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  • Macri’s Kiss of Death: Argentina’s Peso and the IMF    (Steve H. Hanke, 2019-08-20)
    Steve H. Hanke Yesterday, the ticket of Alberto Fernandez and Christina Kirchner crushed the hapless President of the Argentine Republic Mauricio Macri in a primary election. Their victory virtually guarantees that the Fernandez-Kirchner team will occupy the Casa Rosada after the presidential election scheduled for October. For many, including the pollsters, Sunday’s results were a stunner. Not for me. I have been warning for over a year that gradualism, which is Macri’s mantra, is a formula for political disaster. If that wasn’t enough, the Argentine peso is another time bomb that has sent many politicians in Argentina into early retirement. And, to add insult to injury, Macri called in the “firefighters” from the International Monetary Fund (IMF) to salvage the peso. These three factors sealed Macri’s fate. As it turns out, this movie has been played over-and-over again in Argentina. Argentina has seen many political gradualists bite the dust. What makes Macri unique is that he advertised gradualism as a virtue. Macri and his advisers obviously never studied the history of economic gradualism. When presidents are faced with a mountain of economic problems, it’s the Big Bangers who succeed. As for the venom that can be injected by a peso crisis, the instances of the poison delivered by that snake bite are almost too numerous to count. To list but a few of Argentina’s major peso collapses: 1876, 1890, 1914, 1930, 1952, 1958, 1967, 1975, 1985, 1989, 2001, and 2018. It is noteworthy that the frequency of peso crises picked up after the establishment of the Central Bank of Argentina (BCRA) in 1935. With that, serial monetary mismanagement ensued. The chart below tells the BCRA story. Before the BCRA, Argentina (the peso) held its own against the United States (the dollar), with the respective per capita GDPs being roughly equal in 1935. But, after the BCRA entered the picture, a great divergence began. Now, the U.S. GDP per capita is roughly three times higher than that of Argentina. The BCRA’s most recent monetary mishap occurred last year, when the poor peso lost 58% of its value against the greenback from the start of 2018 until the end of May 2019. What was behind that collapse? On Macri’s watch, no less, the BCRA had been surreptitiously financing the government’s deficit spending. It did this through the sterilization of increases in the net foreign asset component of Argentina’s monetary base. This was done via the sale of bonds issued by the BCRA (LEBACS). The sterilization (and financing of the government’s deficit) was on a massive scale. In the January 2017-May 2018 period, the BCRA sterilized 50% of the total increase in the foreign asset component of the monetary base. In consequence, the BCRA was the largest source of financing for Argentina’s sizable primary fiscal deficit. These typical Argentine monetary-fiscal shenanigans were an invitation for yet another currency disaster. After the peso rout, Macri went hat in hand to the IMF. This was the dagger in the heart of Macri’s political career. For one thing, the Argentine public distrusts, if not despises, the IMF-and for good reasons: namely, the IMF’s record of failure in Argentina. Yes, the IMF’s prescriptions have turned out to be the wrong medicine. To stabilize a half-baked currency’s (read: the Argentine peso) exchange rate, the IMF orders sky-high interest rates. With these rates, the economy collapses, as does the local currency that the IMF is trying to stabilize. As Harvard University’s Robert Barro put it, the IMF reminds him of Ray Bradbury’s Fahrenheit 451 “in which the fire department’s mission is to start fires.” Barro’s basis for that conclusion is his own extensive research. His damning evidence finds that: A higher IMF loan participation rate reduces economic growth. IMF lending lowers investment. A greater involvement in IMF programs lowers the level of the rule of law and democracy. And, if that’s not bad enough, countries that participate in IMF programs tend to be recidivists. The IMF programs don’t provide cures, but create addicts. For a clear picture of the addiction problem (read: recidivism), review the chart below. It lists the number of IMF programs that 146 countries have participated in. Haiti leads the pack with 27 programs since joining the IMF in 1953. Argentina is a heavy hitter, too. It joined the IMF in 1956 and is now hooked on its 22nd IMF program. That’s a new program every 2.8 years on average. Armed with this weekend’s election results, Argentines are exchanging pesos for greenbacks as fast as they can. The peso has shed a stunning 20.5% against the preferred greenback since last Friday. And, by my measure, which uses high-frequency data, Argentina’s inflation rate has exploded to 103%/yr (see the chart below). To end Argentina’s never-ending monetary nightmare, the Central Bank of Argentina, along with the peso, should be mothballed and put in a museum. The peso should be replaced with the U.S. dollar. Argentina’s government should do officially what all Argentines do in times of trouble: dollarize. It’s time for the elites in Argentina to wake up and face reality. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
  • Save the Endangered Species Act with Common Sense    (Randal O'Toole, 2019-08-20)
    Randal O'Toole The Endangered Species Act has been called the strongest environmental law Congress has ever written because it gives the government almost unlimited power to regulate private landowners with the objective of saving wildlife, fish, and even insects. Environmental groups that relish seeing this law enforced are upset that the Trump administration is proposing to change how the law is administered. The Fifth Amendment to the Constitution forbids the taking of private property for public use without compensation. The Endangered Species Act violates the spirit, if not the letter, of this amendment. Under the law, if you have an endangered species on your land, or if the government thinks you might have an endangered species on your land, or if the government knows you don’t have an endangered species on your land but thinks that you might someday have that species on your land, then the government can so strictly regulate your land that you can’t get any economic use out of it. For example, the government told Louisiana landowners that they couldn’t develop their property because it was defined as “critical habitat” for a rare frog — even though the frog didn’t, and couldn’t, live on the land without completely removing existing trees and replacing them with other species. Effectively, the government is requiring some private landowners to house and feed certain species of wildlife at the landowners’ expense. Moreover, the government can force this without providing any compensation at all. The law doesn’t require the government to consider the cost of its regulation, so government officials can write overly strict rules just in case it might help a species. Yet there is little evidence that giving the government this power has done much to save species. The few species that have recovered from danger did so mostly for other reasons. [pullquote]Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners.[/pullquote] For example, America’s symbol, the bald eagle, was once considered endangered. But scientists agree that it recovered primarily because the Environmental Protection Agency banned the use of the pesticide DDT a year before the Endangered Species Act was passed. Moreover, the Endangered Species Act may actually do more harm than good to endangered species. To avoid regulation, the law gives private landowners incentives to do everything they can to keep endangered species off their land, leading to the phrase, “shoot, shovel, and shut up.” This entire system is unfair because it forces a few people to pay the costs for something that benefits everyone else. While it is unknown whether the Supreme Court would agree that the law is unconstitutional, we shouldn’t have to ask it because we shouldn’t have imposed such an inequitable burden on a few people in the first place. The Trump administration has proposed to revise how the law is administered in several ways. Among other things, the proposed rules would allow the government to consider the costs of its regulation and would impose less intrusive regulations for the protection of species that are considered “threatened” as opposed to “endangered.” While these changes may ease the burden on some private landowners, Congress and the administration could do much more to assure species recovery without imposing the costs on a few landowners. Carrots work better than sticks, meaning we can save more species by rewarding people for doing so rather than punishing them for having those species on their land. First, a share of public land recreation fees should go into trust funds for protecting endangered species. To adequately fund this program, federal agencies such as the National Park Service, Forest Service, and Bureau of Land Management should be allowed to charge for all recreation on public lands. Currently, most public land recreation, including hunting, fishing, hiking, boating, and off-road vehicles, is free. It is perfectly fair to ask people who use public lands to pay such fees, and many will be happy to pay such fees knowing that by doing so they are helping to save endangered species. Second, on a case-by-case basis, it may be appropriate to give people ownership rights to selected species. In Britain, wildlife are owned by the owners of the land the wildlife use, which can give landowners incentives to protect such wildlife. Giving Americans similar ownership rights can help save many species. People go to great lengths to save rare breeds of dogs, cattle, and other domestic animals, not for any economic reward but simply for the pride in doing so. Creating ownership rights in some species of wildlife can put this energy to work in saving rare species. Saving endangered species is important, but imposing the costs of doing so on a few people is unfair, counterproductive, and may be unconstitutional. Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners. Randal O’Toole is a senior fellow with the Cato Institute and author of Reforming the Forest Service and co-author of The Endangered Endangered Species Act.
  • Maryland Case Reveals Religious Discrimination in Education    (Neal McCluskey, 2019-08-20)
    Neal McCluskey If government says that you are free to believe in something, but not to act on it, you are not truly free. That reality lies at the heart of a federal lawsuit filed by the Bethel Christian Academy against the state of Maryland, which kicked the academy out of a private school voucher program for having policies consistent with the school’s religious values. Such unequal treatment is unacceptable. Immediately at issue are the school’s policies requiring that students and staff behave in ways consistent with the idea of marriage being between a man and a woman, and an individual’s proper gender being the one assigned at birth. The state maintains that those policies are discriminatory against LGBTQ individuals and that allowing public money - school vouchers from the state’s BOOST program - to flow to Bethel Christian is unacceptable. The state’s position is totally understandable: All people should be treated equally when government is involved. The problem is that the state government is not treating religious people equally - a problem in the public education system not just in Maryland, but in every state in the country. It would be better if Maryland had a scholarship tax credit program than a voucher. Then taxpayers could choose to direct their education dollars to religious institutions and get a credit for it, rather than all taxpayers having some sliver go to religious institutions, like it or not. How does the current education system discriminate against religious people? Everyone is forced to pay for public schools - government run and funded schools - but those institutions cannot be religious in nature. They can teach about religion, but even that is very difficult because public schools must not be perceived as even incidentally promoting any religious precepts, much less being openly guided by them. In other words, non-religious people can get the education they want from the government schools for which they must pay, but religious people cannot. There is an excellent reason for prohibiting the endorsement of religion by public schools: In a diverse society, it would inevitably end up with government favoring one person’s religion over another’s. Indeed, for much of our history public schools did exactly that, typically favoring Protestantism over Catholicism, Judaism, atheism and so on. The current system no longer favors Protestantism, instead favoring secularism over religion, a violation of government’s mandate to be neutral with regard to religion. Most famously, a public school can teach that the theory of evolution is true, but not creationism, a religious explanation. If government can neither favor nor disfavor religion, what is it to do? As long as it is going to fund education, the answer is to do what BOOST begins to do: allow families to choose schools with the tax money earmarked for their children’s education. Do not have government decide what is acceptable or unacceptable for children to learn, let families decide for themselves. That is true equality under the law. Which brings us back to Bethel: If a religious school cannot act on its religious principles without being cut off from a choice program, that program ceases to provide equality under the law. It essentially says that educators and parents may pick a school consistent with their faith, but as a practical matter that faith must be dead. Of course, just because liberty and equality dictate that government not take sides on religious questions, it does not mean that individuals who dislike religious schools’ policies have to just accept them. They can and should use their own liberty, especially freedom of speech, to critique and even condemn them. It would be better if Maryland had a scholarship tax credit program than a voucher. Then taxpayers could choose to direct their education dollars to religious institutions and get a credit for it, rather than all taxpayers having some sliver go to religious institutions, like it or not. But it is still far more appropriate in a free society that people can choose schools consistent with their faith rather than be rendered second class. Neal McCluskey is the director of the Cato Institute’s Center for Educational Freedom and maintains the Center’s Public Schooling Battle Map.
  • Forget "Checkbook Diplomacy" and Bring the Troops Home    (Ted Galen Carpenter, 2019-08-20)
    Ted Galen Carpenter President Trump is once again beating the drums about the need for greater burden-sharing by U.S. allies. The latest example is his demand that South Koreans pay “substantially more” than the current $990 million a year for defraying the costs of American troops defending their country from North Korea.  This is not a new refrain from the president. Most of Trump’s spats with NATO members have focused on the financial aspects of burden-sharing. Yet the nature of his complaints leads to the inescapable conclusion that if allies were willing to spend more on collective defense efforts, he would have no problem maintaining Washington’s vast array of military deployments around the world. Trump’s obsession with financial burden-sharing misses a far more fundamental problem. Certainly, the tendency of U.S. allies to skimp on their own defense spending and instead free ride on the oversized American military budget is annoying and unhealthy. But the more serious problem is that so many of Washington’s defense commitments to allies no longer make sense-if they ever did. Not only are such obligations a waste of tax dollars, they needlessly put American lives at risk, and given the danger of nuclear war in some cases, put America’s existence as a functioning nation in jeopardy. American military personnel should not be mercenaries defending the interests of allies and security clients when their own country’s vital interests are not at stake. Even if treaty allies offset more of the costs, as Trump demands, we should not want our military to be modern-day Hessians.  Donald Trump wants our allies to pay more, but outdated overseas defense obligations are the real problem. Unfortunately, the current situation is not unprecedented. During the Persian Gulf War, President George H.W. Bush expressed satisfaction that allied financial contributions offset most of Washington’s expenses. That was undoubtedly true. Indeed, according to some calculations, the United States may have ended up with a modest profit. Kuwait and Saudi Arabia were especially willing to contribute financially to support the U.S.-led military campaign to expel Saddam Hussein’s forces from Kuwait. Japan, still agonizing over the alleged limitations on military action that its “peace constitution” imposed, asserted that while it could not send troops, it would contribute funds to the war effort. All three countries practiced rather blatant “checkbook diplomacy.” The Persian Gulf War was surprisingly short, and U.S. forces incurred far fewer casualties than anticipated. However, the immediate costs were merely the beginning of an expanded American security role in the Middle East that has proven to be disastrous. The checkbook diplomacy payments of 1990 and 1991 did not even begin to offset those horrendous, ongoing costs in treasure and blood.  Financial considerations aside, it never served American interests to become the onsite gendarme of the Middle East. Those who saw the Persian Gulf War as a low-cost, perhaps even no-cost, venture from the standpoint of finances were incredibly myopic. America’s role as Hessians for Kuwait, Saudi Arabia, and other powers undoubtedly benefited the ruling elites in those countries, but it clearly has not benefited the American people. Yet Trump’s security policies continue to evince similar myopic impulses. During the 2016 presidential campaign, he repeatedly criticized NATO members for their lack of burden-sharing, and he even indicated that Washington’s defense commitments to an “obsolete” alliance might be reconsidered. But when the allies pledged greater defense spending at the 2018 NATO summit, Trump’s grousing was replaced by praise and expressions of alliance solidarity. He greeted with even greater enthusiasm the Polish president’s offer to offset construction costs if the United States built a military base in Poland-even though such a move would deepen already worrisome tensions with Russia. The American Conservative’s Daniel Larison put it well: “Trump is often accused of wanting to ‘retreat’ from the world, but his willingness to entertain this proposal shows that he doesn’t care about stationing U.S. forces abroad so long as someone else is footing most of the bill.” The overwhelming focus of Trump’s burden-sharing goals continues to be financial. His administration shows little receptivity to independent defense policy initiativeson the part of allies. Indeed, he and his advisers, especially National Security Adviser John Bolton, show outright hostility to proposals for a European Union army or other manifestations of greater Europeans-only security efforts, even though they would seem to constitute meaningful burden-sharing. Bolton has blasted such initiatives as “a dagger pointed at NATO’s heart.” Washington simply wants the allies to pay more for its own defense protection. Instead, U.S. leaders need to engage in burden-shedding-eliminating security commitments that now entail far more risks than benefits to America. For example, it makes little sense to retain, much less add, obligations to defend small, strategically insignificant countries on Russia’s border. The risks of such a provocative stance clearly outweigh any potential benefits. Likewise, the risk-benefit calculation to continue providing a security shield for South Korea has changed dramatically since the days of the Cold War. Not only is South Korea now a much stronger country economically, one that can build whatever forces are needed for its defense, but North Korea is now capable of inflicting grave damage on U.S. forces stationed in East Asia and will soon be able to strike the American homeland with nuclear warheads. Greater burden-sharing efforts by NATO members or South Korea will not change that more important risk-benefit calculation. The American people deserve a far more substantive policy change.  Ted Galen Carpenter, a senior fellow in security studies at the Cato Institute and a senior editor at The American Conservative, is the author of 12 books and more than 800 articles on international affairs.
  • Terrorist 'Safe Havens' Are a Myth -- and No Reason for Continuing the War in Afghanistan    (John Glaser, John Mueller, 2019-08-19)
    John Glaser and John Mueller America’s longest war may be coming to an end. Although major obstacles remain, the Trump administration’s negotiations with the Taliban, led by U.S. special envoy Zalmay Khalilzad, have made progress toward an agreement that would include a U.S. military withdrawal. In July, President Trump said “it’s ridiculous” that we’re still in Afghanistan after almost two decades of stalemate. His 2020 Democratic challengers seem to agree — most have called for an end to the war — and fewer and fewer Republicans are willing to defend it. But one persistent myth continues to frustrate the political momentum to end the war and may inhibit the impending debate over withdrawal. It is by far the most common justification for remaining in Afghanistan: the fear that, if the Taliban takes over the country, the group will let Al Qaeda reestablish a presence there, leaving the terrorist organization to once again plot attacks on the United States. Experts have effectively contended that, although 9/11 was substantially plotted in Hamburg, Germany, just about the only reason further attacks like that haven’t taken place is that Al Qaeda needs a bigger territorial base of operations — and that such a base will inevitably be in Afghanistan. Virtually all promoters of the war in Afghanistan have stressed this notion. Barack Obama applied it throughout his presidency. Gen. David H. Petraeus, who commanded American forces in Afghanistan, recently contended that a U.S. withdrawal is still premature and would risk leaving behind a haven for terrorist groups comparable to the rise of Islamic State following the U.S. withdrawal from Iraq in 2011, according to a Wall Street Journal op-ed he co-wrote. Trump reflected this thinking as well when he authorized an increase of troops to Afghanistan in his first year in office. His “original instinct,” he noted, was “to pull out,” but his advisers had persuaded him to believe that “a hasty withdrawal would create a vacuum that terrorists … would instantly fill, just as happened before” the Sept. 11 attacks. This key justification for staying in Afghanistan has gone almost entirely unexamined. It fails in several ways. To begin with, it is unlikely that a triumphal Taliban would invite back Al Qaeda. Its relationship with the terrorist group has been strained since 1996 when Osama bin Laden showed up with his entourage. The Taliban extended hospitality, but insisted on guarantees that Bin Laden refrain from issuing incendiary messages and from engaging in terrorist activities while in the country. He repeatedly agreed and broke his pledge just as frequently. Veteran foreign correspondent Arnaud de Borchgrave said he was “stunned by the hostility” expressed for Bin Laden during an interview shortly before 9/11 with the top Taliban leader. According to Vahid Brown of the Combating Terrorism Center at West Point, relations between the Taliban and Al Qaeda during this period were “deeply contentious, and threatened by mutual distrust and divergent ambitions.” Bin Laden’s 9/11 ploy not only shattered the agreement, but brought armed destruction upon his hosts. The last thing the Taliban would want, should it take over Afghanistan, is an active terrorist group continually drawing fire from the outside. Moreover, unlike Al Qaeda, the Taliban has an extremely localized perspective and would be primarily concerned with governing Afghanistan. In addition, it is not at all clear that Al Qaeda would want to return to a ravaged, impoverished, insecure and factionalized Afghanistan even if it were invited. It’s difficult to see how an Afghan haven would be safer than the one Al Qaeda occupies in neighboring Pakistan. There is also concern that the small branch of Islamic State in Afghanistan would rise if the Americans withdrew. However, Islamic State has suffered repeated tactical failures, has little to no support from the local population, and the Taliban has actively fought the group on the battlefield in Afghanistan for years, making a Taliban-sponsored safe haven for that group singularly unlikely. Most importantly, the notion that terrorists need a lot of space and privacy to hatch plots of substantial magnitude in the West has been repeatedly undermined by tragic terrorist attacks in Madrid in 2004, London in 2005, Paris in 2015, and Brussels and Istanbul in 2016. None of the attackers in those incidents operated from a safe haven, nor were their plans coordinated by a group within a safe haven. Al Qaeda Central has not been all that effective since 9/11, but the group’s problems do not stem from failing to have enough territory in which to operate or plan. Pretending that the Taliban can be defeated, and that an independent and democratic government can be left in its place, is unrealistic. The Taliban may very well make further gains following a U.S. withdrawal, but the myth that territorial safe havens provide great utility to terrorists planning transnational attacks should not continue to justify a war that America cannot win. John Glaser is director of foreign policy studies at the Cato Institute. John Mueller is a political scientist at Ohio State University and a senior fellow at the Cato Institute.
  • How the Government Creates Wealth Inequality    (Chris Edwards, 2019-08-19)
    Chris Edwards There are economic storm clouds on the horizon, but for now wages are rising, jobs are plentiful, and poverty is falling. Democrats running for president need an economic line of attack, so the solution has been to focus on wealth inequality. Senator Bernie Sanders claims that there has been a “massive transfer of wealth from the middle class to the top one percent.” Senator Elizabeth Warren lambastes America’s “extreme concentration of wealth.” Even the establishment Joe Biden laments, “This wealth gap that exists in the United States of America is so profound now.” Wealth inequality has risen in recent years, but by far less than the Democrats and many media articles imply. The scarier claims about inequality usually stem from the flawed data created by French economist Thomas Piketty and his colleagues. More careful studies by other economists and the Federal Reserve Board reveal surprisingly modest changes in wealth inequality given the huge revolutions in globalization and technology that have occurred. Are increases in wealth inequality the awful thing that Democrats claim? It depends on what causes them. Much of the recent modest rise in wealth inequality stems from innovations in our economy that are pulling everyone up. Brian Acton and Jan Koum, for example, built huge multibillion dollar fortunes by creating WhatsApp, which provides free phone service for 1.5 billion users globally. Sanders and Warren are right to criticize crony capitalism as a cause of wealth inequality. But their big government approaches to social policy would have the opposite effect on wealth inequality than what they may believe. Acton and Koum’s success may have increased the wealth owned by the top 1 percent, but their product has created massive consumer value as well. Most of the wealthiest Americans are entrepreneurs who have fueled economic growth, which is clear in examining the Forbes 400 list. Wealth created this way is not the zero-sum struggle that Democrats imagine it is. That is the good news. The bad news is that the government itself generates wealth inequality in at least two ways that make us worse off. First, governments give subsidies, regulatory preferences, and other crony-capitalist benefits to wealthy insiders. In the recent Fat Leonard scandal, for example, Leonard Francis gained hundreds of millions of dollars of government contracts by cozying up to Navy officers and providing them with gifts, prostitutes, and other favors to get them to do his bidding. The other way that the government fuels wealth inequality is a deeper scandal. The expansion of social programs over the decades has undermined incentives for lower- and middle-income families to save while reducing their ability to save because of higher taxes. Government programs have displaced or “crowded out” wealth-building by all American families but the richest. Politicians complain loudly about wealth inequality, but their own policies are generating it. This issue receives too little policy attention, but it is profoundly important and reveals the hypocrisy of the political left. Many Americans have saved little for retirement because Social Security discourages them doing so, as does the heavy 12.4 percent wage tax that funds the program. Economist Martin Feldstein found that every dollar increase in Social Security benefits reduces private savings by about 50 cents. Social Security accounts for a larger share of retirement income for the non-rich than for the rich, so this crowd-out effect increases wealth inequality. In a simulation model, Jagadeesh Gokhale and Laurence Kotlikoff estimated that Social Security raises the share of overall wealth held by the top 1 percent of wealth holders by about 80 percent. This occurs because the program leaves the non-rich with “proportionately less to save, less reason to save, and a larger share of their old-age resources in a nonbequeathable form.” A study by Baris Kaymak and Markus Poschke built a model of the U.S. economy to estimate the causes of rising wealth inequality. They found that most of the rise in the top 1 percent share of wealth in recent decades was caused by technological changes and wage dispersion, but the expansion of Social Security and Medicare caused about one-quarter of the increase. They concluded that the “redistributive nature of transfer payments was instrumental in curbing wealth accumulation for income groups outside the top 10% and, consequently, amplified wealth concentration in the U.S.” More government benefits result in less private wealth, especially for the non-rich. It is not just Social Security and Medicare that displaces private saving, but also unemployment insurance, welfare, and other social spending. Some social programs have “asset tests” that deliberately discourage saving. Total federal and state social spending as a share of gross domestic product soared from 6.8 percent in 1970 to 14.3 percent in 2018. That increase in handouts occurred over the same period that wealth inequality appears to have increased. Generations of Americans have grown up assuming that the government will take care of them when they are sick, unemployed, and retired, so they put too little money aside for future expenses. Cross-country studies support these conclusions. A 2015 study by Pirmin Fessler and Martin Schurz examined European data and found that “inequality of wealth is higher in countries with a relatively more developed welfare state … given an increase of welfare state expenditure, wealth inequality measured by standard relative inequality measures, such as the Gini coefficient, will increase.” A study by Credit Suisse found: “Strong social security programs - good public pensions, free higher education or generous student loans, unemployment and health insurance - can greatly reduce the need for personal financial assets… . This is one explanation for the high level of wealth inequality we identify in Denmark, Norway and Sweden: the top groups continue to accumulate for business and investment purposes, while the middle and lower classes have a less pressing need for personal saving.” That is why it is absurd for politicians such as Sanders and Warren to decry wealth inequality and then turn around and demand European-style expansions in our social programs. The bigger our welfare state, the more wealth inequality we will have. The solution is to transition to savings-based social programs. Numerous countries have Social Security systems based on private savings accounts. Chile has unemployment-insurance savings accounts. Martin Feldstein proposed a savings-based approach to Medicare. The assets in such savings accounts would be inheritable, unlike the benefits from current U.S. social programs. Sanders and Warren are right to criticize crony capitalism as a cause of wealth inequality. But their big government approaches to social policy would have the opposite effect on wealth inequality than what they may believe. Chris Edwards is an economist at the Cato Institute. He recently testified before the House Oversight and Reform Committee about the USPS’s dire financial condition.
