In each case, our categorization corresponded directly with the three existing categories. The State Department’s political terror scale has five levels, from the first level where state terror and torture are rare or extremely rare, to levels two and three, in which police brutality and political imprisonment occurs but is limited, to levels four and five, in which gross rights violations, including torture and murder, are common. The states at levels one and two, which are the least likely to use force against their own citizens, received a score of 1 — least risky. Those states at levels four and five are the most likely to use force against their own citizens, so we coded them as 3 — most risky. The group of states in the middle received a score of 2 — medium risk. The Global Terrorism Index scores states on a zero to 10 scale. We coded states that scored between 0 and 2 (no to low impact from terrorism) as least risky. States that scored between 2 and 6 we rated as medium risk, and states that scored between 6 and 10 we ranked as highest risk. Finally, the Fragile State Index runs from roughly 18 to 113. We divided the index into thirds, rating the most fragile third as most risky and the least fragile states the least risky. To get each nation’s risk index score, we simply added its scores for each of the five risk factors. As Table 1 shows, the resulting index ranges between 5 and 15. If a country scored “low risk” on all five individual measures its overall risk index score was 5, while a country that scored “high risk” on all five earned a score of 15. The average score across the 167 nations was 8.2; the standard deviation was 2.9. The result is an index that passes the common-sense test and provides a starting point for policymakers to rethink the risk assessment process, although it unavoidably sacrifices the nuance of the individual components. Because our approach measures only significant differences in state freedom, stability, and so forth rather than attempting to claim undue precision, there is good reason to believe that nations scoring higher on this index are indeed riskier customers even though we cannot be certain about the precise weighting of different components (an area for future research). Figure 1. Cato Arms Sales Risk Index 2018 Table 1. Arms Sales Risk Index Three critical observations emerge from this exercise. First, there are a lot of risky customers in the world, and the United States sells weapons to most of them. Thirty-seven nations (21.8 percent) scored in the highest risk category on at least two metrics and 77 (45.3 percent) were in the highest risk category on at least one of the five measures. There are simply not many safe bets when it comes to the arms trade. Second, as simple as it is, our risk index does correlate with negative consequences. The five countries (Libya, Iraq, Yemen, the Democratic Republic of Congo, and Sudan) that scored as high-risk on all five measures are places where the negative consequences have been worst. American weapons have been stolen, misused, and used against American interests in each of these places since 2002. The very risky category also illustrates the full range of unintended consequences from arms sales. Afghanistan, Egypt, Saudi Arabia, Somalia, and Ukraine fall into this category. Finally, the analysis provides compelling evidence that despite the warning flags, the United States does not discriminate between high- and low-risk customers. The average sales to the riskiest nations are higher than those to the least risky nations. The 24 countries labeled “highest risk” on the Global Terrorism Index, for example, bought an average of $2.2 billion worth of American weapons during the time period we analyzed. The 31 countries in active, high-level conflicts bought an average of $3.1 billion. This strongly suggests that the most obvious risk factors play little or no role at all in limiting U.S. arms sales. Applying the risk assessment framework to the list of embargoed nations only sharpens this point. The 16 nations currently banned from buying American weapons had an average score of 11.6. Many of the nations on the list are adversaries (Iran, North Korea) but others, like Sudan and Eritrea, were only banned after egregious levels of insurgency, terrorism, and human rights abuses emerged. Although it is a sign of progress that these countries were eventually placed on an embargo list, the United States still sold weapons to them when most of the risks were already apparent. Moreover, America’s current customer list includes 32 countries like Egypt, Nigeria, and Pakistan, with a risk index score above the average of those who are banned. Toward More Responsible Arms Sales To be clear, our index is not intended as a standalone tool for deciding where and when to provide weapons to other nations. For each individual sale, the potential risks should be considered in light of the potential benefits. And in some cases, arms sales advocates can rightly argue that our risk index is a measure of which states need the most help. For example, fragile states like Iraq and Afghanistan score high on our index, but no one doubts they need assistance to ensure their security. However, a debate can and should be had about whether providing such states with weapons will achieve the intended goals. Our goal is not to suggest that there aren’t good reasons for providing weapons, but merely to help decision-makers do a better job considering the risks involved so that when the United States does sell weapons abroad, it has done a full accounting of the potential outcomes. Our research suggests the United States could improve its arms sales policy in three important ways. First, the approval process must become more transparent. Neither Congress nor the public has much idea what benefits and risks were considered before an approval was made. All the public gets are stock phrases like “This proposed sale will contribute to the foreign policy and national security objectives of the United States,” and “The proposed sales of equipment and support will not alter the basic military balance in the region.” The executive branch should make the proposed benefits and potential risks clear, so Congress and the public can judge the justification of each sale and its outcomes accordingly. Second, the government should raise the bar for approving arms sales. The United States enjoys a highly favorable strategic environment and an unmatched (though not unlimited) ability to influence events abroad. Focusing more on avoiding the negative consequence of arms sales than in the past would not significantly impair that global influence. One simple step in the right direction would be to stop selling weapons to states with clear warning signs: the most fragile states, those embroiled in civil wars, and those with the worst human rights records. Third, the United States should implement a more comprehensive system of end use monitoring that tracks not only the physical location of American weapons (as is done today), but also attempts to account for how those weapons are used over the several decades during which they will be in service. As much of this data as possible should be made publicly available. Much of the difficulty in weighing risks and benefits is a product of the simple lack of data on what happens over the long-term when America sends weapons abroad. Having more information about both the positive and negative outcomes will help policymakers make more informed decisions about arms sales in the future. The Saudi air campaign in Yemen, enabled by American weapons and American support, makes it clear that selling weapons is an inherently dangerous business. Even when the United States has important reasons for doing so the risks are real. A more prudent approach that denies sales to the riskiest clients would help the United States minimize its unintended consequences. Limiting arms sales, especially to countries engaged in conflict, would also give the United States greater diplomatic flexibility. It is difficult to be a credible mediator while arming one or both sides of a conflict. By taking this step, the United States would send a powerful signal to the international community about the dangers of unrestricted arms sales and America’s intention to be part of the solution to violence rather than an enabler of it. A. Trevor Thrall is an associate professor at George Mason University’s Schar School of Policy and Government and a senior fellow at the Cato Institute’s Defense and Foreign Policy Department. Caroline Dorminey is a policy analyst at the Cato Institute’s Defense and Foreign Policy Department.
  • If Anyone Gets the Nobel, It’s Moon and Kim    (Doug Bandow, 2018-06-13)
    Doug Bandow Donald Trump, Nobel laureate? It is a jarring vision, but one that inched a little closer to reality after the seemingly amiable meeting between the U.S. president and North Korean dictator Kim Jong Un on Tuesday morning in Singapore. South Korean President Moon Jae-in had already proposed Trump for the prize following the Panmunjom talks between North and South Korea that preceded the summit. Some of Trump’s fans gave him credit for achieving peace in our time even before the summit, chanting “Nobel, Nobel, Nobel” at a rally in late April. But the truth is that if there is a trip to Norway in the offing, Moon himself will be a far more deserving winner than Trump, even if his modesty — or cunning — means giving Trump the credit. And much as we might dislike it, Kim probably belongs on the stage too. Talk of the peace prize is obviously premature. Trump’s meeting with Kim had great visuals, but there was no real deal struck and certainly no pledge of denuclearization from the North. And this isn’t the first summit to cause hopes to soar for inter-Korean reconciliation. The blusterer-in-chief might blunder into a good deal with North Korea. But that won’t happen without the actions of several worthier candidates. Still, definitive pessimism is overdone. In important ways, Kim appears different from his father and grandfather — more interested in economic development, more comfortable on the international stage, and perhaps even serious about a deal, though one that won’t come cheap. But let’s optimistically assume that the deal does make substantial progress — if not toward the “full and speedy denuclearization” the Trump administration insists upon, then at least toward a formal peace on the peninsula and a serious thaw in relations between North and South. Denuclearization is desirable but not essential for American security, because a nuclear North Korea could be deterred. Thus, understandings short of full nuclear disarmament still could leave the peninsula more stable. A freeze on missile and nuclear development, especially if backed by inspections, could promote peninsular and regional peace and stability. Conventional forces and deployments also could be adjusted to make war less likely. Regular communication could be established. Any of these would represent significant progress in a region where hostilities have flared for decades. If so, should Trump be standing on the stage in Oslo? The theory is that by trading insult for insult and threatening to blow up Northeast Asia, the president frightened North Korea into coming to the table. That might seem plausible, but Kim seems like a man confident in his power, not scared. North Koreans I spoke with last year seemed befuddled by the administration, not afraid of it. Most U.S. analysts view a U.S. attack as a wild gamble. And despite his bluster, so far, Trump has avoided any actions that would actually prompt serious conflict. If Washington’s confrontational behavior forced anything, it likely was a change in strategy rather than objective. Kim told a high-level Korean Workers’ Party meeting earlier this year that the regime had finished the nuclear prong of its byungjin, or parallel development policy, so Pyongyang now would concentrate on economics. He did not suggest that his government completed the program only to give it away. To the contrary, in his New Year’s address this year, Kim proclaimed that North Korea now possessed “a powerful and reliable war deterrent, which no force and nothing can reverse.” But continuing to formally resist denuclearization would ensure continued confrontation with the United States. That may explain Pyongyang’s feint toward South Korea. The latter creates the possibility of deals short of full denuclearization, while making U.S. military action less likely. This is not a strategy of desperation, but one of patience. So much for the president taking credit. Another possible Nobel nominee is Chinese President Xi Jinping, for applying economic pressure on North Korea. But did Trump force China’s leader to do America’s bidding? Probably not. Although U.S. pressure may have accelerated the China’s move up the sanctions ladder, the Xi government’s patience already was running thin. Beijing was tightening sanctions and enforcement every time North Korea conducted another missile or nuclear test. Xi also refused to meet Kim, despite having regular contact with South Korea’s president, until the crisis seemed to be reaching a breaking point. The sanctions caused the North’s economy significant pain, but hardship isn’t new for North Koreans: a half-million or more people died of starvation in the late 1990s, and the North Korean economy kept growing throughout the sanctions. There is no reason to assume that Kim would sacrifice geopolitical ends in order to improve his people’s lives. Moreover, Kim’s summit gambit generated leverage with China. By engineering a bilateral meeting with the United States, Pyongyang isolated Beijing. Rumors that the North would no longer insist on withdrawal of U.S. military forces from the South may have been a signal to China that North Korea was not going to protect the former’s interests. Anyway, Xi invited Kim to visit. Beijing may have made additional concessions to ensure its involvement in upcoming negotiations. So, Xi doesn’t appear to be the prime mover behind the North’s pirouette. Give credit to Kim Jong Un. He set off the present process with his New Year’s address, in which he suggested that “the south Korean authorities should respond positively to our sincere efforts for a detente” and “a climate favorable for national reconciliation and reunification should be established.” He even “earnestly wish[ed] the Olympic Games a success” and offered “to dispatch our delegation and adopt other necessary measures.” This was not Kim’s first expression of interest in diplomacy. In the Washington Post, David Ignatius pointed to North Korean statements five years ago indicating a desire for better relations with the United States. After “completing” the North’s nuclear deterrent, Kim probably believed he was negotiating from a position of strength, not the weakness Trump hoped he could prey on. Kim’s New Year’s offer was particularly potent because it responded to South Korean fears that the North would attempt to disrupt the latest Olympics, like the one three decades before. Kim followed up by offering to meet Trump and take a number of conciliatory steps. If the latter prove to be ploys, as many believe, there will be no Nobel for anyone. However, if peace and stability advance, Kim will be the one taking his nation into a brighter future. But one of the best candidates may be Moon himself. Shortly after taking office, the South Korean president announced that he planned to sit in the “driver’s seat” when it came to North Korea. His pacific nature made the apparent breakthrough possible. Moon was elected last year more in spite of than because of his commitment to reconciliation with the North, and he tempered his policy in response to a skeptical public and a hostile Trump. Nevertheless, Moon — who cut his teeth in high-level politics as one of the architects of the old Sunshine Policy — made outreach to North Korea a priority after his inauguration last May. Most important, he ran through the opening made by Kim. The Olympics cooperation led to the inter-Korean summit, with the official slogan “Peace, a new start,” and plans for the Kim-Trump meeting. If Kim and Trump reach a real agreement, they will owe their success to Moon’s persistence. The progress made by the two Korean leaders might even survive a Trump tantrum if North Korea kicks back against his claims of nuclear compliance. South Koreans have an obvious reason to resist U.S. threats of war. Given images of a seemingly reasonable Kim meeting leaders of both South Korea and the United States, even Americans might not be convinced that there is an urgent need for military action that could lead to full-scale war. And after his fulsome praise for Kim at the summit, the president’s madman shtick can no longer seem as plausible. Who gets the Nobel for Korean peacemaking? We’ll have to wait and see if there is a peace to reward. In any case, there are better candidates than Donald Trump. The blusterer-in-chief might blunder into a good deal with North Korea. But that won’t happen without the actions of several worthier candidates. Doug Bandow is a senior fellow at the Cato Institute. He is a former special assistant to President Ronald Reagan and the author of several books, including Foreign Follies: America’s New Global Empire.
  • America's Entitlement Crisis Just Keeps Growing    (Michael D. Tanner, 2018-06-13)
    Michael D. Tanner One problem with living in times as interesting as these is that important news often gets lost amid the swirl of rapidly changing events. If you blinked last week, you may have missed the latest report from the trustees of the Social Security and Medicare systems. But for the sake of our children and grandchildren, not to mention the country’s economic future, America’s looming entitlements crisis is worth paying attention to. Start with Social Security. This year, the system’s trustees pegged its official “insolvency” date at 2034, the same as in last year’s report. Unfortunately for those under age 51, of course, we are now a year closer to that date than we were a year ago. And unless something changes dramatically between now and then, current law will require benefits to be slashed by 21 percent at that point. But focusing on that top-line number badly understates Social Security’s real problems. Since 2009, Social Security has taken in less in taxes than it pays out in benefits. It has been using “attributed” interest to maintain a positive balance. But this year, benefits exceeded both taxes and interest, meaning that Social Security had to dip into the principal of the Social Security Trust Fund for the first time. A new government report suggests that Social Security and Medicare are in even worse shape than you thought. Of course, all of this is merely a bookkeeping fiction. The Social Security Trust Fund is not — and never has been — an asset that can be used to pay benefits. Instead, it is an accounting measure of how much money Social Security can draw from general revenues. Since the government doesn’t have any extra cash socked away — you may have noticed that we are running a $21 trillion debt — any Social Security shortfall only adds to the growing tide of red ink. Overall, the trustees report that Social Security’s total unfunded liabilities now exceed $37 trillion, on a discounted-present-value basis over the infinite horizon. And that’s the good news. Medicare is in even worse shape. This year’s trustees’ report estimates that the health-care program for seniors will hit technical insolvency by 2026, three years sooner than last year’s estimate. The program’s worsening financial condition is traced to “higher-than-anticipated spending in 2017, legislation that increases hospital spending,” and higher payments to private Medicare Advantage plans. Congress also repealed the Independent Payment Advisory Board (IPAB), an Obamacare provision that would have limited provider reimbursements. Again, as with Social Security, focus on technical insolvency understates Medicare’s negative impact on the federal budget because of its reliance on Trust Fund accounting. In actuality, Medicare has been running a cash-flow deficit for decades. The trustees’ report does estimate that Medicare’s finances will eventually improve — though not in our lifetimes — but only because it assumes savings built into the rapidly unraveling Affordable Care Act. If those savings fail to materialize (witness the repeal of IPAB), the program’s long-term liabilities could easily exceed $50 trillion or more. The report also makes clear that there can be no long-term reduction in the national debt without addressing these massive entitlement programs. Social Security now costs nearly $1 trillion per year, and Medicare more than $700 billion. Those two programs alone account for some 40 percent of all federal spending. Congress can and should slash away at discretionary spending all it wants, but without entitlement reform, the debt will continue to grow. It is long past time to face facts: We have lied to our kids. Social Security and Medicare cannot pay for all the future benefits that we have promised them — and until we admit that, we’ll continue down the road to national fiscal ruin. Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis.
  • The Saudi-UAE Alliance Is the Most Dangerous Force in the Middle East Today    (Doug Bandow, 2018-06-13)
    Doug Bandow For three years, Saudi Arabia and the United Arab Emirates have conducted a murderous campaign to reinstall a pliable regime in the desperately poor country of Yemen. This campaign is based on a lie intended to gain American support: that the two authoritarian monarchies are responding to Iranian aggression. Now the UAE is preparing a military offensive that could split Yemen apart and create mass starvation. The Saudi-Emirati alliance is the most dangerous force in the Middle East today. Sometimes acting alone, but usually in tandem, the two dictatorships have promoted intolerant Wahhabism around the world, backed brutal tyranny in Egypt and Bahrain, supported radical jihadists while helping tear apart Libya and Syria, threatened to attack Qatar while attempting to turn it into a puppet state, and kidnapped the Lebanese premier in an effort to unsettle that nation’s fragile political equilibrium. Worst of all, however, is their ongoing invasion of Yemen. To demonstrate support for its royal allies, America joined their war on the Yemeni people, acting as chief armorer for both authoritarian monarchies and enriching U.S. arms makers in the process. America’s military has also provided the belligerents with targeting assistance and refueling services. And our Special Forces are on the ground assisting the Saudis. The result has been both a security and humanitarian crisis. Observed Perry Cammack of the Carnegie Endowment: “By catering to Saudi Arabia in Yemen, the United States has empowered AQAP, strengthened Iranian influence in Yemen, undermined Saudi security, brought Yemen closer to the brink of collapse, and visited more death, destruction, and displacement on the Yemeni population.” The latest: they are bombing a port that accounts for 80 percent of the food and aid trickling into starving Yemen. The Yemeni people have done nothing to harm the United States. So why is Washington treating them as the enemy? Yemen, both as one and two states, has been almost constantly at war over the last half century, as its more powerful neighbors have sought to meddle in its affairs. Once, Egyptian and Saudi troops battled each other on behalf of separate Yemeni states. The two Yemens united in 1990, but that resulted in neither peace nor stability. The latest round of violence grew out of the Arab Spring. Long-ruling President Ali Abdullah Saleh, who cooperated with both the U.S. and the Saudis, was ousted. But he soon united with his old enemies, the Houthis, a political and tribal militia whose members are Zaydis, a moderate, Shia-related sect that also shares some Sunni characteristics. Together they defenestrated Saleh’s successor, Abdrabbuh Mansur Hadi. Area specialists agree that Iran had little to do with these maneuvers, while U.S. intelligence reports that Tehran even advised against the anti-Hadi coalition’s march on the capital of Sanaa. The resulting conflict little affected America except in disrupting some operations against al-Qaeda in the Arabian Peninsula (AQAP). But the Saudis and UAE created a “coalition” supplemented with de facto mercenaries—from Sudan, for instance—in March 2015 to restore Hadi. That military operation, which was supposed to take a few weeks, continues more than three years later. Today the Yemeni nation and state no longer exist. The UN has termed the conflict “the largest humanitarian crisis in the world” where “Yemenis are facing multiple crises, including armed conflict, displacement, risk of famine and the outbreaks of diseases, including cholera.” Some 30,000 civilians are estimated to have died since January 2017 alone. In March, the UN High Commissioner for Refugees reported: “Conflict in Yemen has left 22.2 million people, 75 per cent of the population, in need of humanitarian assistance and has created a severe protection crisis in which millions face risks to their safety and are struggling to survive.” The Houthis share the blame for Yemen’s hardship. But the coalition, by employing airstrikes termed “indiscriminate or disproportionate” by Human Rights Watch, has caused at least two thirds of the infrastructure damage and three quarters of the casualties. Yemeni American Rabyaah Lthaibani was blunt: “For three years now, the Saudi Coalition has bombed hospitals, schools and wedding parties. They have systematically targeted roads and farms and blocked ports so lifesaving aid and other goods could not reach people facing famine and the world’s fastest-growing cholera outbreak.” Amnesty International concluded that the coalition deliberately hit civilian targets to create a crisis. On Wednesday, the Saudis and Emiratis launched their planned assault on the port of Hodeida, which will only exacerbate this humanitarian horror. Pleas by the UN and U.S. that upwards of 250,000 people’s lives will be at risk have gone unheeded. But then why would Abu Dhabi listen, since Washington’s support for the coalition has thus far been total? The U.S. is enabling an aggressive war with all of its horrendous human consequences. Washington’s complicity in Yemen’s destruction hasn’t promoted regional stability. Over the last two decades, misbegotten American intervention has spread conflict, loosed Islamist furies, imperiled religious minorities, and expanded Iran’s influence throughout the Mideast and beyond. Inflaming the Yemeni war has proved similarly destructive. Hadi may be Yemen’s “legitimate” ruler, but he sacrificed what little popular support he had when he called in airstrikes on his own people. Nor is he a friend of America: journalist Laura Kasinof observed that Hadi had “cozied up to the Islamists” before his ouster, even sometimes cooperating with AQAP. Saudi Arabia and the UAE also have armed radical forces. AQAP may be the greatest inadvertent beneficiary of the overall conflict. U.S. officials sound like Saudi propagandists when they falsely claim that the Houthis are Iranian proxies. Gabriele vom Bruck at London’s School of Oriental and African Studies explains: “The Houthis want Yemen to be independent, that’s the key idea, they don’t want to be controlled by Saudi or the Americans, and they certainly don’t want to replace the Saudis with the Iranians.” As noted earlier, Yemen has rarely not been at war. According to Thomas Juneau of the University of Ottawa, the present fight “is at its root a civil war, driven by local competition for power, and not a regional, sectarian or proxy war.” The Houthis turned to Tehran out of necessity, after being attacked by their wealthy neighbors backed by America. Bruce Riedel of the Brookings Institution observed: “A major consequence of the war is to push the Houthis and Iran and Hezbollah closer together.” Tehran has opportunistically helped bleed the aggressors, rather like U.S. policy against the Soviet Union in Afghanistan. While Riyadh still pays lip service to the idea of maintaining a united Yemen, the Emirates is actively promoting secessionists in the south. Indeed, the UAE may hope to grab Hodeidah for its own geopolitical and commercial advantage. Reports The Economist: “the UAE’s actions in Yemen appear part of a larger strategy to gobble up ports along some of the world’s busiest shipping routes.” For this, thousands more Yemenis could die. The worst argument for the U.S. to back Saudi and Emirati atrocities is that doing so reduces civilian casualties. The claim is risible. Americans are helping the coalition kill civilians to stop it from killing more civilians? Seriously? In fact, American officials admit they do not monitor Saudi attacks, so they have no means of judging the impacts of the strikes. Anyway, the best way to end coalition attacks on the Yemeni people would be to stop subsidizing coalition attacks on the Yemeni people. Make the royals pay for their own war. Especially now. Hodeidah accounts for perhaps 70 to 80 percent of the aid, food, and fuel reaching Yemen. Observers fear that an Emirati assault would kill thousands and displace much of the city’s 600,000-strong population. Worse, such an attack would almost certainly interrupt vital shipments to Yemen’s civilian population. Abdi Mohamud, country director for Mercy Corps, warned that “Any disruption to this critical lifeline could be a death sentence for millions of Yemenis.” Mark Lowcock, UN undersecretary general for humanitarian affairs, said that “if for any period Hodeidah were not to operate effectively the consequences in humanitarian terms would be catastrophic.” Humanitarian concerns did not stop Abu Dhabi from assaulting Hodeidah. Nor will the sort of cautious statements issued by the Trump administration. Unnamed officials recently told the Wall Street Journal that the administration light was yellow on the matter: “What we are scrambling to do is, if there’s an inevitability to this, we want to ensure that it causes the least amount of damage and make sure things are set up on the humanitarian side in the best way we can.” Last weekend the Red Cross began removing its staff from the city to avoid the coming assault. And on Monday, the UN began evacuating its personnel from the port. That should make it clear: only a cut-off in U.S. assistance will get the UAE’s attention. But that Washington refuses to do. Yemen continues a tragic pattern in American policy. Washington has intervened promiscuously throughout the Mideast, fomenting radicalism, creating chaos, promoting aggression, and subsidizing tyranny. The humanitarian costs of the Yemen war continue to climb. It’s time for the Trump administration to stop supporting tyrannical regimes like the Saudis and Emiratis as they assault both our interests and our values. Doug Bandow is a senior fellow at the Cato Institute.