  • Economic Populism on the Left and Right Is Poisoning US Political Discourse    (Ryan Bourne, 2019-08-16)
    Ryan Bourne In a 1964 US Supreme Court case, Justice Potter Stewart famously realised the difficulty of defining hard-core pornography. Conscious of setting an arbitrary threshold for “obscenity”, he admitted defeat, concluding: “Perhaps I could never succeed in intelligibly doing so. But I know it when I see it …” Economic populism is similarly hard to define. Yet there is plenty of it around in the US and, whether it be Democrat presidential candidates Elizabeth Warren and Bernie Sanders on the Left or President Donald Trump and Fox News host Tucker Carlson on the Right, we should know it when we see or hear it. The stakes mean it’s too important not to. Plenty of conventional descriptions of economic populism are inadequate. Often the term is used to signal disapproval of a policy idea — a sort of “neoliberalism” moniker for the age of Trump and Brexit. Left-wing chattering classes believe that both are “populist” movements, and thus anything they do must, by definition, be “populist” too. For these commentators, populism is just another term for demagoguery. Others wrongly see populism as synonymous with widely popular, but misguided, “common sense” economic ideas, such as “cutting immigration to raise wages”. Its defining feature is supposedly how it ignores or dismisses the knowledge of professional economists, exemplified by Michael Gove’s declaration that “we’ve had enough of experts”. Populism’s opposite, in this view, is technocracy or “expert rule.” But neither of these definitions get to the heart of trends dominating American politics. Listen to Trump or Warren long enough and clear patterns emerge that trigger your inner economic populism alarm. Most obvious is the way issues are framed. Populists pitch themselves as true representatives of “the people”, struggling to overcome some “elite” who undermine “the people’s” interest. Populism’s first characteristic is to divide society between a supposed broad interest and an establishment elite quelling it. Villains and their supposed crimes can differ. For Elizabeth Warren and Bernie Sanders, those rigging the system to our detriment are the rich; mega-corporations; fossil fuel companies; big tech; and pharmaceutical firms. They supposedly buy elections, resist needed welfare programs, rewrite regulations in their interests, stitch up trade deals that undermine workers, rip off consumers and profiteer off our health. For Trump and Carlson, the nefarious elites instead are the Chinese, the cultural America-loathing Left, useless past negotiators and presidents, international institutions and, again, big tech companies. Their misdeeds? Selling out or ripping off American workers on trade; wanting to flood the country with migrants who hate it; and stamping out conservative voices on social media. A key feature of populism as a “thin ideology” then is the idea of an elite working against broad majoritarian interests. Populists can disagree on who the “elites” and “the people” they represent are, although it’s remarkable how often they agree that corporate America is an enemy. The opposite of this populism then isn’t elitism, but pluralism — the idea that multiple identities and interests can compete and coexist within a free society. Economic populism, almost by definition, is therefore anti-market. A healthy market economy is characterised by individual choices, voluntary trades and individuals pursuing their own self-interests. Our wealth comes from bottom-up activity, not top-down decisions. Claiming that a political representative of “the people” knows better how to achieve aggregate goals than a free people erodes any sort of limiting principle on government action. Paradoxically, populism produces demands for new restrictions on transient business “elites” in favour of emboldening another elite, government officials, working in the politician’s name. But what makes populism doubly dangerous is the way its practitioners imply there are big wins out there for “the people” available at no cost. Populists’ policy programmes claim the elites are denying us something that the self-styled people’s representative can deliver to us. Crucially, and distinctly, they claim they can do so without trade-offs, lost opportunities and unintended consequences. President Trump didn’t make the case that building a border wall to reduce illegal immigration would just be net beneficial for US taxpayers. He claimed that Mexico would pay for it entirely. Putting tariffs on China wasn’t justified as a necessary evil to bring the Chinese into negotiations. Trump claimed Chinese companies would pay them, with no effect on American consumers. Bernie Sanders and Elizabeth Warren promise major expansions of the US welfare state in a European direction — “wins” for ordinary people that wealthy interests supposedly deny Americans through their political lobbying. Again though, both wave away claims this will require European levels of indirect taxation or that anyone would suffer worse healthcare under a socialised system. It is “the rich” elites, of course, who will pay. Occasionally, reality intervenes. President Trump this week delayed additional tariffs on a host of imported Chinese goods, saying he didn’t want to hurt American shoppers before Christmas. In one swoop, he blew his “China pays” rhetoric out of the water. Similarly, you could see Bernie Sanders’ facial panic in a recent debate when it was pointed out that paying US government rates for all treatments would lead to widespread hospital bankruptcies. But populist stances, once adopted, are difficult to shake off. Once “elites” have been identified as enemies, it’s difficult to rehabilitate them and argue their success strengthens society. Once trade-offs have been dismissed, it’s difficult to warn people that something might prove costly to them. Populism is poisoning the US economic discourse. The very idea of a majoritarian interest rides roughshod on its liberal and limited government inheritance. Its dismissal of trade-offs ensures an arms race of “wins”, which somebody else will pay for. Let us hope that Americans, like Justice Stewart, recognise “populism” for what it is, and check its growth before it’s too late. Ryan Bourne is the R Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute.
  • An Old-Fashioned Recipe for Economic Growth    (Chelsea Follett, Marian L. Tupy, 2019-08-16)
    Chelsea Follett and Marian L. Tupy With the recent inversion of the yield curve sparking recession fears in the United States and the stock market swinging wildly in response to the ongoing trade negotiations with China, some are wondering if the longest economic expansion in American history may soon come to an end. Those uncertainties bring renewed urgency to the age-old question at the heart of economics: what creates wealth? Throughout most of human history, there was almost no wealth. People were very poor, and there weren’t that many of us. While our species is roughly 300,000 years old, for the first 290,000 years or so we were foragers barely scraping by. Even after Homo sapiens embraced agriculture, progress was still painfully slow. But then, suddenly, population skyrocketed, followed shortly by an explosion in income and standards of living. Between 1700 and 1900, the world’s population rose from about 600 million people to about 1.5 billion people. Between 1800 and 1900, GDP per person per day doubled. Income grew over twice as much in that century as in the preceding 18 centuries combined. The two trends of rising income and population are related. It is obvious how wealth allows for a larger population, but could a larger population in turn also create more wealth? The answer is yes — so long as people are allowed to innovate. The computer or tablet or smartphone on which you are reading this op-ed is the product of a complex web of human innovation and cooperation that spans the globe. People have been innovating since the australopithecines left the African forests — carrying primitive weapons — some seven million years ago. Moreover, we have been specializing at least since Homo erectus some two million years ago. Yet economic progress was very slow. So, what did the species do differently in the last 250 years or so? What allowed humanity at last to fully realize its innovative potential to create wealth? To figure out what caused the wealth explosion, we need to consider where and when the change began. Economic growth started to accelerate some 250 years ago, first in Great Britain and the Netherlands, then the rest of Western Europe and North America, and finally the rest of the world. What happened? There are different theories, many of them complementary. The Nobel-prize-winning economist Douglass North contends that the evolution of institutions, including constitutions, laws, and property rights, was instrumental to economic development. Economist Deirdre McCloskey attributes the wealth explosion, or the “great enrichment,” to a change in attitudes about markets and innovation. Long scorned as vulgar, merchants and inventors began to enjoy respect and institutional protection — what she calls “bourgeois dignity.” But there was also a broader change in the way people thought. It wasn’t just that the British and the Dutch started to look upon shopkeepers and manufacturers without disdain and instead to respect them. Harvard University psychologist Steven Pinker argues that progress is ultimately rooted in the values of the Enlightenment. He claims that reason, science, and humanism are behind the transformation. Another scholar, Stephen Davies, believes that innovation took off in Europe because of interstate competition. Historically, empires like China, Russia, Mughal India, the Ottoman Empire, and Safavid Iran were so large that conflict among them ended in a stalemate. The primary danger to their sovereignty was internal instability, and so they suppressed ideas and innovations that threatened the traditional order in the name of stability. But Europe was divided between many constantly warring powers, so the ruling classes could not totally suppress progress without risking the loss of sovereignty. They relied on innovation to keep them in power, and so they allowed innovation to take place. Over time, new ideas as well as greater inclusivity of political and economic frameworks allowed for a sustained increase in human numbers and prosperity. For the first time, the individual was sovereign, innovation was honored, and human rights were (increasingly) respected. Today, the world’s population is at an all-time high even as hunger and illiteracy are at all-time lows. The revolution in ideas and institutions, in other words, transformed humanity’s lot — for the better. The basic recipe for economic growth is still the same today. Like a beloved family cooking recipe, handed down through the generations, it has stood the test of time. Elected officials can help the U.S. economy to continue to grow by allowing the American people to innovate and exchange. To do so, burdensome regulations and taxes should be eliminated and lowered, and trade wars should be ended. Chelsea Follett is a policy analyst at the Cato Institute. Marian L. Tupy is the editor of HumanProgress.org and a senior policy analyst at the Cato Institute’s Center for Global Liberty and Prosperity.
  • Do Oren Cass’s Justifications for Industrial Policy Stack Up?    (Ryan Bourne, 2019-08-15)
    Ryan Bourne Oren Cass wants the U.S. government to adopt a manufacturing-focused “industrial policy.” In a speech at the National Conservatism conference last month, the Manhattan Institute scholar explicitly repudiated the view that resources are usually best allocated by voluntary market trades between consumers and producers. No, said Cass, “market economies do not automatically allocate resources well across sectors.” Some “vital sectors…suffer from underinvestment” as a result and, though naturally imperfect, a “sensible industrial policy” could improve on the outcomes we currently experience. A belief that there is such widespread “market failure” to be corrected through the government thumbing the scale might sound familiar to those with knowledge of the socialist economic planning debates. Cass baulks at the idea the socialist label can be thrown at him. But he has not yet answered the central questions this analogy poses: Why is the government better placed to decide the industrial composition of the economy than the interaction of consumers and producers? And would the political system deliver an economically-reasoned industrial policy in practice? Some industrial policy advocates rightly state that current policy is more interventionist than we would like, and replete with incentives, subsidies, and tax breaks that could be considered a de facto industrial policy for the economy already. But Cass’s case is not merely a criticism of how current policy operates, or seeking to level the playing field. He explicitly says that markets do not allocate funds effectively, thus implying an explicit manufacturing-focused industrial strategy from government would be desirable even if today’s current distortions were eliminated. Yet his speech gives no indication of how we might judge how well or badly resources are currently allocated across sectors, nor a measure of how we could judge whether there is indeed currently “underinvestment” within them. Oren Cass asserts that markets cannot generally allocate resources efficiently by industry. Yet he provides no meaningful metrics to show this is the case, nor shows why his policies would deliver better outcomes. The closest he gets is a throwaway line about the size of manufacturing in U.S. output (12 percent) being smaller than in Germany (23 percent) and Japan (19 percent). No evidence is presented for why these levels are optimal or even better. Without this kind of information, how are we to judge Cass’s industrial policy prescriptions and whether they achieve his goals? Is economic efficiency his aim? Employment? Or something else? In the absence of meaningful metrics for success, we must instead assess the likelihood of what he foresees as the social and economic benefits from a manufacturing-focused policy shift. The Supposed Benefits of Manufacturing Manufacturing, which he defines as making “physical things” (traditional manufacturing, resource extraction, energy production, agriculture, some construction), is said by Cass to have three major upsides compared to employment in other sectors: It “provides particularly well-paying, stable employment — especially for men with less formal education.” It “tends to deliver faster productivity growth because its processes are susceptible to technological advances that complement labor and increase output.” It (manufacturing production) is inextricably linked with innovation, and thus a more dynamic economy. These are aggregated as justification for policy to incentivize or support manufacturing sectors through nine specific policy proposals, including everything from demands for government investment in basic science research right through to intrusive local content requirements, restrictions on foreign ownership and biasing the tax code towards this “productive” use of labor. Stable Employment? The claim that manufacturing “provides particularly well-paying, stable employment — especially for men with less formal education” is an eye-opening one, given that this debate arises in part due to a precipitous decline of manufacturing employment in the United States over recent decades. Since 1987, employment in manufacturing has fallen by 33 percent, equivalent to around 5 million fewer jobs. As economists Kerwin Kofi Charles, Erik Hurst and Mariel Schwartz have outlined, “the declines [in employment] have been most pronounced among those with lower levels of accumulated schooling.” If “stable employment” that was good for those with “less formal education” was guaranteed by manufacturing, it’s unlikely that policy would be needed to revive it. What Cass means then is that manufacturing *used to* provide stable employment for low-skilled workers in the post-war period. Industrial policy advocates imply either that policy somehow took a wrong turn from the 1980s and 1990s onwards, with “globalization” or liberalized trade, which destroyed this stability, or that with a few policy tweaks we could return to those good old days when low-skilled men had jobs for life. There’s of course some truth in the memory of “jobs for life.” In the immediate post-war period, many people did work for one firm for their whole career. But this belief in widespread post-war manufacturing job stability is somewhat overplayed and infused with romanticism. Even to the extent it did exist, of course, that doesn’t mean an industrial policy will bring it back. In 1963, for example, the median economy-wide measure of continuous years of association with an employer was 4.6 years; in 2018 it was 4.2 years. A fall, sure, but not dramatic. Though absolute employment levels in manufacturing peaked in June 1979, in relative terms manufacturing has been in near continuous decline since WW2 too (see Figure 1). In 1947, 33 percent of the workforce were employed in manufacturing, but that had already fallen to 21.2 percent by the turn of 1980, and further to 8.5 percent today. This is instructive of a trend which suggests “policy” — and hence globalization and trade — is only part of the equation. Across almost all high-income countries, as economies become richer the balance of activity taking place in “industry” falls. Figure 2 shows that in every G7 country, for example, the proportion of total employment in “industry” — mining and quarrying, manufacturing, construction, and public utilities — has fallen since 1991, albeit to different levels. “Manufacturing employment,” as Cass defines it, could only have been more “stable” on aggregate over long periods if you presume that this universally experienced structural trend could have been bucked. It’s true that, at the level of the individual worker, manufacturing jobs tend to be more “secure” in any given year than a job in the rest of the economy. Since 1990, the rate of “job destruction” in manufacturing has averaged 4.5 percent of jobs per year, far below the 6.9 percent for the economy as whole. But that ignores important historical context. The rate of annual job creation in manufacturing since the 1960s has been low too, and there was net job destruction in each decade from the 1960s through 2010. In fact, even in the supposed golden era of “stable employment” from the end of the second world war to 1980, the rate of job destruction in manufacturing was 6 percent per year, not massively dissimilar to the overall rate of job destruction today, and certainly higher than the current manufacturing employment destruction rate (see Figure 3). Manufacturing also seems to fare worse than the broader economy during economic downturns, in both output terms and its net effect on jobs. Real GDP for the whole economy fell between 2007 Q4 and 2009 Q4 by 4.0 percent, for example, yet real value-added in manufacturing fell by a massive 14.9 percent. In that same period, manufacturing employment levels fell by 16.3 percent, compared with a much smaller overall decline in total nonfarm payrolls of 5.9 percent. Some security! In short, manufacturing provides more stable employment in the sense that the likelihood of your job being lost in any given year is lower than for the rest of the economy. But the sector as a whole has been in long-term employment decline, even prior to contemporary globalization, with net job losses over long periods and a huge fall in the manufacturing share of total employment. Job creation and destruction likewise tend to be much more volatile in manufacturing and so disproportionately drive fluctuations in the broader economy. Perhaps the policy tools Cass favors could raise the output and employment share of manufacturing. Whether that would generate more secure employment sustainably seems unlikely. Higher Productivity? The second reason Cass gives for favoring a manufacturing-biased industrial strategy is that manufacturing tends to experience higher rates of productivity growth. The idea is simple enough: Cass rightly highlights that manufacturing activities tend to be more prone to automation or, as he puts it, “technological advances that complement labor and increase output.” Productivity growth is ultimately what drives improvements in living standards. Surely, then, if policy had ensured more resources towards the manufacturing sector then economic growth and the gains to ordinary workers would have been much stronger over the past 30 years? Sadly, this view gets things completely backwards and shows a glaring contradiction with his first claim about employment. As my trade colleagues never tire of outlining, manufacturing output has continued rising and the real GDP share of manufacturing has remained steady despite a long-term decline in manufacturing employment. That’s precisely because historic productivity growth in manufacturing overall has been strong, causing (at least a large part of) the employment decline of the sector. Cass’s desire for “stable employment” and “high productivity growth” in manufacturing is thus a direct contradiction. Productivity is about producing more output with less input (including labor). Automation and technological improvements reduce the number of workers needed to produce a given quantity of goods. Unless there is very responsive consumption demand, then, productivity improvements (fostered by both innovation and indeed trade competition) will tend to reduce the number of required workers. Workers that remain will also tend to be higher skilled and hence higher paid. The economist Robert Lawrence outlines the story best. Suppose an innovation trickles through the manufacturing sector, raising the productivity of workers. This increases the supply of the good. The extent to which this feeds through to higher output or lower prices depends on the elasticity of demand — that is, the slope of the demand curve for the product. For manufactured goods in general, demand is relatively unresponsive to price. As prices fall due to increased supply, the quantity demanded does not greatly change. Consumers instead pocket the savings and tend to spend more on services. The workers that remain in the sector, on higher wages, likewise spend relatively more on services with their higher incomes. That’s why, between 1947 and 2017, the share of consumer spending on goods fell from 62 percent to 33 percent, despite manufacturing output continuing to rise. The broad statistics show this this trade-off between productivity and employment. Between 1980 and 2010, when manufacturing productivity growth was rapid, employment levels in manufacturing fell dramatically. Since 2010, when the manufacturing productivity performance has been near stagnant, employment in manufacturing has crept up. You can see this at the sub-sector level too. Take the manufacturing industry for computers and electronic products. Over the past 30 years, the sector has seen a 1000 percent increase in productivity. That has meant employment even in that sector, where demand has grown massively, has fallen by a huge 47 percent since 1987. This trade-off can be seen by looking at the manufacturing industries with the strongest employment performance too. Manufacturing industries that have bucked the trend with employment growth, rather than contraction, include “support activities for mining,” “beverages and tobacco,” and “food manufacturing.” Yet these are three of the six worst performing manufacturing in terms of labor productivity performance. “Beverages and tobacco” has actually seen a labor productivity decline since 1987. In contrast, the top 5 manufacturing industries by productivity performance since 1987 — computer and electronic products, but also oil and gas, textile mills, primary metals and transportation — each saw reductions in employment between 21 percent and 78 percent of their 1987 workforces. That’s not to say that there is a definitive pattern between employment and productivity at the level of individual industry. American apparel production for, example, has seen a dramatic employment collapse while labor productivity has stagnated over the last 30 years. This is presumably because demand for clothes has simply shifted to cheaper imports from less developed countries. Plastics employment has been fairly stable too, despite impressive productivity growth. This is presumably because plastics consumption has been rising. This all highlights an obvious truth though. The only ways to get “stable employment” through a manufacturing industrial policy would be a) to avoid disruptive productivity improvements in sectors where demand is largely fixed, b) to ensure workers are always able to move into new manufacturing industries as labor-saving technologies proliferate, or c) to focus attention solely on sectors where demand is likely to continue growing. Strategy a) would clearly worsen economic efficiency — it would be actively making the economy poorer. Both b) and c) depend on second-guessing future demand patterns and the likelihood of individual sectors enjoying productivity growth. Even if the economy could be engineered in this direction, rapid productivity growth industries would unlikely lead to a return of tons of stable blue-collar jobs for low education workers either. Would it not be better to just follow a consumer-led policy where the US traded according to its comparative advantages, and the industrial structure of the economy adapted to changing domestic and global demands? One cannot help but feel lots of industrial policy advocates simply do not like the sorts of service sector jobs that have proliferated as consumer demands have shifted. They get incredibly defensive about accusations they desire the reshoring of monotonous low-skilled manufacturing activities. But these are exactly the sorts of jobs that would provide the relatively “stable employment” they desire. In a world where a massive growth of the middle-class in China and beyond is expected to lead to a surge in demand for services and high value-added manufacturing, which the US specializes in, it would especially seem short-sighted to actively try to rebalance the economy to much wider manufacturing employment. Even aside from the growth-destroying effects of the cronyism and rent-seeking Cass’s programs would facilitate, it seems weird to assume too that manufacturing productivity will necessarily be more robust than services sectors in future. Many believe we could be on the cusp of AI, driverless cars and robotics enabling rapid productivity growth even within the service sector. Innovation? Cass’s final claim is that manufacturing is inherently tied up with innovation. He does not explain what he means by this, other than saying a productive capacity is needed to “scale” ideas. Nor does he provide metrics of innovation he believes would improve under his policies. That’s probably unsurprising — innovation is itself difficult to define and measure. Given that Cass cites Germany and Japan as “successful” examples of the sorts of economic structure he desires though, perhaps comparisons between the United States and these countries might be instructive? Various global innovation indices produce very different results on which of these countries are more innovative, though the US does not perform consistently “worse” across them than either Germany or Japan. In the face of such subjectivity, we might judge overall economy-wide productivity as an appropriate proxy of past innovativeness. OECD data suggests GDP per hour worked is around the same in Germany and the United States, and much higher in both than Japan. Average annual productivity growth across all three countries has been almost exactly the same since 1990 too, though over the past 10 years it has been significantly faster here in America (even as manufacturing productivity growth has slowed). In fact, between 1980 and 2010 manufacturing productivity growth overall was stronger in the United States than Germany or Japan. It’s only since the financial crisis that U.S. productivity has completely stagnated (see Figure 4). Cass cites China as another tentative success story too. But China’s growth is largely “catch-up,” and the country is still much, much poorer than the United States. Studies of specific components of China’s industrial strategy have found that while interventions did alter the country’s industrial composition, they led to “sizable distortions” and “increased industry fragmentation and idleness.” But maybe Cass believes America has big successes to build on. Maybe if we just used his tools to eke out a slightly larger manufacturing sector, then the economy could be even more dynamic and innovative. The belief that “industrial policy” could improve the dynamism of the economy also finds little support in the UK’s experience. A comprehensive evaluation by economists Tim Leunig and Stephen Broadberry of post-war policy found the creation of “national champions” had very poor results, while industrial subsidies were “an almost unmitigated failure” and “not successful in either supporting output or employment.” In particular, the government could not “successfully distinguish between sectors that were in inevitable decline and sectors with real prospects for the future.” The knowledge problem strikes again. None of this is to say everything is perfect here in the United States, nor that policy currently isn’t interventionist in ways that currently harm manufacturing, innovation, and the broader economy. Too often, in making some of the arguments outlined above, libertarians are misinterpreted as being inherently hostile to manufacturing industries, rather than simply being neutral and not seeking to prefer them to service sectors. Reviewing regulatory and environmental rules, the poor application of property taxes that can bias against industrial activity at the local level, and trade protectionism that raises costs for importers of intermediate goods, could all make manufacturing more productive, while reversing policy biases against it. But it’s worth noting that Leunig and Broadberry’s conclusions about what improves manufacturing performance are the precise opposite from the policies Cass wants to adopt. They say the things that helped make British manufacturing stronger and more productive were foreign direct investment, greater trade liberalisation and a market-based competition framework. Cass instead wants to “Tax foreign acquisition of U.S. assets, making U.S. goods relatively more attractive,” “Retaliate aggressively against mercantilist countries that undermine market competition,” and “Impose local content requirements in key supply chains like communications.” Conclusion Oren Cass asserts that markets cannot generally allocate resources efficiently by industry. Yet he provides no meaningful metrics to show this is the case, nor shows why his policies would deliver better outcomes. His two main claims about the benefits of a manufacturing sector — “stable employment” and “strong productivity growth” — are directly contradictory. A plethora of evidence suggests as countries’ get richer due to automation and technological improvements, they demand relatively more services, and so the industrial sector declines in employment terms. It would hurt, not improve, general economic performance to try to create stable employment in manufacturing industries given these trends, and would be particularly foolish given the likely rising demand for high-end manufacturing and services (healthcare, education, insurance, finance, etc.) as the global middle-class develops. Ryan Bourne occupies the R. Evan Scharf Chair for the Public Understanding of Economics at Cato.
  • Will Hong Kong Survive China's Crackdown?    (Doug Bandow, 2019-08-15)
    Doug Bandow Perhaps the greatest threat to liberty is disorder. Not because chaos necessarily begets violence. But because the fear of lawlessness often encourages repression. The Chinese government poses the greatest threat to Hong Kong’s liberties. However, activists are increasing chances of a crackdown by making the territory impossible to govern. Beijing will choose violence over mayhem. Hong Kong long led a privileged existence. More than a century ago Great Britain misused its power to force the cession and lease of lands which made up the colony of Hong Kong. However, that protected residents from the debilitating weaknesses of Imperial China, violent chaos of battling warlords, and revolutionary madness of the Red Emperor, Mao Zedong. Of course, Hong Kongers lived under benevolent tyranny rather than parliamentary democracy. But they enjoyed British civil liberties and prospered in the freest economy on earth. The exigencies of history sheltered them from the impoverishment of China’s Great Leap Forward and insanity of the Cultural Revolution. Alas, it seems that all good things must come to an end. Hong Kong’s ninety-nine-year lease expired in 1997. London could have attempted to muddle along with Hong Kong Island, Stonecutters Island, and Kowloon Peninsula, which had been ceded, not leased. However, they accounted for barely 14 percent of the colony’s territory and Beijing would not likely have continued to acquiesce to unfair treaties based on antiquated imperialism. Britain also could have played geopolitical chicken, calling a referendum on the territory’s future. That would have set up a confrontation when the People’s Republic of China finally felt able to fully assert its geopolitical interests. [pullquote]Hong Kong’s democracy activists are playing with fire. Disorder is likely to yield repression from Beijing. The consequences for all sides could be calamitous.[/pullquote] Instead, the British negotiated Hong Kong’s transfer back to the PRC. Beijing promised to maintain the unique status of what became a Special Administrative Area. As such, Hong Kong served as the test case for China’s supposed model of one nation, two systems. The SAR would retain its unique protections for a half century, until 2047. For more than a decade the PRC kept its promise. A journalist friend told me that Beijing had interfered less in his business than London did. However, Beijing’s political reticence eventually faded. In 2014 the SAR’s chief executive began a process of electoral reform, which fell short of genuine universal suffrage as promised by the Basic Law, essentially the territory’s constitution. The proposal would have maintained Beijing’s control over the nomination process. That approach violated the spirit if not the letter of the Basic Law. The so-called Umbrella Revolution, a youth-led effort, erupted and paralyzed several areas for seventy-seven days. Drawing up to one hundred thousand protestors, the campaign confounded the government by demanding the impossible: real democracy, which Beijing would never grant. However, without unified leadership the demonstrators were unable to force concessions. Eventually the protests withered and activists were evicted. The PRC avoided any direct involvement in the controversy. However, the Chinese authorities acted covertly, kidnapping publishers of books critical of the PRC. (Beijing claimed the men returned to China voluntarily.) In 2016 activists elected to the Legislative Council used their oaths to disrespect the PRC, an action which, perhaps more than anything else, awakened the not so cuddly Great Panda. At that point Beijing directly intervened, ordering the exclusion of election winners and disqualification of candidates. Last year the SAR government began prosecuting Umbrella Movement leaders. In February the SAR’s chief executive Carrie Lam proposed extradition legislation which could have been manipulated by the PRC to legally kidnap critics. That sparked demonstrations which peaked at two million people. Again, the protests were decentralized and the demands unrealistic. Lam suspended the legislation, which could have ended the controversy. However, demonstrators demanded that the bill be formally withdrawn, then that Lam resign, then that protestors detained be released, and finally that full democracy be granted. Also, over the objection of older democracy activists protestors turned to violence, trashing the legislative chamber, clashing with police, occupying the airport, and roughing up suspected infiltrators—who turned out to be Chinese citizens. Police escalated their use of force, the PRC used local thugs provided by the criminal triads to beat up protestors, and Beijing ratcheted up its rhetoric, calling the protestors “terrorists,” blaming their actions on “hostile foreign forces,” and threatening to intervene if order was not restored. China also played the nationalism card for its domestic audience in its coverage of the controversy. The PRC rejected Lam’s offer to resign. Unconfirmed reports indicated that Chinese troops were moving to the territory’s border or paramilitary (People’s Armed Police) forces were being assembled for use in Hong Kong. Protestors use desperation as justification for their actions. One demonstrator’s sign declared: “We’re fighting for survival.” No doubt, but the tactics adopted make survival far less likely. Hong Kong seems to risk descending into chaos with street battles, roaming protests, and cancelled flights. Although the vast majority of Hong Kongers backed the initial campaign against the extradition bill, support for the apparently aimless protests has begun to ebb. Some protestors and their allies argue that the PRC cannot afford a Tiananmen Square-style showdown. Analysts contend that the reputational damage to Beijing from doing so would be too great. However, China—or at least the Chinese Communist Party—also is fighting for survival. It cannot show weakness in the face of popular protests or grant democratic freedoms to but one small part of the nation. Nor can the PRC accept chaos in one of its premier cities, which has long been the major entry point for Western commerce. Making the situation even less tenable is the imagined role of the United States. Anyone familiar with democratic polities understands that the protests are homegrown, but some demonstrators have waved the American flag. Moreover, American politicians have loudly backed the protests. House minority leader Kevin McCarthy opined: “We see you waving the American flag, and we hear you singing our national anthem.” That cannot help but inflame the Xi regime’s suspicions, especially given Beijing’s ongoing propaganda offensive. The CCP cannot concede to demands advanced in league with America. If chaos continues, then the only realistic alternative for the PRC, whatever the cost, is to restore order. With the June 1989 crackdown in Tiananmen Square as the model, such an effort could result in significant bloodshed. Such a crackdown would have horrid consequences for all concerned. The SAR would lose its relative autonomy, almost certainly ending up under direct Chinese rule, and, likely temporarily under military control. Business and investment would flood outward, not likely to return for years, if ever. Wealthy individuals would look to transfer their wealth overseas while seeking any possible foreign refuge. The commercial impact elsewhere on China would be modest, but some foreign firms likely would prepare for Western economic and political retaliation. With foreign relations almost certain to collapse, businesses that remain in the PRC could become collateral damage. The United States would revoke Hong Kong’s special trade status. Economic sanctions of some sort would be equally inevitable. A trade embargo would remain unlikely, but in contrast to 1989 the debate over American policy would occur during the nadir of post-Mao Sino-U.S. relations. The economic relationship already is under siege; human-rights concerns are on the rise; the Pentagon is emphasizing security issues in the Indo-Pacific region. A bloody crackdown would shatter what remains of bilateral ties and strengthen arguments of hawks who believe that a new Cold War is imminent, if it has not already arrived. Europe also would face significant pressure to act. Despite their desire for expanded economic ties, European governments have become more concerned about recent Chinese behavior. When NATO members met in April the PRC topped the agenda. “China is set to become the subject of the twenty-first century on both sides of the Atlantic,” opined German Foreign Minister Heiko Maas. Earlier this month Secretary General Jens Stoltenberg urged greater attention to Beijing: “This is not about moving NATO into the Pacific, but this is about responding to the fact that China is coming closer to us.” Europe could ill afford not to impose at least some economic penalties on the PRC. Asian countries would be more reluctant to act. However, those reliant on America for their defense could ill afford to continue business as usual with China. Even in its own region Beijing would find its neighbors more wary and hostile, and readier to strengthen their own militaries. Whatever additional stability the CCP might believe it gained by cracking down would be dearly bought. Beijing should recognize the very high price it would pay for any military response in Hong Kong and step back while it can. Hong Kongers should make that decision easier for China. Demonstrators need to act with intention rather than in anger. Every step should be directed at increasing the survival chances of Hong Kong’s liberties. With the Xi regime predisposed toward repression, territorial activists should not give Beijing any excuses. Hong Kong is poised on the precipice. A Chinese crackdown would be a disaster. Beijing needs to act with forbearance. So do Hong Kong democracy activists. Otherwise disorder is likely to yield repression. Doug Bandow is a senior fellow at the Cato Institute.
  • Saving China’s Uighurs: Can Washington Do the Impossible?    (Doug Bandow, 2019-08-15)
    Doug Bandow Almost from the nation’s beginning, Americans have sought to liberate their geographical neighborhood and the world beyond. Only a few years after winning independence, they debated aiding faraway Greeks fighting the Ottoman Empire, even though this was well beyond their means. Two centuries later, a far more powerful United States faces a similar dilemma. There is a growing movement to “do something” about China’s terrible treatment of its Muslim Uighur population, a million of whom (and perhaps far more) have been locked up in reeducation camps. Authoritarian, even totalitarian, controls have been imposed in Xinjiang province. The scope of oppression is breathtaking. Writes the Washington Post’s Josh Rogin: “Republicans and Democrats, isolationists and internationalists, the Trump administration and Congress, even Christians and Muslims all agree: This is a catastrophe the United States can no longer ignore.” Several House members have written to express their dismay that “the administration has taken no meaningful action in response to the situation.” They insist that the president come up with plans to hold “Beijing accountable” and “make clear to the Chinese government that the situation is a priority for the U.S. government.” Unfortunately America’s desire to redress injustice far outstrips our ability to do so. Laments Dolkun Isa, president of the World Uighur Congress: “Each time the world swears never again. When will we actually mean it?” Yet what does “never again” mean when dealing with a major, well-armed power with nuclear weapons? During the Cold War, a much weaker People’s Republic of China committed far worse crimes against its own people. Today, humanitarian military intervention is inconceivable: the result would be even worse human carnage. America certainly isn’t going to war with the PRC. Economic sanctions have become America’s “go to” policy when it dislikes what other countries are doing. However, Beijing is a far more significant power than those nations typically targeted. China’s commercial ties extend through Asia and Europe and on to Africa and even Latin America. Trade penalties have proven ineffective even when applied against weaker nations, including Russia, Iran, North Korea, Sudan, Cuba, and Venezuela. At best, those sanctions helped push some, like Tehran, to the negotiating table. But in no case did those countries change their internal policies. Indeed, sanctions do more to hurt the people than their governments. Consider the infamous exchange with UN Ambassador Madeleine Albright, who, when pressed to justify the deaths of a half million Iraqi children due to sanctions, asserted: “We think the price is worth it.” Someone should have asked the Iraqis. In response to such criticism, the U.S. insists that it’s now imposing “smart” sanctions, punishing those believed to be responsible for offensive policies. However, the leaders of hostile states rarely bank or vacation in America. Some of their supporters might enjoy the West’s good life, but Russia’s oligarchs are still unlikely to overthrow their czar anytime soon. In the case of China, it’s been suggested that we sanction Chen Quanguo, Xinjiang’s party chief and Politburo member (who previously kept brutal order in Tibet). Doing so might represent “the determination not to turn a blind eye,” as Rogin puts it, though not much more. That won’t change anything in Beijing. Indeed, the Uighur Human Rights Policy Act, pending in both houses, is mostly hortatory. The bill demands that the administration do something, such as condemn Chinese abuses, impose Magnitsky Act penalties against select Chinese officials, ban the export of technologies used for repression, and protect Uighurs and others in the U.S. from Chinese harassment. Protecting Chinese of any background living in America is worthwhile, but well-nigh impossible when relatives remain in the PRC. Indeed, China is reportedly seeking to create a database of Uighurs living abroad and their relatives left in Xinjiang, in order to more effectively pressure the former. Sophie Richardson of Human Rights Watch urges the targeting of American companies tied to Chinese firms “engaged one way or another in repression in Xinjiang.” That would be morally satisfying, but it would not stop other nations’ businesses from stepping in. China will have no trouble manning and servicing its camps. House Speaker Nancy Pelosi argues: “The administration must demonstrate the moral courage to use its economic leverage to not only guarantee fair trade for American products in Chinese markets, but also to advance human rights in China.” Similarly, as regards Hong Kong, Amnesty International’s Francisco Bencosme observes, “While the U.S. is negotiating trade agreements, I think it’s important to remember that history is not going to remember the details of the negotiations but where the United States was on this massive human rights issue.” But what to do? Impose human rights tariffs? Embargo all trade? And would the objective be to close the camps or liberate Xinjiang? To kill Hong Kong’s extradition bill or force democratic rule? And what of the many other human rights violations—attacks on religious liberty, arrests of human rights lawyers, creation of a totalitarian “social credit” system, restrictions on academic exchanges and internet access, and much more? Is there any reason to believe that a rising nationalist power would cave on such issues? If not, then just “doing something” would be for our benefit, not that of the oppressed. Congress also recently targeted China’s ongoing crackdown in Hong Kong. House Speaker Nancy Pelosi said that if Hong Kong approves the proposed extradition bill, “the Congress has no choice but to reassess whether Hong Kong is ‘sufficiently autonomous’ under the ‘one country, two systems’ framework” to maintain existing trade preferences. Legislation has been introduced to reaffirm Washington’s commitment to human rights in Hong Kong, certify the sufficiency of the territory’s autonomy, and impose personal sanctions on those responsible for violating liberties. If the Special Administrative Region loses its special status, then it should lose any corresponding trade preferences. Nevertheless, the threat to strip away trade benefits won’t change Beijing’s behavior. If millions of demonstrators can’t sway Hong Kong and Beijing authorities, American economic penalties won’t do so. The SAR matters ever less economically to China and Chinese leadership will not yield control of a territory they only regained a couple decades ago. Michael Mazza of the American Enterprise Institute proposes that the U.S. boycott the 2022 China Winter Olympic Games to protest Beijing’s Xinjiang practices. If the International Olympics Committee was deciding where to schedule the next games, denying them to the PRC would be sensible punishment. However, a unilateral boycott—Mazza expressed the likely forlorn hope that Washington could convince others to go along and the IOC to cancel or relocate the competition—would merely be an exercise in moral vanity. It would be a particularly curious statement if tourists and businessmen filled planes headed for China while American athletes were stuck at home. So far the administration has resisted pressure to act. Secretary of State Mike Pompeo unconvincingly claimed that he has raised human rights “in multiple conversations.” However, the administration values human rights only as a foreign policy weapon against particularly hated adversaries. Punishing the PRC would also interfere with other important policy objectives, such as moving North Korea toward denuclearization. Nor is China the only country that offends American values. For example, during the contested redo of Istanbul’s mayoral race, Bloomberg’s Eli Lake contended that the issue should be “at the top of the U.S. agenda with Turkey.” Yet what could Washington have done? President Recep Tayyip Erdogan felt threatened by the initial opposition victory: holding onto power was his priority and would have trumped any threat from Washington. Moreover, were the U.S. government seen to be allying with the opposition, it might prove to be more burden than asset in a nationalist state with significant anti-American sentiments. American intervention might also might have spurred Erdogan to do whatever was necessary to ensure his party’s victory. History has not ended and horrific violations of human rights abound across the globe. Alas, America’s desire to redress injustice far outstrips its ability to do so. Even when addressing offenses like the mass incarceration of China’s Uighurs, prudence remains a virtue. Best would be for the administration to encourage creation of a global coalition to address these horrific problems. 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.
  • Trump’s Latest Immigration Proposal Has One Goal: Keep Immigrants Out    (David Bier, 2019-08-13)
    David Bier President Trump’s administration rolled out its most significant change yet to immigration policy Monday: the “public charge” rule. This regulation will ban legal immigrants if government bureaucrats believe that they might use welfare. Officials claim the rule will protect taxpayers and make immigrants self-sufficient, but the rule isn’t designed to meet these goals. It’s just designed to keep immigrants out. In the late 19th century, when Congress first passed the law on which the regulation relies, a “public charge” meant a ward of the state — someone whom the government had the primary responsibility to care for. These people lived in “almshouses” and were entirely dependent on the government for their subsistence. Congress rightly decided it wanted only immigrants who could support themselves or be supported by family or private charity. As almshouses disappeared and the modern welfare state emerged, implementation of the public-charge standard fluctuated arbitrarily depending on the administration. Finally, in 1999, the Immigration and Naturalization Service introduced a clear definition of a public charge: anyone who receives most of their cash income from the government. This standard accounted for both the receipt of benefits but also how much the immigrants were supporting themselves. But the Trump administration rejects this historic understanding. Its rule will ban immigrants if they might - again, in the future - use any welfare at all (including noncash programs such as Medicaid) for more than 12 months in any 36-month period. Using four different programs for three months would count as 12 months of use, making anyone who falls on hard times for even the briefest period a “public charge.” Far from helping to ‘protect taxpayers’ and requiring self-sufficiency, the public-charge rule will harm the economy by turning away hard-working immigrants who are contributing to the United States. The real problem with the public charge’s new definition is not that it’s harsh; immigrants can certainly survive without welfare. The problem is that it’s economically misguided. No one who cares about public finances would design a rule that entirely ignores the degree to which the immigrants support themselves. Mere use - projected by a bureaucrat in any amount - would trigger a public-charge denial, even if it was a tiny fraction of the person’s income. For example, a government adjudicator could estimate that that an immigrant would receive 95 percent of their income from private sources and just 5 percent from the government, yet that (projected) 5 percent would require the applicant be denied. Long gone are the days when public charges were people almost entirely dependent on the state. Now, this administration wants us to believe that people almost entirely independent from the state are public charges. There’s an irony in how the rule defines “dependency,” too. At one point, it defines a dependent of an immigrant as someone who receives more than 50 percent of their financial support from that immigrant. But then, in its next breath, the rule labels a dependent of the government as anyone who receives anything - even less than 5 percent of their income - from the government. It’s contradictory, but if the goal is just to reduce legal immigration, the contradiction makes perfect sense. The problem with the rule runs deeper. The entire methodology of how a bureaucrat will predict someone’s future likelihood to use benefits is designed to set immigrants up to fail. It sets up a checklist of factors, including age, education, family size, English language ability, income, assets, etc. The government plans to count the negative factors and “weigh” them against the positive ones. But empirically, it’s just not true that a person with two “negative” factors is twice as likely to use government benefits than someone with just one factor in isolation - or any more likely at all. For example, the government plans to “negatively weight” dropping out of high school and not speaking English. But someone who both dropped out of high school and doesn’t speak English is no likelier to use benefits than someone who just dropped out of high school. This wouldn’t be a big deal if these factors in isolation were good predictors of welfare use. But according to data that the government cites in the rule, they aren’t. Nearly 70 percent of noncitizens who don’t speak English didn’t use any welfare at all in 2013. This was virtually the same percentage as for high school dropouts. In other words, these factors aren’t good at predicting welfare use, and few immigrants - just 1 in 5, according to government data - used any welfare in 2013. Still, the government plans to use these factors anyway. Adding this inaccurate and misleading methodology to an already hopelessly flawed definition will produce disaster for legal immigrants. When the rule takes effect in October, legal immigrants will receive a blitz of denials. Barring noncitizens from welfare makes sense. But banning immigrants from the country based on an inaccurate methodology won’t help public finances because most immigrants, according to the National Academy of Sciences, will pay more in taxes than they receive in benefits over their lives. Far from helping to “protect taxpayers” and requiring self-sufficiency, the public-charge rule will harm the economy by turning away hard-working immigrants who are contributing to the United States. Unfortunately, the effect of the misguided policy is - for the president - a feature, not a bug David Bier is an immigration policy analyst at the Cato Institute.
  • It’s Time for Colombia to Dump the Peso    (Steve H. Hanke, 2019-08-11)
    Steve H. Hanke Colombia’s peso is in trouble, again. Against the U.S. dollar, the peso has shed 20% of its value in a little more than a year and 7% in the last month. Like most Latin American currencies, the Colombian peso bobs up and down like a yo-yo, and its long-term trend is one of weakness. Indeed, since August 2014, the peso has lost 45% of its value against the greenback. Talk about a theft! The chart below tells the peso’s most recent tale. So, in addition to being a destructive destabilizer, the peso is a long-term loser. That is why Colombians prefer greenbacks. Maybe it’s time for the government to officially dump the peso and give Colombians what they prefer: the U.S. dollar. The dollar has been the official coin of the realm in Panama for over a century. It wasn’t until early 2001 that Colombia’s neighbor, Ecuador, became the next Latin American country to officially adopt the dollar. Shortly thereafter (also in 2001), El Salvador dumped the colón and replaced it with the dollar. To illustrate the important features of dollarization, let’s take a look at Panama, the granddaddy of Latin American dollarizations. Panama officially adopted the dollar in 1903, and with that, it became part of the dollar bloc. Consequently, the exchange rate risks and the possibility of currency crises vis-à-vis the U.S. dollar disappeared. In addition, the possibility of banking crises is largely mitigated because Panama’s banking system is integrated into the international financial system. The nature of the banks that hold general licenses provides the key to understanding how the system as a whole functions smoothly. When these banks’ portfolios are in equilibrium, they are indifferent at the margin between deploying their liquidity (creating or withdrawing credit) in the domestic market or internationally. As the liquidity (credit-creating potential) in these banks changes, they evaluate risk-adjusted rates of return in the domestic and international markets and adjust their portfolios accordingly. Excess liquidity is deployed domestically if domestic risk-adjusted returns exceed those in the international market and internationally if the international risk adjusted returns exceed those in the domestic market. This process is thrown into reverse when liquidity deficits arise. The adjustment of banks’ portfolios is the mechanism that allows for a smooth flow of liquidity (and credit) into and out of the banking system (and the economy). In short, excesses or deficits of liquidity in the system are rapidly eliminated because banks are indifferent as to whether they deploy their liquidity in the domestic or international markets. Panama can be seen as a small pond connected by its banking system to a huge international ocean of liquidity. Among other things, this renders the traditional lender-of-last-resort function performed by central banks unnecessary. When risk-adjusted rates of return in Panama exceed those overseas, Panama draws from the international ocean of liquidity, and when the returns overseas exceed those in Panama, Panama adds liquidity (credit) to the ocean abroad. To continue the analogy, Panama’s banking system acts like the Panama Canal to keep the water levels in two bodies of water in equilibrium. Not surprisingly, with this high degree of financial integration, there is virtually no correlation between the level of credit extended to Panamanians and the deposits in Panama. The results of Panama’s dollarized money system and internationally integrated banking system have been excellent when compared with other emerging market countries. Countries that are officially dollarized produce lower, less variable inflation rates and higher, more stable economic growth rates than comparable countries with central banks that issue domestic currencies. Dollarization is, therefore, desirable. The chart below shows the normalized values for nominal GDP in terms of U.S. dollars between 2001 (index value = 100) and 2018 for six Latin American countries. Three — Panama, Ecuador, and El Salvador — are officially dollarized, while Peru has a dual currency system (read: both the Peruvian sol and USD are legal tender). In the three officially dollarized countries, GDP growth in terms of U.S. dollars has been more stable than growth in the countries that issue their own domestic currencies. Peru, with its dual currency system, displays less stability than the fully dollarized countries, but has relatively strong growth. When it comes to Colombia, its growth rate is highly variable and modest. Indeed, thanks to the plunge in the peso after 2013, Colombia’s GDP has, well, plunged. When we look at inflation, central banks in all of Latin America are big losers compared to the U.S. Federal Reserve (read: dollarized systems). Inflation rates over the decades for Colombia and Panama tell that stunning story (see the chart below). It’s time for the Colombian government to embrace the same conclusion as did the late-great MIT economist, Rudi Dornbusch: official dollarization is a “no-brainer.”