  • 5 Steps to Take After Trump's North Korea Summit    (Doug Bandow, 2018-06-13)
    Doug Bandow President Donald Trump and North Korea’s “chairman” Kim Jong-un met in Singapore. Their unlikely, on-off-on summit simultaneously changed everything—and nothing. Their time together was short, little more than five hours. Nevertheless, the president tells us, Kim is “very smart,” “very talented” and “loves his country very much.” One wonders if President Trump, George W. Bush redux, peered into the Korean leader’s soul and saw something warm and fuzzy. After all, said the president, they had developed a “special bond” and formed an “excellent relationship.” Just think of the connection the two men might have made had they spent an entire day together! Proving that it is not only the Democratic People’s Republic of Korea (DPRK) which turns hyperbole into an art form, the two leaders declared that “the US-DPRK summit—the first in history—was an epochal event of great significance.” Unlike those past South-North Korean summits, which dissolved in the mists of time. What could better encapsulate the importance of the current proceedings than a tearful Dennis Rodman lauding the meeting between his “special friend” and America’s president? Surely that made the event epochal, if nothing else. Although the summit is an inevitable target for snark, it nevertheless was a positive development. Most importantly, the talks were a welcome change from the hostile posturing and war threats which dominated relations between the two governments last year. Instead of insulting one another, the two leaders committed to peaceful cooperation and denuclearization. Trump and Kim’s on-off-on summit simultaneously changed everything-and nothing. Furthermore, it will be much harder for President Trump to again threaten military action, which could trigger a full-scale Second Korean War. Sen. Lindsey Graham might believe that such a conflict would be no big deal since it would be “over there,” but that would offer cold comfort to South Koreans, Japanese, and Chinese, whose nations could end up battle zones—as well as North Koreans—who should not be needlessly sacrificed because of their government’s policies. Moreover, plenty of Americans, military personnel in combat as well as civilians caught in the crossfire, likely would die in any conflict. Launching attacks in the hope that everything would work out just right would be playing a fearsome geopolitical game of chicken with potentially millions of lives at stake. Because of the summit, South Koreans, whose attitude toward the North Korean dictator has changed dramatically, would be in no mood to risk pyrotechnics launched by Washington against a North which no longer looked so threatening. And how for the president to explain to the American people that aggressive war must be launched against someone he not long before embraced? Especially if Kim was playing the role of peacenik, no longer threatening to turn cities and countries into lakes of fire? The meeting yielded some other benefits. For instance, China’s president-for-life Xi Jinping appeared discomfited by the possibility of being excluded from negotiations which could reorder Northeast Asia. The summit might also have exposed some fault lines in the DPRK: shortly before the meeting Kim replaced three top military leaders. Since taking power he has regularly shuffled the security leadership, but the mass removal was unusual. Still, even optimists must find the summit’s outcome surprisingly thin. The joint statement was short and mostly rehashed previous promises, without detailing implementation. The president said that “some things were agreed and not reflected in the agreement,” but presumably anything important deserved formal recognition. For instance, presumably the North will maintain its freeze on missile and nuclear testing. It appears that the United States may have informally agreed in turn to end military exercises, which the president said would be suspended so long as negotiations were ongoing. That’s actually a good trade for the United States, but the president apparently sought to deflect domestic opposition by keeping the deal off the books, so to speak. However, fudging commitments risks undermining denuclearization. Ironically, the day before the summit Secretary of State Mike Pompeo dismissed previous agreements: “Many presidents previously have signed off on pieces of paper only to find that the North Koreans either didn’t promise what we thought they had, or actually reneged on those promises.” In this case Kim simply didn’t promise much of anything. When asked how his piece of paper was different from signed by past presidents, President Trump responded: “well, you have a different administration. You have a different president. You have a different secretary of state. You have people that are—you know, it’s very important to them. And we get it done.” That obviously remains to be seen. In fact, the United States gave up nothing of substance to get Kim to sign the statement. The North sacrificed little in return: the release of three prisoners who were more useful freed and destruction of a nuclear test site of dubious value. On a personal level Kim has gained the most, dramatically stepping onto the international stage, meeting the U.S. president as an equal, holding two summits each with China’s and South Korea’s leaders, and invited to visit Russia. Still, sampling life among the great and powerful might encourage him to stake his place by making future concessions. However, the meeting will prove “epochal” only if the general commitments are given effect. With that in mind, the most important official promise was “to hold follow-on negotiations … at the earliest possible date” to generate concrete results from the summit. Substantively, the United States and DPRK are in the same place they were on Monday, last month, last year and a decade before. It won’t take long for the warm feelings to fade quickly without both sides taking significant steps toward a stable, lasting peace on the Korean Peninsula. Such negotiations should quickly demonstrate whether Kim deserves the confidence placed in him by the president, who said that press conference that “I think he wants to get it done.” In moving forward—apparently the president extended an invitation for Kim to visit the White House—it is worth keeping some important realities in mind. First, North Korea is a challenge, not a crisis. There is no evidence that Kim is suicidal; to the contrary, like his father and grandfather, he appears to prefer his virgins in this world. Indeed, he demonstrates that, as Henry Kissinger once opined, even paranoids have enemies. Kim rightly fears the United States. He does not plan on attacking America, thereby guaranteeing his departure from this world in a radioactive funeral pyre. Washington deterred Stalin’s Soviet Union and Mao’s China. Washington can do the same to Kim’s North Korea. Second, the president’s new bosom buddy is a tough character whose rule is less than genteel. Whatever, say, Justin Trudeau’s foibles, he is not known for executing his opponents and maintaining large labor camps in Canada. The president is right to believe that the United States should engage the DPRK, but he should do so without illusion. Third, while Chairman Kim appears genuinely committed to development, security remains his first priority. And the president is operating with a handicap—promiscuous U.S. intervention against weak states, including Afghanistan, Iraq, Libya, and Syria, failure to protect Ukraine, which gave up its nuclear weapons, and his own administration’s willingness to toss aside the Iran deal and make a litany of tougher demands of Tehran. None of these encourage the DPRK to give up its leverage and hope for the brighter future the president speaks of. Washington should offer more than verbal assurances and paper guarantees. Fourth, the People’s Republic of China (PRC) could be helpful, but will want to see its interests protected. It will not promote reunification which strengthens America’s influence and turns the peninsula into another U.S. instrument to contain Beijing. Both the United States and Republic of Korea should act to assuage the PRC’s concerns. Fifth, Washington must set priorities. And denuclearization is the most important objective. Without some resolution of the security challenge on both sides, significant improvement in the DPRK’s relations with its neighbors and respect for human rights internally is unlikely. Thus, the Trump administration should offer significant benefits for disarmament. What to do from here? Establish regular diplomatic channels—best would be to inaugurate formal relations. That should be viewed as a form of communication, not a reward. Imagine having no contact with the Soviets during the Cold War. Had Chinese and U.S. diplomats talked in 1950, perhaps the two countries could have avoided a clash which prolonged the Korean War by more than two years. Negotiations should begin on a peace treaty. That would be a significant symbolic step to demonstrate that the United States is not interested in forcing regime change in the North. Indeed, Washington should follow South Korea’s lead on this issue, since the latter has the most at stake in creating a stable peace. The administration should promote travel and exchanges both ways. The United States should drop its travel ban and encourage North Korean visitors. In this way, Washington should play the long game and encourage the transformation of the North through social, economic and cultural contact. Moreover, Washington should develop a list of steps desired by the United States, including denuclearization, other forms of disarmament, and improvements in human rights, and by the North, including end of sanctions, opening of trade, membership in international financial institutions, and “security guarantees” of various sorts. Then the administration should suggest various mini-deals on the road to denuclearization, striking agreements along the way. For instance, a North Korea which no longer tested missiles or nukes, capped its existing arsenal and allowed free access to inspectors would be a major improvement. As relations improved, the United States and its allied could continue pressing toward the ultimate goal of denuclearization. Finally, the United States should put its troop presence in and alliance with South Korea on the table. American disengagement would provide a form of security guarantee to the DPRK while simultaneously ameliorating Beijing’s concern over Korean reunification. Seoul is more than able to defend itself from a non-nuclear North. An added advantage would be to disentangle the United States from the day-to-day squabbles in Northeast Asia, leaving Washington freer to decide when vital interests truly were at stake. North Korea is a “threat” to America only because the United States is “over there,” intervening in what is essentially a Korean civil war. Otherwise Pyongyang would have little interest in America, and certainly no reason to threaten the United States. For seventy years North Korea has been a seemingly intractable problem. President Trump deserves credit for his willingness to ignore critics even within his own party and meet Kim. Now comes the hard part. The president must demonstrate similar independence and determination in making the tough compromises necessary to strike more detailed agreements with North Korea, especially one to fully denuclearize. The task could prove impossible. But the attempt would be worth the effort. Doug Bandow is a Senior Fellow at the Cato Institute and a former special assistant to President Ronald Reagan.
  • What Gina Haspel's Confirmation Really Represents    (Sahar Khan, 2018-06-12)
    Sahar Khan Gina Haspel was sworn in as the Central Intelligence Agency’s (CIA) first female director on May 21, 2018 following a controversial nomination period and a contentious Senate confirmation hearing. While Haspel is qualified for her new role—she is a career intelligence officer with 33 years of service in the CIA—her appointment is troublesome because of her involvement in the United States’ torture program and endorsement of destroying interrogation tapes of key terrorist suspects. In the context of U.S. foreign policy, her appointment represents two troubling developments: an erosion of checks and balances on the executive, and a potential “torture redux.” A president’s constitutional powers are complicated, and law professors are often divided on the issue of the scope and limits of presidential power. Haspel’s advocates argue that she would be in a unique position to restrain President Trump, who publicly voiced support of torture, especially as his inner circle is filled up with like-minded advisors. And she would be able to do so for two reasons. First, her main focus is to improve the CIA’s operational capacity—something former director John O. Brennan also sought to do during his tenure at the CIA. During her swearing-in ceremony she discussedboosting the agency’s foreign-language proficiency, strengthening intelligence sharing with allies, and deploying more covert officers abroad to better serve as a foreign intelligence service. Second, she has a good professional relationshipwith Secretary of State Mike Pompeo, having served as his deputy when he was the director of the CIA before accepting his current position. Yet, there was little discussion on how increasing the CIA’s capacity might impact its tendency to inflate threats. For example, declassified CIA documents from the 1950s and 1960s revealed that the United States significantly overestimated the number of Soviet missiles. In January 2018, then CIA Director Pompeo spoke of the growing threats from China and Russia, though there is a great deal of skepticism surrounding this claims. What is even unclear is how Haspel will address the problem of threat inflation. I am preparing for the continuation of a poorly informed hawkish foreign policy that will result in misguided hardline approaches, troop increases, and a sidelining of diplomacy. I just hope it does not include torture’s comeback. The U.S. torture program began under the Bush administration via an executive order in 2002. President Barack Obama ended the CIA’s enhanced interrogation techniques in 2009 but opted not to pursue accountability for those involved— one of the primary reasons why Haspel was able to remain at the CIA and advance her career. On the same day of Trump’s first State of the Union address, when he talked about “annihilating” terrorists, Trump signed an executive order keeping the controversial detention facility at Guantanamo Bay open. During Haspel’s confirmation hearing, Senators Kamala Harris (D-CA), Mark Warner (D-VA), and Susan Collins (R-ME) asked her what she would do if the president asked her to restart the torture program. Haspel replied that while she doubted that Trump would ask her to do so, she would “never, ever take CIA back to an interrogation program”. Nevertheless, when asked if she thought torture was immoral, she bypassed the question numerous times and instead focused on legal issues related to the program. For example, Haspel repeatedly stated that the torture program was legal at the time and, as an intelligence officer, she was simply following the law. But the legality of the program was always questioned, and the CIA continues to declassify details of the torture program. Nevertheless, Haspel’s phrasing evoked memories of the “just following orders” defense at the Nuremberg Trials following WWIII, when Nazi officials argued they were acting under the orders of their superior. This “superior order” legal strategy was rejected by the standing International Military Tribunal. Domestically, the Haspel confirmation process has been odd. The CIA is known for remaining silent and out of the public eyes if it can help it. But when Haspel was nominated, the Agency went out of its ways to advocate for her as the director. She also has a great deal of support from the intelligence community, including Doug Wise, the former deputy director of the Defense Intelligence Agency. The CIA, however, has been selective about declassifying information on Haspel’s career for the Senate Intelligence Committee. For example, the CIA declassified the memo on Haspel’s involvement in the destruction of interrogation tapes, but it redacted all negative information, which should remain a cause for concern. Haspel is the first female director of the CIA, which is a huge achievement for gender parity. But it is not a reflection of the general female experience in intelligence. Women are constantly overlooked for promotions. The intelligence community is also facing its own version of the “MeToo” campaign, called “MeTooNatSec” that will hopefully influence gender relations in a positive way. More significantly, Haspel’s critics state that her stance on torture negates any kind of gender parity she brings. Ultimately, the CIA is an intelligence agency that follows orders. One can only hope that if faced with a situation where the president asks Haspel to engage in questionable intelligence practices, she will do what she said in her confirmation hearing, which is to refuse the president. I, however, remain doubtful that she would. Instead I am preparing for the continuation of a poorly informed hawkish foreign policy that will result in misguided hardline approaches, troop increases, and a sidelining of diplomacy. I just hope it does not include torture’s comeback. Sahar Khan is a visiting research fellow in the Cato Institute’s Defense and Foreign Policy Department.
  • The Singapore Strategy Fascinates Supreme Leader Kim Jong-Un    (Steve H. Hanke, 2018-06-12)
    Steve H. Hanke Reporting of the historic Singapore Summit between President Donald J. Trump and Supreme Leader Kim Jong-un has been fascinating. The lead story in Pyongyang has been on the Supreme Leader’s Singapore walk around, and his desire to learn about economic development from the Singapore Strategy. In the western press, however, Pyongyang’s lead story is nowhere to be found. Kim Jong-un is clearly onto something. As anyone watching telecasts from Singapore during the past few days could observe, Singapore appears to be very prosperous. And it is. Measured by per capita income, Singaporeans are some of the richest people in the world. The economy is capitalist, and capitalist on steroids. That’s why Singapore has shot up from the depths of the Third World, at its founding, to the upper reaches of the First World, today. Singapore gained its independence in 1965, when it was, in effect, thrown out of Malaysia. At that time, Singapore was backward and poor — a barren speck on the map in a dangerous part of the world. If that wasn’t enough, it was experiencing race riots, which came close to igniting a civil war. Singapore’s per-capita income in 1965, adjusted for inflation, was roughly equivalent to that of poor countries like Albania, Angola, Armenia, Guyana, Kosovo, and Mongolia, today. But, at its founding, Singapore had a leader, Lee Kuan Yew. He had clear ideas about how to modernize the country — a strategy which I have dubbed the “Singapore Strategy.” This strategy contained the following elements: The first element was stable money. Singapore started with a currency board system — a simple, transparent, rule-driven monetary regime. Currency boards operate on autopilot, with automatic adjustments keeping the system in balance. Accordingly, currency boards deliver discipline to the spheres of money, banking, and fiscal affairs. For Singapore, the currency board provided stable prices and free convertibility of the Singaporean dollar, which was fully backed by foreign reserves and gold, at a fixed exchange rate. This established confidence and attracted foreign investment. The second element was that Lee Kuan Yew ruled out passing the begging bowl. Singapore refused to accept foreign aid of any kind. This is a far cry from many developing countries, where, when you pick up the paper, all you see are politicians and bureaucrats trying to secure foreign aid from someone, be it an NGO, a foreign government, or an international financial institution, like the World Bank. By contrast, signs reading “no foreign aid” were hung figuratively outside every government office in Singapore. The third element was that Singapore strived to have first-world, competitive private enterprises. This was accomplished via light taxation and light regulation, coupled with completely open and free trade — in short, policies that enabled Singapore to become one of the Asian Tigers. The fourth element in the Singapore Strategy was an emphasis on personal security, public order, and the protection of private property. The fifth, and final, element in the Singapore Strategy was a “small,” transparent government — a minimalist government that avoided complexity and “red tape”. To execute the strategy with precision, Singapore appoints only first-class civil servants and pays them first-class wages. Today, for example, the Singaporean Finance Minister’s annual salary is 1.3 million dollars (USD). In exchange for these high salaries, the Singapore Strategy demands that the government runs a tight ship, with no waste or corruption. By embracing Lee Kuan Yew’s Singapore Strategy of stable money, no foreign aid, first-world competition, law and order, and a government that is free of waste and corruption, Singapore has transformed itself from a poor, barren speck to a global financial center. It should come as no surprise that Singapore today is one of the freest, most flexible, and prosperous economies in the world. Kim Jong-un clearly has his eye on a winning strategy. Maybe the Supreme Leader is a bit more clever than most western observers give him credit for. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
  • President Trump’s Confused Approach to Trade Is One Giant Contradiction    (Ryan Bourne, 2018-06-12)
    Ryan Bourne President Trump’s ideas on trade often seem paradoxical. At the weekend G-7 summit, he floated both abolition of all tariffs worldwide and banning trade with certain countries entirely over the course of just 24 hours. His recent announcement of the removal of exemptions from steel and aluminum tariffs for the European Union, Canada and Mexico was justified on “national security” grounds. Yet reminded that these countries are military allies of the United States, the president retreated to suggesting the tariffs were retaliation for current EU and Canadian trade barriers to U.S. products. Two theories of the president’s approach are consistent with these interventions. The optimistic case for free traders says that Trump is threatening tariffs and using the presidential bully pulpit to try to open up highly protected foreign sectors, and ushering a new era of global free trade. The pessimistic case says the president and his close team are protectionists at heart, and use the veneer of arguments about reciprocity to cover up their true intentions. Rather than seeing free trade as a means of promoting mutually beneficial exchange between buyers and sellers, the president thinks of trade as a zero-sum game that sees nations “winning” if they export more than they import. Sadly, most available evidence now points toward the latter. Over the last three decades there has been a slow but steady liberalization of markets, with tariff rates among advanced economies falling, in large part due to painstaking multilateral negotiations and trade deals. According to World Bank data, the weighted mean applied tariff rate for the U.S. and EU are near identical at 1.6%, and even lower in Canada at 0.8%. Mexico is higher at 4.4%, but given this has tumbled from 15.5% just 15 years ago, and many goods are traded tariff-free with the U.S. due to Nafta, focusing on these countries seems an odd place to start if your aim is a freer global trading environment. That is not to say that there are not egregiously overprotected markets in the EU and Canada. All countries seem to have some well-organized vested interests who resist this pull toward open competition. President Trump is correct that the Canadian dairy sector uses a “supply management” system incorporating tariff rates of up to near 300% on dairy products for imports beyond quotas. These do raise prices for Canadian consumers and discourage importation of American produce. The European Union likewise imposes much higher tariffs on American car imports than vice versa (10% vs. 2.5%), though the U.S. imposes higher tariffs than the EU on trucks. The world as a whole would be better off if these restraints were gone entirely. But reversing the progress made because of unusually high tariffs in certain sectors is misguided. If the president were a free trader at heart, one might imagine he would celebrate the overall progress, and push to go further. He would practice what he preaches, taking on his own domestically protected sectors, as in sugar, where federal interventions, tariffs and production quotas raise the American sugar price to almost double the world price. At the very least, he would argue his steel and aluminum tariffs were merely a necessary evil to compel broader liberalization overseas. Yet this is not the argument the president or his key advisers make. When it comes to the aluminum and steel tariffs, for example, Trump adviser Peter Navarro has claimed, rather dubiously, they have encouraged a new aluminum mill in Kentucky and restarted steelmaking facilities in Illinois. He appears indifferent or willing to ignore the impact raising the price of a key input will have for the 6.5 million workers in industries that consume steel, instead claiming they are “pro-worker”. This is not the line an administration would take if they saw steel and aluminum tariffs as a damaging short-term pill to swallow to compel a more liberal trading environment in future. Indeed, everything from Trump’s obsession with economically meaningless bilateral trade deficits, to his constant focus on producers, rather than consumers, suggests that “exports good, imports bad” represents Trump’s worldview. Rather than seeing free trade as a means of promoting mutually beneficial exchange between buyers and sellers, the president thinks of trade as a zero-sum game that sees nations “winning” if they export more than they import. The danger with this thinking now is that nationalism begets nationalism. A world in which the U.S. president seeks to bully other countries to lower particular tariffs in certain areas but offers up no firm proposals to take on its own highly protected sectors is a world in which EU countries and Canada feel unfairly singled out, and retaliate in kind. Focusing on individual, politically sensitive foreign sectors (troublesome as they are) risks unwinding the true progress that has been made over many decades. Economists will carefully explain to all sides that higher tariffs harm domestic economies by generating investment-deterring uncertainty, raising prices for consumers, and undermining overall efficiency (as producers are insulated from global competition and face higher input prices). But the president seems indifferent to their protestations, instead offering his biggest contradiction of all: that tariffs will be good for the U.S. today, but that the abolition of tariffs will be good for the economy in future. Ryan Bourne occupies the R. Evan Scharf chair for the Public Understanding of Economics at the Centre for Economic Studies at the Cato Institute.