  • Accept Reality: North Korea Will Remain a Nuclear State    (Doug Bandow, 2019-08-10)
    Doug Bandow President Donald Trump has discovered that nations around the world will not readily submit to his will. His administration has increased sanctions on and made military threats against Cuba, Venezuela, Russia, Iran and North Korea. So far, none of them have surrendered to Washington. Only the Democratic People’s Republic has come to the negotiating table. The president’s willingness to talk with North Korea’s Supreme Leader Kim Jong-un deserves praise, despite complaints from the warmongering Right and partisan Left. However, his demand for instant and complete denuclearization was never realistic. Alas, negotiations in which the president placed so much hope have ground to a halt. Most recently, North Korean diplomats skipped the ASEAN summit, where Secretary of State Mike Pompeo had expected to meet with North Korean foreign minister Ri Yong-ho. Said Pompeo: “We stand ready to continue our diplomatic conversation with the North Koreans,” but, he added, “I regret that it looks like I’m not going to have an opportunity to do that while I’m here in Bangkok.” U.S. policy toward North Korea always has been one of second-best options. Preparing for a world with North Korea as a nuclear power is a necessity for the future. Indeed, the bilateral relationship is deteriorating. The United States and the Republic of Korea are conducting military exercises, despite bitter attacks by Pyongyang. The DPRK is conducting short-range missile tests, embarrassing the Trump administration and unnerving both the ROK and Japan. The president continues to express his confidence in Kim’s commitment to denuclearize, but the former might find that position harder to defend in the face of Democratic Party attacks as the 2020 presidential campaign accelerates. The North is forever unreasonable and obstructionist. That is unlikely to change. But in this case Pyongyang’s position is logical, reflecting the interests of the Kim family regime. After all, Kim is supposed to abandon his leverage in return for vague promises of positive benefits in the future. However, the United States routinely coerces governments on its enemies list, such as Serbia, Afghanistan, Iraq and Libya. Notably, none of those countries had a nuclear deterrent. In the latter case, dictator Muammar el-Qaddafi yielded his nation’s missile and nuclear programs in return for promises of official Western favor. He originally was welcomed in European capitals, but when the Arab Spring hit Libya the United States and its European allies took advantage of his weakness to force his ouster. In truth, rather like the North, Washington cannot be trusted. Indeed, after viewing Qaddafi’s fate, Kim would be a fool to entrust his future to the United States. And whatever Kim is, he is no fool. He also probably doesn’t want to rely on China’s, Japan’s and Russia’s goodwill. North Korea exists in a bad neighborhood. Possessing the ultimate deterrent guarantees international respect if not love. David Maxwell of the Foundation for the Defense of Democracies wrote of the need to convince “Kim that his nuclear arsenal is a strategic liability, not a vehicle for extortion,” but that seems well-nigh impossible. Under even the best of circumstances, Pyongyang is likely to disarm, if at all, only over time and in carefully calculated steps. North Korean diplomats have emphasized to me that last year’s summit statement encompassed a sequential process. First, a better bilateral relationship. Second, an improved regional environment. Third, denuclearization. All of which makes sense: why should the DPRK give up its ultimate deterrent until it believes the United States has established a relationship and its neighbors have created an environment in which the use of military force against the North is unlikely? I doubt even then that Pyongyang would disarm, but it certainly won’t do so if those conditions are not met. Moreover, even a genuine commitment to denuclearization would not, indeed cannot, be achieved quickly. What are the North’s nuclear assets? Where are they located? How can they be removed? What would satisfy Washington that the DPRK complied with denuclearization? This process likely would take years. The administration’s attempt to rush disarmament appears to be an attempt to sabotage the president’s agenda within. (Ironically, National Security Adviser John Bolton denounced reports that the administration was considering working toward a North Korean nuclear freeze as “a reprehensible attempt by someone to box in the president.”) In fact, the administration might be considering proposals to seek small deals offering benefit for benefit. E.g., pursue the Hanoi summit’s proposed trade-off of closing Yongbyon in return for sanctions relief. Then desire for the perfect, instant full denuclearization, would not prevent achievement of the good, meaningful limitation of North Korea’s nuclear capabilities. However, Washington should go further, at least in its internal discussions. It should maintain its overall public objective of CVID: complete verifiable irreversible denuclearization. But in practice the United States should systematically promote a series of more limited but nevertheless beneficial reforms. If completed, they would amount to CVID. But if only a few were adopted they still would provide significant independent benefits. For instance, production of a nuclear inventory. Inspection and investigation to verify the inventory. Permanent end of nuclear and missile testing. Guarantees against proliferation. Caps on the size of North Korea’s nuclear arsenal. Elimination of Pyongyang’s capability to expand and improve its nuclear capabilities. International monitoring of the North’s activities. Further, the president should clearly reject belief that the alternative to denuclearization is war. The threat of attack, if credible, might offer negotiating leverage, but also would raise tensions and make the North more likely to preempt military action it believed to be imminent. After all, given United States conventional superiority, the North must use or quickly lose its military capabilities and would be forced to respond almost instantly to any assault by Washington. Moreover, America could live with a North Korean nuclear weapon. Former Secretary of State Rex Tillerson complained that the latter would “leave North Korea with significant capabilities that would represent a true threat, not just to the region, but to American forces, as well.” To the contrary, though unfortunate and unpleasant, a DPRK nuke would not really threaten America. There is no evidence that Kim or anyone else in Pyongyang’s ruling elite is suicidal. They want to enjoy their virgins in this world. Rather, the North is looking for a deterrent to U.S. military action. The only reason to target America is because Washington is there—with troops on the Korean peninsula and throughout Northeast Asia, backing a “mutual” defense treaty to defend the ROK. Therefore, in practice a North Korean nuclear capability to attack America would not threaten U.S. security. Rather, it would undermine South Korean security since Washington could not credibly threaten to intervene in an inter-Korean war if the result might be the incineration of American cities. Nothing in Korea warrants Washington taking that kind of risk. The only logical response would be to disengage militarily, shifting responsibility for the South’s defense to where it belongs, Seoul. American acceptance of nuclear proliferation would not be new. Nor would doing so collapse the nonproliferation framework, since countries appear to make decisions about nuclear weapons overwhelmingly in response to their own circumstances and security situations. Moreover, the United States long ago lost its nonproliferation virginity. It has supported or accommodated the United Kingdom, France, Israel, India, Pakistan and China gaining nuclear weapons. In the early 1960s Washington considered and rejected launching a preventive war against Beijing. The United States abandoned its attempts to force India and Pakistan to abandon their nuclear programs. Yet Islamabad, which proliferated technology to Libya and North Korea, may be the most dangerous nuclear power today. Washington simply recognized its limits and made the best of a bad situation. The possibility, indeed likelihood, that the DPRK will remain a nuclear power makes improving relations with the Kim regime more urgent. The United States should pick up with the Singapore summit statement: end the dual travel ban on North Korean travel (Washington should want more visitors both ways, to spread ideas and increase knowledge), open liaison offices (it will be increasingly important to have regular communication channels) and make a peace declaration/sign a peace treaty (the war is over and should be recognized as such). Moreover, Washington should suggest the ROK begin making plans for taking over its conventional defense: that means augmenting its personnel, taking over command and control responsibilities now handled by Washington, accepting a larger regional defense role, and forging better ties with like-minded neighbors—most importantly, Japan. Washington also should indicate that Seoul and its neighbors will need to take the lead on dealing with the North, which matters far more to them than to America. This would help prepare the peninsula for U.S. disengagement. A gaggle of analysts, journalists and politicians are wringing their hands over the failure of North Korea to disarm. That was never a realistic prospect. Policy toward the DRPK has always been one of second-best options. Preparing for a world with North Korea as a nuclear power is a necessity for the future. Doug Bandow is a senior fellow at the Cato Institute.
  • A Tool Meant to Help Minorities Buy Homes Is Instead Speeding up Gentrification in D.C.    (Diego Zuluaga, 2019-08-09)
    Diego Zuluaga More than 50 years after the passage of comprehensive anti-discrimination legislation, American cities remain highly segregated. The nation’s capital is a glaring example: The D.C. area’s African American residents are concentrated in the Northwest D.C. neighborhoods of Brightwood, 16th Street Heights and Petworth — and, above all, in Northeast D.C. and east of the Anacostia River, where 25 census tracts (the U.S. Census Bureau’s geographic subdivisions) have African American population shares exceeding 90 percent. Yet Washington is also the most rapidly gentrifying metropolitan area in the United States. Since 2000, 22 percent of D.C. census tracts have seen a large influx of wealthier residents. Gentrification has demographic implications, too. Between 1990 and 2010, the two tracts covering the section of Columbia Heights between 14th and 16th streets saw the black share of the population drop by 20 and 30 percentage points, respectively. The white share in each jumped by more than 20 points. As they renovate dilapidated buildings and attract new businesses, “gentrifiers” are having a positive impact on many communities. Yet a common downside of gentrification is the displacement of historic low-income residents, particularly renters, who struggle to keep up with a rising cost of living. Now evidence suggests that a major financial regulation enacted to promote financial inclusion may in fact be accelerating displacement, at least in the D.C. area. The CRA appears to be accelerating the displacement of minority renters in gentrifying communities, without increasing the proportion of minority residents who can buy homes. The Community Reinvestment Act (CRA), passed in 1977, sought to stem “redlining,” the systematic exclusion of minority communities and neighborhoods from access to credit. Redlining made it hard for black Americans to buy homes and move closer to economic opportunities. Its legacy persists in the form of a $154,000 median wealth gap between whites and blacks, much of it explained by differences in home values. The CRA requires banks to demonstrate a record of lending in low-income communities and gives bank regulators the authority to block bank mergers if the banks fail to perform. Banks have a strong incentive to get high CRA marks. According to the National Community Reinvestment Coalition, banks have made a cumulative $6 trillion worth of CRA-related commitments since 1992. In the District, banks lent out $2.7 billion worth of mortgages eligible for CRA points in 2017. But making loans in compliance with the CRA is no guarantee that they will reach historically underserved residents, because loans in a low-income census tract might still be going to people with high incomes who would qualify even without the CRA. In fact, using detailed mortgage loan data for 2017, my colleague and research associate Andrew Forrester and I found that two-thirds of the mortgage loans eligible for the CRA in the District went to higher-income borrowers living in low-income areas — gentrifiers. In previous years, the gentrifiers’ share of CRA mortgages frequently exceeded 70 percent. Not only is CRA lending failing to reach its target population, but also evidence suggests it has accelerated the displacement of minorities. Between 2012 and 2017, an additional percentage-point increase in CRA loan volume was associated with a three-percentage-point decline in the minority share of that census tract’s population. However, when we limited our analysis to borrowers, we found that CRA lending did not correlate with an increase in the minority share of those getting mortgage loans. In plain English: The CRA appears to be accelerating the displacement of minority renters in gentrifying communities, without increasing the proportion of minority residents who can buy homes. That is quite a disappointment to those who see the CRA as an instrument for financial inclusion. It would be a mistake to blame banks for this failure. Banks have a mandate to lend in the communities where they have branches without incurring risks that might cause them to fail. They seek to make viable loans throughout the communities where they operate, in compliance with regulation and their own underwriting standards. That their CRA-eligible loans mostly go to gentrifiers is likely the result of attempting to reconcile many different objectives at once. Although mandating banks to lend to low-income borrowers may seem the obvious solution to address the CRA’s shortcomings, history suggests this approach is fraught with risks. In the run-up to the 2007 financial crisis, government steadily raised the share of mortgages going to low-income borrowers, some of whom could not afford to repay. This cost taxpayers hundreds of billions of dollars and forced millions of vulnerable people from their homes. Instead of using the CRA’s perverse consequences as reason to give politicians more power to dictate who gets loans, we should ask what effective financial inclusion policy looks like in 2019. For example, many of the 8.4 million U.S. households that lack a bank account - disproportionately black, Latino and low-income — say they do so not because they live far from branches but because they deem fees too high and banks untrustworthy. Why not let other businesses — such as retailers and tech firms — provide basic banking services? In Africa, nonbanks offering mobile money accounts have brought tens of millions of people into the financial system. The same solution could help resolve America’s “unbanked” problem. Policymakers are also right to examine ways that “credit-invisible” consumers, typically young and minority, can make relevant credit information more easily available to lenders. These people are often creditworthy, but they lack the history and assets to qualify using traditional credit scores only. The legacy of redlining continues to have an impact on the economic opportunities available to different communities across the country. And while there has been progress thanks to growing competition and innovation, decades-old policies such as the CRA no longer work well in many low-income urban areas. It is time to try something different. Diego Zuluaga is a policy analyst at the Cato Institute..
  • Freeports Must Not Come at the Expense of Broader Free Trade    (Ryan Bourne, 2019-08-09)
    Ryan Bourne Liz Truss has wasted little time burnishing her liberalising credentials as the new Secretary of State for International Trade. Last week her department announced a panel to advise on creating 10 British “freeports”- areas around existing ports and airports with business-friendly incentives on tariffs, taxes and regulations. The idea itself is nothing new. Since 1981, the Adam Smith Institute has advocated that areas around ports be designated foreign territory for economic purposes. Yet last time the concept was adopted here, the benefits were stamped out by the EU and UK governments’ unwillingness to cede meaningful exemptions to taxes and red tape. Outside the EU’s clutches and with a pro-market government, advocates hope for a meaningful second attempt at implementation. Struggling towns around existing ports are understandably keen to win designation. The real open question is what freeports imply about the Government’s broader post-Brexit trade agenda. Around the world, freeports operate with different levels of freedom. The US equivalents, for example, are called “foreign trade zones”. Physically located in the US, these fall outside domestic administrative jurisdiction for assessment of customs duties. Such areas therefore allow manufacturers the opportunity to import intermediate inputs tariff-free and without complying with extensive customs rules and red tape. Value-added activity using these inputs can take place within the FTZ, with tariffs only paid when products enter the rest of the domestic economy. If finished products or the inputs are re-exported, there’s no customs duties at all. Freeports then can be considered true uninhibited “free trade” areas, pushing customs borders further inland. Cost reductions and deferrals for businesses are the major policy innovation. Freeports also afford firms “tariff inversion” benefits — taking advantage of situations where final manufactured goods face lower eventual tariff rates when entering the full economy than their component parts (which enter the freeport tariff-free). Truss wants all this, plus to add in a streamlined planning processes, a lighter-touch regulatory environment and pro-investment tax incentives, increasing cost savings to businesses further. Her freeports would be a kind of love child of American FTZs and Margaret Thatcher’s enterprise zones. This framework brings obvious and widely highlighted costs. Policy preferentialism unavoidably displaces some activity from other areas of the UK into the freeport. There will be a fiscal cost too, given the tariff and tax exemptions — the shortfall for which must result in spending reductions, other tax rises or more borrowing. Inevitably, then, freeports tend to be discussed as a tool of regional regeneration. Of moving activity around to poorer areas. Critics will compare any fiscal shortfall against estimates of jobs created and argue that most observable activity comes at the expense of elsewhere and the taxpayer, a claim that will be partly correct. The estimate of the net creation of up to 86,000 jobs from Rishi Sunak, the Chief Secretary to the Treasury, may well prove optimistic based on the trade policy components alone. But all too often critics themselves only paint a partial picture. The UK already “intervenes” regionally through vast social welfare spending. Creation of new manufacturing jobs for export and the income taxes and national insurance they provide will offset at least some of this direct cost. So long as designation is granted to areas with real potential for growth, then there’s no reason per se to expect failure. Make no mistake, much freeport activity will be genuinely additional. Reducing business costs improves profitability, making more businesses and investments viable. Centre for Cities’ analysis suggests that just under half of jobs in Mrs Thatcher’s enterprise zones, for example, were genuinely additive. To assume otherwise, that all freeport activity will just be displaced from elsewhere, is to deny that tax and regulation has any effect on aggregate activity. That seems a bold claim given how much more successful Hong Kong has been historically to, say, mainland China. No, the tax and regulatory alleviation that comes with freeports will improve the productive potential of the economy. If it facilitates regional hubs of high-value added manufacturing activity and Britain leading the way in port innovation technologies, those productivity benefits could be greater still. The real open question is what freeports imply about the Government’s broader post-Brexit trade agenda. If successful, freeports will expose the destructive cost of current protectionism. Any new value-added activity highlights the folly of existing tariffs which raise UK exporters’ input costs and reduce their pricing competitiveness in world markets. Indeed, freeports are deemed necessary precisely as relief against tariffs and customs procedures. But that also means the ports’ relative success becomes dependent on the continuation of protectionism in the rest of the country. Freeports’ very existence may create an interest group for the preservation of the status quo policy mix and against further liberalisation. A voice could now exist to oppose unilateral tariff reductions or any otherwise beneficial free trade agreements that incorporate provisions that cut across a freeports’ relative position of strength. If that means tariffs that would otherwise be abolished are maintained, we will be trading off the interests of consumers and non-freeport producers against the health of manufacturing firms in freeports. Now that zero-sum outcome is not inevitable. Freeports can be used as laboratories to test out other policies to improve the whole economy. Big gains could be made from targeted attempts to streamline the planning system, a nut that Margaret Thatcher’s enterprise zones failed to crack. But in the trade policy area, it’s important to always look ahead to your eventual desired destination. Freeports, by reducing costs for input importers who export final products, shift us in a free-trade friendly direction. Truss must ensure these regional interests don’t then become a bulwark against the whole country moving towards free trade in future. Ryan Bourne is the R Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute
  • Mandatory National Service: A Bad Idea That Won't Die    (Doug Bandow, 2019-08-08)
    Doug Bandow Another presidential election, another proposal for mandatory national “service.” This time, two Democratic candidates hope to turbocharge their otherwise dubious electoral prospects by proposing to draft all young people to spend a year or two working for Washington’s political elite. That’s not how they put it, of course. But that is what the national service movement is about. Sorry Pete Buttigieg, but government conscription is unconstitutional and poorly thought through. Service, real service to real people, is baked into Americans’ DNA. Alexis de Tocqueville, the great French classical liberal, cited civic activism as one of the new republic’s distinguishing characteristics in his famous Democracy in America. He wrote: “I have seen Americans making great and sincere sacrifices for the key common good, and a hundred times I have noticed that, when needs be, they almost always gave each other faithful support.” The resulting vibrant civil society was very different from the enervating monarchies and aristocracies that still dominated Europe. This commitment to service permeated the nation—transforming people, creating institutions, and strengthening America. But some commentators and politicians view private action as inadequate. Instead, they believe, “service” should be organized, planned, and managed by the state. The fount of modern thought on national service remains Looking Backward, the 1888 publication of lawyer and journalist Edward Bellamy, which envisioned compulsory employment for men and women between the ages of 21 and 45. A couple decades later, philosopher William James issued an essay, “The Moral Equivalent of War.” In it, he argued that “the martial virtues, although originally gained by the race through war, are absolute and permanent human goods,” and that national service provided a method for instilling those values during peacetime. He wrote: “Our gilded youths would be drafted off to get the childishness knocked out of them, and to come back into society with healthier sympathies and soberer ideas.” Today his essay is almost entirely forgotten, except for the title. But a host of philosophers, policy analysts, and politicians proffer their own very different proposals for “the moral equivalent of war.” These plans rarely reflect a shared consensus of the national or public interest. More often, they involve blatant social engineering for ideological ends. For instance, sociologist Margaret Mead advocated a universal program that “would replace for girls, even more than for boys, marriage as the route away from the parental home.” Compulsion was essential to such proposals. In 1979, the Committee for the Study of National Service declared: International comparisons also fire some American imaginations. Millions of young people serve social needs in China as a routine part of growing up, many [are] commanded to leave the crowded cities and to assist in the countryside. Castro fought illiteracy and mosquitoes in Cuba with units of youth. Interesting combinations of education, work, and service to society are a part of the experience of youth in Israel, Jamaica, Nigeria, Tanzania, and other nations. The civic spirit being imbued in youth elsewhere in the world leaves some Americans wondering and worrying about Saturday-night-fever, unemployment, the new narcissism, and other afflictions of American youth. Admittedly, seeing Mao’s Red Guards as a model for America appears dated at best. But current national service advocates similarly seek to transform society. They envision their program providing job training and employment, encouraging social equality, promoting tolerance and civic-mindedness, expanding access to college, engendering patriotism, and addressing ubiquitous “unmet social needs.” The idea sounds great. But in practice it is dangerous nonsense. First to join the ranks of national service advocates was South Bend Mayor Pete Buttigieg, who complained about America’s lack of “social cohesion.” What to do? Why, force everyone to work together, of course! Voila, “social cohesion”! In his defense, Buttigieg was just ambiguous enough to allow himself to wriggle out of a political tight spot. He explained on MSNBC: “One thing we could do that would change that [inadequate social cohesion] would be to make it, if not legally obligatory, but certainly a social norm that anybody, after they’re 18, spends a year in national service.” The problem is that a lack of compulsion ensures that Buttigieg’s plan will fail. There will always be 18-year-olds who will resist even a purported “social norm.” Yet for national service advocates, such resisters are precisely those most in need of civilizing “service,” meaning political projects mandated by the social engineers in Washington. Those suffering from “Saturday night fever, unemployment, the new narcissism, and other afflictions of American youth” don’t realize that they are sick and therefore must be forcibly cured. John Delaney would unashamedly drop any ambiguity. Polling at less than 1 percent makes presidential candidates say the damnedest things. He tweeted: “It’s time to bring the country together, to restore our sense of shared purpose and rebuild a common and inclusive national destiny. That’s why we need mandatory national service.” Every 18-year-old would have to work for Uncle Sam for at least a year, “no exceptions.” It is a remarkably dumb idea. First, there’s the constitutional problem—the 13th Amendment clearly proscribes “involuntary servitude,” the foundation of Delaney’s program. Moreover, as worthy as it might be to encourage others to “begin their adult lives serving their country and working alongside people from different backgrounds,” that is a bad reason for what amounts to enslavement. National service requires punishing people—presumably by arresting and jailing them—for resisting the state’s social engineering. Under Delaney’s plan, conscripts, conveniently excluding people his or Buttigieg’s age, would choose between serving in the military, “a new expanded Community Service program,” “a new National infrastructure Apprenticeship program,” and “a newly created Climate Corps.” Conceptually, there’s nothing particularly new in his proposal. But subjugating people to provide cheap labor for politically inspired projects is bad both in principle and practice. First, the military doesn’t want conscripts or short-termers. The armed services learned during the Vietnam War that those who don’t want to be there tend to develop discipline problems, have little interest in training and education, refuse to take greater responsibility, and won’t re-up and populate a career NCO corps. Moreover, one year of military service is a spectacular waste: just as someone gets trained, he or she leaves. Second, “community service”—cleaning hospital bedpans, shelving library books, and whatever else moves interest groups and legislators—is valuable but not national, and moral but only if not coerced. There is no such thing as compulsory compassion. It is hard to think of a worse abuse of government power than to arrest and jail someone for not showing up to “tutor disadvantaged children,” one of Delaney’s approved projects. Third, “infrastructure apprenticeship,” meaning cleaning up parks and improving federal buildings, is not “service” in any meaningful sense. The government can easily hire workers for such jobs. Coercing people to perform such tasks isn’t going to morally uplift anyone. Fourth, the “Climate Corps” is more of the same, namely assisting “in clean energy projects, including solar installation, improving building efficiency, developing community gardens, and increasing awareness about sustainable practices.” Apparently running for president has left Delaney almost completely disconnected from American life. Companies send people door-to-door to sell products that cut energy use. Firms fiercely compete to install solar panels on private homes and in commercial operations. People freely create community gardens in their neighborhoods without the assistance of federal conscripts. And there’s plenty of lobbying for “sustainable practices.” You don’t need to threaten to arrest people to force them into the PR business. Perhaps the biggest problem with national service is that neither Delaney nor Buttigieg nor anyone else seems to understand the opportunity costs. That is, drafting people to plant gardens, pick up trash, smile at hospital patients, manage food kitchens, and improve federal facilities costs whatever else the draftees would otherwise be doing: completing their education, helping family members in need, contributing to their communities in their own way, preparing for economically and socially valuable careers, and otherwise using their skills to better meet human needs. Having politicians assign people to an arbitrary mix of tasks, virtually none of which are vital in any sense, is guaranteed to be a grand waste of money, time, and talent. Delaney wants to “restore our sense of shared purpose and a common and inclusive national destiny.” That’s a wonderful objective with which most people would agree. But corralling millions into his pet programs and jailing recalcitrant 18-year-olds who don’t share his vision is no answer to anything. Such a program—with older men and women safely beyond its reach, free to blame young people for America’s problems—would breed cynicism and hostility, not “service and patriotism.” America faces serious challenges. But most of them have no political solution. “We need big transformational change to stop America from dividing any further,” argues Delaney. Then let him persuade his fellow citizens to voluntarily join him in making that transformational change. Americans need more service, not national “service.” 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 The Politics of Plunder: Misgovernment in Washington.
  • Prisons Are Packed Because Prosecutors Are Coercing Plea Deals. And, Yes, It's Totally Legal.    (Clark Neily, 2019-08-08)
    Clark Neily America is the most prosperous country in the history of the world. We excel at innovation and mass production — and nowhere is that more true today than our criminal justice system, which features a streamlined process for transforming millions of suspects into convicted criminals quickly, efficiently and without the hassle of a constitutionally prescribed jury trial. It’s called coercive plea bargaining, and it’s the secret sauce that helps us maintain the world’s highest incarceration rate. According to a recent study from the Pew Research Center, of the roughly 80,000 federal prosecutions initiated in 2018, just two percent went to trial. More than 97 percent of federal criminal convictions are obtained through plea bargains, and the states are not far behind at 94 percent. Why are people so eager to confess their guilt instead of challenging the government to prove their guilt beyond a reasonable doubt to the satisfaction of a unanimous jury? American prosecutors are equipped with a fearsome array of tools they can and do use to discourage people from exercising their right to a jury trial. The answer is simple and stark: They’re being coerced. Though physical torture remains off limits, American prosecutors are equipped with a fearsome array of tools they can use to extract confessions and discourage people from exercising their right to a jury trial. These tools include charge-stacking (charging more or more serious crimes than the conduct really merits), legislatively-ordered mandatory-minimum sentences, pretrial detention with unaffordable bail, threats to investigate and indict friends or family members, and the so-called trial penalty — what the National Association of Criminal Defense Lawyers calls the “substantial difference between the sentence offered prior to trial versus the sentence a defendant receives after a trial.” Of coercive plea bargaining’s many problems, two are particularly concerning. The first is false convictions. Though it was once believed that a confession in open court — a guilty plea — was proof-positive of a person’s guilt, we now know that simply isn’t true. Indeed, of the more than 300 people definitively exonerated by the Innocence Project using DNA evidence, some 11 percent pleaded guilty to crimes they did not commit since 1989. The National Registry of Exonerations puts the total number at 20 percent since 1989. But whatever the precise figure, it is clear that innocent people are routinely coerced into pleading guilty to crimes they did not commit. Despite this mounting evidence, however, the U.S. Supreme Court has steadfastly refused to police the line between permissible inducements and unconstitutional coercion. For example, in a notorious 1978 case called Bordenkircher v. Hayes, the defendant was accused of forging an $88 check and told that, if he refused to take a five-year plea offer, the prosecutor would re-indict him as a habitual offender — which would increase his maximum sentence from 10 years to mandatory life in prison. On appeal, the Supreme Court found nothing problematic about using the threat of a life sentence to try convince a defendant to accept a five-year plea, and allowed the life sentence to stand, since Bordenkircher had refused the deal. The other big problem with coercive plea bargaining is that it helps cover up an untold amount of prosecutorial misconduct. Even in the federal system, where prosecutors are held to a relatively higher standard, there has been a surprising amount of misconduct in the handful of cases that end up going to trial. The most notorious example is the failed 2008 prosecution of then-Sen. Ted Stevens, R-Alaska, who, after refusing a one-count guilty plea to one felony charge with no jail time, was indicted on seven counts of failing to report gifts on his financial disclosure forms after allegedly paying an insufficient amount for the renovation of his house in Alaska. After the jury voted to convict but before Stevens was sentenced, the star witness against him recanted part of his testimony in a letterand an FBI whistleblower disclosed a pattern of deliberate, systematic cheating by prosecutors that has since been documented in a 500-page document called the Schuelke Report. The Justice Department then asked the judge to dismiss the indictment. Had Stevens taken the plea, none of the prosecutorial misconduct or exculpatory evidence in his case might ever have been revealed. But that is hardly the only example. In 2017, what should have been slam-dunk case against Nevada rancher Cliven Bundy for inciting violence against federal officials unraveled when a judge determined that prosecutors showed “a reckless disregard for the constitutional obligation to seek and provide evidence,” by withholding documents and misstating facts about the case. And in 2018, a jury acquitted Noor Salman, the wife of the Orlando nightclub shooter Omar Mateen, after defense attorneys showed that her confession to FBI agents that she had helped “case” the club was contradicted by her cell phone’s geolocation data — evidence prosecutors should have shared but did not, earning a pointed rebuke from the trial judge. Defenders of the status quo claim that examples like these are unusual and that prosecutors rarely commit misconduct. But how can we possibly know that? When only two percent of federal prosecutions go to trial, it is impossible to say how many would blow up as spectacularly as the Stevens or Bundy cases if every one of them went to trial against zealous and adequately-resourced defense counsel. The framers of the U.S. Constitution put citizen participation at the very heart of our criminal justice system in the form of jury trials. With coercive plea bargaining, prosecutors have ripped that heart right out of that system and made sure that ordinary citizens have almost nothing to do with the administration of criminal justice in America. Our system wasn’t designed to function that way, and growing public disillusionment suggests that it won’t — not for much longer, anyway. Clark Neily is vice president for criminal justice at that Cato Institute and an adjunct professor at Antonin Scalia Law School at George Mason University.
  • Parents Don't Care About Standardized Test Scores, and Experts Shouldn't Either    (Corey A. DeAngelis, 2019-08-07)
    Corey A. DeAngelis They say you shouldn’t miss the forest for the trees. Unfortunately, several people in the education policy debate are doing just that. Researchers and journalists are focusing on the effects of education policies on standardized test scores while ignoring more important long-term outcomes such as crime and earnings. That’s obviously a problem. Here’s a case in point. Matthew Yglesias, co-founder of Vox, just quoted five rigorous studies linking families’ schooling selections to student outcomes. Yglesias quoted snippets from the five abstracts finding no change in students’ test scores. The only problem is that he completely omitted all of the positive effects on long-term outcomes such as health, safety, crime reduction, and earnings. Researchers and journalists are focusing on the effects of education policies on standardized test scores while ignoring more important long-term outcomes such as crime and earnings. For example, Yglesias cited a rigorous study of families’ schooling selections finding that “on average, sought-after schools do not improve student test scores.” However, perhaps unintentionally, he left out that getting the chance to go to those same preferred schools reduced teen pregnancies and improved “educational attainment, occupational rank, earnings, and health.” He cited another rigorous study finding that families’ schooling selections had “no effects on traditional outcomes.” However, Yglesias again forgot to include the positive effects of those same selected schools on students’ reports of safety. But that’s not all. Yglesias also cited an experimental study finding that students winning a lottery to attend a public school of choice in Chicago didn’t provide “any benefit on a wide variety of traditional academic measures, including standardized test scores, attendance rates, course-taking, and credit accumulation.” It’s encouraging that he expanded this particular quote to include non-test score outcomes here. But, again, Yglesias somehow forgot to include the positive effects of the same schools of choice on reducing “self-reported disciplinary incidences and arrest rates.” This isn’t the first time someone has cited lackluster test score results while completely omitting the important positive effects of attending a chosen school. For example, reporters such as Valerie Strauss focused on initial negative effects of the D.C. voucher program on test scores without even mentioning that the same study found positive effects on student safety. We can all learn something important from these omissions. The fact that the story changes substantially when long-term outcomes are omitted tells us that standardized test scores are not good proxies for true success in the long-run. My recent peer-reviewed summary of the evidence shows that there are many more examples of disconnects between schools’ effects on test scores and their effects on long-term outcomes. We should look at all available outcomes when evaluating any education policy. But we should always prefer valuable long-run outcomes to standardized test scores. And we should think twice about judging families who choose schools that don’t increase their children’s test scores. After all, this evidence suggests families know a lot more about their children’s needs than the experts. Corey DeAngelis is the director of school choice at the Reason Foundation and an adjunct scholar at the Cato Institute..
  • Some Thoughts on the El Paso Shooting    (Michael D. Tanner, 2019-08-07)
    Michael D. Tanner A few thoughts in the wake of the horrendous white-supremacist terrorist attack in El Paso: We must be careful not to let fear (and grief and anger) drive us to rashness. We should never forget that the purpose of terrorism is to terrorize. To the degree that we succumb to fear, that we alter our lives, or that we give up our freedoms, the terrorists win. It is not to diminish the horror of such events to recognize that we remain remarkably safe in this country. Your chances of being murdered by a terrorist of any kind remain smaller than your chances of drowning in a bathtub. We should not stop going to stores, eating at restaurants, having a drink in bars, or otherwise living our lives. In the wake of 9/11, we allowed fear to lead us into a host of measures that threatened our civil liberties. Muslims and Muslim Americans were obviously the most likely to be targeted, but all Americans were caught up in increased surveillance and other law-enforcement measures. Recall that the Patriot Act passed by a margin of 91-1. Now we see similar knee-jerk calls for the government to “do something.” Already there have been calls to regulate the Internet, ban video games, curtail free speech, and generally increase police powers. Gun-control advocates ratchet up their proposals with little regard for practicality or empirical evidence. And that doesn’t even include bizarre proposals like Sean Hannity’s call for transforming America into a virtual armed camp, with paramilitary forces surrounding schools, stores, and other locations. But as Benjamin Franklin once warned, “Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.” None of this is to diminish the threat from nor the noxiousness of white supremacy. Nor is it a call for inaction. Certainly, there are things that the government can and should do. It is long past time to take violence from white supremacists as seriously as we do the threat from Islamic extremists. There may even be gun-control measures that can make us safer without infringing on our rights to self-defense or legitimate gun ownership. But whatever we do should be thoughtful and with full consideration of possible unintended consequences. Among other things, that means acting through the regular legislative process. Executive actions or hastily convened legislative sessions are invitations to abuse. A thoughtful decision needs to be based on data, not emotion. But that data is hard to come by, often biased, and subject to varying interpretations. To cite one example, President Trump stated that the rate of mass shootings has remained constant throughout the years. This is true if your definition of a mass shooting is just all homicides with more than four people. However, a stricter definition of mass shooting will show a sharp rise. Similarly, there is no agreement on the definition of terrorism or assault rifle. One thing that all sides should agree on is the need for better information. Perhaps the most important things we can do don’t involve the government. For instance, we can police our own speech and behavior. We can all be more civil with one another. Political disagreements are not “treason.” It is not political correctness to avoid personal insults or to show sensitivity, especially when discussing difficult issues such as race. And when we encounter racism or other forms of bigotry, it is incumbent on us to speak out, denounce it, and shun those who perpetuate it. And, yes, this is particularly important for our political leaders. President Trump is not responsible for the actions of the El Paso gunman, but it is clear the president’s rhetoric has contributed to the toxic stew in which the gunman’s sick beliefs festered. We have experienced a terrible tragedy. We must be careful not to let fear (and grief and anger) drive us to rashness. That would be too much the victory for the terrorists. Michael Tanner is a senior fellow at the Cato Institute and the author of The Inclusive Economy: How to Bring Wealth to America’s Poor.
  • U.S. Currency Wars with China--past and Present    (Steve H. Hanke, 2019-08-06)
    Steve H. Hanke In a purely political move, the Trump administration (read: the U.S. Treasury) has branded China as a currency manipulator. This is an act of war. After President Trump announced that even more tariffs would be imposed on China, the markets took the value of the Chinese yuan down a notch or two. So, who was “manipulating” the yuan, Beijing or Washington? Well, it looks like Washington is engaging in yet another Asian currency war. As it turns out, the United States has a long history of waging currency wars in Asia. We all know the sad case of Japan. The U.S. claimed that unfair Japanese trading practices were ballooning its bilateral trade deficit with Japan. To “correct” the so-called problem, the U.S. demanded that Japan adopt an ever-appreciating yen policy. The Japanese complied and the yen appreciated against the greenback from 360 in 1971 to 80 in 1995 (and 106, today). But, this didn’t close the U.S. trade deficit with Japan. Indeed, Japan’s contribution to the overall U.S. trade deficit reached almost 60% in 1991. And, if that wasn’t enough, the yen’s appreciation pushed Japan’s economy into a deflationary quagmire. Today, the U.S. is playing the same baseless blame game with China. And why not? After all, China’s contribution to the overall U.S. trade deficit has surged to 47%. America’s recent declaration of economic war against China isn’t the first time the U.S. has used currency as a weapon to destabilize the Middle Kingdom. In the early 1930s, China was still on the silver standard, and the United States was not. Accordingly, the Chinese yuan-U.S. dollar exchange rate was determined by the U.S. dollar price of silver. During his first term, President Franklin D. Roosevelt delivered on his Chinese currency stabilization “plan.” It was wrapped in the guise of doing something to help U.S. silver producers and, of course, the Chinese. Using the authority granted by the Thomas Amendment of 1933 and the Silver Purchase Act of 1934, the Roosevelt Administration bought silver. This, in addition to bullish rumors about U.S. silver policies, helped push the price of silver up by 128% (calculated as an annual average) in the 1932-35 period. Bizarre arguments contributed to the agitation for high silver prices. One centered on the fact that China was on the silver standard. Silver interests asserted that higher silver prices — which would bring with them an appreciation of the yuan against the U.S. dollar — would benefit the Chinese by increasing their purchasing power. As a special committee of the U.S. Senate reported in 1932: “silver is the measure of their wealth and purchasing power; it serves as a reserve, their bank account. This is wealth that enables such peoples to purchase our exports.” But, things didn’t work as Washington advertised. They worked as “planned,” however. As the dollar price of silver shot up, the yuan appreciated against the dollar. In consequence, China was thrown into the jaws of the Great Depression. In the 1932-34 period, China’s gross domestic product fell by 26% and wholesale prices in the capital city, Nanjing, fell by 20%. In an attempt to secure relief from the economic hardships imposed by U.S. silver policies, China sought modifications in the U.S. Treasury’s silver-purchase program. But, its pleas fell on deaf ears. After many evasive replies, the Roosevelt Administration finally indicated on October 12, 1934 that it was merely carrying out a policy mandated by the U.S. Congress. Realizing that all hope was lost, China was forced to effectively abandon the silver standard on October 14, 1934, though an official statement was postponed until November 3, 1935. The abandonment of silver spelled the beginning of the end for Chiang Kai-shek’s Nationalist government. America’s “plan” worked like a charm — Chinese monetary chaos ensued. This gave the communists an opening that they exploited — one that contributed mightily to their overthrow of the Nationalists. Today’s currency war with China promises to deliver what currency wars always deliver: instability and uncertainty. And with that, it’s becoming clearer with each passing day that President Trump will not be the 2020 “Peace and Prosperity” candidate. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
  • Trump and Bipartisan Majority in Congress Complicit in Chinese Currency Manipulation Canard    (Daniel J. Ikenson, 2019-08-06)
    Daniel J. Ikenson With his ill-advised, incongruous, amateurishly-executed trade war, President Trump has uncorked a cacophony of reverberating effects that are beginning to spiral out of control and will prove difficult to subdue. Among those effects is the force of downward pressure on the value of the Chinese currency, as multinational businesses relocate to other countries to avoid the tariffs, and the savings of Chinese households and investors go searching for safety in the United States and elsewhere. Trump’s chosen course of action has sent waves of uncertainty across the globe and one of the most predictable responses to uncertainty is flight to safety—that is, purchases of what are considered relatively safe U.S. assets. It’s some sort of paradox that global uncertainty—even when induced by the risky policies and actions of an impulsive, unpredictable U.S. president—inspires people to invest in U.S. and other dollar-denominated assets. But it does. As global uncertainty stokes demand for dollars, the certainty of U.S. tariffs on Chinese-originating goods further reduces demand for Chinese yuan, exacerbating the downward pressure on the price of yuan in dollars. This precipitous depreciation, which is a consequence of Trump’s policies, has got the president and other like-minded rabble-rousers accusing the Chinese of currency manipulation. Late yesterday, Trump’s Treasury Department squandered its credibility by labeling China a currency manipulator, despite Beijing meeting only one of the three criteria necessary for such a conclusion. Do you want to know what’s not currency manipulation? The People’s Bank of China observing the value of the yuan plummet as markets respond to Trump’s tariff frenzy is not currency manipulation. The Chinese monetary authorities have been trying to prop up the value of the yuan to discourage capital flight and instill confidence in the yuan, but they’ve had to burn through over $1 trillion of reserves just to maintain the yuan’s value, which continues to fall in response to Trump’s tariffs. Do you want to know what is currency manipulation? The president of the United States imploring the Federal Reserve chairman to lower interest rates for the distinct purpose of reducing the value of the dollar is currency manipulation. The “scourge” of currency manipulation and what to do about it has been vexing policymakers for a long time. Back in 2003, Sen. Chuck Schumer (D-NY) first introduced a bill calling for a 27.5 percent tariff on all imports from China to compel Beijing to allow the undervalued yuan to appreciate. But Schumer’s idea was rejected as a massive consumption tax on the American people—as well as a violation of World Trade Organization rules (yes, youngsters, WTO compliance used to matter to U.S. policymakers). But that didn’t stop Schumer from re-introducing the same bill in subsequent Congresses with Sen. Lindsey Graham (R-SC), where it met the same fate. Since then other proposals have come and gone and come again, including the idea that currency manipulation should be treated as a subsidy and remedied under the U.S. Countervailing Duty law. That proposal, which ran into a lot of objections for practical and theoretical reasons in the past, was recently reincarnated by the U.S. Commerce Department. Commerce is proposing to retrofit the regulations governing administration of the CVD Law, so that U.S. tariffs can be imposed under circumstances where they are currently prohibited. A quick review of how Sen. Schumer came to choose 27.5 percent as his magic number illustrates why skepticism about using the CVD law in this manner is still warranted. When Schumer introduced his bill, economists were generally in consensus that the Chinese currency was undervalued. But they disagreed widely about the magnitude of undervaluation. Economists from the IMF, the OECD, the Federal Reserve, the U.S Treasury, think tanks, and academia were all producing different estimates. Schumer chose 27.5 percent because it was the midpoint in a range of dozens of these estimates spanning from 10 percent to 45 percent. More important than the obvious imprecision in Schumer’s approach is the fact that reputable economists from esteemed institutions disagreed widely in their estimates of undervaluation. This tells us that different economists took different approaches to estimating the difference between the yuan’s actual value and its true market value, which is pretty revealing about the problem at hand. There is no consensus among economists about how to estimate currency undervaluation because there is disagreement about how to ascertain the true market value of a currency unless it is free-floating and determined by its supply and demand. Without knowing the true market value of a currency, it is impossible to calculate accurate countervailing duties to offset the effects of currency manipulation. A 10 percent countervailing duty implies that the currency is priced below its actual market value by 10 percent or that the manipulation amounts to a 10 percent subsidy for exports. But at best, a countervailing duty could only be an estimate of the value of a subsidy conferred through manipulation of the currency. Considering that economists’ estimates of Chinese currency undervaluation varied by as much as 35 percentage points, and that any methodology employed by the U.S. Department of Commerce — in its zeal to protect domestic producers above all else — would certainly differ from one employed by an MIT or IMF economist, countervailing duties would likely worsen any distortions and inflict collateral damage on consumers and import-using producers. Moreover, if a currency’s true market value is determined by the intersection of its supply and demand curves, it is important to recognize that those curves (their shapes and positions) are affected by underlying economic activity, as well as public policy—monetary, fiscal, and regulatory. In other words, currency values reflect all sorts of policy decisions that it would be improper to indict direct manipulation occurring through currency market interventions, but not indirect manipulation delivered through other policy channels—or presidential signaling via Twitter. Last week Sens Josh Hawley (R-MO) and Tammy Baldwin (D-WI) introduced a piece of legislation ostensibly to discourage foreign currency manipulation. But it is premised on a very poor understanding of economics. “The Competitive Dollar for Jobs and Prosperity Act” would require the Federal Reserve to establish an exchange rate policy “to achieve and maintain a current account balance.” The main tool to assist the Fed in achieving this dubious objective would be a “market access charge” on foreign purchases of U.S. assets. In other words, balance would be achieved by limiting the inflow of foreign capital through taxation, which would deprive the U.S. economy of the very oxygen it needs to be a competitive economy. Foreign investment in the United States is a blessing and a seal of good housekeeping—and the fact that foreigners want to hold U.S. assets is hugely beneficial to Americans and the U.S. economy. Discouraging it is akin to raising the white flag and declaring the United States no longer wishes to participate in the global economy—something reminiscent of China closing itself off to the world in the early 19th century, ushering in its infamous century of humiliation. Currency hawks long have exaggerated the impact of currency values on trade flows. Of course, they matter. But with the proliferation of global supply chains and cross-border investment, the overwhelming majority of trade flows today are intermediate goods, so the effect of currency values on final prices cuts in different directions. That’s why, despite a 38% appreciation of the Chinese Renminbi vis-à-vis the dollar between 2005 and 2013, the bilateral U.S. trade deficit with China didn’t decrease, but rather increased by 46%. That’s why Yen depreciation, by increasing the cost of imported inputs priced in foreign currencies, raises the cost of production in Japan and can make Japanese producers less competitive in the global economy, not more. Support in Congress for the president’s trade war and his fabricated claims that China is manipulating its currency suggests that bilateral relations and global economic conditions are going to get a lot worse before they get better. Daniel J. Ikenson is the director of Cato’s Herbert A. Stiefel Center for Trade Policy Studies, focusing on WTO disputes, regional trade agreements, U.S.-China trade issues, steel and textile trade policies, and antidumping reform.