  • Corbyn's Tipping Tirade Lays Bare His Anti-Business Agenda    (Ryan Bourne, 2018-06-12)
    Ryan Bourne Jeremy Corbyn has had another brainwave. The Labour leader wants to make it illegal for businesses to “pocket” tips and optional service charges. Some restaurants and hospitality firms currently collectivise what we add to our bills or give to waiters and waitresses. They might directly pool tips to redistribute them through a common fund system or add them to general revenues. For Corbyn, these actions amount to theft. “It is not right that workers have their tips stolen by bosses,” Corbyn said. The next Labour government will ensure that “workers keep 100 per cent of their hard-earned tips”. Imposing strait-jacket regulation across a variety of businesses is the order of the day. Let’s leave aside the fact that workers would keep far from 100 per cent, given the high taxes likely under a Corbyn administration. Unfortunately, the Labour leader is not alone. He is making the same mistakes as then business secretary Sajid Javid made when discussing this subject: first, assuming that social expectations about where tips go can harmlessly be enshrined in legislation; second, failing to differentiate between the flow of cash and the overall economic impact. In fact, imposing a one-size-fits-all “tip must go to worker” regulation could adversely affect businesses and workers alike, given the different nature of restaurant models and how managers use tipping to adjust total compensation. Restaurant-specific tipping practices can be an important way to deal with risk, manage staff morale, and ensure that customers get a good service. Though less important generally in Britain than in the US, basic tipping can play an important economic function. Consider the set-up that Corbyn has in mind, in which, say, a single waiter or waitress serves a set of tables exclusively. The purpose of tips here is to be a form of risk-sharing for the restaurant, particularly if it is not easy to observe the behaviour and competence of wait-staff. Tips lower the underlying hourly wage a restaurant might need to offer to attract staff (lowering fixed costs), and total remuneration for a worker becomes linked to customer satisfaction. This averts the need for workplace performance assessments and controversial wage negotiations for each and every staff member. However, even this simple example (to say nothing of larger, more complicated restaurant set-ups) highlights reasons why it might make sense to deal with tips differently. In very small restaurants or established chains, where behaviour is observed or customer expectations simple, it could make more sense to adjust overall pay rates and put any tips into general revenue toward that. If the work is relatively homogenous, staff might resent a tipping “lottery”, where lucky workers benefit from generous tippers and other wait-staff who work just as hard do not. It can therefore make sense for restaurants to centralise this pot for distribution, or see it as general revenue, for the restaurant as a whole. That is exactly what lots of restaurants do, distributing tips through formulae in many cases. This amounts to some centralised assessment of what components of the customer experience generate the extra revenue, which is subsequently used to set a system to reward good performance, individually or collectively. Think about it: when you go for dinner, do you really just tip based on the likeability or performance of your waiter? Or do you also take into consideration whether the manager was accommodating with your table preference, the food was good and prepared in a timely manner, the server spilled food over you, and the restaurant had your favourite dessert available? It’s pretty obvious that lots of these things are outside the gift of the waiter or waitress. A strict version of Corbyn’s proposal would simply make it more difficult for firms to find imaginative ways to incentivise staff, and could in some cases work out as less fair than the system he is criticising. No doubt firms would adjust in other ways: underlying pay rates and consumer prices would be tinkered with. But as Labour is also proposing a significant national living wage hike, many restaurants would have to cope with both higher fixed costs and less control of potential income. In fact, this whole proposal speaks volumes about Labour’s economic ideology in general. Nefarious restaurant owners (for which we can read business bosses in general) are regarded as having the market power and desire to screw over their workers at every available opportunity, while any perceived injustice can supposedly be corrected without harm by central diktat. Imposing strait-jacket regulation across a variety of businesses is the order of the day. No thought is given to how this might affect norms and conventions that businesses adopt to solve their own challenges and balance the needs and desires of staff, customers, and managers. It starts with restaurants, and ends with the whole economy. Ryan Bourne holds the R Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute.
  • Fiscal Blunders in Barbados Spell Gloom and Doom    (Steve H. Hanke, 2018-06-11)
    Steve H. Hanke Barbados is begging for handouts in the form of debt relief. This is nothing new for countries in the Caribbean region. Indeed, since 2010, St. Kitts and Nevis, Antigua and Barbuda, Belize, Grenada, and Jamaica have all been hit by financial distress and debt defaults. This distress can be laid at the feet of fiscal mismanagement and blunders. In Barbados, the newly elected Prime Minister Mia Mottley at least had the courage to recently utter a little-known truth. Once undisclosed liabilities are added to the Barbados fiscal tab, its overall debt as a percent of GDP surges from 137% to 175%. A bleeding budget and fiscal deficits have resulted in Barbados’ mountain of debt. The biggest source of the bleeding has been transfers to state-owned enterprises (SOEs). The largest expenditure category in the budget are “transfers”, with a whopping 60% of the total transfers going to SOE zombies. There is only one proven way to stop the budget bleeding caused by the SOEs. Barbados should privatize its zombies. But, though privatization may stop some of the budget’s hemorrhaging, it won’t stop all of it. To save the patient, fiscal order and transparency must be established. Barbados currently lacks the fiscal institutions to control the budget deficits and government spending. To put its fiscal house in order, Barbados’ government should publish a national set of accounts. These should include a balance sheet of its assets and liabilities and an accrual-based annual operating statement of income and expenses. These financial statements should meet international accounting standards and should be subject to an independent audit. Just what is an accrual-based operating statement? At present, accounts in Barbados are kept on a crude cash basis. Revenues and expenditures are recorded when cash is received or paid out. With accrual accounting, spending and revenues are recorded when they are incurred, regardless of when the money actually changes hands. Accrual accounting gives a much more accurate picture of the realities and avoids the many financial tricks that politicians can play with cash accounting. For example, under cash accounting, politicians can promise pensions for future retirees, but since no money is paid until people retire, there are no budgeted costs under cash accounting until the pensions are paid. With accrual accounting, the promises to pay future pensions would appear in the government’s accounts when the promises for future obligations are made. Consequently, under accrual accounting, the government cannot distort the magnitude of its spending obligations. Do any countries use accrual accounting for their public accounts? Yes. For instance, New Zealand started to use it in 1989. As a result, New Zealand presents a far more transparent and honest picture of its government operations than do most other governments. This has allowed New Zealand to make more informed decisions and control its budgets more effectively. In addition to rigorous and transparent accounts, supermajority voting should be established for important fiscal decisions. Many countries do require supermajority voting for important decisions. Such a voting rule protects the minority from the potential tyranny of a simple majority. The arithmetic of the budget shows us that two new fiscal rules would be sufficient to control the scope and scale of the government and protect minority interests. Total outlays minus total receipts equals the deficit, which in turn equals the increase in the total outstanding debt. Rules that limit any two of these variables (total outlays, total receipts, or the deficit) would limit the third variable. Which two variables should be limited? The easiest way to answer the question about which two variables should be limited by supermajority voting rules is to sketch an amendment to the Barbadian constitution: Section 1. The total Barbadian debt may increase only by the approval of two-thirds of the members of the House of Assembly and the Senate. Section 2. Any bill to levy a new tax or increase the rate or base of an existing tax shall become law only by approval of two-thirds of the members of the House of Assembly and the Senate. Section 3. The above two sections of this amendment shall be suspended in any fiscal year during which a declaration of war is in effect. The adoption of these three rules would generate a significant confidence shock in Barbados. And, with that, an investment boom and prosperity would follow. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
  • Capitalism's Critics Need to Be Told About Its 200 Years of Success    (Ryan Bourne, 2018-06-11)
    Ryan Bourne Sometimes, there’s nothing more controversial than a self-evident truth, especially on Twitter. Want to trigger a swarm of angry Corbynistas? Mention how capitalism has greatly reduced material misery in the past 200 years. “If you honestly believe that, I actually feel bad for you,” one replied. Others mused that capitalism was responsible for slavery, war, poverty, hunger, and inequality. All of which would be news to anyone who has studied pre-19th century history. Whether through ignorance or utopianism, lots of people forget we live in unprecedented prosperity. Poverty is not a product of capitalism, but has been with mankind for all time. The facts speak for themselves. Prior to the Industrial Revolution, most people lived on about £2.20 per day, or £800 per year in today’s money, according to economic historian Deirdre McCloskey. In 2015, average earnings for a full-time UK employee were £27,600. But it’s not just income. Capitalism has liberated us from back-breaking agricultural and domestic toil, reducing average hours worked considerably. Crop yields have risen. Undernourishment has collapsed. Access to electricity has dramatically increased. Global average life expectancy rose from 52.5 years in 1960 to 71.6 in 2015 alone. Yes, there are costs to development, including on the environment (though these days wealthy countries are far more environmentally friendly than poor). But the idea capitalism itself makes us sicker, more exploited and poorer is a historical nonsense. The Corbynistas implicitly admit as much when they pivot to extolling how rich we are to justify ramping up government spending. As the American conservative commentator Jonah Goldberg explains in his new book, Suicide of the West, the past 200-plus years have been a “miracle” in the truest sense of the word. The take-off in human flourishing is largely unexplained by conventional economics, because lots of the components we take as partial explanations — trade, property rights, and technological advances — were found in previous societies, without the dramatic results. Both Goldberg and McCloskey conclude that a combination of ideology and rhetoric, including the elevation of individual liberty and innovation, were critical factors that birthed the golden egg-laying goose. The major problem is capitalism is unnatural. Human nature is instinctively tribalistic, even socialistic. We’ve got rich not because we are now free to act on our instincts, but because we developed a system restraining them. But our innate, romantic tribal desires live on. In an era in which civil society is weak, we put more demands on politics to fulfil it, in turn blaming alien capitalistic institutions for all ills. The result is fomenting across developed countries. On the Left, through increasing identity politics, and resurgent socialism; on the Right, burgeoning anti-immigrant feeling and nationalism; on both, rabid partisanship and politics as a “team sport”. At best capitalism’s critics are complacent that growth and material prosperity will go on forever, irrespective of how much institutions and norms are corrupted. At worst, they do not care. But when shadow chancellor John McDonnell states his desire to “overthrow capitalism” or substantially erode property rights, or when Donald Trump singles out individual companies or orders businesses to purchase energy from struggling suppliers, we should worry about the longer-term consequences. For just as we talked ourselves into the miracle, logic suggests we can talk ourselves out of it. That’s not to say that all politics risks our economic inheritance. There has and will always be a legitimate debate about how to assist the poor, from classical liberalism to aggressively redistributive social democracy. The former elevates freedom from government restraint as an end, and the latter the so-called “positive” freedom that comes about from state security. Importantly though, both champion the concept of liberty, just in different manifestations. But right now this settlement and these ideas are under attack, and conservatives are failing to defend institutions worth actually conserving. In the US, plenty of erstwhile conservatives embrace nationalistic interest-group politics purporting to elevate “the people” against elites. Former Trump adviser Steve Bannon even believes there is a “dominant political force coming in American politics” with “elements of Bernie Sanders coupled with the Trump movement”. And this is logical. A tribal politics based on “the nation” will inevitably lead to socialism, because the only institution that can claim to act on behalf of the whole nation is the national government. Here, Priti Patel was right this week too to say the Conservative Party is lazy in the battle of ideas. With the notable exception of the redoubtable Liz Truss, few Conservatives extol the economic liberties that underpin our prosperity. Even fewer express support for strong families, civil society institutions and charities. Instead, faced with resurgent socialism, the Conservatives sound apologetic about market economics, and increasingly jettison personal responsibility in favour of government curing “burning injustices”. Vacating the field in these debates though is a dangerous game. Failure to express the miracle, why it happened and why it must be defended gives capitalism’s critics a free run. It may well be that right now, the public’s taste for high living standards, fading memory of the Seventies decline, and appreciation of failing regimes around the world checks the rise of British socialism. But if the story we tell ourselves is that everything is disastrous, then the overturning of existing institutions will follow. Former US president Ronald Reagan once said: “Freedom is a fragile thing and is never more than one generation away from extinction.” He may have been exaggerating. But history suggests our prosperity is dependent on ideas. And at the moment, a politics appealing to our base instincts risks turning allowing bad ideas to fruition. Ryan Bourne is the R Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute
  • The U.S.-North Korea Summit: Some Daunting Obstacles    (Ted Galen Carpenter, 2018-06-11)
    Ted Galen Carpenter The on-again, off-again summit meeting between President Donald Trump and North Korean leader Kim Jong-Un is on again. However, crucial conditions must be met for the event to become anything other than a brief photo opportunity that later descends into an exchange of vitriol. Various experts have argued that Kim must commit to his country’s complete de-nuclearization for the summit to succeed. That may well be true, and it is highly uncertain whether he is willing to take such a drastic step. Even if he does, there also must be important changes in U.S. policy. Two shifts are imperative. One is that Washington must abandon its fixation on the “Libya model” as the outcome it seeks. Vice President Mike Pence, Secretary of State Mike Pompeo, and National Security Advisor John Bolton have all invoked that model in recent weeks. Their citation of the Libya agreement has led critics to wonder whether those outspoken hawks are trying to sabotage the negotiations. One could scarcely come up with an argument less likely to induce Kim to compromise than highlighting the Libya precedent. Even if President Trump is willing to embrace maximum diplomatic flexibility, the odds still are against a comprehensive agreement emerging from the summit. An accord was reached between Libyan dictator Muammar Qaddafi and the Western powers in 2003 following the U.S.-led invasion and occupation of Iraq. The Libyan leader appeared to be trying to avoid Saddam Hussein’s fate. Qaddafi agreed to abandon Libya’s embryonic nuclear program and revive Tripoli’s adherence to the Nuclear Nonproliferation Treaty. In exchange, the Western powers agreed to lift the economic sanctions they had imposed on Libya, normalize their relations with Tripoli, and welcome Qaddafi’s government back into international forums and institutions. There are two problems with an attempt to apply the Libya model to North Korea. First, there is a massive difference between the Libyan and North Korean nuclear programs. Tripoli’s effort was in its infancy, so agreeing to abandon it was not a huge concession. Pyongyang’s program is far advanced. Indeed, most experts believe that the country has enough nuclear material to build more than a dozen weapons, and the regime very likely has built and deployed nearly that number already. North Korea has conducted several underground nuclear tests as well as multiple tests of ballistic missile delivery systems. In other words, Washington is asking Kim to give up an existing, albeit still modest, nuclear arsenal. That is a much greater concession than Qaddafi was expected to make. But there is a second, even more important, reason why the Libya model is sheer poison to North Korea. Kim and his colleagues remember all-too-well what happened to Qaddafi after he relinquished his nuclear program. When another in a long series of revolts erupted against his rule in early 2011, the United States and its NATO allies double crossed the Libyan leader and backed the rebels. In other words, they launched a regime-change war. U.S./ NATO air and cruise missile strikes were crucial factors in the insurgents’ successful revolution. Not only did they overthrow Qaddafi, they tortured and executed him in a most gruesome manner. U.S. officials are being utterly obtuse if they think North Korean leaders do not recall what happened to the Libyan strongman once he gave up his country’s nuclear program. Members of North Korea’s political elite recall that outcome with great clarity, including Washington’s duplicity. Kim and his associates are not likely to put their necks in a similar noose. Following Qaddafi’s demise, they specifically cited the episode as a key reason why their country needed to build and retain a nuclear deterrent. If the summit meeting is to succeed, the Trump administration must abandon all references to the Libya model and all hope of achieving a similar agreement. Another change that must occur in Washington’s approach is a greater willingness to make concessions that meet North Korea’s principal policy objectives. Those demands are long-standing and straightforward. Pyongyang wants a full, formal treaty ending the Korean War. The 1953 armistice suspended combat operations, but it did not resolve the underlying diplomatic and political questions. Both the United States and China would have to add their signatures to the agreement that Kim and South Korean President Moon Jae-In signed in April, or more likely, all four parties to the conflict would need to sign a broader treaty to achieve that goal. Pyongyang wants Washington to extend diplomatic recognition to the Democratic People’s Republic of Korea (DPRK) and lift the economic sanctions that Washington and its allies have imposed over the decades. Those two issues are certain to be at the forefront of any summit meeting that takes place between Kim and President Trump. Other issues include Pyongyang’s demand for an end to the annual military exercises between U.S. and South Korean forces, the withdrawal of U.S. “nuclear and strategic assets” from South Korea, and, at some point, the withdrawal of all U.S. forces from the Peninsula. Washington’s key demand will be for North Korea’s full denuclearization, including the shipment of all existing warheads out of the country and a system of inspections to ensure Pyongyang’s continuing compliance with a nonnuclear status. President Trump must decide if the United States is willing to make all, or at least most, of those concessions in exchange for North Korea’s ironclad agreement to relinquish its existing nuclear weapons and forego any future nuclear ambitions. Unless U.S. leaders are prepared to take that step, hopes for lasting peace on the Peninsula will be stillborn. In addition to meeting such North Korean demands, the Trump administration must be willing to offer the DPRK a nonaggression pact or security guarantee. That means a written agreement reassuring Kim that the United States is now out of the forcible regime-change business. There is a potential complication, though. Washington may well press Beijing to provide a guarantee that North Korea will remain nonnuclear, if the United States meets Pyongyang’s demands. It is not certain whether Beijing would be willing to offer a guarantee of good behavior on the part of its longtime, but volatile, ally. Moreover, North Korea may well want China to add its signature to any security guarantee that the United States offers. Just as American leaders are likely to be wary of a paper promise of denuclearization from Pyongyang, Kim is not likely to place extensive trust in a promise from Washington that the United States will not pursue forcible regime change at some point. Taken together, these factors suggest that even if President Trump is willing to embrace maximum diplomatic flexibility, the odds still are against a comprehensive agreement emerging from the summit. At best, the meeting is likely to produce only a few, initial steps toward such an objective. And even that achievement will require U.S. leaders to abandon their fixation on the Libya model and make concessions that they have declined even to consider until now. If those obstacles can be overcome, however, there is at least a glimmer of hope for progress toward lasting peace on the Korean Peninsula. Ted Galen Carpenter, a senior fellow in defense and foreign policy studies at the Cato Institute and a contributing editor at The American Conservative, is the author of 10 books, the contributing editor of 10 books, and the author of more than 700 articles on international affairs.
  • Bad Rules Can Cost Money Even Before Being Implemented    (Ike Brannon, 2018-06-11)
    Ike Brannon Beryllium is not exactly the sexiest of the elements, but I feel compelled to write about it just the same. While it is relatively rare in the universe and has only a few useful applications, it does happen to be incredibly useful in those applications. For instance, because it is so light (its atomic number is 4) and forms a strong alloy with other metals, it is essential in the construction of satellites and spaceships. It turns out the the metal is also harmful to humans should they ingest it. For nearly all of us that is not remotely possible, but for some people who work in the industries and occupations that produce or use beryllium, especially those that do abrasive blasting work, exposure can be a concern. As it happens, workers in such industries also face potential exposure from other possible contaminants as well, a reality that some time ago led to OSHA to require that that companies take multiple steps to protect these workers in some way. When Washington imposes confusing, unnecessary and burdensome regulations there are always unanticipated winners and losers that go beyond mere compliance costs. Abrasive blasting is already subject to over two dozen OSHA rules governing worker safety, including preventative measures to avoid undue exposure to airborne chemicals. As a result, illnesses from exposure to beryllium in these industries have been all but nonexistent in the U.S. The Occupational Safety and Health Administration several years considering whether to reduce the already-low exposure standards for beryllium. It had preliminarily decided to exempt abrasive manufacturers, since it did not appear that new regulations would not result in any discernible safety improvements, but its final regulation, issued in the waning days of the Obama Administration, contained no such exemption. I argued at the time that this last-minute increase in the rule’s scope made no sense at all; it was done without public input on those changes to the rule, it was unnecessarily intrusive on an industry that had no instances of beryllium-related illnesses, and it certainly flunked any objective cost-benefit analysis. The Trump administration agreed that the haste with which OSHA made those last minute changes was unwarranted, and in March 2017 it announced a delay of the rule to give it time to reconsider its scope. However, while the postponement may have allowed companies that would have been affected by its implementation to avoid—or at least delay—spending on costly methods to reduce beryllium exposure, OSHA’s actions may nonetheless cost them. Some abrasive manufacturers have begun to seize on the proposed rule to market their products as “beryllium free.” The implication is that glass abrasives are supposedly safer and less costly than other abrasives, like coal slag, because they happen to already comply with the proposed OSHA rule. The problem is that such a statement is patently false. The only published study on beryllium content in different abrasive types finds that all abrasives contain enough beryllium to hit OSHA’s new exposure limits, but that exposure is mitigated by pre-existing OSHA safety rules, like the requirement that blasters wear personal protective equipment. When Washington imposes confusing, unnecessary and burdensome regulations there are always unanticipated winners and losers that go beyond mere compliance costs. Private companies exploit the confusion created by redundant and complicated rules to denigrate its competitors and boost market share. A similar phenomenon occurred when the Clinton Administration dramatically reduced the allowable exposure limits to arsenic beyond what could be justified by any cost-benefit analysis at the end of that administration. People were made to fear even the most minute exposure to the element, which led to people foolishly spending thousands of dollars to tear down perfectly good decks made with pressure-treated wood that had a coating containing small amounts of arsenic simply because of some mistaken perception that they could get arsenic poisoning from sitting on it. Further reducing exposure to potentially hazardous elements is not an automatically sensible thing to do. If it is costly to do so and does little to benefit public health, then forbearance is the better approach. In a world of finite resources it is a dictum that bears repeating. Ike Brannon is a visiting fellow at the Cato Institute and president of Capital Policy Analytics, a consulting firm in Washington DC.
  • Trump's Anti-Opioid Ads Won't Work    (Jeffrey Miron, Robert Capodilupo, 2018-06-09)
    Jeffrey Miron and Robert Capodilupo This week the Trump White House unveiled its highly-anticipated advertising campaign that aims to reduce opioid overdose deaths in the United States. According to the administration, these commercial - which depict anecdotal stories of drug users intentionally harming themselves to acquire more prescription opioids—are an attempt to “shock the conscience” of the American people, specifically youth, and steer them away from opioid use. But while anti-drug media campaigns are a perennial favorite of politicians, little evidence suggests this advertising has any significant effect in reducing drug use. Indeed, the Trump Administration is not the first to utilize advertising and public service announcements in an effort to curb drug use. Most notable was the Reagan Administration’s “Just Say No” campaign, which employed widespread advertising and outreach to discourage drug use among children. Since then, several federally funded ad campaigns have pursued this cause, including the 1998 National Youth Anti-Drug Media Campaign, which targeted marijuana use by teens. The results are disappointing, at best. According to an evaluation of the National Youth Anti-Drug Media Campaign, this program failed to affect teen attitudes toward marijuana. In fact, “more ad exposure predicted less intention to avoid marijuana use…and weaker antidrug social norms.” Thus the campaign may have undermined its goal of steering American youth away from drugs. The White House’s anti-opioid advertisements represent the reprisal of a failed approach to drug policy. Similarly, a 2015 review of 19 studies analyzing anti-drug media campaigns found only mixed evidence of positive impacts. Of the programs reviewed, only four seemed to reduce use, while eight had no effect and two seemed to increase use. The review cautions that, “[c]ontrary to common belief, antidrug media campaigns may be damaging.” A plausible explanation is that advertisements imply that drug use is common. Robert Hornik finds that “more ad exposure was associated with the belief that other youths were marijuana users, and this belief was predictive of subsequent initiation of marijuana use.” And these campaigns are not free. The National Youth Anti-Drug Media Campaign, which ran between 1998 and 2004, cost an estimated $1.2 billion. The cost of President Trump’s anti-opioid campaign is not yet known, but The Hill has reported that “likely millions of dollars would need to be behind a national media blitz.” This for an initiative shown in analogous cases to have negligible or even perverse effects. Perhaps in response to these concerns, the administration emphasizes that anti-opioid advertisements are only part of its efforts to curb opioid use. Indeed, President Trump’s plan to reduce overdoses includes several interventions, including the death penalty for drug dealers, tougher immigration restrictions, and greater restrictions on legal opioid prescriptions. All these policies are misguided, but tighter restrictions on the amount of prescriptions doctors can issue are especially concerning. The DEA has proposed limiting opioid production in the United States by 20% over the course of this year, which will harm patients who need opioids for medical reasons. As Diederik Lohman, Director of Health and Human Rights for Human Rights Watch told the Pain News Network that without access to these drugs, people face “tremendous suffering that actually could be relieved pretty easily through very inexpensive palliative care and pain management.” Worse, restrictions on opioid prescriptions push those who want opioids, for whatever reason, to the black market, where the risks of opioids are far greater due to lack of information about potency. Since federally inspired crackdowns on prescriptions began in 2010, overdoses have risen even faster as consumers substitute their prescriptions with heroin, often laced with even more potent fentanyl. Contrary to the claim that prescribing causes overdoses, the evidence shows that limits on access to opioid prescriptions generate overdoses. The White House’s anti-opioid advertisements represent the reprisal of a failed approach to drug policy. Likewise, past attempts to double down on prohibition have only made drug use more dangerous, while also fostering crime and corruption. If President Trump truly wishes to reduce overdose deaths, he should look away from the television camera and towards the harmful effects of his own restrictions on prescribing. Jeffrey Miron is director of economic studies at the Cato Institute and the director of undergraduate studies in economics at Harvard. Robert Capodilupo is an undergraduate student at Harvard, studying Government and Economics.
  • Venezuela's Inflation Breaches 25,000%    (Steve H. Hanke, 2018-06-08)
    Steve H. Hanke When it comes to hyperinflation, we can measure it with great accuracy. But, it is impossible to produce meaningful hyperinflation forecasts. During episodes of hyperinflation, their courses and durations change so rapidly, and so dramatically, that predictions are a fool’s errand. Indeed, hyperinflations are so unstable and unpredictable that even forecasting the inflation rate for a coming month with any degree of accuracy is impossible. However, this has not deterred the International Monetary Fund (IMF). The IMF repeatedly produces forecasts (read: finger in the wind guesses) of Venezuela’s inflation rate. These guesses appear regularly in the IMF’s bi-annual World Economic Outlooks (WEO). What does not appear in the WEO reports, however, are inflation measurements. Just how looney are the IMF’s guesses? To answer that question, consider that the IMF forecast for Venezuela’s 2018 year-end annual inflation rate is 12,874.6%. On May 30th, I accurately measured Venezuela’s annual inflation rate, and for the first time, it breached 25,000%, and today, May 31st, it sits at 27,364% (see chart below). That’s more than double the IMF’s year-end inflation forecast, and there are still seven months left to go until year-end. And this is only one example of the IMF’s carelessness. In the same April 2018 WEO report, the IMF forecasts that Venezuela’s inflation rate at the end of 2019 will be exactly the same as the IMF estimate for the end of 2018, namely 12,874.6%. And when I say “exactly,” I mean “exactly.” Down to the last decimal point. Talk about spurious accuracy. Why does the IMF’s carelessness matter? After all, who cares if the IMF is delivering faulty forecasts? Well, the financial press should care. The Central Bank of Venezuela no longer reports annual inflation rates. So, there is no official Venezuelan source for information on what is, in fact, currently the world’s highest inflation rate. So where can the financial press turn for an “official” number? As is often the case, the press turns to the IMF. The problem is that the press, for the most part, merely reports the IMF’s forecasts, without so much as a mention of the fact that inflation forecasts during an episode of hyperinflation are nonsense. So, where can we find accurate measurements of Venezuela’s hyperinflation? There are two ways to measure inflation during episodes of hyperinflation. One way, which is practical, accurate, and cost-effective, is to employ Purchasing Power Parity (PPP) theory. That’s what I do. Using high-frequency, black-market exchange rate data, I am able to calculate an implied annual inflation rate for Venezuela on a daily basis. The PPP approach has time and again proven to be extremely accurate in hyperinflationary environments. My daily measurements of Venezuela’s inflation rate are posted on my Twitter. The second method for measuring hyperinflation involves going out in the field and actually sampling the prices of a “basket” of goods that make up a price index, such as a consumer price index. When prices of goods in the index are compared over time, an inflation rate can be calculated for the individual items that make up the index, as well as for the index itself. This second method represents the standard approach for measuring inflation. It is suitable for situations in which prices are not moving too rapidly. But, this is not the case during an episode of hyperinflation. In Venezuela, for example, prices, by my measure, using high-frequency data, are doubling every 29 days. This makes measurements based on data gathered from the field inaccurate, simply because the samples can’t be taken frequently enough. For example, when the standard method is used, measurements for some goods in a consumer price index are taken at the start of the month, while others are taken at the end. In consequence, the inflation rate represented by changes in the consumer price index will be way off the true rate of inflation. Therefore, accurate measurements during an episode of hyperinflation require high-frequency (read: daily) data. That said, since December 2016, the opposition-controlled National Assembly of Venezuela (NA) has attempted to use the standard approach to construct a consumer price index, and to calculate inflation. How well has the NA done? The chart below compares the results of the NA’s standard approach with a 30-day moving average of my PPP-based approach. We can see that the NA’s measurements are roughly in line with my PPP-based method, which is the “gold standard” for measuring hyperinflation. While the National Assembly’s measurements have been credible, the problems inherent in their methodology will become more apparent if Venezuela’s hyperinflation accelerates. With an acceleration, the National Assembly’s measure will probably begin to underestimate and lag behind the PPP “gold standard” measurement. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
  • As Fentanyl Floods the Streets, Don't Blame Doctors, Patients    (Jeffrey A. Singer, 2018-06-08)
    Jeffrey A. Singer U.S. Food and Drug Administration Commissioner Scott Gottlieb announced a one-day “Online Opioid Summit” to be held in June to discuss “the compelling ease with which average Americans can now purchase illicit opioids online.” According to the federal Drug Enforcement Administration, while Mexican cartels play a role by using its well-established heroin and methamphetamine distribution networks, most of the fentanyl comes into the U.S. from China. The overdose crisis has always been primarily due to nonmedical users accessing drugs in the dangerous black market that results from drug prohibition. While some unethical and unscrupulous doctors used their medical degrees to disguise their drug dealing operations in the form of “pill mills,” these were extreme exceptions to how doctors practice medicine and have been largely eradicated. Yet their behavior played into the false narrative to which misguided policymakers stubbornly cling. For nearly 10 years, policymakers have been deluded into thinking that reducing prescriptions will reduce overdose deaths. State-based prescription drug monitoring programs already contributed to reducing the prescription of high-dose opioids by over 41 percent since 2010, the peak year of opioid prescribing. And opioid production quotas, set by the DEA, were cut 25 percent last year and another 20 percent this year. It was hoped that reducing the number of opioids in circulation would leave less available for diversion into the black market. Fighting the war on drugs is like playing a game of Whac-A-Mole. Doctors and patients are the wrong targets. The prescription cutdown has made many pain patients suffer needlessly and cruelly. Some have turned to suicide. Others access the black market for substitutes like heroin or fentanyl. As is always the case with prohibition, purveyors of illicit substances find new ways to satisfy market demand. Sometimes that involves substituting old drugs with new, more powerful ones. This was seen during alcohol prohibition as well, when bootleggers pushed whiskey over beer and wine. And so the overdose rate continues to climb. Dealers are responding to market forces. Online distributors throughout China frequently sell fentanyl over the “dark web,” often shipping the products to the U.S. via the U.S. Postal Service or United Parcel Service. This is the way most fentanyl makes it on to the street, according to the DEA. The U.S. Centers for Disease Control and Prevention reports fentanyl caused 26,000 overdose deaths in 2017. For the past few years, fentanyl and heroin have been the major causes of opioid overdose deaths. The National Survey on Drug Use and Health reports nonmedical use of prescription opioids peaked in 2012, and total prescription opioid use in 2014 was lower than in 2012. Last week, Nebraska State Patrol confirmed its spectacular drug bust of April 26 turned out to be “entirely fentanyl.” A total of 118 pounds of the white powder was seized, more than 26 million lethal doses. Last January, two men were sentenced to prison for smuggling nearly 100 pounds (roughly 18 million lethal doses) into the New York/New Jersey region in mid-2017. Many dealers use pill presses to make counterfeit OxyContin or Vicodin pills and trick nonmedical users into thinking they are buying the real thing. That’s how Prince died. The singer/songwriter abused Vicodin. Records show he never got prescriptions from doctors. He died from ingesting counterfeit Vicodin pills he obtained on the black market that turned out to be fentanyl. Policymakers remain fixated on the false narrative that the overdose crisis is the result of doctors overprescribing opioids to their patients in pain, who then get hooked on opioids and become trapped in the web of addiction. But Prince’s tragic death actually typifies what is really happening. A 2009 University of Pennsylvania study of OxyContin abusers found 78 percent of them had not received a prescription for any medical reason, 86 percent said they used the drug to “get high or get a buzz” and 77 percent gave a history of prior rehab for substance abuse. According to the National Survey on Drug Use and Health, less than 25 percent of nonmedical opioid users obtain prescriptions from a doctor. Three-quarters obtain them from a friend, relative or dealer. Meanwhile, like a broken record, policymakers are intent on further reducing opioid prescriptions, as if that will do anything other than exacerbate matters. Columbia University researchers last month found evidence that the present restrictive opioid policy is not lowering overdose rates, but merely pushing nonmedical users to more dangerous drugs, making patients suffer in the process. This comes after two earlier studies came to similar conclusions. Drug dealers are quickly responding to the reduced supply of “diverted” prescription opioids with deadlier substitutes. Fighting the war on drugs is like playing a game of Whac-A-Mole. Doctors and patients are the wrong targets. Until drug prohibition is recognized as the culprit, don’t expect the death rate to go down. Jeffrey A. Singer practices general surgery in Phoenix and is a senior fellow at the Cato Institute.
  • As Fentanyl Floods the Streets, Don't Blame Doctors, Patients    (Jeffrey A. Singer, 2018-06-08)
    Jeffrey A. Singer U.S. Food and Drug Administration Commissioner Scott Gottlieb announced a one-day “Online Opioid Summit” to be held in June to discuss “the compelling ease with which average Americans can now purchase illicit opioids online.” According to the federal Drug Enforcement Administration, while Mexican cartels play a role by using its well-established heroin and methamphetamine distribution networks, most of the fentanyl comes into the U.S. from China. The overdose crisis has always been primarily due to nonmedical users accessing drugs in the dangerous black market that results from drug prohibition. While some unethical and unscrupulous doctors used their medical degrees to disguise their drug dealing operations in the form of “pill mills,” these were extreme exceptions to how doctors practice medicine and have been largely eradicated. Yet their behavior played into the false narrative to which misguided policymakers stubbornly cling. For nearly 10 years, policymakers have been deluded into thinking that reducing prescriptions will reduce overdose deaths. State-based prescription drug monitoring programs already contributed to reducing the prescription of high-dose opioids by over 41 percent since 2010, the peak year of opioid prescribing. And opioid production quotas, set by the DEA, were cut 25 percent last year and another 20 percent this year. It was hoped that reducing the number of opioids in circulation would leave less available for diversion into the black market. Fighting the war on drugs is like playing a game of Whac-A-Mole. Doctors and patients are the wrong targets. The prescription cutdown has made many pain patients suffer needlessly and cruelly. Some have turned to suicide. Others access the black market for substitutes like heroin or fentanyl. As is always the case with prohibition, purveyors of illicit substances find new ways to satisfy market demand. Sometimes that involves substituting old drugs with new, more powerful ones. This was seen during alcohol prohibition as well, when bootleggers pushed whiskey over beer and wine. And so the overdose rate continues to climb. Dealers are responding to market forces. Online distributors throughout China frequently sell fentanyl over the “dark web,” often shipping the products to the U.S. via the U.S. Postal Service or United Parcel Service. This is the way most fentanyl makes it on to the street, according to the DEA. The U.S. Centers for Disease Control and Prevention reports fentanyl caused 26,000 overdose deaths in 2017. For the past few years, fentanyl and heroin have been the major causes of opioid overdose deaths. The National Survey on Drug Use and Health reports nonmedical use of prescription opioids peaked in 2012, and total prescription opioid use in 2014 was lower than in 2012. Last week, Nebraska State Patrol confirmed its spectacular drug bust of April 26 turned out to be “entirely fentanyl.” A total of 118 pounds of the white powder was seized, more than 26 million lethal doses. Last January, two men were sentenced to prison for smuggling nearly 100 pounds (roughly 18 million lethal doses) into the New York/New Jersey region in mid-2017. Many dealers use pill presses to make counterfeit OxyContin or Vicodin pills and trick nonmedical users into thinking they are buying the real thing. That’s how Prince died. The singer/songwriter abused Vicodin. Records show he never got prescriptions from doctors. He died from ingesting counterfeit Vicodin pills he obtained on the black market that turned out to be fentanyl. Policymakers remain fixated on the false narrative that the overdose crisis is the result of doctors overprescribing opioids to their patients in pain, who then get hooked on opioids and become trapped in the web of addiction. But Prince’s tragic death actually typifies what is really happening. A 2009 University of Pennsylvania study of OxyContin abusers found 78 percent of them had not received a prescription for any medical reason, 86 percent said they used the drug to “get high or get a buzz” and 77 percent gave a history of prior rehab for substance abuse. According to the National Survey on Drug Use and Health, less than 25 percent of nonmedical opioid users obtain prescriptions from a doctor. Three-quarters obtain them from a friend, relative or dealer. Meanwhile, like a broken record, policymakers are intent on further reducing opioid prescriptions, as if that will do anything other than exacerbate matters. Columbia University researchers last month found evidence that the present restrictive opioid policy is not lowering overdose rates, but merely pushing nonmedical users to more dangerous drugs, making patients suffer in the process. This comes after two earlier studies came to similar conclusions. Drug dealers are quickly responding to the reduced supply of “diverted” prescription opioids with deadlier substitutes. Fighting the war on drugs is like playing a game of Whac-A-Mole. Doctors and patients are the wrong targets. Until drug prohibition is recognized as the culprit, don’t expect the death rate to go down. Jeffrey A. Singer practices general surgery in Phoenix and is a senior fellow at the Cato Institute.