  • Is Manila Worth American Lives?    (Doug Bandow, 2019-08-04)
    Doug Bandow Washington policymakers treat allies like Facebook friends, the more the merrier. Montenegro or the United Kingdom, allies are viewed as much the same. Administrations routinely ink another “mutual” defense treaty and pretend the result is a real military alliance, designed to make America more secure. In fact, most U.S. “allies” are nothing of the sort. During the Cold War Washington’s principal objective was to prevent weak, war-torn, and/or failed states from falling under the control of the Soviet Union, and later China and North Korea. Although General and then President Dwight Eisenhower warned against turning the Europeans into security dependents, successive administrations ignored his advice. The U.S. inevitably took the lead and didn’t worry much about what its nominal allies did. They lagged behind the United States, failed to fulfill their commitments, and not too subtly took a very cheap if not quite free ride at Washington’s expense. U.S. officials whined on cue about the unfairness, but otherwise did nothing. The allies eventually recovered economically, with Japan, Germany, the UK, France, and South Korea becoming important international players. Nevertheless, Washington continues to be overwhelmingly responsible for national and regional as well as global security. The presumption is that its alliances are essentially costless. All Washington needs to do to deter impudent adversaries is make an occasional threat or issue a pertinent demand. There’s really no need for allies to even possess weapons. However, that world, which never really existed, is gone forever. Both Russia and China are well-armed and hostile; neither is inclined to give way to America. Smaller states, such as Iran and North Korea, have an even greater incentive to establish their credibility in order to resist Washington’s dictates. Still, the alliances are supposed to deter aggressors. And surely they do to the degree that they are seen as credible. However, they have three additional, less positive impacts. The first is to discourage defense efforts by the country or countries being protected. NATO is a spectacular example. Even those nations which claim to be most worried about the threat of Russian attack spend barely two percent of their GDPs on the military, far less than the United States. Some European states, secure in their belief that America will do whatever is necessary, don’t even spend a percent of GDP on defense. The Philippines might be a nice place to visit. But it isn’t a nation whose security America should guarantee. The second incentive created by an American defense guarantee is to encourage nations to be more aggressive, even reckless. Once the Democratic Progressive Party began winning elections in Taiwan, the U.S. had to worry that the new government would declare independence or otherwise challenge the People’s Republic of China. It was a reasonable fear: when I visited during the Chen Shui-bian administration members of his government were confident that Washington would feel obligated to protect Taiwan irrespective of their behavior in a crisis. It appears that Georgia’s government took a similar position in 2008. Although his country was not a formal ally, President Mikhail Saakashvili apparently believed the U.S. would back him after he launched an attack on Russian troops in secessionist territory. The other result of alliances is to ensure Washington’s involvement in conflicts involving other alliance members, irrespective of America’s interests. In South Korea the U.S. long deployed troops along the Demilitarized Zone to act as a tripwire, ensuring Washington’s entry into any war. Various “reassurance” initiatives in Europe are intended to have a similar effect, guaranteeing almost immediate involvement in any conflict. All of these come into play in the Philippines, a dysfunctional state headed by a president irresponsible even by Trumpian standards, Rodrigo Duterte. Elected in 2016, he may be most noteworthy for his insouciant attitude toward the widespread murder of drug users and dealers by security forces. He came into office hostile to the U.S. and especially Obama administration, announced his government’s “separation” from Washington, talked of aligning with the People’s Republic of China, and suggested sending home American troops currently assisting Filipino forces against Islamist insurgents. (Duterte’s minister of defense later said the relationship would be reviewed and suggested that his nation adopt a non-aligned foreign policy.) However, that was then and this is now. When a Chinese ship rammed and sank a Filipino fishing vessel in June in Reed Bank, where Chinese territorial claims conflict with the Philippines’ Exclusive Economic Zone, Duterte did little. He told his people that dealing with the PRC was a “delicate balancing act.” And he warned: “A shooting war is a grief and misery multiplier. War leaves widows and orphans in its wake. I am not ready or inclined to accept the occurrence of more destruction, more widows and more orphans should war—even at a limited scale—break out.” His soft approach, even admitting that he had agreed to allow Chinese vessels to operate in the EEZ, led to calls for his impeachment. But then Duterte put a call into Washington, demanding that the United States send warships to confront the PRC: “I’m calling now, America. I am invoking the RP-US pact, and I would like America to gather their Seventh Fleet in front of China. I’m asking them now.” And that’s not all. He added that “When they enter the South China Sea, I will enter. I will ride with the American who goes there first. Then I will tell the Americans, ‘Okay, let’s bomb everything.’” Perhaps Generalissimo Duterte would like a nuke to ride like Maj. T.J. Kong in the movie Dr. Strangelove. Others backed Duterte, though their rhetoric was less florid. For instance, Sen. Panfilo Lacson, an independent with his eye on the Philippine presidency, advocated formally invoking the alliance to contain China. The advocates of confrontation and maybe war appeared to be pushing on an open door. U.S. Ambassador Sung Kim said the “Mutual” Defense Treaty could be invoked in the case of “any armed attack” including by “government-sanctioned Chinese militia” against Filipino forces in the disputed areas. Why should America go to war with the PRC because the Philippines makes territorial claims it can’t or won’t defend militarily? In fact, the treaty does not automatically trigger military intervention even in the case of an attack on the Philippines proper. Nevertheless, Washington is entangled with an ambitious but unbalanced authoritarian in political trouble. America desperately needs to cut commitments to such “friends.” Better yet, the U.S. should use a Facebook technique and begin “unfriending” wastrel defense dependents, such as Manila. The Philippines and the United States have a unique history. Washington seized the archipelago after defeating Spain in 1898 in a conflict nominally fought over Cuba. Then American forces spent more than three years crushing the indigenous independence movement, copying Spain’s brutal tactics which the McKinley administration originally denounced. By mid-1902 the U.S. was in control, at the cost of some 200,000 Filipino lives. It wasn’t an obvious start of a beautiful friendship, but good feelings eventually won out in most of the islands. Washington granted self-rule and then, in July 1946, formal independence. Five years later Washington negotiated the usual sort of non-mutual “Mutual” Defense Treaty characteristic of the time. Then the agreement’s focus was on the possibility of a rearmed Japan. The Soviet Union became the next threat, but it has since disappeared. Now the new “necessary enemy” is China. The PRC isn’t a good substitute for the USSR. China is more fascist than communist, and is not engaged in an ideological war directed at global domination. Beijing seeks to restore influence lost when the decrepit Chinese Empire was coerced by the Western powers, which means pushing aside Washington and its allies when necessary, not defeating them globally. The PRC’s objective is to aggrandize itself, not destroy the U.S. As such, the Chinese threaten Washington’s outsize influence in East Asia, not America’s existence and liberal political system. Nor is there any evidence that Beijing hopes for physical conquest of its neighbors. Indeed, if there is a model for China, it likely is America’s decades of domination of Latin America. With the 1823 Monroe Doctrine, Washington asserted its hegemony in its neighborhood. Physical occupations of nearby states were few, especially as international sensibilities changed during the twentieth century. However, the U.S. forcefully asserted its interest, even risking war to prevent Moscow from stationing nuclear weapons in Cuba. The PRC probably hopes to establish similar control. However, its task is much more difficult. America enjoyed pacific neighbors north and south (after the mid-1800s). China is surrounded by nations with which it has been at war: Russia, Vietnam, India, South Korea, and Japan. Moreover, while Beijing is much larger economically than its neighbors, it faces far more serious competitors, including nuclear-armed Moscow, rapidly developing India, wealthy, well-armed Tokyo and Seoul, and growing Islamic Indonesia. The Philippines is much smaller and weaker, but the costs of occupying even such a state almost certainly would greatly outweigh any conceivable benefits. Moreover, the archipelago’s primary security benefit for America is a bootstrap: the regional presence yields influence, which requires presence to sustain. Washington wants to be the dominant Asian power forever but would be secure without doing so. And the cost of projecting power is much greater than of deterring the projection of power. The Pentagon recognizes the challenge posed by China’s anti-access/area-denial capabilities. But taking the war to the Chinese mainland, the most obvious response, would not only be more costly. It would ensure escalation, since the PRC could not placidly accept such attacks. The contested territories, rocks in the case of Scarborough Shoal, matter even less. Ownership offers control of resources, most notably fisheries and hydrocarbons. The extra-national wealth would be useful, but hardly worth full-scale war. Who owns what is a matter that America can largely view with indifference. Perhaps Washington should backstop the independence of friendly nations, but that is very different than defending a gaggle of subsidiary interests. Nevertheless, the Obama administration increased military ties with Manila, signing the “Enhanced Defense Cooperation Agreement” in 2014. U.S. combat forces aided the Filipino military in battling Islamist insurgents. The Philippines requested logistical aid for forces confronting the Chinese military in the South China Sea. Washington increased the number of exercises and other military activities, and rotated surveillance aircraft through the Philippines. The U.S. also transferred equipment and provided grants, including for construction of facilities expected to eventually house American forces. Defense consultant Jose Antonio Custodio cited “an obvious bending” of the law, adding that, “The U.S. and Philippine governments have always found ways to liberally interpret the provisions of the existing agreements.” If there was one administration likely to change U.S. policy, it would seem to be the current one. Almost unique among American presidents, Donald Trump maintained a bitter and extended rhetorical attack on the United States as the international chump. Nervous foreign diplomats from allied states ask me if he is serious about demanding higher host nation support and even withdrawing troops. Yet earlier this year Secretary of State Mike Pompeo warned Beijing against even looking harshly at Manila, lest war with America result. He declared: “Any armed attack on Philippine forces, aircraft or public vessels in the South China Sea will trigger mutual defense obligations.” Philippine Foreign Secretary Teodoro Locsin Jr. generously said his government would accept America’s word, which he interpreted to mean “we have your back.” The U.S. and Philippines also have a dozen projects set under the EDCA, as well as nearly three hundred other joint military activities scheduled this year. Where is the “mutual” in this relationship? Someday Manila might allow the prepositioning of equipment which might be useful in contingencies elsewhere, but Washington has no shortage of bases in the region. If the U.S. ends up at war in Korea, fighting China over Taiwan, or defending Japan’s claim to the Senkaku (Diaoyu to the PRC) Islands, will Manila join in? If so, with what? Its naval flagship is a half-century-old American Coast Guard cast-off. The Philippines is not arming to deter and defeat Beijing. The Philippines is whining to get America to deter and defeat Beijing. The greatest heat is generated by the battle over two rocks called Scarborough Shoal (Panatag Shoal to the Philippines and Huangyan Islets to China). Originally administered by Manila, the territory was seized by the PRC seven years ago. Also contested is Mischief Reef, on which Beijing has constructed military facilities despite its location within the Filipino Exclusive Economic Zone. And these are not the only territories in dispute in the region. China and Japan are battling over the Senkaku/Diaoyu Islands, Japan and the Republic of Korea are squabbling over the Liancourt Rocks (Dokdo/Takeshima Islands to the PRC and ROK, respectively). Finally, Brunei, China, Malaysia, Taiwan, and Vietnam variously claim ownership of the Paracel and Spratly Islands. The specifics of each case vary, but collectively such territorial claims have inflamed nationalistic sentiments in many nations. Until Pompeo’s gratuitous statement, Washington had been cautious in its expressions of support, generally speaking more action taken by unnamed parties in the Pacific. After all, there is nothing at stake that justifies America making Manila’s contested claim essentially its own. And doing so inevitably creates bad incentives. The Duterte government has less reason to invest more in the military. It can confidently be more reckless and assertive. And thereby—intentionally or not—might pull the U.S. into a war with nuclear-armed China over an issue of no importance to Americans. Indeed, in March Philippine Defense Secretary Delfin Lorenzana announced that if the Trump administration did not clarify Scarborough Shoal status under the “Mutual” Defense Treaty, Manila might end the alliance relationship. Lorenzana explained that “It is not the lack of reassurance that worries me. It is being involved in a war that we do not seek and do not want.” He added that “If the Philippines does not want to be involved in a war, it can opt out on that basis.” If Manila doesn’t believe the contested territories are worth war, then why should the U.S. believe so? Far better for the Philippines to expand its defense relationship with other parties. Indeed, three years ago at Manila’s request, Tokyo transferred two coast guard ships to the Philippines. India and Vietnam also could do much more to assist the Duterte government. A separate issue of interest to Washington in East Asian waters is freedom of navigation. However, that doesn’t warrant intervening in often convoluted territorial arguments. The U.S. has mounted Freedom of Navigation Operations, or FONOPS, operations in waters claimed by Beijing. Observed Pompeo: “I think the whole world understands that the Trump administration has made a true commitment to making sure that these seas remain open for the security of the countries in the region and the world, open to commercial transit.” Sovereignty questions are not paramount for navigation. Even in EEZ or territorial waters, international law recognizes a general right to transit freely. Nor is the PRC likely to end commerce which has benefited it and most everyone in the region. It would be different in wartime, but then all that would matter would be the respective navies’ fighting capabilities. How much naval power America needs to protect its interests is a matter of contention. Earlier this year author Mark Helprin complained that Washington must “alter the correlation of military forces in the Western Pacific, and indeed in the world, so that it no longer moves rapidly and inevitably in China’s favor.” If not, he warned, “the Pacific Coast of the United States will eventually look out upon a Chinese lake.” In fact, Beijing’s ability to operate along America’s west coast will be even more limited than Washington’s ability to operate along the PRC’s east coast. Nor have the Chinese demonstrated much interest in doing so, if for no other reason than projecting power in that way would be so expensive. China lacks nearby bases and the U.S. could load up the mainland with plenty of ship-killing missiles. And if Helprin or anyone else seriously believe that America’s Pacific Coast might be at risk, then it would be better to concentrate resources and money on defending the American homeland than the Filipino islands. Defeating ever-growing Chinese forces so close to their home would require an expensive, exhausting, and permanent military expansion. One the PRC would have every incentive to match. The Philippines might be a nice place to visit. But it isn’t a nation whose security America should guarantee. The United States certainly shouldn’t protect Manila’s sovereignty over territories which the latter is unable to defend. Nor to let the authoritarian ruler of a decrepit government of peripheral interest to America decide when Washington should go to war. The PRC is likely to pose the greatest challenge to the United States in the coming years. It is in Washington’s, as well as Beijing’s interest to keep that competition as peaceful as possible. America should not go to war for anything short of fundamental, even vital interests. None are at stake in the Philippines, let alone Scarborough Reef. 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 The Politics of Plunder: Misgovernment in Washington.
  • Prepare for a More Authoritarian China    (Ted Galen Carpenter, 2019-08-03)
    Ted Galen Carpenter With the onset of China’s economic reforms in the late 1970s, a widespread belief took hold in the United States and throughout the Western world that establishing robust economic relations with the “new China” would lead to gradual political liberalization. That belief persisted even after the communist government’s June 1989 bloody crackdown on pro-democracy demonstrators in Tiananmen Square. Most proponents of increased diplomatic, political, and economic engagement with Beijing (including this author) concluded that the massacre, however tragic, was merely a regrettable interruption in the long-term liberalization process. Robert B. Zoellick, Deputy Secretary of State under President George W. Bush, memorably expressed the prevailing expectation that a more open China would become a “responsible stakeholder” in the international system. Developments in recent years should create doubts about that assumption. Under President Xi Jinping, China has become noticeably more authoritarian, not less, at home. His presidency has been characterized by an insistence that all individuals in positions of responsibility devote more serious study of and adherence to Marxist-Leninist doctrine. He has conducted a systematic purge of the Party’s ranks in the name of combating corruption. Although that appeared to be a reasonable justification in some cases, given the level of corruption that had developed along with China’s meteoric economic growth, in other cases Xi seemingly used it as a pretext to get rid of personal and ideological rivals. There was no question that he was determined to enhance and perpetuate his dominant role. Although China remained a one-party state even after the demise of Mao Zedong’s totalitarian rule, implicit political reforms became an impediment to rule by a single individual. An especially crucial measure was the establishment of term limits on the powerful post of president. Xi and his followers eliminated that restriction in 2018, enabling him to hold the office indefinitely. As its military power has expanded, China’s behavior has become noticeably less accommodating, if not outright aggressive. An array of autocratic policies has accompanied the growth and perpetuation of Xi’s personal authority. The government’s Orwellian “social-credit” system is used to restrict the travel and other rights of actual or potential critics. Prominent liberal economists, who once enjoyed Beijing’s favor or at least toleration, are now targets of growing campaigns of harassment. Only incurable optimists or the willfully blind would argue that today’s China is more tolerant and open than it was a decade ago. The trend is toward greater repression and regimentation, not greater liberalization. Beijing’s foreign policy is exhibiting a similar worrisome pattern. As its military power has expanded, China’s behavior has become noticeably less accommodating, if not outright aggressive, in such locales as the East China Sea, the Taiwan Strait, and the South China Sea. In the East China Sea, Beijing is contesting Japan’s control of the Senkaku islands and pressing its own claim to that territory. In addition to national pride, China’s pressure reflects a desire to control extensive fishing resources and probable oil and mineral wealth in the waters surrounding the uninhabited Senkakus. Beijing’s belligerence is even more evident in the Taiwan Strait. A senior Chinese official, Liu Junchuan, boasted that “the contrast in power across the Taiwan Strait will become wider and wider, and we will have a full, overwhelming strategic advantage over Taiwan.” Speaking on June 1, 2019, at the Shangri-La Dialogue, the annual multilateral conference on Pacific security issues, Defense Minister Wei Fenghe warned against efforts either in Taiwan or foreign countries to thwart China’s goal of reunification. Wei added ominously, “If anyone dares to split Taiwan from China, the Chinese military will have no choice but to fight at all costs, for national unity.” In addition to its own accelerated military activities in the Taiwan Strait, China is reacting with intense hostility to the transit of naval vessels from any other country. Most of Beijing’s angry protests have been directed at the United States for sending warships through the Strait, but Chinese officials display similar intolerance toward other powers. When a French naval vessel sailed through the Strait. Beijing responded with a vitriolic protest. It is evident that Chinese leaders not only regard Taiwan as part of China, but also consider the entire Strait to be Chinese territorial waters. There also are multiple signs of a more assertive, uncompromising Chinese policy in the South China Sea. China’s protests about U.S. “freedom of navigation” patrols have become increasingly shrill, and China’s warships are now shadowing and harassing the American vessels. There are worrisome threats from the Chinese military hierarchy to escalate the confrontational policy. Beijing’s autocratic domestic and international tendencies blend together in the government’s policy toward Hong Kong. When the PRC regained sovereignty over Hong Kong from Britain in 1997, Chinese officials assured residents that they would enjoy extensive self-rule. Hong Kong was legally designated as a “Special Administrative Region” to emphasize its unique autonomy. Beijing would make decisions pertaining to foreign policy and national security, but on most other matters, the people of Hong Kong would run their own affairs. Unfortunately, the Chinese government’s erosion of that autonomy has accelerated in recent years. When Beijing and its appointed chief executive in Hong Kong proposed an extradition agreement that would have given the PRC enormous leverage over Hong Kong’s ostensibly independent judicial system, large, angry demonstrations erupted. Chief executive Carrie Lam then withdrew the bill from consideration, but anti-government demonstrations have persisted and even grown in both size and virulence. Beijing indicates how it is likely to respond if such defiant behavior persists. A defense ministry official warned that demonstrators were now challenging the authority of the central government and the principle of “one country, two systems”—the legal basis of Hong Kong’s autonomy. The Chinese military command stated further that troops can be deployed to Hong Kong to maintain order at the request of the city’s government, adding that the July 21 siege of the mainland government’s liaison office in the city was “intolerable.” Such a “request” would come from Hong Kong’s chief executive—i.e., Beijing’s appointee. That warning is more than a little ominous. However, such a crackdown might finally gain the attention of politicians, pundits, and policy wonks in the United States who have thus far persisted in the illusion that engagement with China will inevitably lead to that country’s political liberalization and peaceful international behavior. True, greater economic openness and trade with the outside world has produced a remarkable improvement in the living standards of the Chinese people, and that development is gratifying. But members of the political and foreign policy communities in the United States and throughout the democratic West need to face the reality that such progress has not led either to political reform in China or more accommodating behavior from Beijing abroad. Indeed, the trends in both cases point in the opposite direction. Ted Galen Carpenter, a senior fellow in security studies at the Cato Institute and a contributing editor at the National Interest, is the author of 12 books and more than 800 articles on international affairs.
  • If Protesters Want to Protect Hong Kong’s Way of Life, They Must Win the War of Ideas    (James A. Dorn, 2019-08-02)
    James A. Dorn The massive demonstrations in Hong Kong against the proposed extradition bill have revealed the moral rectitude of citizens to protect their way of life and freedom from communist China. On June 9, hundreds of thousands exercised their right to peacefully contest the legislation supported by Chief Executive Carrie Lam Cheng Yuet-ngor. By putting moral and political pressure on government, the people succeeded in reversing the course of the bill, which was suspended on June 15 and declared “dead” on July 9. Yet, the bill has not been fully withdrawn — and the protests continue. Protesters are concerned that, if a bill allowing extradition to the mainland were enacted, Hong Kong would risk losing its unique status as a guardian of the rule of law, limited government, economic freedom and human rights. The possibility of being subjected to China’s draconian penal system would increase uncertainty and result in self-censorship — undermining the free market in ideas that is Hong Kong’s trademark. The resulting outflow of human and financial capital would have dire consequences for both Hong Kong and China. To win the war of ideas, Hong Kong needs to remain an open society and fight the mainland -and those who sympathise with Beijing -with ideas. It was to protect their way of life that the protesters marched and stopped the pulse of everyday life in the world’s freest economy. But on June 12, the protests turned violent, as a small minority clashed with police, and called for immediate withdrawal of the bill and the ouster of the chief executive. More recently, protesters have broken into the Legislative Council building, defaced the Chinese national emblem and thugs have beaten pro-democracy demonstrators. One young demonstrator expressed their sentiment by saying: “Protesting is the only way we can make our voices heard in the absence of democracy.” It would have been more correct to say “one of the few ways” because, unlike the People’s Republic of China, Hong Kong has a genuine rule of law that respects basic human rights. Article 27 of the Basic Law states: “Hong Kong residents shall have freedom of speech, of the press and of publication; freedom of association, of assembly, of procession and of demonstration.” The grounding of rights in individuals, not the state, contrasts sharply with the top-down approach to rights in China, where basic rights stated in the constitution are merely “paper rights” and the rule of law is a rule designed to “build socialism” — not a meta-legal principle to defend life, liberty, and property. That is why ethnic Chinese in Hong Kong mostly see themselves as “Hongkongers,” not as national citizens of the People’s Republic. The “one country, two systems” doctrine embedded in the Basic Law will end in 2047; what happens in the next 28 years will define the future of Hong Kong. If Hong Kong can export its system of limited government and individual freedom to the mainland — by showing that a free market in ideas is far superior to “socialism with Chinese characteristics” — then there is hope that China may eventually move from a model based on “building socialism” to one that recognises the principle of spontaneous order under what Friedrich Hayek called a “constitution of liberty”. Unlike in the mainland, everyone in Hong Kong has a voice in a free market for ideas and an opportunity to criticise the state, including Beijing. The evils of the 1989 Tiananmen crackdown have not been forgotten. Why China’s youth don’t talk about Tiananmen The moral force of the voices of freedom and limited government should not be underestimated. Just as free trade in goods and services increases the wealth of a nation, so does free trade in ideas. Social media has been widely used to “spontaneously” organise the protests. But when young demonstrators think taking to the streets is the “only way” to make their voices heard, they risk taking a tactical approach to reform that could backfire as protests become violent or disruptive. What is needed is a long-term strategy that relies on the strength of Hong Kong’s ethos of liberty and adherence to limited government. China has certainly benefited from allowing Hong Kong to maintain its free-market trading system since 1997, but that system could not have survived without a corresponding free market in ideas. The protests against the extradition bill have succeeded in killing the legislation for now, and Hong Kong leaders who favoured the bill have lost face — but not their official status. Without competitive, free elections, Hongkongers are handicapped but not totally ineffective in shaping the political landscape and confronting Beijing with the stark reality of two systems: one in which there is still a free market in ideas and the other in which a “president for life” is intent on suppressing all criticism. To win the war of ideas, Hong Kong needs to remain an open society and fight the mainland — and those who sympathise with Beijing — with ideas. Key to that battle is the idea that limited government and a free market in ideas are better means to enable individuals to pursue happiness than state control. James A. Dorn is a senior fellow and China specialist at the Cato Institute in Washington, DC.