  • U.N. Human-Rights Dissonance: From Religious Freedom to Criminalizing Blasphemy    (Aaron Rhodes, Roger Pilon, 2018-06-08)
    Aaron Rhodes and Roger Pilon When Secretary of State Mike Pompeo released the State Department’s International Religious Freedom Report for 2017 last week, he announced that in July he will host a meeting of “like-minded” foreign ministers to discuss ways to “push back” against countries engaged in religious persecution. That’s good news, but the initiative itself may get pushback from the international human-rights establishment, several of whose members he plans also to invite. It took no time for a taste of that to emerge. Sarah Margon, for example, the Washington director at Human Rights Watch, is reported to have cautioned that elevating the importance of religious freedom could be positive “as long as doing so does not minimize other rights concerns,” such as those of the LGBT community, and doing so “truly protects victims of all religious persecution,” not just Christians and Jews in Muslim countries. Such concerns are not entirely unfounded. Both Secretary Pompeo and former Kansas governor Sam Brownback, now U.S. ambassador-at-large for international religious freedom, belong to Christian denominations that opposed same-sex marriage. And President Trump’s oft-stated comments on Muslims give pause to many about the possibility of selective attention to religious persecution. In international-affairs parlance, ‘rights’ has a very different meaning from the one we know. But a much broader pushback lies ahead, and it undercuts religious liberty. Pompeo invoked the natural-rights tradition that America’s Declaration of Independence rests on, finding religious freedom “in the American bloodstream.” By contrast, the modern human-rights movement rests on the U.N.’s 1948 Universal Declaration of Human Rights. Arising from political compromises between post-war progressives and some of the world’s worst tyrannies, the UDHR bows simply to “inherent dignity,” making no mention of natural law or natural rights. To be sure, it lists rights in that tradition. But it goes on with a list of so-called economic and social rights — to jobs, housing, “periodic holidays with pay” — which today dominate human-rights debate and practice. Unlike natural rights to freedom, which require only that we be left alone, these economic and social rights, if rights at all, are not universalizable. They’re created by legislatures, requiring endless redistributive schemes. And as demand for them grows, governments grow and liberty yields. More sinister still, the original compromises that elevated these rights to the status of human rights have enabled totalitarian regimes to sit at the human-rights table. After 70 years, a toxic hypocrisy poisons the debate. Russia, China, Cuba, Islamic theocracies, even North Korea boast about their often illusory economic and social programs as evidence of human-rights compliance and their own legitimacy. For a time before the Berlin Wall fell in 1989, Soviet and other dissidents focused international attention on the stark differences between rights to freedom and these collective rights. But in 1993, at the U.N.’s massive World Conference on Human Rights, the international community put its imprimatur on a vision of human rights that has influenced discourse and practice ever since. Adopting the doctrine of “indivisibility” between the two kinds of rights, the conference set the stage for the proliferation of rights, including group rights and rights to combat racism, discrimination, xenophobia, and intolerance. These newest rights evolved in part from earlier efforts to square Islamic law with international human-rights law, echoing even earlier efforts concerning Communist law. Not surprisingly, the focus in both cases was on economic- and social-rights provisions found in all three systems. Rights to freedom, such as freedom of speech, were “contextualized.” Thus Article 22 of the 1990 Cairo Declaration on Human Rights in Islam, adopted by the Organization of the Islamic Conference, reads in part: “Everyone shall have the right to advocate what is right . . . according to the norms of Islamic Shari’ah.” Fidel Castro was more succinct: “Within the Revolution, everything. Against the Revolution, nothing.” In 2011, the U.N. Human Rights Council memorialized those efforts when it passed 17 resolutions aimed at protecting Muslims from Islamophobia, taking advantage of language that totalitarian states had earlier secured: “Any advocacy of national, racial or religious hatred that constitutes incitement to discrimination, hostility or violence shall be prohibited by law.” In its definition of “hate speech,” the European Union Agency for Fundamental Rights includes “disrespectful public discourse.” Language so capacious is an invitation to political prosecutions, of course. Yet today, all European countries outlaw hate speech, echoing the blasphemy laws found in Islamic countries. And throughout Europe, many prosecutions have followed, often for posts on social media. In fact, even social-media platforms are criminally responsible for users’ posts. Predictably, there has been an authoritarian backlash against what many see as “politically correct” prosecutions. Yet as with the U.N.’s earlier bow to the Communist concept of human rights, this gutting of free-speech rights has little affected Islamic countries, where apostates, women, LGBT people, and minority believers continue to suffer. Even among “like-minded” ministers, therefore, Secretary Pompeo and Ambassador Brownback may face pushback, for which the restoration of freedom is the only answer. Aaron Rhodes the president of the Forum for Religious Freedom-Europe, was the executive director of the International Helsinki Federation for Human Rights from 1993 to 2007. Encounter Books has just published his The Debasement of Human Rights: How Politics Sabotage the Ideal of Freedom. Roger Pilon is the vice president for legal affairs at the Cato Institute. He was the director of policy for the State Department’s Bureau of Human Rights and Humanitarian Affairs (1986-87) during the Reagan administration.
  • Will America's Allies Turn on Trump at the G-7 Summit?    (Doug Bandow, 2018-06-08)
    Doug Bandow Group of seven meetings, known as the G-7 Summit, are usually civil, even boring. They feature heavily scripted discussions with a bias toward consensus, so genuine news only rarely emerges. But the G-7 Summit, which began in Quebec on Friday, might yield a surprise or two. The most important issue is whether President Donald Trump’s counterparts have grown some cojones and are willing to challenge the United States on economic and security issues. The summit meetings began four decades ago. They bring together the leaders of Western industrialized states and typically focuses on economic issues. However, the participants are mostly American military allies. That means that the president will be meeting with his counterparts from Canada, France, Germany, Italy, Japan, and United Kingdom, as well as the European Union. U.S. presidents haven’t always gotten on well with allied leaders, but never have so many of their relationships—both personal and official—been so toxic. Before heading for Canada, President Trump complained about his hosts burning down the White House two centuries ago (actually, it was the British), while ignoring Americans’ multiple, and largely disastrous, invasion attempts of Canada. He also sniped at Prime Minister Justin Trudeau for “being so indignant” (after all, the president never exhibits indignation, righteous or otherwise) and again complained about America’s trade deficit, which economists recognize to be an accounting fiction. The G-7 Summit could be the start of a serious allied challenge to Washington’s leadership. In return, the Canadaians and the Europeans have been unusually irritated, and perhaps willing to act on their anger. French President Emmanuel Macron, who enjoys one of the better personal relationships with President Trump, observed: “The American president may not mind being isolated, but neither do we mind signing a six country agreement if need be.” After all, “these six countries represent values, they represent an economic market which has the weight of history behind it and which is now a true international force.” That it is, but words alone will not impress if the “international force” is not wielded effectively against Washington. As European Council President Donald Tusk acknowledged, “Washington may not be interested in reconfirming our shared commitment to the rules-based international order.” The G-7 Summit’s formal agenda of economic prosperity, gender equality, environment issues and global security is likely to be overshadowed by the double-Trump assault on America’s allies. The first is a trade war, one in which Washington is punishing American consumers and exporters along with foreign producers. Trump’s claim that U.S. national security was at stake—that, say, luxury German autos were going to destroy America—was understandably viewed as risible by nations which had backed Washington in war. Canada and Europe plan to retaliate, thereby earning the president’s ire (since trade wars as supposed to be “easy to win”). Trump responded by threatening to impose additional tariffs. Neither side represents virginal innocence when it comes to trade, and the United States long has more success with negotiations than threats in lowering trade barriers worldwide. The second fight is over Iran, after President Trump tossed the multinational accord reached with Iran and issued a diktat to Tehran which he expected the Europeans to back. They have been seeking to save the agreement, and had to abase themselves to request that Washington not do what seems inevitable, apply secondary sanctions on European firms that deal with Iran. If the administration treats allies as enemies it will turn European anger into rage. However, that is not likely to concern the president. He has taken a negative measure of his counterparts, as was evident from his not so gentle shove of Montenegrin prime minister Dusko Markovic at last year’s NATO summit. Trade and Iran are not on the formal agenda, and the president is departing the G-7 meeting early, before the release of the joint statement. Afterward, he will be represented by a middling White House aide. President Trump doesn’t believe the allies matter and he treats them accordingly. Only if they decide on action that causes America economic pain, and him political difficulty, is he likely to take their interests into account. Ironically, the Europeans could use to their advantage his unexpected call for the inclusion of Russia, which was tossed from the once-upon-a-time G-8 Summit four years ago. Despite the president’s personal overtures to Vladimir Putin, U.S. policy toward Moscow has been more hostile under his administration than under that of his predecessor. Also, Washington has consistently pressed the EU for tougher action against Russia. On Thursday Putin exhibited more than a little schadenfreude when discussing the allied trade dispute: “In essence, these are sanctions. What, did they “annex Crimea,” as many of our partners say?” The president’s counterparts could invite Putin to appear and include him in any statement criticizing the United States on trade and Iran. The ultimate question, however, is whether the allies will do anything other than talk. German chancellor Angela Merkel called on the Europeans to take the lead, but her government still refuses to fund and deploy a military capable of leading. And will the other G-7 Summit members do any better? For instance, will they overtly cooperate with China and Russia over Iran? Will they work with those two states to create an alternative financial structure that insulates them from U.S. sanctions? Will the Canadians, Europeans and Chinese join together on trade questions against Washington? Will the Europeans, and even Japan, develop an independent military capability that frees them from debilitating reliance on America? So far, there is little indication that the other members of the G-7 are serious. So long as Washington can bully U.S. allies, it will do so. And not just the Trump administration. But President Trump could become the necessary catalyst for change. The president is right to challenge even friendly nations when he believes U.S. interests to be at risk. However, to treat long-time allies dismissively, even contemptuously, sacrifices goodwill which someday might lead to the contemptuous treatment of Washington as well. Until now the Europeans have shown no inclination that they will make the necessary sacrifices to seriously challenge the United States. But President Trump has shown himself to be a truly transformational leader. Perhaps he will goad America’s traditional allies to take a big step into a new future—one that forces the United States to respond to group pressure. If so, this G-7 Summit could be the start of a serious allied challenge to Washington’s leadership. Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan.
  • Here's How Trump Can Win Big at the North Korea Summit    (Doug Bandow, 2018-06-08)
    Doug Bandow The summit between United States President Donald Trump and North Korean leader Kim Jong-un is almost certainly is going to happen. After all, neither party can afford to cancel this late. So the question is how best to make it a success? We know the result will not be denuclearization as defined by the U.S. All that talk about speedy complete, verifiable, irreversible denuclearization (CVID) was apparently just talk. The idea of loading North Korea’s weapons, centrifuges, and perhaps even physicists onto American planes and spiriting them away was fanciful. Furthermore, so were any plans to collect any other parts of North Korea’s various weapons of mass destruction programs. We will not implement the Libya model, despite what National Security Adviser John Bolton said. The summit between United States President Donald Trump and North Korean leader Kim Jong-un is almost certainly is going to happen. After all, neither party can afford to cancel this late. So the question is how best to make it a success? Making the summit a success will involve process, as the president suggested, but also will need to address the right substance as well. We know the result will not be denuclearization as defined by the U.S. All that talk about speedy complete, verifiable, irreversible denuclearization (CVID) was apparently just talk. The idea of loading North Korea’s weapons, centrifuges, and perhaps even physicists onto American planes and spiriting them away was fanciful. Furthermore, so were any plans to collect any other parts of North Korea’s various weapons of mass destruction programs. We will not implement the Libya model, despite what National Security Adviser John Bolton said. A process can be helpful, and the right process can be critical. Still, a process is only a means to bring about a substantive result. So what should the latter be? First, contra the president, the two leaders should sign something, even if just a short, but specific, promise by the U.S. to end what might be considered “hostile policy” toward North Korea in return for Pyongyang’s commitment to denuclearize by eliminating all of their nuclear weapons and their entire atomic infrastructure. Of course, words alone have little value. But the document would set the stage for further negotiations and be useful in holding North Korea to account if it again grows recalcitrant. Second, Washington should seek to make permanent the North’s freeze on nuclear and missile tests. That commitment would be easy to police and would limit the reach of missiles and inhibit improvement of nuclear weapons. The U.S. could pay for such a concession with something that could be easily revoked if the Democratic People’s Republic of Korea changed its mind and again began testing. For instance, Washington and Seoul could suspend joint military exercises. Third, President Trump and Supreme Leader Kim Jong-un should declare that they view the Korean War to be over and agree to negotiations that include the other major combatants, South Korea and China, to forge a peace treaty formally ending hostilities. That should be followed by Security Council recognition since the allies fought under the auspices of the UN. Fourth, the president should propose a move toward diplomatic relations. That would not be a reward; after all, America currently recognizes the legitimacy of scores of unpleasant, sometimes bloody governments. The objective would be to create a regular communications channel while establishing an outpost for learning more about what long was accurately termed the Hermit Kingdom. With South Korea recognized by the North’s war-time allies, China and Russia, the U.S. could easily do the same for North Korea. Fifth, Washington would explain that expanding the American mission into a full-scale embassy would depend on North Korean officials being willing to engage on a range of political topics, including human rights. After all, recognition would be intended to promote robust dialogue. While it would be essential to enter any such discussions without illusions, similar engagement with the Soviet Union ultimately increased pressure for change. Sixth, on landing in Singapore, the president should announce an end to the ban on Americans traveling to the North. Additionally, at the meeting, he should offer to initiate a liberal visa policy for North Korean visitors, who would be invited to come to America for sports, cultural, educational, and other purposes. Nothing suggests that a “Korean Spring” is imminent, but foreign contacts in and out of the North help spread knowledge of the outside world and undermine regime propaganda. An internal, organic transformation led by North Koreans would be far better than an external attempt to impose regime change. Seventh, the president should override his “alliance forever” advisers and indicate his willingness to withdraw U.S. troops from and close America’s “nuclear umbrella” over South Korea in return for CVID. Winning North Korean agreement for actual denuclearization still is a long-shot. But doing so is an important objective worth making significant concessions. Moreover, denuclearization would eliminate any need for a U.S. garrison in the South. This would have the additional advantage of shifting decisions over the future of the Korean peninsula to the Republic of Korea, which obviously has much more at stake than America. U.S. security would be enhanced if Washington did not insist on inserting itself in every controversy in every region on Earth, especially one as dangerous as Northeast Asia. Eighth, the two leaders should establish the “process” that the president mentioned. A set of negotiations should be initiated with CVID as the formal objective, but capable of reaching more limited agreements along the way. For instance, an inventory of the DPRK’s nuclear assets, backed by inspections to verify its accuracy, would be an essential step toward denuclearization, which the North previously refused to take. Reintroduction of inspectors to declared nuclear sites would be another forward step. A freeze on additional nuclear weapons production, also backed by inspections, would be a major security gain. Measures to reduce the possibility of a conventional clash would be advantageous to both parties and would be an important test of Pyongyang’s sincerity. Moreover, Washington should simultaneously encourage the Kim government to engage both South Korea and Japan, since their support would add to the success of a shift toward a more peaceful environment. At the same time, the U.S. should discuss the future of the Korean peninsula with China, indicating that Washington desires to step back militarily, especially in the event of reunification, which, of course, remains a very distant possibility. Nevertheless, the Trump administration should encourage a more cooperative Beijing by indicating that the latter need not fear an American attempt to turn the peninsula into another military outpost in a regional containment system. When candidate Trump said he was willing to talk with Kim Jong-un, most professional Korea watchers snickered. It is hard to imagine any other president who would have agreed to a summit under these circumstances. However, President Trump deserves credit for taking the risk. He even was right to step back from demanding immediate CVID, since expecting too much could have resulted in a catastrophic summit break-down and thereby returned the two countries to sort of dangerous confrontation which dominated last year. Whatever happens in Singapore, North Korea will still be a nuclear state when the sun rises on June 13 this year, and next year too. Nevertheless, much good could be done at thesummit and beyond. Making the summit a success will involve process, as the president suggested, but also will need to address the right substance as well. The president still might fall short of a Nobel, but he could help defuse one of the world’s hot spots. And that would be an accomplishment worth celebrating. Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan.
  • Government Loan Programmes Are Failing the Most Vulnerable Students    (Diego Zuluaga, 2018-06-07)
    Diego Zuluaga To extend credit to people in the knowledge that they are unlikely to repay is decried by some as predatory lending. Those suspected of engaging in this practice will face scorn from regulators and opprobrium in the media. Yet predatory is not an inaccurate sobriquet for government policy towards the funding of higher education. So doggedly have administrations around the world pursued the goal of giving everyone a degree, that they haven’t stopped to ponder whether this drive benefits taxpayers — or, indeed, students themselves. As so often with government-induced disasters, the original motivation was laudable. Because human capital accumulation raises worker productivity and therefore salaries, higher education was viewed as a driver of increased prosperity and social mobility. Moreover, since higher productivity raises output and tax revenue, having more educated workers became not just a private but a social good in politicians’ minds. Governments on both sides of the Atlantic are trapping many young people in debt at the start of their working life in pursuit of qualifications that, plainly, do not benefit them. However, the crisis and its aftermath have forced an unwanted reckoning. Even as enrolment rates have climbed strongly, rising from 49 to 69 per cent among US high school graduates — especially those from lower-income backgrounds - between the 1970s and 2016, and reaching 49 per cent among all 18-year-olds in Britain, the expected returns have failed to materialise for many. A 2014 report from the Urban Institute, using a conservative methodology, found 25 per cent of US bachelor’s degree holders working in occupations for which they were overqualified. In Britain, as many as 16 per cent of those in employment between the ages of 16 and 64 were “overeducated” in 2015, up from 13 per cent in 2006. Overqualification need not be a concern so long as it’s the product of choice. It is generally associated with lower median earnings than occupations which require a university degree. But plenty of less-than-well-paid jobs, such as journalism, political activism and creative writing, feature a preponderance of university graduates in their ranks. The problem arises when overqualification stems from graduates’ inability to find suitable work. It may be that their specific skills do not match the needs of firms - which might require more introverted computer scientists and fewer eloquent philosophers — or that the skills taught in universities do not add up to much valuable human capital. Economist Bryan Caplan has persuasively contended that college education is more a signalling device than a provider of hard skills. If that is the case, then encouraging university attendance will not benefit those at the bottom of the graduate pile, let alone those who fail to complete their studies. The scale of the student debt burden in both America and Britain suggests that many are being failed by the system. Outstanding higher education loans in the United States recently passed the $1.5 trillion mark, up from under $500 billion in 2006. In the UK, student debt stands at just over £100 billion, but it has more than doubled since 2011 and continues to increase rapidly. Aggregate amounts can only convey a crude picture, but the rapidity with which loans outstanding have mounted is at least suggestive that some borrowers are giving little thought to whether borrowing is a good idea. On an individual level, the problem is not stratospheric indebtedness. Recently, the Wall Street Journal profiled a 37-year-old Utah orthodontist whose balance exceeds $1 million and will in a few years surpass $2 million, as his $1,600 monthly repayment doesn’t suffice to cover the monthly interest expense. But that’s an exceptional case. Moreover, those who carry six-figure balances are often lawyers and medical doctors whose training raises their lifetime earnings by a multiple of the cost of their degree. Even making conservative assumptions about physician and attorney salaries ($150,000 and $100,000, respectively) and comparing them to the 75th percentile of U.S. income-earners ($65,000), the lifetime salary boost of a medical or legal education would justify an investment upwards of $500,000. The amount borrowed is a poor predictor of whether a borrower will default. According to a recent analysis by the U.S. National Center for Education Statistics, 27 percent of borrowers entering higher education in 2003-04 had defaulted on their payments twelve years later. Such rates of non-repayment are extraordinary, on a par with payday and other high-cost short-term credit used in times of stress. Perhaps surprisingly, default rates are highest among those who borrowed the least. There’s an explanation for this puzzle. Those who never completed their degrees are over represented among loan defaulters. Their problem is not that they borrowed too much, but that they cannot make even modest repayments. The loans instead become a drag on their borrowing capacity until they are written off many years later. The stain on their credit score, on the other hand, can be permanent. The key to solving the student debt mire thus seems to be not so much to reduce the borrowing needs of the typical student, but to ensure that those who will not benefit from higher education or are likely to drop out are not led to borrow for it. Yet public policy currently achieves the precise opposite. The trend in both Britain and America has been to subsidize loan interest rates and link repayment to future income, writing off any outstanding balances after 25 or 30 years. Indeed, only 45 percent of post-2016 student borrowers in the UK are expected to repay their loans in full. This system attracts more of the wrong sort of borrower, by lowering the cost of taking many years to repay and eventually cancelling whatever remains. If interest rates were instead adjusted for the borrower’s individual risk, as most other consumer loans are, those who expect to struggle to repay or to benefit little from education would refrain from borrowing. Another problem is that the first beneficiaries from increased education spending, the universities themselves, have little skin in the game. Whether or not they furnish students with valuable and productive skills, their tuition fee revenue is unaffected. If universities instead had to bear part of the burden of repayment risk, they would be more reluctant to admit candidates whose likelihood of completion and professional success is low. Greater risk sharing might also lead universities to be mindful of cost inflation and focus additional expenditure on those items that enhanced the educational experience. Importantly, however, governments that instituted greater risk-sharing should apply the standard symmetrically to all institutions. This means no special carve-outs for favoured universities or politically popular degrees, as these would again distort the incentives of university administrators. It may be objected that these changes would result in the exclusion from higher education of some of the most vulnerable. But that implicitly assumes that those now pursuing degrees who would be excluded under a more market-based system do in fact benefit from their education. Default rates and the hardship of carrying a large loan balance for decades suggest otherwise. Governments on both sides of the Atlantic are trapping many young people in debt at the start of their working life in pursuit of qualifications that, plainly, do not benefit them. If they weren’t lured into higher education, these people could begin their professional careers early and debt-free. At a time of great transformation and opportunity, surely that presents a more attractive prospect than the costly disappointment of a failed university education. Diego Zuluaga is a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives.
  • Poland Wants an American Garrison: Let Germany Do It!    (Doug Bandow, 2018-06-07)
    Doug Bandow For years American officials have variously demanded, urged, and begged European governments to increase military outlays. For years the Europeans have instead reduced their spending, manpower, and procurement. There has been a slight uptick in their defense efforts under President Donald Trump, but most NATO members, including large and important nations such as Germany, Italy, and Spain, aren’t coming close to meeting the official standard of spending 2 percent of their GDPs on defense. Now Poland, which fell just short of that level last year, is requesting that Washington establish a permanent base and garrison. Warsaw says it will kick in a couple billion dollars, while Washington can pick up the change on its way to confronting nuclear-armed Russia in a crisis. But instead of sticking America with yet another tab, it would make more sense for Poland to send its bill to Berlin. German Chancellor Angela Merkel has called for European leadership on defense. But her coalition partners won’t let the continent’s dominant nation and biggest economy meet its military obligations. The Germans should garrison their neighbor in return for the cash. The transatlantic alliance made sense when it was established in 1949. Western Europe was still recovering from World War II and Joseph Stalin’s Soviet Union was a cautious predator. The continent required time to reestablish something approaching a reasonable balance of power. Before taking office Trump seemed to understand that European free-riding was counterproductive. What about now? Still, Dwight Eisenhower, who served as NATO’s first Supreme Allied Commander, warned against a permanent American presence that would “discourage the development of the necessary military strength Western European countries should provide themselves.” Allied outlays remained anemic even after the continent’s recovery. The end of the Cold War triggered a rush to demobilize while NATO expanded toward the new Russian Federation’s shrunken borders—despite contrary Western assurances given to Soviet and later Russian officials. Few considered how to defend new members, essentially treating the alliance as a gentleman’s club to which every respectable nation should belong. The Russo-Georgian war of 2008 and especially the 2014 conflict between Ukraine and Russia have since reminded Europeans that NATO is, in fact, a militaryalliance. Yet only “new” Europe, as Donald Rumsfeld called it, seemed much worried about Moscow’s intentions, demanding guarantees that the alliance would hold off Vladimir Putin and his hordes. “Old” Europe offered its formal assent but not much more. Instead, Washington created a special budget line to augment its forces in Europe. First came the European Reassurance Initiative, which then morphed into the European Deterrence Initiative. At $6.5 billion this year, the EDI spends more than Belgium, Denmark, Romania, and Greece devote to their entire militaries. Meanwhile, the pending National Defense Authorization sets as policy an “increased United States presence in Europe through additional permanently stationed forces, including logistics enablers and a combat aviation brigade,” along with “increased United States pre-positioned military equipment, including munitions, logistics enablers, and a division headquarters” and “sufficient and necessary infrastructure additions and improvements throughout Europe.” Vladimir Putin is an unpleasant character, but he is not suicidal. Russia today looks a lot like the pre-1914 Russian Empire, intent on having its interests respected and its borders protected. Taking back Crimea, which hosts the Black Sea base at Sevastopol, and preventing Georgia and Ukraine from joining NATO were obvious and important interests. But Putin would stand to gain little from triggering full-scale war by invading one or more of the Baltic States or Poland, the most nervous alliance members. Most of Europe agrees with this assessment. The specter of Russian aggression simply does not frighten. Europeans recognize that Russian troops are not going to march through their neighborhoods, so why spend more on defense? Especially since Uncle Sam can be trusted to play his default role. The recent increase in allied outlays isn’t great and isn’t likely to be sustained. Only four European countries last year hit 2 percent of GDP on defense. Most of the others are unlikely to ever reach that level, irrespective of their promises. All this has left “New” Europe dissatisfied. So Warsaw wants the U.S. to offer extra protection directly, even though we already maintain two combat brigades in Germany and Italy has an equivalent force that rotates through Eastern Europe. Warsaw, however, wants its very own American garrison. Declared the Polish defense ministry: “Poland is a steadfast ally of the United States and is committed to advancing our shared interests and values, which increasingly are being threatened by Russian interference. A permanent U.S. presence in Poland will ensure that both nations can continue to advance, strengthen, and protect these values and interests.” At least the Poles offered to contribute $1.5 billion to $2 billion to the effort, saying, “The Government of Poland understands that such a burden must be shared,” and “such expenses cannot and should not be financed by one country alone.” Which, admittedly, is contrary to what most European governments believe. Still, this is an awful idea. First, Moscow doesn’t threaten America. And nothing suggests Russia plans to attack Poland. Merely being in NATO does not entitle member states to a U.S. military unit stationed within their borders. Second, Polish analysts worry that the proposed contribution will be deducted from outlays to improve their own country’s military. Lukasz Kister of the Jagiellonian Institute warns that “The proposal to pay the U.S. for ensuring our security raises doubts we will be able to finance the modernization of our own armed forces.” Third, the proposal ignores the fact that the major cost of commitments such as NATO isn’t in overseas basing, but in creating extra units. The more and greater Washington’s military guarantees, the larger the force that is required. Fourth, American soldiers are not mercenaries to be rented out to the highest bidder. If the Poles really believe themselves to be at risk, they should spend not 2 percent of GDP on their military, but 5 or 10 percent, perhaps even more. They should ask themselves how much their freedom is worth. There is, however, an obvious solution. Some 240 years ago Great Britain hired “Hessians,” who came from several German principalities, to fight against American revolutionaries. Poles could hire modern “Hessians” to guard Poland. After all, Chancellor Merkel responded to President Trump’s criticism of Europe’s defense dependence by calling on Europeans to “take our fate into our own hands.” Alas, Berlin’s behavior has yet to reflect her rhetoric—but Germany is contributing 450 soldiers to a NATO mission in Lithuania. That’s a start. The biggest problem today is that Berlin’s actions don’t match its words. In 2014, Merkel’s last government promised to hit 2 percent of GDP by 2024. She recently said reaching that level is “not completely beyond the imagination.” But in 2015, total German defense spending dropped to 1.1 percent. During last year’s election campaign, the opposition Social Democrats hardened their position against expenditures that, from Berlin’s standpoint, make no sense, since the likelihood of a Russian attack on Germany is only a bit greater than that of a Martian invasion. German Defense Minister Ursula von der Leyen recently expressed a desire “to reach defense expenditures of 1.5 percent of GDP in 2025.” However, the coalition budget caps military outlays at 1.3 percent. This helps explain the judgment of the Atlantic Council’s Jorge Benitez: “The readiness of the German military is abysmal.” During a recent assessment, the German army had 244 tanks, but only 95 were battle-ready. None of the country’s six (count ‘em, six!) submarines were in service. Not one Eurojet fighter was combat-ready. Just 8 percent of German soldiers said they trusted their weapons. Alas, admitted Hans-Peter Bartels, parliamentary commissioner for the armed forces: “the Bundeswehr as a whole cannot currently be used in the collective defense.” With dramatic understatement, he noted: “Additional efforts are necessary.” Obviously the Bundeswehr could use Poland’s $2 billion. What does Europe need for its defense? Inadequate resources is not a problem. The continent enjoys about 12 times the economic strength of Russia. Italy’s GDP alone is larger than that of Russia. Moreover, the Europeans have more than three times Russia’s population. Yet none of the nations worried in principle about Russian aggression act worried about it in practice. Bulgaria, Estonia, Lithuania, Latvia, Poland, and Romania respectively devote 1.53, 1.73, 1.75, 1.80, 1.99, and 2.08 percent of their GDPs to their militaries. That compares to America’s 3.57 percent. They have no reason to do better so long as the U.S. will do it for them. President Trump said that European laggards would be “dealt with,” but they have no reason to change as long as Washington continues to subsidize them. For instance, despite its irresponsible defense policy, Germany continues to host some 35,000 American troops. Before taking office, the president seemed to understand that America’s defense of Europe was counterproductive. But he surrounded himself with officials determined to increase U.S. military entanglements. And the Polish government is lobbying hard. Opined Polish defense minister Mariusz Blaszczak: “The decisions on this matter are moving in a good direction,” by which he meant bad for the American people. The president should tell Warsaw no. If Poland doesn’t want to raise more of its own soldiers, then it should hire a few Hessians from its German neighbor. Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan. He is author of Foreign Follies: America’s New Global Empire.
  • Republicans, Don’t Let Trump Bully You on Tariffs    (Daniel J. Ikenson, 2018-06-07)
    Daniel J. Ikenson For several months, President Trump has been vandalizing the global economy and subverting the rules of international trade with his wrecking ball of tariff indiscretions. Finally, someone in Congress is doing something to stop this menace. Senator Bob Corker, a Republican from Tennessee, introduced legislation on Wednesday that takes back some of the authority President Trump has been abusing under the guise of protecting national security. Mr. Corker, who is retiring, attracted six Republican co-sponsors for the bill, which would amend the Trade Expansion Act of 1962 to require the president to get approval from Congress for any tariffs proposed on national security grounds. But the Senate majority leader, Mitch McConnell, said he would not allow the legislation to come to the floor as a stand-alone bill. House Speaker Paul Ryan seems similarly uninterested in a bill likely to be vetoed by Mr. Trump. “You would have to pass a law that he would want to sign into law,” Mr. Ryan said. “You can do the math on that.” For several months, President Trump has been vandalizing the global economy and subverting the rules of international trade with his wrecking ball of tariff indiscretions. Finally, someone in Congress is doing something to stop this menace. Why don’t the president’s trade transgressions elicit meaningful resistance from party leadership? His trade views are disdainful of freedom and informed by economic fallacies, yet Republican leaders have watched quietly from the sidelines as Mr. Trump misappropriates his authorities to disrupt global supply chains, inflict pain on American trade partners, generate enormous amounts of domestic collateral damage and make the United States an international scofflaw. The United States Constitution vests authority in Congress to collect duties and to “regulate commerce with foreign nations.” But over the course of the 20th century, Congress delegated some of its authority to the president. In most cases, the statutes giving the executive branch the authority to raise tariffs require that certain conditions be met and that any actions taken be subject to limitations, as well as judicial review. President Trump has found a way to weaponize these statutes to advance his “America First” agenda. Since taking office, he has initiated six investigations under three highly contentious laws. Five of those investigations — on steel, aluminum, washing machines, solar panel components and Chinese technology products — have led to the president imposing or announcing tariffs on imports of more than 1,500 products valued at about $100 billion. A new investigation of whether imports of automobiles and parts constitute a national security threat could raise the value of sanctioned imports to $400 billion. Factoring in the likelihood of retaliation against American exporters, about 20 percent of total goods trade could find itself in the cross hairs by year’s end. For more than 80 years going back to Franklin D. Roosevelt, American presidents viewed trade as a win-win proposition, fostering mutual economic growth and better relations among nations. Those presidents supported the rules and institutions that helped reduce protectionism and made trade more affordable, seamless and predictable. Between 1947 and 2006, average global tariffs fell to 4 percent from 40 percent in developed countries, trade flourished, and economies expanded rapidly. Mr. Trump’s actions risk reversing these gains. He has invoked laws that were passed under the assumption that the president, reflecting a broader national consensus, would always be more circumspect and less likely to impulsively raise tariffs than a parochially minded Congress. Lawmakers failed to contemplate the possibility of a president as cavalier about the consequences of protectionism and as impervious to the lessons of history as Mr. Trump. Last year, the excuse for the Republican leadership’s acquiescence to Mr. Trump’s trade assault was their desire for tax and regulatory reform. Done. Then the excuse was that opposing Mr. Trump on trade would invite a primary election challenge. With three months to go until the last state primaries, that concern is becoming moot. Loyalty to the president over the Constitution speaks volumes about a party that was once committed to free markets and the rule of law. In fairness, a few Republican senators who aren’t retiring have shown some courage. Senator Mike Lee of Utah has proposed legislation that would effectively bring back to Congress most of the authorities it delegated to the executive over the years by requiring votes before any presidential trade proclamations can take effect. Senator Ron Johnson of Wisconsin is exploring how to give more legal weight to the arguments and concerns of American companies adversely affected by tariffs. Mr. McConnell and Mr. Ryan have done nothing. At a minimum, they should be whipping up support for Mr. Corker’s bill to make sure they have two-thirds of both chambers ready to override Mr. Trump’s inevitable veto. Republican leadership should also introduce “sense of the House” and “sense of the Senate” resolutions making clear that each chamber values the relationships America has with its allies and will work to repair and strengthen them. These measures are a promise to the American people and a signal to our allies that Congress will continue to support the global trading system and its rules and institutions, and that it will do all that is in its power to prevent the president from continuing to trample on both Republican and republican principles. Daniel J. Ikenson is the director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.
  • A Prison-Reform Bill Passed the House 360–59. It’ll Probably Die in the Senate    (Michael D. Tanner, 2018-06-06)
    Michael D. Tanner Imagine legislation that was drafted with the help of presidential son-in-law Jared Kushner and, unsurprisingly, supported by President Trump himself. Imagine that this same bill is supported by such stalwarts of “The Resistance” as the Urban League and the Equal Justice Initiative, and also backed by prominent conservative groups such as FreedomWorks and the Faith and Freedom Coalition. The Koch brothers and Grover Norquist are advocates, and so is liberal commentator Vann Jones. In fact, imagine a bill so bipartisan that it passed even this deeply divided House on a 360-59 vote. That legislation would be the “FIRST STEP Act,” a prison-reform bill. And, this being Washington in 2018, it is almost certainly not going to become law. Indeed, it looks doubtful that the Senate will even vote on it. The FIRST STEP Act is hardly radical. It doesn’t reduce inmate sentences or otherwise deal with the intensely punitive approach to justice that has given the United States the world’s largest per capita prison population. Nor does it remedy the ongoing racial issues that continue to infect our criminal-justice system. Instead, it would make a number of extremely modest humanitarian reforms to the way we treat prisoners. For example, it would make female health products more available in federal prisons and all but end the practice of shackling female inmates during childbirth. It would try to keep inmate families together by expanding visits, phone privileges teleconferencing, and opportunities to transfer to prisons closer to home. It would increase mental-health and substance-abuse treatment for inmates. One has to wonder if congressional dysfunction has reached a breaking point. It would also provide a modest $250 million over five years for new inmate-education and -rehabilitation programs, and establish incentives (including time credits) for prisoners to participate. Prisons would also be required to conduct “risk assessments” of soon-to-be-released inmates and to tailor programs to meet these inmates’ needs. Over the long run, most experts believe the legislation would save money. For example, studies have shown that every dollar spent providing needed mental-health and substance-abuse treatment to inmates ultimately saves taxpayers $1.27 to $5.47 in reduced crime and incarceration costs. One should always be skeptical of claims that government spending will save money, but this initiative clearly passes the common-sense test. Similarly, keeping families together is likely to reduce future welfare costs as well as crime. And since nearly all prisoners will eventually be released, programs to reduce recidivism are also likely to prove cost-effective. magine legislation that was drafted with the help of presidential son-in-law Jared Kushner and, unsurprisingly, supported by President Trump himself. Imagine that this same bill is supported by such stalwarts of “The Resistance” as the Urban League and the Equal Justice Initiative, and also backed by prominent conservative groups such as FreedomWorks and the Faith and Freedom Coalition. The Koch brothers and Grover Norquist are advocates, and so is liberal commentator Vann Jones. In fact, imagine a bill so bipartisan that it passed even this deeply divided House on a 360-59 vote. That legislation would be the “FIRST STEP Act,” a prison-reform bill. And, this being Washington in 2018, it is almost certainly not going to become law. Indeed, it looks doubtful that the Senate will even vote on it. The FIRST STEP Act is hardly radical. It doesn’t reduce inmate sentences or otherwise deal with the intensely punitive approach to justice that has given the United States the world’s largest per capita prison population. Nor does it remedy the ongoing racial issues that continue to infect our criminal-justice system. Instead, it would make a number of extremely modest humanitarian reforms to the way we treat prisoners. For example, it would make female health products more available in federal prisons and all but end the practice of shackling female inmates during childbirth. It would try to keep inmate families together by expanding visits, phone privileges teleconferencing, and opportunities to transfer to prisons closer to home. It would increase mental-health and substance-abuse treatment for inmates. It would also provide a modest $250 million over five years for new inmate-education and -rehabilitation programs, and establish incentives (including time credits) for prisoners to participate. Prisons would also be required to conduct “risk assessments” of soon-to-be-released inmates and to tailor programs to meet these inmates’ needs. Over the long run, most experts believe the legislation would save money. For example, studies have shown that every dollar spent providing needed mental-health and substance-abuse treatment to inmates ultimately saves taxpayers $1.27 to $5.47 in reduced crime and incarceration costs. One should always be skeptical of claims that government spending will save money, but this initiative clearly passes the common-sense test. Similarly, keeping families together is likely to reduce future welfare costs as well as crime. And since nearly all prisoners will eventually be released, programs to reduce recidivism are also likely to prove cost-effective. So why is such a modest and humane bill almost certain to die? In part, the FIRST STEP Act is a victim of the infighting and turf protection that helps explain Congress’s 18 percent favorability rating. Senator Chuck Grassley (R., Iowa), who as chairman of the Judiciary Committee has jurisdiction over the bill, favors a much more expansive bill, the Sentencing Reform and Corrections Act, which he is co-sponsoring with Sen. Dick Durbin, the Senate’s No. 2 Democrat. Grassley and Durbin are insisting that the FIRST STEP Act be rolled into their bill. But their legislation, which is indeed worthwhile, is being blocked by Senate majority leader Mitch McConnell because the White House won’t sign off on some provisions. In the meantime, prison reform goes nowhere. An even more significant roadblock is being provided by Senator Tom Cotton (R., Ark.), who opposes nearly all efforts at criminal-justice reform. Senator Cotton, one of the few Americans who believe we have an underincarceration problem, in his words, has mounted an effective guerrilla campaign to undermine the bill’s support on the right. For example, Cotton is reportedly pushing law-enforcement groups to oppose the bill. His efforts have been drawing fruit. Recently the Federal Law Enforcement Officers Association withdrew its endorsement of the bill after being pressured by Cotton’s office. Republicans, always fearful of being called “soft on crime,” will find it difficult to buck law enforcement. Complaints about congressional gridlock are often exaggerated. The Founders intended legislating to be slow, deliberate, and challenging. But when even commonsense legislation with broad bipartisan support can’t so much as get a vote, one has to wonder if congressional dysfunction has reached a breaking point. Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis.