  • Facebook Deserves More Credit... Our Data Is Not "the Product"    (Ryan Bourne, 2019-08-02)
    Ryan Bourne It’s the must-say cliché about Big Tech. On a new Netflix documentary, The Great Hack, digital media professor David Carroll repeated that, when it comes to social media platforms, “we are the commodity.” Such thinking is common in writing about Google and Facebook. Tropes such as “you’re not the consumer, you’re the product” are repeated ad nauseam. The idea is the same. Since Facebook and Google do not charge us for services, it’s said we pay through giving up our information, in turn sold to third parties for well-targeted advertising. So entrenched is this belief, a Financial Times editorial this week advocated overhauling competition laws to acknowledge that “digital services increasingly cost long-term privacy rather than money”. Whoa, there. Before good policy is sacrificed to this meme, let us pause and reflect. Yes, Facebook and Google make money through information-infused advertising targeted at granular user populations. But there’s nothing new about this practice. Nor does it follow that users are “the product” or that privacy is “the cost” of digital services. Journalists, of all people, should understand this. Free newspapers and free-to-air broadcasters, such as ITV and Channel 4, have similar business models. All seek to capture readers or viewers by providing good quality content. Generating these large audiences is necessary for their advertising space to generate revenue. Media companies must profile their readers or viewers, pitching this demographic information to would-be advertising buyers. Yet, strangely, nobody says ITV viewers or Metro readers are “the product” or a “commodity” of the companies. True, TV networks and papers don’t collect much individual level data or enjoy the scale of information of Google or Facebook. Yet this is a matter of degree, not principle. One senses the teeth gnashing comes precisely because tech has disrupted the traditional media’s approach. Advertisers on Facebook can now target ads at 35 to 40-year-olds, living in the Medway towns, who are interested in water polo; obtaining real-time feedback on the ad’s success. That obviously helps maximize the effectiveness of ad spend. None of that makes our data “the product” or privacy “the cost” of Google or Facebook though. In fact, there are three clear reasons why such claims are misguided. First, and most obviously, the value of these firms’ advertising space is dependent on strong user numbers. Google must deliver an accurate search engine, and Facebook high-quality networking and applications, to keep us using their websites or apps. That provides an incentive to respond to our wants and needs, including on privacy. We might not be paying customers, but we are much-needed consumers. For now, these firms are successful. Alternatives are just a click away with Yahoo, DuckDuckGo and Bing but Google still has an 88pc UK market share in internet search. Facebook is currently the largest UK social media site in terms of reach, consumption and revenue. The point though is we aren’t powerless pawns here; we willingly use both because we like their products. If that changes and user numbers collapse, so will their business models. Second, perhaps less obviously, much “data” commonly described as “ours” is actually the creation of Facebook’s own structure and processing. Writing out your personal details, friends list, and upcoming social events on a sheet of paper might have some inherent value to certain companies, but it will be relatively small. No, we aren’t “the product” of Facebook and Google, and privacy is not “the cost” of using them No, what Facebook does that adds value is processes this raw data, linking with others, in turn making predictive profiles across larger populations. It’s this new information that’s valuable for improving its consumer service and being attractive to advertisers. Our data might be an input to a product, in other words, but “we” aren’t. As George Mason University economist Alex Tarrabok has explained, those who demand “access” to “our data” or demand it be made portable for other sites miss the point. There’d be no value to a list of photos we’d “liked” or bars we’d “checked in” to using Facebook’s platform. Information like that becomes valuable because of how Facebook processes or aggregates it. Finally, the Financial Times’ assertion that “digital services increasingly cost long-term privacy” is incredibly misleading. Some people may well be “privacy fundamentalists” who see divulging any personal information as a cost. But 74pc of UK internet users feel confident about managing their data online. We’d be troubled if our health or financial information were exposed, obviously, but we are relaxed about tech firms knowing our click habits or on-site browsing history. Indeed, one study of nearly 1,600 internet users in the US found that “85pc are unwilling to pay anything for privacy on Google” and of the remaining 15pc, the median amount they would give up was “a paltry $20 per year”. This suggests for most people the privacy given up on Google is no cost at all By and large, we seem satisfied with the current grand bargain of cheap or zero-priced content financed by targeted ads. Is this surprising? Targeted advertising can be highly beneficial for us as customers too, alerting us to things we want to buy and avoiding wasting time scrolling elsewhere. None of this is to deny that genuine privacy breaches that break terms and conditions should have consequences. It’s little surprise that Facebook usage fell following scandals associated with third parties’ wrongful access to data. More transparency on who has access might help inform users. But the zeitgeist here is troubling. In a trivial sense, Facebook and Google’s profitability of course relies on its users and their information. To declare from this that “we are the product” is to spread a misleading cliché that ignores the obvious value-added activities these companies deliver to both users and advertisers. Ryan Bourne occupies the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute.
  • The Tariffs Will Bite U.S. Consumers: Prepare to Feel Their Effects More Than Before    (Daniel J. Ikenson, 2019-08-02)
    Daniel J. Ikenson Announcing his intentions on Thursday to hit all remaining imports from China with tariffs, President Trump is now all-in on the trade war. This doesn’t bode well for Americans’ wallets, bilateral relations or the global economy. As costly as this course of action will prove to be, it isn’t hard to understand why Trump has continued down this treacherous path. The adverse consequences of the trade war so far have been contained. The president believes he has the leverage to bend Beijing to his will. And if he were to ease up on the pressure, Trump would be portrayed as weak by the dozen or more Democratic presidential aspirants hoping to outflank him with protectionist promises to win back Rust Belt voters. A few words of advice: Go shopping. Now! Buy your phones, laptops, clothes, furniture, hockey gear, football helmets and hand tools now. Tariffs on imports from China, which Trump first imposed last summer, were gradually broadened and increased over the course of the ensuing 12 months. As of this moment, U.S. Customs is assessing taxes of 25% on about $250 billion worth of imports from China. Most of those products are capital equipment and “intermediate goods,” which is to say machinery, raw materials and components required by U.S. producers to manufacture their own output for sale in the United States and abroad. Of course, those taxes get passed on to U.S. consumers in the form of higher prices (to cover the higher costs of production) and to workers whose compensation and hours worked suffer from their companies’ dwindling profits. According to a report from the Federal Reserve Bank of New York, “Over the course of 2018, the U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete pass-through of the tariffs into domestic prices of imported goods.” However, even though the costs are real and consequential, to a large extent the pain has been dispersed and the cause and effect has been hard for people to discern. But as of Sept. 1, the remaining 55% of imports from China (about $300 billion worth of mostly consumer goods) that have thus far been spared the tariffs, will be taxed at 10%. A few words of advice: Go shopping. Now! Buy your phones, laptops, clothes, furniture, hockey gear, football helmets and hand tools now. In 2017, the last full year before Trump’s punitive tariffs were imposed, U.S. imports from China totaled $504 billion, and duties paid by U.S. importers to U.S. Customs amounted to $13.5 billion. That’s an average applied tariff rate of 2.68%. In 2018, when tariffs of 25% on $50 billion of Chinese goods were imposed in June and July, and additional tariffs of 10% on $200 billion of Chinese goods were imposed in late September, the value of imports from China totaled $544 billion and the duties collected came to $23 billion — an average applied tariff rate of 4.23%. Nearly $10 billion of costs associated with the higher tariffs were imposed on consumers, businesses, shareholders and employees. But as of Sept. 1, the remaining 55% of imports from China (about $300 billion worth of mostly consumer goods) that have thus far been spared the tariffs, will be taxed at 10%. A few words of advice: Go shopping. Now! Buy your phones, laptops, clothes, furniture, hockey gear, football helmets and hand tools now. In 2017, the last full year before Trump’s punitive tariffs were imposed, U.S. imports from China totaled $504 billion, and duties paid by U.S. importers to U.S. Customs amounted to $13.5 billion. That’s an average applied tariff rate of 2.68%. In 2018, when tariffs of 25% on $50 billion of Chinese goods were imposed in June and July, and additional tariffs of 10% on $200 billion of Chinese goods were imposed in late September, the value of imports from China totaled $544 billion and the duties collected came to $23 billion — an average applied tariff rate of 4.23%. Nearly $10 billion of costs associated with the higher tariffs were imposed on consumers, businesses, shareholders and employees. So far, the pain has been concentrated in a few sectors and dulled by subsidies and the fiscal stimuli of lower taxes and much higher public spending. But as this sugar high wears off and the economy slows, conditions are likely to worsen. Hang on. Daniel J. Ikenson is director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies in Washington, D.C.
  • Time for Ukraine — and America — to Make a Deal With Russia    (Doug Bandow, 2019-08-01)
    Doug Bandow Ukraine’s political revolution is now complete. The country just elected as president the comedian Volodymyr Zelensky, who crushed the incumbent by a nearly three-to-one margin. His party won the first majority in the Rada since the nation was reborn after the Soviet Union. Zelensky, who largely wiped out parties that favored continued confrontation with Russia, should now use his substantial authority to make peace with Moscow. The United States and Europe can help seal the deal. In particular, the Trump administration should end the burgeoning cold war between Washington and Moscow. The conflict is unnecessary and is in nether side’s interest. Russia’s Vladimir Putin is neither Western liberal nor American friend. He pursues his own agenda, disregarding what Washington wants. Most controversially, he has followed the U.S. example of intervening in other nations’ elections for political advantage, tossing a wrench or two into America’s presidential contest. As bilateral ties began to fray, Moscow took advantage of opportunities to hinder American policy elsewhere. It helped preserve the Assad regime in Syria against all enemies, sustained Venezuela’s Nicolás Maduro despite substantial American pressure, diminished Washington’s economic assault on North Korea, frustrated President Donald Trump’s “maximum pressure” campaign against Iran, and manipulated European governments. Some of these actions, such as the ones in Syria, reflected long-standing Russian policies; others, such as in Venezuela, were mostly intended to undermine Washington’s position. Could comedian-turned-President Volodymyr Zelensky be the man who finally brings peace? However, Putin is not solely at fault for the collapse of U.S.-Russia relations. Declassified documents make clear that Washington lied to Moscow about its intention to expand NATO. Unconcerned about Russian sensitivities, the Clinton administration moved the border of the Western alliance to within a couple hundred miles of St. Petersburg. The U.S. ignored Russian interests in the Balkans and attempted to cut out Moscow while dismembering the latter’s traditional Slavic partner Serbia. The Clinton administration used money and influence to keep Boris Yeltsin in power even as Russia’s economy was being looted in the name, though not the reality, of a market transition. The Bush administration continued to promote NATO expansion, even to Georgia, which started a shooting war with Russia in apparent expectation of U.S. backing, and Ukraine, long part of the Russian Empire and Soviet Union. In 2014 came Europe’s attempt to pull Kiev westward economically and subsequent support from Brussels and Washington for a street putsch against Ukraine’s Moscow-friendly president, who had won a fair election. In the aftermath, U.S. officials openly spoke of their favored candidates for Ukrainian office. None of this justified Moscow essentially waging war on Ukraine and forcibly annexing Crimea. However, Western behavior undermines the claim that Putin is the latest Hitler, out to dominate the world. Russia couldn’t conquer Europe even if it wanted to: the continent has 10 times the economic strength and three times the population of Russia. Despite having rebuilt its military, Moscow is a declining power, focused on ensuring that its security and interests are respected by the West. Switch Mexico for Ukraine and Washington would be most unhappy with Russian “meddling,” per the Monroe Doctrine. Those Washingtonians currently outraged at Moscow’s behavior would be demanding that America make an equivalently aggressive response. Today, Washington and Moscow appear to be adversaries trending towards enemies. Outrage is particularly abundant in Congress, whose members seek to punish anyone anywhere who opposes them. Yet sanctions against Moscow have completely failed. The Putin government has not disgorged Crimea, nor has it abandoned separatists in Ukraine’s Donbass, left Syria, dropped support for Venezuela’s Nicolás Maduro, or otherwise changed its foreign policy. And Moscow is unlikely to do so even if the U.S. turns up the pressure. At the same time, Russia has closed the Nixon-promoted gap between Moscow and Beijing, which now cooperate together against America. Zelensky’s election offers an opportunity for Ukraine, Europe, and America to repair relations with Moscow. During the campaign, Zelensky both called for negotiations with Russia and promised not to sacrifice Ukrainian territory, and since has responded aggressively to Putin’s pressure. When Moscow offered Russian passports to residents of the Donbass, Zelensky invited Russians to request Ukrainian passports. Kiev recently seized a Russian tanker, while releasing its crew, in retaliation for Moscow’s previous detention of three Ukrainian vessels. The new Ukrainian leader has spoken with Vladimir Putin by phone, proposed a swap of prisoners, indicated a willingness to end the blockade of rebel regions, and suggested talks that would include Donald Trump and several European leaders. With a Rada majority, Zelensky should be able to pass any legislation required for a peace agreement. Ending the war would allow him to concentrate on the real existential threats to his country-corruption, poverty, extremism, and despair. Agreement will require compromise, including from American legislators who seem mostly interested in posturing. But that should still be possible-so long as everyone accepts the underlying, if unpleasant, realities. A cool peace would be far better than today’s lukewarm war. First, NATO should indicate that expansion of the alliance has concluded. With a peaceful resolution to the Ukraine conflict, there would be no further extension of troops, exercises, or bases to Russia’s borders-most importantly in Georgia or Ukraine. Rather, the alliance would repair contacts with Moscow that have been damaged in recent years. Second, the Minsk agreement would be refined and implemented. Kiev would provide autonomy for the affected region while Russia ended its support for separatists. The Putin government would shift its objective from destabilization to stabilization, recognizing that a prosperous friend on its border would improve Russia’s economy and security. Third, the West would drop sanctions on Moscow. The two sides would move back toward normal commercial ties. However, the legal authority for their speedy imposition would remain should Russia violate the accord. Fourth, Moscow would eschew future intervention in American and European political affairs. That would include cyber activities, funding of political groups, and electoral hacking. In turn, Washington would acknowledge its past political meddling and foreswear future interventions in Russian affairs, including funding private organizations involved in political activities. Fifth, Ukraine would be free to form commercial ties and forge economic agreements both east and west. While Moscow might claim an enhanced influence over security issues, it could make no similar claim over investment and trade. Russia would cease to use its gas monopoly as a weapon; in return, Washington would drop its opposition to the Nord Stream 2 project. Sixth, Crimea’s final status would be left for the future. Ukraine and the West would informally recognize that Russia is highly unlikely to return the territory under the best of circumstances while officially refusing to acknowledge the transfer. In continuing to press for Crimea’s return, they would propose a referendum. Washington, Brussels, and Kiev would then offer a formal resolution: a referendum conducted with international oversight to decide final control by Ukraine or Russia. The benefits of such a peace to America are obvious. Moscow would end its destabilization of Ukraine while Americans would no longer be entangled in a conflict irrelevant to their security. Russo-American economic ties could be revived as Moscow ended its political meddling. Washington could build on this success, steering Moscow in a different direction on Cuba and Venezuela and winning Russian assistance or acquiescence on other controversies, such as Iran and North Korea. Finally, the U.S. could focus on separating Moscow from China. No doubt such a package would elicit strong opposition from some, especially in Kiev. Obviously only Ukraine can decide what its priorities are. However, the U.S. and Europe should inform Kiev that their security interests require ending any plans to add Ukraine to NATO. America’s defense, ultimately the raison d’etre of its participation in the transatlantic alliance, is not served by Washington confronting a nuclear-armed state, namely Russia, over its relations with a nation essentially irrelevant to American security. Ukraine should make its decision realizing that it cannot rely on the protection of others. How Zelensky would view such a proposal is unknown. But he would have good reason to embrace an agreement that ended Russian military intervention and secured his country’s freedom to choose economically. Crimea would not be returning, but under no circumstance other than full-scale war is it ever likely to be. And Ukraine need not formally accept the territorial loss. In any case, Washington should move ahead and make a deal that best serves America’s interests. That will require minimizing U.S. military commitments to Ukraine, which might be a worthy friend but should not remain a defense dependent. It will also mean not treating Russia like an enemy.
  • Brave Nuclear World    (Emma Ashford, 2019-08-01)
    Emma Ashford On Friday, the United States will complete its withdrawal from the Intermediate-Range Nuclear Forces (INF) Treaty, an agreement that had prohibited the United States and Russia from deploying certain kinds of missiles since 1987. Following on the heels of Donald Trump’s withdrawal from the JCPOA, and his unwillingness to negotiate an extension to New START, the collapse of the INF Treaty is just one more step towards the demise of Cold War-era arms control. Of course, though the problem started with Trump, the deaths of these agreements will outlast his administration; agreements not negotiated today mean no agreements on arms control tomorrow, opening up the disturbing possibility of renewed arms races. Indeed, a survey of global leaders taken last year at Davos highlighted nuclear war as a key concern. Though mutually assured destruction is still the core strategic logic underlying most countries’ nuclear arsenals, the structure of the system is no longer the same. But figuring out the questions we need to ask may end up being as important as the answers. As a new publication from the Cato Institute highlights, the nuclear challenges of today are substantially different than the ones we faced during the Cold War. In that context, it’s worth asking which of the assumptions we have about nuclear weapons still hold up — and which don’t. 1. Is superpower-style mutually assured destruction the best way to understand the modern nuclear balance? Not really. Though mutually assured destruction is still the core strategic logic underlying most countries’ nuclear arsenals, the structure of the system is no longer the same. In place of the US and USSR locked in superpower competition, there are a number of key players and a growing sense of rivalry between the US and China. Developments in weapons technology - a move towards tactical nuclear weapons, and to dual-use technologies that can be used for both conventional and nuclear purposes - are challenging strategic stability in new ways. All of which suggests that while mutually assured destruction still exists, the broader strategic situation is more complex than during the Cold War, increasing the possibility of nuclear use. 2. Are nuclear weapons useful for something other than deterrence? Not particularly. Much of the Trump administration’s case for a harder line on Iran and North Korea was premised around the idea that these states could potentially use nuclear weapons to make political or military gains. But while this administration has played up the fear of ‘nuclear blackmail,’ the historical record reveals how difficult it is to use nuclear weapons for coercion. Most states who seek to acquire nuclear weapons want a last-ditch backup to protect their country or ensure regime survival: ironically, as the Nobel Laureate Thomas Schelling once noted, the US invasion of Iraq was actually a key driver of nuclear proliferation by states like North Korea. 3. Is arms control dead? Not necessarily. John Bolton may be doing his best to kill today’s arms control treaties, but in some ways, it’s questionable how effective many of these treaties were at dealing with modern nuclear realities. Future arms control treaties will be more difficult to negotiate and will need to focus on different things. Where most Cold War treaties tended to focus on numerical caps, for example, that approach isn’t as useful if the United States wants to engage a country like China, which fields a substantially smaller arsenal. Future treaties will likely need to be multilateral, and focus on other topics such as crisis stability, new types of weapons and the importance of information sharing. It will be particularly challenging to negotiate new nonproliferation agreements after the Trump administration’s withdrawal from the Iran nuclear deal. While it will be difficult to negotiate new arms control agreements, though, that doesn’t mean future administrations shouldn’t try; the alternative is too risky. 4. Do we need to maintain our Cold War nuclear arsenal to combat China? Probably not. The Trump administration’s 2018 Nuclear Posture Review actually suggested increasing spending and adding new types of weapons. But as critics of the review - notably Adam Smith (D-WA), Chairman of the House Armed Services Committee - have pointed out, there are lots of places where the United States could cut our nuclear forces while still maintaining a substantial strategic edge. For example, downsizing the land-based elements of the triad, which are among the most vulnerable and least flexible of our nuclear forces, could save tens or even hundreds of billions of dollars in coming decades. Of course, while these issues are widely discussed among policy wonks, they don’t get a lot of attention in broader political debates. The Democratic candidates for 2020 have weighed in on nuclear issues to varying degrees, with most of the debate focusing on the narrow and largely academic question of whether the United States should have a ‘no first use’ nuclear policy. But the broader question of how the United States should approach nuclear issues in coming decades is vitally important. The final collapse of the INF should prompt policymakers and candidates to think more closely about these issues. The Trump administration has smashed the existing arms control order. The next presidential administration - whether it’s two years from now, or six — is going to have to pick up the pieces and figure out how to shape them into something new. Emma Ashford is a Research Fellow in Defense and Foreign Policy Studies at the Cato Institute, where she focuses on U.S.-Russian relations, Middle Eastern affairs, energy politics, and U.S. grand strategy.
  • 'Free' College Hurts Minorities and Low-Income Americans    (Russell Rhine, 2019-07-31)
    Russell Rhine Three of the top Democratic presidential candidates, Joe Biden, Sen. Elizabeth Warren, and Sen. Bernie Sanders support four years of free-meaning taxpayer funded-higher education. But by ignoring incentive-driven behavioral changes, free college for all will hurt many young adults, including minorities and low-income Americans. What would happen if public colleges were suddenly free? Demand to attend these schools would likely skyrocket well beyond the current level. Research has repeatedly identified the inverse relationship between tuition and enrollment changes-falling prices increase enrollments. Many colleges have successfully attracted students by lowering tuition. Public Research I schools are the most price sensitive because they compete with other flagship schools as well as private colleges and universities. Free college would cause high school graduates who didn’t plan to attend college because of the high cost to apply for admission. Other new graduates who would have attended a private college, but now can’t resist saving tens- or hundreds-of-thousands of dollars, would also apply. Similarly, many students enrolled in costly private colleges would want to transfer to a free public school. And adults in their late 20’s or older who wanted more education but were unable or unwilling to pay would apply. The result would be a tidal wave of applications flooding public colleges, forcing admission departments to ration the limited openings. College admission is largely based on academic performance, and the expanded candidate pool increases applicants of all achievement levels, including high-performing students. Those admitted would have higher standardized test scores and GPAs. In other words, public colleges and universities would become more competitive, at least in the program’s early years. SAT scores are correlated with income, and black and Hispanic GPAs lag behind Asian and white students. With fixed classroom and dorm space, low-income and minority students would find it more difficult to get accepted into college if it were free. A classic example of the detrimental effect of price control is rent-controlled housing. Local governments set rents below the market price intending to help low-income residents. Demand for those apartments’ skyrockets, exceeding available units and creating long waitlists. Landlords have little incentive to spend money maintaining buildings because of an abundance of prospective tenants eager to replace unsatisfied exiting renters. In other words, apartment quality falls. Biden, Warren, and Sanders’ proposals ignore the predictable behavioral response to the offer of free college and will ultimately make the poorly designed higher education financing system even worse. Free college is also a price control example, but it’s even more extreme than rent control because the price isn’t just low-it’s zero. The surplus of college applicants would eliminate the need to attract more students through increasing or maintaining academic quality, potentially leading to worse educational outcomes. Long-term implications are less certain. If public college and university capacity fails to keep up with demand, these problems will continue. Alternatively, lawmakers such as Sen. Sanders who believe that higher education is a right would pursue expanding capacity to accommodate the growing number of applicants, and relaxing admission requirements to prevent students from being denied their right to higher education. This could lead to public higher education mirroring the state of America’s K-12 public schools. They too are “free” and have not typically needed to compete for students. Sadly, while there are some very good public schools, many Americans are unhappy with free public school. Millions of children’s families pay for private schools, nearly 3 million students enroll in charter schools, and almost 500,000 children take advantage of other school choice options-tax scholarships, education savings accounts, or vouchers. Biden, Warren, and Sanders’ proposals ignore the predictable behavioral response to the offer of free college and will ultimately make the poorly designed higher education financing system even worse. If anything, the federal government should reduce its role while encouraging state and local governments and the private sector to explore policies and solutions. Russell Rhine is a policy analyst at the Cato Institute.