  • Washington's Dangerous Fixation on Iran    (Doug Bandow, 2018-06-06)
    Doug Bandow United States President Donald Trump appears to worry a lot about Iran, a concern that is shared by his secretary of state and national security adviser. They were so worried about a nuclear Iran that they revoked the international agreement known as the Iran deal, which was supposed to prevent Tehran from developing nuclear weapons. Instead, Trump now demands Iran’s de facto surrender. However, the administration is so far is backed only by Israel and Saudi Arabia, which want America to do their dirty work. Why is the Trump administration so fearful of Tehran? Iran is a struggling regional power. It lags well behind its competitors in economic and military clout. Even its greatest enemy, Saudi Arabia, dismisses the Islamic Republic as being no match. Additionally, Iran clearly is not in America’s league. The U.S. has a vastly bigger economy, far more powerful military, the globe’s dominant culture and is allied with most of the industrialized world—at least until President Donald Trump initiated a misguided trade war against Washington’s allies. Nor does the Middle East matter much to America anymore. The U.S. is becoming the world’s leading energy producer, and other sources are being developed, diminishing the importance of the region’s oil. Israel has become a regional superpower and is cooperating with Saudi Arabia, eliminating their need for Washington’s protection. What little remains of the Islamic State should be left to those it threatened- virtually every other state in the region. Furthermore, Syria is a tragedy that is mostly best left to its neighbors. Instead of treating Iran as the locus of all evil, Washington needs to develop a more balanced policy for the region. Even claims that Iran is a terrorist state aren’t true, at least in the usual sense that most Americans understand. Instead, Washington complaints are about Iran’s support for Hezbollah and Hamas, two quasi-governments which periodically battle Israel. Would it be better if Tehran cut off its support for them? Of course, but what Middle Eastern power doesn’t meddle in the affairs of others? The list of Middle East actors that have acted up and intervened in each other’s affairs is a long one. Israel routinely bombs Syria, having blown up that nation’s nuclear reactor and more recently having targeted Iranian forces fighting on behalf of the Syrian government. Israel also assassinated a Hamas operative in Dubai while maintaining the more than half a century-long occupation of Palestinian territories. Saudi Arabia invaded Yemen, sent troops to Bahrain to support their dictatorial monarchy, sent money to Egypt to help their dictatorial military regime, backed efforts to overthrow Syria’s Bashar al-Assad and even kidnapped Lebanon’s prime minister. Riyadh also continues to promote the fundamentalist Wahhabist strain of Islam throughout the Middle East and around the world. The United Arab Emirates has joined with Saudi Arabia in several of these malign efforts. Turkey initially aided ISIS in Syria and later intervened in both Iraq and Syria, grabbing territory and combatting Kurdish forces. Finally, Qatar has backed opposition groups, which were usually radical, in Syria and Libya. In other words, no one’s hands are clean. Tehran is terrible, but on most measures, Saudi Arabia’s repression and aggression are notably worse than Iran’s. Perhaps the most problematic aspect of how Iran’s specter haunts America is that it forecloses serious domestic introspection about Washington’s Middle Eastern policies. This is unfortunate because the U.S. bears much responsibility for what Iran and the surrounding region have become today- but America seems unlikely to recognize that anytime soon. The starting point for modern U.S.-Iran relations is the 1953 coup which overthrew Prime Minister Mohammad Mossadegh. He had come to power in a democratic vote, but America used force to oust him. It is true that he had plenty of domestic enemies and that America was not alone in its effort. Nevertheless, in the eyes of many Iranians, Washington became the prime architect of their future misery from that point onward. The Shah of Iran turned from a constitutional ruler into an absolute one and, with U.S. backing, created a vicious police state which sought to modernize a traditional people forcibly. Along the way, he even began a nuclear weapons program, and many of his enemies became America’s enemies. Tragically, the most virulent and violent of the Shah’s enemies, Ayatollah Khomeini, pushed aside more moderate elements in the struggle for power after the Shah fled into U.S. exile. In addition, after Iraq’s Saddam Hussein—yes, that Saddam Hussein!—invaded Iran, the U.S. even backed the aggressor. Washington sent Donald Rumsfeld to Baghdad in 1983 to confer with its new de facto ally. America provided intelligence, reflagged Kuwaiti oil tankers— the proceeds of which were lent to Hussein to fund his war— and sold dual-use products which Iraq turned into chemical weapons. Along the way the U.S. Navy also shot down an Iranian airliner, mistaking the plane for a belligerent attacker. Since then, Washington has threatened Iran with a military attack, imposed economic sanctions, launched cyber-attacks, armed the Islamic Republic’s Gulf enemies, and sought to overthrow Tehran’s only close ally, Syria. Whatever the justification for these policies on independent grounds, they have created an unmistakably hostile policy in Iran’s mind. Tehran deserves blame but is hardly alone in its support for violent organizations. Indeed, imagine the enormous liability if the victims of U.S.-backed forces—Syrian soldiers killed by insurgents, Soviet soldiers lost fighting the Mujahideen, Nicaraguans who died at the hands of the Contras, Vietnamese killed by the U.S.-backed South Vietnamese government, and anyone dead in an American bombing or drone attack—could sue Washington. The tab might bankrupt the country. On October 23, 1983, a suicide bombing at the Marine Corps barracks in Beirut killed 241 Americans. The U.S. had intervened, nominally as a peacekeeper, in the Lebanese civil war, which had been raging since 1975. (The Pentagon up through Defense Secretary Caspar Weinberger opposed the president’s decision to deploy American forces.) Cohen Milstein Sellers & Toll blamed Hezbollah, which the firm claimed acted with Iran’s backing. The lawyers filed suit under U.S. law, which creates an exception for terrorism lawsuits from normal sovereign immunity for governments. The attack, including one against French military forces, was awful. I remember hearing the news in the pre-Internet age. But truth be told, the U.S. government, headed by the president for whom I worked, Ronald Reagan, bears primary responsibility for the American deaths. The more significant problem, however, is that the barracks bombing was not a terrorist attack. The action was an act of war, and therefore a legal response to U.S. military intervention. President Reagan presented Washington’s involvement as “peacekeeping,” but there was no peace to keep. There were more than a score of armed factions—Weinberger figured twenty-seven or twenty-eight—which represented different faiths, tribes, allies, and leaders and whose allegiances often shifted. Israel and Syria had also joined Iran in seeking to influence the outcome. The U.S. became just another belligerent and thus made more than its share of enemies. American forces began by training the Lebanese army and offered live military support. Michah Zenko of the Council on Foreign Relations noted that “by summer 1983 [the U.S.] had openly sided with the pro-Israeli Lebanese government. To support the Lebanese military, the U.S.S. New Jersey was authorized to shell the Druze militia and Syrian military forces in the mountains surrounding Beirut.” Shia fighters also were targeted. Historian Patrick Brogan noted that U.S. naval fire offered “convincing proof the U.S. was no longer neutral.” The Christian Science Monitor reported that, prior to the attack on the barracks, “two American warships had bombarded antigovernment artillery and missile batteries.” Alas, “the Lebanese army did a poor job … of calling in the bombing coordinates,” misdirecting the fire. A military investigation found that some shells missed their targets by as much as 10,000 yards (5.6 miles). Tim McNulty of the Chicago Tribune wrote: “Everybody loved the New Jersey until she fired her guns. Once she fired, it was obvious she couldn’t hit anything,” or, at least, anything she intended. Compounding this issue was that civilian casualties received scant attention in the U.S. media. As Researcher Franklin Lamb wrote in 2013, many Lebanese homes damaged by the American bombardment and remained unrepaired, along with unremoved, unexploded shells. The U.S. steadily became an ever more active combatant. In early 1984 the Washington Post reported that “The 16-inch guns of the U.S. battleship New Jersey fired hundreds of rounds at artillery positions of Syria and its Lebanese allies in Lebanon’s eastern and central mountains today in the heaviest American naval barrage since the Vietnam War.” The Monitor observed: “Two American nurses who worked in Lebanon say that the use of United States Navy guns in support of the Lebanese army turned many Druze Muslims against the United States.” For instance, Walid Jumblatt, still head of the Druze decades later, explicitly threatened retaliation for U.S. attacks. According to historian Benis M. Frank, who authored U.S. Marines in Lebanon, 1982-1984, Marine Corps commander, Col. Timothy Geraghty “recognized that providing U.S. naval gunfire support for the [Lebanese army] had changed the nature of his mission. The Marines were now considered legitimate targets by anti-government forces.” As Geraghty explained: “The firing we did in support” of the Lebanese army “moved us from a previous, very careful, razor edge line of neutrality that we were walking, and treating all the Lebanese communities alike … to a different category.” Soon the Marines were referring to anti-government forces as the “enemy.” Lebanese fighters, who lacked America’s long-range firepower, found another way to strike back. As Colin Powell later explained, “When the shells started falling on the Shiites, they assumed the American ‘referee’ had taken sides against them. And since they could not reach the battleship, they found a more vulnerable target: the exposed Marines at the airport.” Furthermore, one Pentagon commission called the attack “tantamount to an act of war using the medium of terrorism.” The Marines did not deserve to die. However, the most important cause of their deaths was not terrorism, Hezbollah, Iran, or even the Islamic Jihad Organization. It was the U.S. government turning them into combatants in another nation’s impossibly bitter and complicated civil war. Indeed, after the bombing, even Reagan came to realize that making Lebanon’s fight America’s fight was a huge mistake, and he withdrew American forces. Today, continuing to blame Iran might allow U.S. officials to shirk responsibility for their errors— but it does nothing to make the region more stable or peaceful. Tehran is a malign actor in the Middle East, but so are Saudi Arabia, the UAE, Egypt, Bahrain, Turkey, and Iraq. Instead of treating Iran as the locus of all evil, Washington needs to develop a more balanced policy for the region. That includes acknowledging how America has dramatically contributed to the Mideast’s problems, including with Iran. Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan.
  • Pharmacy Benefit Managers Are Not the Cause of High Prescription Drug Prices    (Ike Brannon, 2018-06-06)
    Ike Brannon The press has found no shortage of villains for the high cost of prescription drugs today. While the pharmaceutical companies typically receive the lion’s share of the blame, of late the Pharmacy Benefit Managers have come under fire for their supposed role in high drug prices. Pharmacy Benefit Managers work on behalf of health insurance companies to help them negotiate prices with the pharmaceutical companies, and the price breaks they obtain typically come in the form of rebates paid to the companies. Some aver that the rebates solely benefit the health insurance companies, that they do nothing to reduce drug prices, and that they should be abolished. Even Scott Gottlieb, the FDA commissioner, has suggested that Congress consider legislation that would limit rebates in some way. However, blaming the system of rebates for high drug prices completely misdiagnoses the prescription drug market, and eliminating them would accomplish nothing. In a recent study I wrote with Tony Lo Sasso of the University of Illinois at Chicago, we argue that tying the hands of PBMs could very well raise drug prices. Pharmacy Benefit Managers arose simply because there was a lacuna in the healthcare market: put simply, nothing constrained the price of prescription drugs; Doctors would prescribe the drugs they thought necessary, pharmaceutical companies would charge whatever they wishes for drugs still on patent, and the insurance companies would foot the bill without any real recourse other than to raise their prices the following year. Pharmacy Benefit Managers do two principal things: First, they negotiate prices for on-patent drugs. The high prices reported for new drugs are appropriately shocking, but those are not what insurance companies pay: they frequently negotiate a steep discount, which in turn allows insurance companies to keep premiums lower. The second thing PBMs do is encourage competition in the drug market. They steer doctors to prescribe generic equivalents or other substitutes when available. For instance, while many activists decry the production of “me too” drugs that merely seek to duplicate existing drugs, rather than spending resources developing new drugs for other illnesses, such drugs allow PBMs to put pressure on the pharmaceutical company that makes the original drug to lower its prices. The recent plethora of drugs that cure Hepatitis C bear this out: When Gilead put out Sovaldi at a list price of $84,000, the brunt of the media attention was not on the amazing accomplishment of curing an illness that had heretofore been incurable absent a liver transplant, but on the enormous cost. However, that list price was not anywhere near what insurance companies paid, precisely because of PBMs, and as other companies introduced their own Hepatitis C drugs—anxious to cut into Gilead’s market—prices fell even further. Constraining health care costs is extremely difficult, especially in a marketplace like ours where the recipient of the treatment is largely insulated from its direct cost. Constraining Pharmacy Benefit Managers by eliminating their ability to procure rebates for insurance companies will make it more difficult for them to negotiate discounts. Letting pharmaceutical companies earn more money is not the route to constraining health care costs. Healthcare costs are indeed going up, and if we could constrain them in a way so as to not reduce access or deter innovations then we would all benefit. However, it is worth keeping in mind that pharmaceuticals have been a highly cost-effective driver of mortality gains for a long period of time, not to mention a source of improved quality of life for millions of Americans. Limiting the ability of PBMs to negotiate discounts in drug costs is not the way to create a more value-oriented healthcare system. Ike Brannon is a visiting fellow at the Cato Institute and president of Capital Policy Analytics, a consulting firm in Washington DC.
  • The Masterpiece Cakeshop Dodge Sets up an Epic Fight for the Next Supreme Court Vacancy    (Ilya Shapiro, 2018-06-05)
    Ilya Shapiro There were many ways to slice Masterpiece Cakeshop: the Supreme Court chose an exceedingly narrow cut that leaves all the big questions for another day. While it’s gratifying that, by a 7-2 vote, the court reversed Colorado’s persecution of Jack Phillips—the baker who had no problem serving gay people but wouldn’t bake a cake for a same-sex wedding—it did so only on the basis that the state commission that enforces antidiscrimination law displayed overt hostility to religion and treated secular refusals to bake religious messages differently. That’s an unusual circumstance, and one not typically in play in these wedding-vendor cases. Indeed, the petition of a Washington florist who declined to provide arrangements for a longtime gay client’s wedding, Arlene’s Flowers v. Washington, is pending. With Monday’s narrow ruling, the justices can’t simply send that case back to the state court for reevaluation, because Monday’s rule of decision is fact-specific rather than announcing some clarifying principle. Even if they do (we should learn by Monday), all they could ask of the Washington Supreme Court is to evaluate whether the state showed any anti-religious animus in its proceedings against Barronelle Stutzman. That perfunctory exercise would only buy a few months until a renewed petition arrived back at the marble palace. The food fight over Masterpiece Cakeshop shows how pivotal the next Supreme Court vacancy will be. That’s why this ruling is “narrow,” effectively a ticket good for this confection only. You’re simply not going to have too many cases where a government official will, in a public hearing, liken orthodox Christian (and Jewish and Muslim) beliefs about marriage to religious justifications for slavery and the Holocaust. (I’m not exaggerating; that’s why Justice Anthony Kennedy, who wrote the majority opinion, was so upset with Colorado’s lawyer during oral argument.) Cynics may even say the rule is now that legislators and bureaucrats may indeed punish those whose views they don’t like, but only if they hide their motives. Still, there’s plenty of resonance with Kennedy’s majority opinion in Obergefell v, Hodges, the case that struck down laws that didn’t allow same-sex marriage. He wrote then that “[m]any who deem same-sex marriage to be wrong reach that conclusion based on decent and honorable religious or philosophical premises,” just as he wrote now that “gay persons and gay couples cannot be treated as social outcasts or as inferior in dignity and worth.” Regardless, all this talk of “animus”—the flipside to Kennedy’s jurisprudence regarding the right to “dignity”—ignores the bigger questions that Masterpiece Cakeshop raised and aren’t going anywhere. Is a decision not to work a gay wedding no different than a decision not to serve gay people? Can an artistic or expressive professional be compelled to produce something for an event he disagrees with? How do we decide what kinds of professions get that kind of First Amendment protection? Does it matter whether the objection is religious? Does it matter that, unlike the oft-invoked Jim Crow analogy, gay couples can generally get cakes, flowers, and other wedding products and services without having to travel too far? All of these questions are left for some future case, when the swing vote may belong to someone other than Kennedy. In that way, this squib of a ruling—18 pages, most of which just recites factual and procedural background—underlines how the battle over the 81-year-old Kennedy’s successor will be, whenever that happens. On those big issues, when the Supreme Court is forced to “go for it” rather than punting, we see a glimpse of the playbook in the food fight among the concurring and dissenting opinions. Justice Neil Gorsuch, joined by Justice Samuel Alito, emphasized how striking it was that the commission applied different standards and levels of definitional generality to achieve different legal results based on the viewpoint at issue. Justice Elena Kagan, joined by Justice Stephen Breyer, joined the majority but took issue with Gorsuch’s characterizations and argued that if one is in the business of making wedding cakes, one must make such cakes for all weddings. Justice Clarence Thomas, joined by Gorsuch, went into the free-speech aspect that had dominated the briefing and commentary (including mine) before argument, showing how Phillips was engaged in expressive behavior whose constitutional protection can’t be blithely undermined. “The First Amendment prohibits Colorado from requiring Phillips to bear witness to these facts or to affirm a belief with which he disagrees,” Thomas concluded, citing the Hurley case, where the Supreme Court ruled that a parade can’t be forced to allow all comers to march. Meanwhile, Justice Ruth Bader Ginsburg, joined by Justice Sonia Sotomayor, found even Kennedy’s milquetoast decision to be over-yolked, seeing the commissioners’ anti-religious statements as irrelevant to the resolution. It’s a shame that, the superficial agreement in this narrow ruling notwithstanding, Masterpiece Cakeshop split the court—and the country—so sharply. After all, the most basic principle of a free society is that the government can’t willy-nilly force people to do things that violate their beliefs. Some may argue that these wedding-vendor cases present a conflict between religious freedom and gay rights, but that’s a “false choice,” as a recent president liked to say. People have simply forgotten the distinction between state and private action. There’s no clash of individual rights except when the government itself declines to consistently protect everyone. County clerks must issue marriage licenses regardless of their personal beliefs, but bakers aren’t government agents and so should maintain freedom of conscience. Kennedy could’ve forestalled some of this mischief by making clear in Obergefell that the Constitution protects not just the right to “advocate” and “teach” religion but also to “exercise” it, and that regardless people on either side of the debate shouldn’t be forced to convey messages they don’t like. But he didn’t, so it’s left to the better angels of our pluralistic nature to tolerate views and lifestyles we may not like. And to fight like hell for judges who agree with that sentiment. Ilya Shapiro is a senior contributor to The Federalist. He is a senior fellow in Constitutional Studies at the Cato Institute and Editor-in-Chief of the Cato Supreme Court Review.
  • Trump's Trade Adviser Fails the First Test of a Good Economist    (Ryan Bourne, 2018-06-05)
    Ryan Bourne Next time someone advocates a new government policy, dear reader, here’s a simple test to tell whether they are serious or selling snake oil: are they willing to acknowledge the trade-offs inherent in their proposal? That might seem a banal — and low — hurdle to pass. But it has a remarkable ability to separate wheat from chaff. Any idea that changes incentives or re-allocates resources is going to come with costs as well as benefits. So when we are told that there is either all upside or all downside from a proposal, be suspicious. It is highly unlikely that regulations to reduce carbon emissions are simultaneously good for the environment and for economic growth, with no downside. That sound you can hear is the nineteenth century French economist Frederic Bastiat spinning in his grave. It is highly improbable that there are zero possible economic benefits from Brexit — as the referendum Treasury analysis insisted — or no potential risks. Whenever we spend more taxpayer funds on something, families have less money to spend on themselves and their own needs — and this has consequences too, all too often neglected. This week, President Trump’s Trade Council director, Peter Navarro, would have failed the test. In an article defending the President’s decision to not renew exemptions on steel and aluminium tariffs for the EU, Canada and Mexico, Navarro extolled how existing protectionism had encouraged a new aluminium mill in Kentucky and restarted steel-making facilities in Illinois. Remarkably, he concluded that this was the first step in making US manufacturing great again. That sound you can hear is the nineteenth century French economist Frederic Bastiat spinning in his grave. “There is only one difference between a bad economist and a good one,” Bastiat mused. “The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” What Navarro neglected to mention were the two key downsides from the protectionist policy: higher costs for US steel consumers, and other US exporting industries being hit by tariff retaliation. Yes, it would be churlish not to admit that protecting domestic steel and aluminium industries might lead to more investment (at least in the short-term) in those industries. But a manufacturing boom? Steel and aluminium are key intermediate goods in the production process of other manufacturers. It’s difficult to see how raising the price of steel, for example, will help the 300m customers and 6.5m workers in industries which consume it, rather than produce it. The impact is likely to be higher product prices for consumers of these goods, or shrinking businesses. For reference, there are only around 140,000 US workers in steel production. If this is populism, the word has lost all meaning. Already, US steel prices have diverged dramatically from prices seen elsewhere — and that was before these exemptions expired. The effects are beginning to be felt, with companies losing contracts to foreign suppliers as they pass these cost increases on in the form of higher prices. Others have cancelled plans to expand or are considering relocating manufacturing plants to Europe or Canada. Even if the tariffs themselves do not bite too hard for a particular business, the uncertainty inherent in current US policy may deter some from making investments. I’ve warned before on these pages that European leaders should not escalate tensions with the US by retaliating with more tariffs. After all, the insight that tariffs are primarily paid by your own consumers applies to the EU too. But Mexico, Canada and the EU look set to do just that. And while their own consumers will suffer, there will be concentrated impacts on certain US industries too, with agriculture likely hit particularly hard. Funnily enough, again, Navarro failed to mention that effect. As my Cato colleague Simon Lester tweeted, Navarro’s article reveals that there are some die-hard protectionists at the very top of the Trump administration — as if that was not obvious already. How else can one explain the spurious use of national security grounds to protect against steel imports from military allies? If that justification wasn’t shaky enough, the new discussion of using the same rationale to impose tariffs on imported cars should dispel the myth that this is a targeted deviation from free trade, as opposed to a broader ideological crusade. The Navarro-ites clearly want to use trade policy to explicitly help particular heavy-manufacturing industries. But this protection, and the concentrated benefits it bestows, comes with larger yet more diffused costs across the US economy, as input costs soar and resources are allocated to less efficient use. To ignore these costs, wittingly or unwittingly, is to make a cardinal sin of economic analysis. Ryan Bourne holds the R Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute.
  • The Difference Between Roads and Education: the Human Mind    (Neal McCluskey, 2018-06-05)
    Neal McCluskey Should people be able to take government funding for their own private parks, roads or police? It’s a rhetorical question frequently used against policies such as vouchers that enable people to choose private schools rather than have their tax dollars go only to public institutions. The answer opponents are typically looking for is, “No, they should not. Like all those things, public education is a public good.” It is a weak analogy, but much worse, it dangerously downplays what education is: nothing less than the shaping of human minds. On a technical note, as my colleague Corey DeAngelis recently explained, education does not meet the economic definition of a public good; something “nonexcludable” and “nonrivalrous in consumption.” Basically, a good that non-payers cannot be prevented from using, and that one person using does not prevent others from enjoying it equally. An example is a radio broadcast; anyone with a receiver can listen, and one person listening doesn’t prevent others from doing the same. To assert that letting taxpaying families choose their schools is akin to letting them build private thoroughfares or parks with public dollars at best trivializes education, at worst threatens basic freedom. That said, what wielders of this rhetorical club are probably trying to hammer home is not that education is a public good as economists see it, but that to work it needs to be provided and controlled by government. If the intent of establishing parks is to ensure that natural space is preserved for all to use, regardless of ability to pay, it seems reasonable that government must control park lands. To build an interstate, there will be lots of privately-held property on the best potential routes. Lest road creators be gouged, or highways forced to slalom along inefficiently circuitous paths, the power of eminent domain seems important. And the job of government is to keep people from forcibly imposing on each other—e.g., assault, theft—so giving government the power to stop the use of force and punish transgressors appears logical. But education is fundamentally different from these things. For starters, there is no logical or demonstrated need for government to provide schools. Schools do not require great geographic space, education has been provided privately at significant scale, and there are numerous private schools operating today despite users having to pay once for public schools, and a second time for private. And as Nobel laureate Milton Friedman observed, government can ensure people can access education without providing the schools. Far more important, education is inherently about the shaping of minds, and that puts people’s intimately held values and identities—things that make them who they are—in the balance. Requiring all, diverse people to fund a single system of government schools thus forces conflict and, even worse, threatens to implant standardized thoughts in all people. Parks and roads aren’t close to comparable threats to basic freedom and diversity. The reality of treating education like interstates has often been painful. In the beginning of the “common schooling” era, many Protestants objectedto public schooling “father” Horace Mann’s essentially Unitarian vision of what religion the schools should inculcate. The arrival of millions of Roman Catholics led to decades of conflict—including the 1844 Philadelphia Bible Riots that killed and injured scores of people—over the Protestant character of many public schools. Numerous Catholics ultimately felt they had no choice but to forsake their tax dollars and start their own schools, which by their peak in 1965 enrolled roughly 5.5 million children. Many African-Americans, after finally being allowed into the public schools, have had to fight to have meaningful power in the schools to which their children are assigned. And they are not alone. Today, battles over people’s cultures, ethnic identities, and values are widespread and perpetual. The Cato Institute’s Public Schooling Battle Map, which I maintain, includes nearly 2,000 such conflicts, and with its content drawn mainly from major media reports, there are likely many conflicts missing. Parks, roads, even policing, don’t come close to the intensely and fundamentally personal—fundamentally human—purpose of education. To assert that letting taxpaying families choose their schools is akin to letting them build private thoroughfares or parks with public dollars at best trivializes education, at worst threatens basic freedom. Indeed, far from calling for government control, the nature of education cries out for letting all people choose. Neal McCluskey is a contributor to the Washington Examiner’s Beltway Confidential blog. He is the director of the Cato Institute’s Center for Educational Freedom and maintains Cato’s Public Schooling Battle Map.
  • Masterpiece Cakeshop Ruling Dodges the Big Question    (Walter Olson, 2018-06-04)
    Walter Olson In the end, the Masterpiece Cakeshop ruling was narrow without being close. Justice Kennedy won over liberals Elena Kagan and Stephen Breyer into a 7-2 majority to rule that Colorado had improperly shown contempt for Jack Phillips’s religious views while considering the case against him brought by wedding-cake hopefuls Charlie Craig and Dave Mullins. By deciding the case on those grounds, Kennedy sidestepped the broader question that has dominated public discussion of the case all year: When does it violate the First Amendment to require business people to accept work they believe implicates them in expression contrary to their beliefs? Dodged today, that question will assuredly be back in future. Despite early melt-the-screen reactions from some on the left (bake a take as fast as you can!) Kennedy specifically did not carve out any new exceptions from state LGBT anti-bias measures; he even took pains to praise that body of law. Instead, his message to Colorado was: Go back and run the process again without showing animus toward people’s religious beliefs. SCOTUS hones in on Colorado’s contempt for Jack Phillips, not the First Amendment and free expression. As he documents in his majority opinion, at least two members of the Colorado Civil Rights Commission had used official proceedings to make clear their disdain for the baker’s convictions. One had dismissed an argument as “one of the most despicable pieces of rhetoric that people can use to—to use their religion to hurt others.” Overall, Kennedy wrote, Phillips was not given “the neutral and respectful consideration of his claims” to which he was entitled. Or as Justice Gorsuch put it in a pithier concurrence, “no bureaucratic judgment condemning a sincerely held religious belief as “irrational” or “offensive” will ever survive strict scrutiny under the First Amendment.” Justices Kagan and Breyer agreed that the proceedings were tainted by anti-religious animus—a relatively easy concession compared with the other ways Phillips might have won—but the liberals did nothing to hide their view that the state would win a future case on these facts if it went back and did things in proper form. Their concurrence even provides a little road map for the state to get there by tinkering with its legal theory. It’s true that in separate concurrences, Justices Gorsuch, Alito, and Thomas express more eagerness to get to Phillips’s substantive claims. But that adds up to three: there is no sign at present that the court is one vote away from declaring a sweeping or even narrow win for the next baker in a similar situation. The Ginsburg and Sotomayor dissent deserves special notice. They argue that for the proceedings of a state agency to be tainted by prejudicial remarks from some participants is not itself reason to throw out its work if there were freestanding untainted grounds for action, if a multi-stage process worked to counteract a bias confined to one stage, and so forth. These are not bad arguments! In fact they’re much the same arguments that Trump administration lawyers will need to rely on if they are to defend the legality of executive actions that (plaintiffs argue) were tainted by prejudicial remarks made by the President himself or appointees along the way. Monday’s ruling will not keep agencies like the Colorado Civil Rights Commission from waging culture war on minority religious beliefs. But it may induce them to sublimate how they talk and emote along the way, so as at least to simulate respect for all parties. Progress? Walter Olson is senior fellow at the Cato Institute’s Robert A. Levy Center for Constitutional Studies.
  • The Euro Isn't Dead (Yet)    (Diego Zuluaga, 2018-06-04)
    Diego Zuluaga People have been forecasting the end of the euro since the currency came into being in the late 1990s. Yet the euro has survived five sovereign bailouts—including three successive ones of Greece (the continent’s most troubled economy)—and two bank rescues aimed at Spanish and Cypriot banks. The Eurozone debt crisis reached a climax in the summer of 2012, when European Central Bank Chairman Mario Draghi defused it with his vow to do “whatever it takes” to preserve the single currency. Regardless of one’s views on the prudence of the ECB’s subsequent monetary easing, Draghi’s promise succeeded in calming financial markets. Yet six years on, political uncertainty in Italy and Spain has people pondering the imminent demise of the euro again: To many southern Europeans, euro membership is the lesser of two evils when greater monetary control by their national governments is the alternative. Earlier this week, the Italian president’s refusal to appoint a finance minister who had previously advocated contingency planning for a potential Italian exit from the euro unsettled bond markets, causing interest rates on the country’s debt to skyrocket. While subsequent negotiations have ended the stalemate and delivered a coalition government, their members’ strong anti-EU disposition will prolong policy uncertainty. In Spain, a vote of no confidence in the centre-right government has led to its replacement by a left-wing administration propped up by communists and separatists, igniting fears that the market reforms undertaken since 2012 may be unraveled. And raising taxes, increasing regulation and centralizing power would indeed spell doom for the Spanish economy, whose GDP has been growing at annual rates in excess of 3 percent for three years. Unemployment, which topped 26 percent at the height of the crisis, has since fallen rapidly thanks to a much-needed loosening of hiring and firing rules. Italy’s recovery has been less resplendent, with tepid growth, stagnant labor productivity and wages, and a national debt of around 130 percent of GDP. Nevertheless, its fiscal position had stabilized in recent quarters and business investment had picked up after a number of modest regulatory reforms. * * * Skeptics of the euro blame the single currency for the poor economic outcomes of southern European countries (the uncharitably nicknamed “PIGS”). However, if you look closely at the data, it’s clear that bad performance long precedes the advent of the euro: Unemployment rates of 25 percent have characterized every major Spanish recession since the 1970s. Greece has defaulted on its external debt on half a dozen occasions since it became an independent country. Italian productivity growth began to falter in the early 1990s, hampered by onerous labor market rules, inefficient taxation, poor property rights protections, and a weak bankruptcy code. In other words, the barriers to the economic healing of these countries lie mostly with domestic politics and policy, not the strictures of their membership in the Europe-wide currency. There are problems with the euro, to be sure. A single currency for a large and diverse geographic area makes optimal monetary policy difficult to implement. Furthermore, the absence of control over the currency makes governments unable to use devaluation as tool of crisis management. (Although depreciating currencies can temporarily improve a country’s competitive position, in the long-run it lowers living standards and has historically been resorted to more by incompetent governments in failing economies than by responsible democracies.) Another problem of the euro as it exists today is that its rules are routinely violated. Member countries were never supposed to borrow as much as many have. Nor was there supposed to be any tolerance for bailing out individual countries. Some have even questioned the constitutional propriety of the ECB’s monetary loosening. But, to many southern Europeans, euro membership is the lesser of two evils when greater monetary control by their national governments is the alternative. There are few things that Spaniards and Italians enjoy less than the patronizing politicians from Germany and the Netherlands. But one of them is surely their own political classes. Which explains the persistence of public support for euro membership, even as politicians routinely disparage the constraints it places on domestic policy-making. When the Greek government held a referendum on the conditions imposed by its creditors in 2015, a majority supported its defiant stance. Yet Greeks refused to countenance the country’s departure from the euro and the E.U., and the associated loss of freedoms and purchasing power. This time is unlikely to be any different. Even if political squabbles prolong uncertainty into the summer, the cataclysm will probably fail to materialize. There is simply too much at stake in Italian and Spanish membership of the euro, and even disgruntled citizens know this in their heart of hearts. Diego Zuluaga is a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives.
  • The Different Responses in Parkland and Santa Fe Show We Need School Choice    (Neal McCluskey, 2018-06-04)
    Neal McCluskey Intellectually, I have many objections to gun control — but even my instinctive reaction whenever there is a school shooting, or any mass shooting, is that the big problem is the guns, and something needs to be done about them. And if I, a libertarian strongly predisposed against gun control, have that as my first reaction, surely all people must feel the same way. Right? Apparently not. And that illustrates something important about how we organize education, and a whole lot else. I have been surprised by how different the reactions to the horrific school shootings in Parkland, Fla., and Santa Fe, Texas, have been. The response from the Parkland community was one powerfully focused on gun control. The response from Santa Fe, where gun rights appear to be much more cherished, has been very different. The Associated Press recently ran an article about the near silence on gun control in Santa Fe, in stark contrast to Parkland. The Texas Tribune covered a roundtable discussion in the Texas Capitol attended by people from Santa Fe and other Lone Star communities affected by mass shootings. Reported the Tribune: “This is not a gun thing,” said Jay Horn, the parent of a student who is in the hospital after injuries from the shooting. “Evil’s going to happen with anything.” He got a loud round of applause. The contrast in the responses is striking because I assume if my gut reaction is for gun control, then surely almost everyone, especially shooting survivors, would want it. I suspect I’m not that different from most people in feeling—though on a rational level I know it not to be the case—that everyone must pretty much thinks the way I do. But it turns out there really is great diversity in the values and beliefs of communities and people. Of course, this is not just evident by comparing Santa Fe and Parkland. We can all agree that the school shootings in Parkland, Santa Fe, and many other places were evil, atrocious acts. But that does not mean that even communities affected by the shootings share the same beliefs about what can and should be done. The Cato Institute’s Public Schooling Battle Map, which I run, demonstrates this far more comprehensively. It includes nearly 2,000 conflicts in public schools, many over what values schools will teach or reinforce, such as comprehensive sex education or abstinence-only; modest dress or student freedom; bathroom choice or bodily privacy. These conflicts attest to the diversity of values strongly held by Americans, though of course we also know this from our increasingly visible and deep polarization well beyond education. Given this diversity, we should be very hesitant to impose uniform solutions to social problems (including education), even if we feel like most people would or should agree with us. On a practical level, such remedies may not be sustainable in many places because the people would ignore or work their way around them. More importantly, imposing morally controversial rules and policies curbs people’s basic rights to act according to their consciences. Seeking centralized remedies also raises the political stakes of all social disagreements, forcing more, diverse people into divisive political combat to have their values upheld. The first protection against this in American education is local control of public schooling; letting individual communities make decisions for themselves about what is taught and what rules schools will have. Unfortunately, we have been eroding this bulwark for decades, both with consolidation of districts and moving decisions up to state and federal levels. That said, if there is diversity within a district, freedom of conscience will still be threatened. That is why we ultimately need universal school choice—essentially, the most local control—freeing all educators and families to choose education that shares their values. We can all agree that the school shootings in Parkland, Santa Fe, and many other places were evil, atrocious acts. But that does not mean that even communities affected by the shootings share the same beliefs about what can and should be done. It’s a powerful reminder of the diversity in America that we need to protect when we seek to deal with social problems. Neal McCluskey is a contributor to the Washington Examiner’s Beltway Confidential blog. He is the director of the Cato Institute’s Center for Educational Freedom and maintains Cato’s Public Schooling Battle Map.
  • The Nasty Surprises That Plague Our Health-Care System    (Charles Silver, David A. Hyman, 2018-06-04)
    Charles Silver and David A. Hyman If you’ve ever been in a collision, you’ve probably dealt with a body shop. In all likelihood, the process went smoothly. You paid your deductible, your insurer paid the rest, and that was the end of the financial side of the repair. Health care works differently. After eight-year-old Ben Millheim injured himself during a camping trip, his family was stuck with a $32,000 bill from the sky-ambulance company that flew him 88 miles to a hospital in St. Louis. That was the balance that remained after the Millheims’ insurer paid $12,000 for the service. Elizabeth Moreno was stuck with a bill for $17,850 because a physician asked her to provide a urine sample. She didn’t know that the doctor’s testing lab was out of her insurance network. Moreno’s insurer, Blue Cross Blue Shield of Texas, which would have paid an in-network lab $101 for the service, refused to cover the bill at all. Fearing for his daughter’s credit rating, Moreno’s father bargained the bill down to $5,000 and paid. The Millheims and Morenos are but two of the tens of thousands of families who receive surprise medical bills every year. These are “balance bills,” that seek to hold patients responsible for charges their insurers won’t pay. The problem is so bad and so widespread that, as of 2017, 21 states had sought to protect patients by requiring insurers and providers to participate in arbitration or mediation. Several more states, including Georgia, New Hampshire, and New Jersey are considering similar legislation. Unfortunately, even in states that have enacted legislation, many patients are still at risk of receiving surprise bills. For example, some states’ laws cover bills sent out by physicians in emergency departments (“EDs”), but exclude bills sent by physicians who see patients that have been admitted to the hospital. A lack of market competition has allowed hospitals to thrive while patients get hit with exorbitant, unexpected, unfair bills. How common are these bills? According to a study published in the New England Journal of Medicine in 2017, 22 percent of patients received bills they did not expect. That same year, a study published in Health Affairs found that “20 percent of hospital inpatient admissions that originated in the emergency department, 14 percent of outpatient visits to the [ED], and 9 percent of elective inpatient admissions likely led to a surprise medical bill.” Patients treated at EDs in McAllen, Texas — already infamous for being the highest-cost county in the U.S. for Medicare — were especially unlucky. Eighty-nine percent of them received balance bills from doctors who didn’t take their insurance, even though the hospitals they visited did! Most surprise bills are sent by ED doctors, anesthesiologists, radiologists, and pathologists, but out-of-network providers can pop up anywhere. Two Georgia parents whose son was born prematurely received a surprise bill for more than $4,000 because, although their hospital was in-network, its neonatal intensive-care unit was not. Peter Drier, who needed neck surgery, received a $117,000 surprise bill from an “assistant surgeon” he hadn’t known about or met. The assistant surgeon’s charge was almost 20 times the $6,200 fee charged by the primary surgeon. As these examples indicate, surprise bills are often grossly inflated. When providers are in-network, they give enormous discounts on their rack rates — known as “chargemaster” prices in the trade. If you’ve seen a bill from an in-network provider or the corresponding “explanation of benefits” from your insurer, you know what we mean. The hospital or physician may “charge” $3,000 for a service, but the insurer will disallow a huge chunk of that — say, 75 percent — and pay only $750. The real price is $750; the $3,000 charge is a fictional price plucked out of thin air. But when an out-of-network provider bills a patient, no discount is applied. The insurer then pays the same $750, leaving the patient responsible for the $2,250 that remains. The out-of-network provider has no duty to accept the insurer’s payment as full compensation and is free to bill the patient for the balance. The phony, made-up price suddenly becomes very real. A report published in the Journal of the American Medical Association found that anesthesiologists, radiologists, and ER doctors regularly charged out-of-network patients four to six times more than they accept from Medicare for the same services. Anesthesiologists were the worst offenders. Why are patients hit with surprise bills so often, and why are the charges so high? Providers blame insurers. Per Dr. Steven Stack, who served as president of the American Medical Association: “The real crux of the problem is that health insurers are refusing to pay fair market rates.” Insurers, in turn, accuse doctors of price-gouging and hospitals of being complicit. “[It is hospitals’] responsibility,” they contend, “to ensure [that] all physicians treating patients in their facility are covered by the same insurance contracts as the hospital.” Insurers are right about one thing. Nothing prevents hospitals from doing what auto-body shops do. Hospitals, too, could bring all providers in-house and send out all-inclusive bills at reasonable prices. In fact, some hospitals do just that. But other hospitals seem to go out of their way to create opportunities for surprise bills. Some have no doctors in their EDs who are in the same insurance networks they are. Literally every patient who visits the ED at these hospitals is likely be balance billed. Many hospitals have no in-network anesthesiologists on their staffs either. After having her thumb operated on, Elaine Hightower was balance billed for $6,300. Her hospital and doctor were in-network but the anesthesiologist on duty that day wasn’t. Nationwide, hospitals employ over 140,000 physicians. These doctors are in the same networks as the hospitals they work for, so they don’t send out surprise bills. The question is: Why don’t hospitals eliminate surprise bills by employing anesthesiologists, ED docs, and other physicians who tend to be out-of-network? The answer is simple: money. Hospitals gain financially by bringing some doctors on board but not others. The doctors they hire generate payments that are known as “site-of-service differentials.” The doctors they leave out do not. The latter physicians remain independent because hospitals have little to gain by hiring them. Consider colonoscopies. Patients can obtain this service at doctors’ offices and at hospitals’ outpatient departments, among other places. You might think that Medicare, Medicaid, and private insurers would pay the same amount for colonoscopies regardless of where they take place (also known as “site-neutral payment”). But you’d be very wrong. In 2012, Medicare paid an average of $1,300 for colonoscopies performed in doctors’ offices, but it shelled out $1,805 — 39 percent more — when these procedures were delivered at hospitals. Is it any surprise that only 4 percent of all colonoscopies were performed in doctors’ offices that year? By performing colonoscopies in hospitals, doctors and hospitals collected the extra money and split it between themselves. Site-of-service differentials exist for a host of medical procedures. When a cardiologist in private practice provides a level II echocardiogram without contrast, Medicare pays $188. But when a doctor connected to a hospital performs the same test in an outpatient context, the payment is $453. That’s why hospitals brought so many cardiologists on board. After one cardiology practice was purchased, its former chief operating officer likened the movement of doctors onto hospitals’ staffs to “a migration of wildebeests.” There are even site-of-service differentials for cancer drugs. When a hospital gives a lung-cancer patient a dose of Alimta, its fee is about $4,300 larger than a doctor with an independent practice would receive. For Herceptin, a drug given to women with breast cancer, the site-of-service differential is about $2,600. And for Avastin, when used to treat colon cancer, it is $7,500. No wonder hospitals brought many cancer doctors in-house. Unfortunately (or, perhaps, fortunately, depending on one’s view), hospitals cannot obtain site-of-service differentials by employing ED doctors, anesthesiologists, radiologists, or pathologists. Nor can they gain patient referrals. Patients pick EDs on the basis of convenience, not because they know the doctors who practice there. The same goes for anesthesiologists, radiologists, and pathologists. Hospitals have little to gain by employing doctors who neither generate site-of-service differentials nor bring patients to their doors. To make matters even worse, these doctors gain by remaining independent. They can still collect in-network payments from insurers, and they can extract additional dollars from patients by balance billing too. Refusing to join insurers’ networks is a dominant strategy for independent physicians. They always earn at least as much as they would if they were in-network, and they often earn more. Hospitals can gain by allowing independent physicians to stay out of insurers’ networks too. A study of an ED-staffing company known as EmCare showed how this can occur. When hospitals hired EmCare to run their EDs, two things happened: the rate at which patients received surprise medical bills skyrocketed; and hospitals’ revenues increased because EmCare’s physicians prescribed more treatments and recommended that more patients be admitted for additional care. In effect, EmCare repaid hospitals for the opportunity to balance bill their patients by generating additional revenues that the hospitals could pocket. Providers wouldn’t allow the practice of surprise billing to persist if they knew they’d lose patients as a result. No auto-body shop would think of letting its painters or mechanics bill separately for their services, for fear of getting pummeled on Yelp and losing customers in droves. But doctors and hospitals know that our competition-stifling, government-controlled, and insurer-dominated payment system will ensure that patients keep coming — no matter how often they send out surprise bills and no matter how high their charges are. This is why state laws that mandate arbitration or mediation are really just band-aids. Competition is the only real solution because only it can make surprise bills unprofitable. The moment surprise bills start costing doctors and hospitals patients, they’ll stop sending them out. Charles Silver is an adjunct scholar at the Cato Institute and a law professor at the University of Texas at Austin.. David A. Hyman is an adjunct scholar at the Cato Institute and a professor at the Georgetown University Law Center.


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