  • Can China, the United States, Japan, and South Korea Agree on Policy toward North Korea?    (Ted Galen Carpenter, 2019-07-30)
    Ted Galen Carpenter President Trump’s continuing willingness to meet with Kim Jong-un reflects both a major shift in U.S. policy and the importance of China’s constructive influence.  Beijing has pushed Washington for years to open a bilateral dialogue with Pyongyang. Previous U.S. administrations spurned or deflected China’s advice. The closest Washington came to adopting that course was as a participant in the Six-Party Talks that Beijing hosted and chaired beginning in 2003. There were reports of informal bilateral discussions on the sidelines, but the Bush and Obama administrations steadfastly refused to hold formal two-party negotiations with the North Korean government. The Six-Party Talks gradually became moribund, since the United States was the only country that could grant most of the meaningful benefits Pyongyang sought, especially a complete lifting of economic sanctions and Washington’s formal diplomatic recognition of the DPRK. The prevailing U.S. attitude was that the onset of bilateral negotiations would be a prestigious diplomatic coup for Pyongyang - especially if the United States agreed to a summit meeting. U.S. officials were firm that Washington would not participate in bilateral talks - much less a summit - unless Pyongyang first made major moves toward shuttering and gradually eliminating its nuclear program. The prevailing U.S. attitude was that the onset of bilateral negotiations would be a prestigious diplomatic coup for Pyongyang - especially if the United States agreed to a summit meeting. China continued making efforts to facilitate a breakthrough on bilateral talks. With the election of President Moon Jae-in, the Republic of Korea (ROK) pursued a similar strategy as part of its own conciliatory policy toward Pyongyang. Under President Donald Trump, however, the United States adopted an alarmingly confrontational approach. Washington lobbied for harsher economic sanctions against the DPRK and prodded its allies (and China) to tighten enforcement efforts. The United States deployed more air and naval forces to Northeast Asia, and Trump’s own rhetoric turned nasty, punctuated by his scornful public reference to Kim as “Little Rocket Man” in November 2017. Tensions on the Peninsula had reached their worst level in decades. Japan and the ROK officially supported their American ally, but only Japan seemed truly on board with Washington’s hardline approach. Then, in early 2018, Trump changed course dramatically.  For the first time, not only did the United States agree to bilateral negotiations with Pyongyang, but Trump did so at the highest level, holding a summit meeting with Kim in Singapore in June 2018. Both China and South Korea expressed strong approval of that course change. Japan’s reaction, while supportive, was noticeably more subdued. As the second Trump-Kim summit in Hanoi approached in February, 2019, Prime Minister Shinzo Abe’s government exhibited distinct signs of uneasiness that it was being bypassed and that Japan’s security interests might be sacrificed. When U.S.-North Korean tensions rebounded modestly following the collapse of the Hanoi summit, both Moon and Chinese President Xi Jinping labored to salvage the embryonic dialogue between Washington and Pyongyang.  Xi took the highly significant step to visit Pyongyang and hold a face-to-face meeting with Kim. It was the first trip by a Chinese president to North Korea in more than 14 years. Much of the substance of their talk has not been made public, but it seemed more than a coincidence that just days later President Trump made his supposedly spontaneous comment that, during his forthcoming summit trip to the ROK, he might be willing to meet Kim at the Demilitarized Zone (DMZ) to say hello and shake hands. That move, of course, set the stage for the celebrated “photo-op” summit at the DMZ and Trump’s symbolically important 20-step stroll into North Korea. Whether the process of bilateral conciliation continues as Seoul and Beijing favor remains uncertain. Not only has Prime Minister Abe been noticeably subdued about the warm personal relationship between Kim and Trump, he notices the U.S. president’s criticism of the venerable U.S.-Japan alliance. Although Trump offered reassurances about the defense commitment, Japan’s security establishment appears less than thrilled about Washington’s budding rapprochement with Pyongyang. The ROK’s rapprochement with North Korea also is generating friction between Seoul and Tokyo. Recently, Abe implied that Moon’s government was not diligently enforcing sanctions against Pyongyang, an allegation that the ROK heatedly denied. Japanese officials, along with hawks in the United States, seem especially disturbed about press reports that the Trump administration might now accept merely a freeze of the DPRK’s nuclear program rather than continuing the traditional U.S. demand that North Korea accept a “complete, verifiable, and irreversible” end to its nuclear efforts. It is just one aspect of Trump’s North Korea policy that has deeply divided the American political and foreign policy communities.  Some of the president’s more outspoken critics object to him even meeting with Kim, contending that such a prestigious encounter “gives legitimacy” to North Korea’s brutal, repressive regime. Others insist that while meeting with Kim might be acceptable, Trump should have demanded that Pyongyang take tangible steps toward complete denuclearization before agreeing to future sessions.  Even some administration officials, most notably National Security Adviser John Bolton, appear to hold similar views. Therefore, the U.S. rapprochement with the DPRK is quite fragile, as is the parallel effort on the part of President Moon. China consistently has been supportive of the U.S. and South Korean initiatives to improve relations with Pyongyang. But Japan’s position is more ambivalent, and hawks (along with opportunistic, partisan opponents of President Trump) in the United States seem eager to derail the process. And ultimately it is not certain if Trump himself is sufficiently committed to detente with North Korea to persist in overcoming the numerous obstacles. The opportunity exists to transform the security environment on the Korean Peninsula to the benefit of people throughout East Asia, and it would be a tragedy for all concerned if the budding rapprochement fails.
  • Congress Tackles the "100-Mile" Border Zone for Federal Checkpoints    (Patrick G. Eddington, 2019-07-30)
    Patrick G. Eddington The migrant crisis along America’s southwest border has, with good reason, received a lot of attention this year, including the Trump administration’s use of what have been appropriately described as concentration camps for those fleeing violence and poverty in the lands of their birth. But another long-festering issue affecting the entire U.S. border on the north, south, east, and west is finally getting congressional attention: the so-called “100-mile border zone” that has existed under regulation for more than 50 years. A still controversial 1976 Supreme Court decision, U.S. v Martinez-Fuerte, essentially validated the federal law enforcement practice of stopping and questioning motorists in a broadly defined “border zone” about their citizenship status—a decision I have sharply criticized. The Border Zone Reasonableness Restoration Act of 2019 (S. 2180, offered by Senator Patrick Leahy (D-VT), and H.R. 3853, offered by Rep. Peter Welch (D-VT)) would reduce the “border zone” from 100 miles to 25 miles into the United States from the physical border, within which the Department of Homeland Security (DHS) may make vehicle stops and searches, and from 25 miles to 10 miles for DHS access to private property. Thus far in the Senate, only Leahy’s Democratic colleague Patty Murray of Washington state has signed onto the bill. Welch’s House version is also a Democrats-only affair to date, with Reps. Chellie Pingree (D-ME), Ann Kirkpatrick (D-AZ), James P. McGovern (D-MA), Pramila Jayapal (D-WA), and Ann M. Kuster (D-NH) having signed on. As I’ve noted previously, the DHS Customs and Border Patrol (CBP) internal checkpoints these bills are designed to limit have led to frequent confrontations with local residents in southwestern border states, as well as litigation over Fourth Amendment rights violations. Indeed, earlier this month the issue of commercial bus lines allowing CBP to stop and search their buses and passengers resurfaced as another flashpoint in the ongoing controversy over “border zone” immigration enforcement operations. If enacted, would the Leahy-Welch bill at least reduce the number of people encompassed by the “border zone”? Not significantly, which speaks to one of the larger problems with the bill. A CityLab analysis of “border zone” population density conducted last year illustrates the point. Reducing the zone from 100 to 25 miles would still leave nearly all of the major cities well inside the “border zone”—Chicago, New York, Washington, Norfolk, Charleston, Miami, Houston, San Diego, Los Angeles, San Francisco, and Seattle. And even the Leahy-Leach 10-mile limit for access to private property would have the same effect. The bill also contains a disturbing provision allowing the Secretary of Homeland Security to expand the zone from 25 to 100 miles for up to five years via certifications to Congress of the need to do so. However, the bill does establish a private right of action to challenge in court such certifications by persons “with an interest that is, or may be, adversely affected by the maximum distance limitations established” by such a certification. Granted, even if Leahy and Welch had limited the zone to just one mile from the border, the area would still encompass millions in the very cities cited above. But such a tight geographic restriction would have the positive effect of reducing the zone to the point that far fewer persons in the areas at the epicenter of America’s “immigration war” (i.e., the southwestern border states) would have to deal with fixed or mobile CBP checkpoints on a daily basis. The larger problem underlying the Leahy-Welch approach is the idea of permitting any geographic zone to exist—in statute—that allows fundamental constitutional rights to be suspended in the name of border security. Given GOP control of the Senate and the more immediate (and proper) focus on ending the Trump concentration camp system targeting migrants, it’s highly unlikely that the Leahy-Welch bill will move during this Congress. I do worry, however, about the precedent being set by the mere introduction of a bill that would, if enacted, create a statutorily-sanctioned slice of America where you can be stopped, asked to prove your citizenship, and possibly be detained or even assaulted and held by federal agents for refusing to answer their questions. To that end, let me offer some workable alternatives to the current Leahy-Welch approach. The first principle should be the dismantlement of fixed or semi-permanent checkpoints more than one mile from the international border. Doing so would free up CBP agents currently manning checkpoints for redeployment to the border itself, where they would be far more likely to actually catch illegal border crossers. Eliminating checkpoints more than a mile from the border also would de-escalate confrontations with local residents opposed to such checkpoints, as has occurred in places like Aravaca, Arizona for years. Second, CBP should be required to document stops at immigration checkpoints that last longer than 10 minutes. As revealed in CBP internal documents I obtained via a Freedom of Information Act lawsuit (which is ongoing), CBP acknowledges, “Just the fact that someone is refusing to answer questions or is being otherwise passively noncompliant, absent exigent circumstances, does not equate to a violation of law.” In most situations, those who CBP deems “noncompliant” are American citizens asserting their constitutional rights at a checkpoint. Rather than escalating the situation, CBP should simply wave those motorists through. If they elect not to and demand the motorist submit to “secondary” screening, they should be forced to document the alleged probable cause justifying the detention, as the Martinez-Fuertecourt ruled. In the last Congress, Senator Kirsten Gillibrand (D-NY) introduced the DATA Act, which would require documentation for stops that exceed “a brief and limited inquiry.” Having that kind of requirement hanging over their head would likely make most CBP agents think twice about stopping someone being “noncompliant” absent a truly valid reason. Leahy and Welch are smart, experienced legislators. I appreciate that they’re trying to tackle this very serious problem, which has been neglected by Congress for decades. I commend them for it. I just hope that they’ll consider revising their approach. A call to Senator Gillibrand would be a good first step. Patrick Eddington is a research fellow at the Cato Institute, a former CIA analyst, and an ex-House senior staffer.
  • The Ominous Ally Quarrel That's Giving Washington a Headache    (Ted Galen Carpenter, 2019-07-29)
    Ted Galen Carpenter One of the problems a great power faces is how to handle situations where two or more allies quarrel and adopt antagonistic policies towards each other. The United States faces that challenge now, as Japan and the Republic of Korea (ROK) engage in escalating disputes involving both economic and security issues. Their spats could scarcely come at a worse time. President Trump is pursuing a delicate policy of rapprochement with North Korean leader Kim Jong-un. For that initiative to have even a reasonable chance of success, both Tokyo and Seoul need to be supportive and not undermine Washington’s approach. This is hardly the first time that an American leader has dealt with headaches caused by allies or security dependents that seem to loathe each other. Since Turkey and Greece joined NATO in 1952, they have frequently pursued conflicting foreign policy goals—most notably with respect to the Bosnia and Kosovo conflicts in the 1990s. Worse, they have nearly come to blows on several occasions. The worst incident occurred in 1974 when the military junta ruling Greece helped unseat the moderate president of neighboring, majority-Greek Cyprus in a bid to orchestrate a merger of the two countries. Turkey responded by invading Cyprus on the pretext of protecting the Turkish ethnic minority there, and proceeded to occupy nearly 40 percent of the island, expelling the Greek inhabitants. Washington was barely able to prevent a war. Even before the Cyprus incident, Turkey had made a habit of sending its warplanes into Greek airspace, stoking tensions. These antagonisms continue even now: there were some 36 violations on a single day in December 2018. A desire to preserve their security ties with the United States against a larger, more powerful potential aggressor was the major factor that inhibited Greece and Turkey from letting their own rivalry spiral out of control. A similar situation exists with Japan and the ROK. During the Cold War, worries about North Korea, China, and the Soviet Union compelled a degree of unity as Washington put both countries behind the U.S. security shield. In the post-Cold War years, concerns over Pyongyang’s volatile behavior muted the animosity between Japan and South Korea. Nevertheless, there is no love lost between these two countries. Many Koreans have never forgiven Japan for the abuses Tokyo committed between 1910 and 1945 as Korea’s colonial master. Forcing young Korean women into sexual servitude to the Japanese military was only the most egregious of the offenses, and Tokyo’s reluctance to apologize for that outrage and compensate the victims has exacerbated the resentment among South Koreans. Other quarrels flare up from time to time. One is the simmering territorial disputeover a cluster of small islands that the Japanese call Takeshima and the Koreans call Dokdo. Although the tangible stakes are minimal, the symbolism has resulted in dangerous posturing (including military maneuvers) by both sides on several occasions. The latest petty display erupted when Seoul circulated a map for the upcoming 2020 Olympics showing the islands as part of the ROK. Japanese officials responded with shrill protests. As both Japan and the ROK emerged as major players in the global economy, bilateral economic spats became more frequent. Indeed, the current surge of quarrels began primarily in the economic arena. In recent weeks, trade tensions have become especially acute, with Japan moving to eliminate South Korea from the list of countries enjoying minimum restrictions. Seoul has taken that dispute to the World Trade Organization, where the ROK position was greeted with a lack of enthusiasm bordering on indifference. Such quarrels and their potential for poisoning relations between two allies undoubtedly concern U.S. officials. But the growing gap between the Japanese and Korean positions regarding North Korea may prove to be a more serious worry. With the election of President Moon Jae-in, the ROK has pursued a highly conciliatory policy toward Pyongyang. Indeed, Seoul has prodded the Trump administration to back away from its initial confrontational approach to North Korea. Moon has helped facilitate Trump’s summit meetings with Kim and avidly cheered the easing of tensions. Japan’s reaction, while officially supportive of Trump’s diplomacy, has been noticeably more subdued. As the second Trump-Kim summit in Hanoi approached in February 2019, Prime Minister Shinzo Abe’s government exhibited distinct signs of uneasiness that it was being bypassed and that important Japanese security interests might be sacrificed. Japan’s military and diplomatic establishments appear less than thrilled about Washington’s budding rapprochement with Pyongyang. The ROK’s own warming relationship with North Korea is generating noticeable frictions between Seoul and Tokyo. Recently, Abe implied that Moon’s government was not enforcing sanctions against Pyongyang, which drew an angry reaction. Managing the contentious relationship between Japan and South Korea may prove even more difficult for the United States than dealing with the habitual tensions between Greece and Turkey. Athens and Ankara are at least both members of NATO and have treaty obligations to each other. Japan and South Korea are linked to the United States through separate mutual defense treaties, but there are no official multilateral defense ties. Japanese-ROK security initiatives have remained tentative and tepid. Indeed, Washington’s repeated efforts to promote robust, official security cooperation have been met with a lack of enthusiasm. All this means the Trump administration will go into the next phase of its dealings with Pyongyang with considerable uncertainty about the unity and common purpose of its two key East Asian allies. In an increasingly dangerous world, that’s a worrying prospect. Ted Galen Carpenter, a senior fellow in security studies at the Cato Institute and a contributing editor at The American Conservative, is the author of 12 books and more than 800 articles on international affairs.
  • Congress Should Bring 'New Starts' to an End    (Randal O'Toole, 2019-07-29)
    Randal O'Toole In 1991, Congress created the “New Starts” program to help fund the construction of new transit infrastructure. Unfortunately, New Starts has done more harm to our cities than any federal program since the urban renewal projects of the 1950s. On July 16, the Subcommittee on Highways and Transit of the House Transportation & Infrastructure Committee held a hearing on New Starts, which will expire in 2020 unless it is reauthorized. Transit agencies attending the hearing told the subcommittee that New Starts has helped them build high-capacity transit projects that have generated economic development, provided mobility for low-income people, and helped protect the environment. None of this is true. New Starts is an “open bucket” fund that requires local matching funds, and the more expensive the project, the more money is provided by New Starts. This has led cities to plan increasingly expensive projects to get “their share” of federal funds. For example, the average, inflation-adjusted cost of new light-rail lines has increased from $17 million a mile in 1981 to more than $200 million a mile today. To provide local matching funds, transit agencies have imposed large increases in taxes and gone heavily into debt. Worse, light rail is an obsolete form of transportation because buses are not only less expensive to buy and less expensive to operate than light rail, they can move far more people per hour. In fact, light rail is by definition low-capacity transit because, for safety reasons, light-rail lines can only move about 20 trains per hour. By comparison, busways can move hundreds of buses per hour, enabling them to move more than twice as many people per hour as the highest capacity of any light-rail line in America. Because of this, a recent report from the Institute for Transportation & and Development Policy concluded, “there are currently no cases in the US where LRT [light-rail transit] should be favored over BRT [bus-rapid transit].” Streetcars, as illustrated by Washington’s H Street streetcar, are even worse than light rail and commuter trains are no better. Most new commuter-rail lines carry so few riders that it would have been less expensive to give every daily round-trip rider a new Toyota Prius every other year for the life of the project than to build and run the rail line. Contrary to claims that rail transit generates economic development, research funded by the Federal Transit Administration concluded, “Urban rail transit investments rarely ‘create’ new growth, but more typically redistribute growth that would have taken place without the investment.” This hasn’t stopped transit agencies from claiming that everything that happened to be built near a rail line was built because of the rail line. Phoenix’s Valley Metro Rail claims that its light-rail line stimulated more than $11 billion worth of new development, but its list of developments includes gas stations, an automobile dealership, and more than 70,000 parking spaces, not to mention many government and government-subsidized buildings. Far from helping the poor, rail transit often hurts low-income commuters. Rail lines built to entice middle-class commuters out of their cars have been so expensive that many transit agencies have been forced to cut bus service to working class neighborhoods. Los Angeles has lost more than 4 bus riders (mostly minorities) for every new rail rider (most of them white) it has attracted by building light rail. As a result, most low-income families have bought cars and no longer rely on transit. Data collected by the Census Bureau show that people who earn under $25,000 a year are significantly less likely to take transit to work today than they were a decade ago, while people who earn more than $75,000 a year are significantly more likely to ride transit to work. Nor is rail transit particularly green. Except on the West Coast, even electric powered transit gets most of its energy from fossil fuels. The Washington Metrorail system uses more energy and emits more greenhouse gases, per passenger mile, than the average car, while the DC streetcar is dirtier than the worst coal-rolling truck. Even on the West Coast, encouraging people to drive more fuel-efficient cars does far more to help the environment than building rail transit. For all these reasons, Congress should not reauthorize New Starts in 2020. If Congress wants to continue subsidizing transit agencies, it should distribute the money using a formula that takes transit fares heavily into account. This will encourage transit agencies to put riders first and to emphasize programs that increase ridership rather than ones that increase costs. Randal O’Toole is a senior fellow with the Cato Institute and author of Romance of the Rails: Why the Passenger Trains We Love Are Not the Transportation We Need.
  • A US-China Trade Deal Needs Some Balance and Cooperation with US Allies    (Inu Manak, Huan Zhu, 2019-07-29)
    Inu Manak and Huan Zhu Tariffs have been the trade policy tool of choice for the Trump administration as a strategy to gain concessions in trade talks, imposed on allies and rivals alike. The Trump administration has used tariffs on steel and aluminum under the Section 232 statute, as well as tariff threats on autos and auto parts, as leverage in trade negotiations with Korea, Canada, and Mexico, as well as the European Union. Tariffs are weak pressure point Most recently, the administration has used tariffs to put pressure on China, but negotiations have sputtered, and no deal has yet been reached. While the United States has valid concerns regarding China’s trade practices, the approach taken so far in addressing them may not yield the best results. If President Trump truly wants to close this deal, he should reconsider using punitive tariffs as a negotiating tactic, and instead take a more balanced approach, working with US allies. Doing so could lead to a long-term and politically viable deal that the Chinese leadership could accept. While the Trump administration may have had limited success pressuring Korea, Canada, and Mexico with tariffs, it is unclear how many concessions the strategy actually delivered. Regardless: China presents a more difficult negotiating challenge. It is a much larger economy than that of Korea and Canada - and will therefore be better able to cope with the impact of tariffs. Its domestic politics presents a unique challenge. It cannot make concessions in the name of preserving a military alliance. China is currently in the midst of an internal debate between economic reformers, on the one hand, and those who support the status quo and may view the United States as a rival, on the other. While the reformers may want to push for more significant internal economic changes, they also are conscious of appearing too accommodating to US requests, which could hurt them in their overall reform efforts. Supporters of the Trump administration’s trade policies insist that tariffs are an effective tool. Though the Trump administration has been able to get China to the negotiating table, it is not clear that the Section 301 tariffs will be enough to secure an agreement. Stalemate Recent talks have reached a stalemate, with the United States accusing China of “reneging,” by walking back from its previous concessions. Chinese officials, on the other hand, criticized the deal as being unbalanced, and said the United States’ insistence on changes to domestic Chinese law as part of the agreement goes too far. While there are likely significant gaps in consensus over substantive issues, there are also differences in negotiating styles. One Chinese official recently said that “all countries have their own dignity and the text of the agreement must be balanced and acceptable”. The Chinese Minister of Foreign Affairs called for a negotiation based on an equal footing. In contrast, President Trump recently made clear that a deal cannot be “50-50.” It is true that there are real problems with China’s trade behavior, which were extensively outlined in the United States Trade Representative’s Section 301 Report. It therefore would not be appropriate to simply split the difference between the two sides. So how should the Trump administration navigate negotiations? Winning over allies If it really wants a deal, there are two things the United States can do. First, it should work with its closest trading partners to address shared concerns on China’s trade practices. One way to do this is through current trilateral discussions with Japan and the European Union, who are trying to address non market-oriented practices of third countries, among other things. In a recent meeting of the three trade ministers, they agreed to continue work on finalizing a text “with the aim of initiating negotiations on stronger disciplines on industrial subsidies and state-owned enterprises.” However, it is not yet clear if the parties can come to agreement on working definitions on these issues so that they narrowly address concerns with China without impacting policies in the European Union and the United States as well. Talks are ongoing, so there is still time to bridge these gaps. In addition to improving disciplines in these areas, the European Union and other allies can work with the United States to bring new complaints against to the World Trade Organization, which would take pressure off of bilateral talks. The Trump administration has argued that the WTO cannot help with China’s protectionism and other trade practices. However, a study of WTO complaints against China shows that China does reasonably well in complying with WTO dispute settlement rulings against it. Existing WTO obligations will not solve all the trade concerns with China, but they can help more than people think. While the European Union and Japan should continue to engage with the United States and encourage a multilateral approach, the United States also needs to be mindful of actions that could alienate its allies. If the United States wants to win broad support for tackling concerns with China, it should remove threats of tariffs on autos and lift the remaining tariffs on steel and aluminum, without replacing them with quotas. This would be an important signal to US allies that we are working towards the same goals and are on the same side. Drop zero-sum approach Second, the United States should move away from the idea of a zero-sum result where China caves on everything, and instead create a pathway for a soft landing by making serious offers on issues that China really cares about. To start, the Trump administration should offer to remove all tariffs upon reaching an agreement, something that the administration has resisted so far. By offering to lift all tariffs, the United States can show that it is negotiating in good faith and make it easier for the Chinese negotiators to agree to significant concessions while also being able to sell the deal at home. If the United States is concerned about China not following through on its promises, it can include language in the deal to reenact tariffs if China reneges on its new commitments. In addition, the United States should provide a clear pathway for the two sides to stabilise bilateral trade relations more generally. For instance, the United States could consider clarifying its broad definition of national security and “emerging and foundational technologies” in relation to its export control regime. Furthermore, the Trump administration could offer to change the way it calculates anti-dumping tariffs on Chinese goods, by taking China off the list of countries who are given particularly unfavorable treatment, contingent on getting specific concessions from China in exchange. This would be a very big change for the United States, but if it could generate acceptance of even bigger changes by China, it might be worth it. Ultimately, however, if the United States is prepared to make substantive offers, it should do so through a comprehensive trade agreement with China, and not a temporary political agreement. The United States should also find a way to ‘multilateralise’ the concessions China agrees to. By offering a more balanced deal as part of these negotiations, the United States can distance itself from the image of bullying China into concessions, and in doing so give China the political space it needs to make difficult reforms. Inu Manak is a Visiting Scholar at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies. Huan Zhu is a Research Associate at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.
  • The Ever-Political IMF Meddlers Give Boris Johnson Unsolicited Advice    (Steve H. Hanke, 2019-07-26)
    Steve H. Hanke No sooner than Boris Johnson put his foot over the threshold of 10 Downing Street, the International Monetary Fund (IMF) offered its unsolicited advice to the newly elected Tory Prime Minister. Johnson won the right to replace the hapless Theresa May by pledging to remove Britain from the EU by October 31, 2019, “deal or no deal.” Enter the IMF. In a preemptive strike, the Philosopher Kings threw cold water on the idea of a no deal, asserting that it would be a disaster. Talk about entering a domestic quarrel without an invitation. But, such meddling is nothing new for the IMF. Indeed, a bipartisan Congressional commission (The International Financial Advisory Commission, known as the Meltzer Commission) concluded in 2000 that the IMF interferes too much in the domestic politics of member countries. Just recall the IMF’s involvement in toppling Indonesian President Suharto in 1998. This scandalous episode was confirmed by no less than former U.S. Secretary of State Lawrence Eagleburger. I would add that the IMF propensity to interfere has become much more pronounced since the days of the last great Managing Director of the IMF Jacques de Larosière (1978-1987). The IMF, which was born in 1944, was designed to provide short-term assistance on the cheap to countries whose currencies were pegged to the U.S. dollar via the Bretton Woods Agreement. When these countries found themselves running short of foreign exchange (read: U.S. dollars), they could obtain balance-of-payments assistance from the IMF. This was the IMF’s rather straightforward original, narrow remit. But, in 1971, when President Richard Nixon closed the gold window, the Bretton Woods exchange-rate system collapsed. And, with that, the IMF’s original purpose was swept into the dustbin. However, since then, the IMF has used every rationale under the sun to reinvent itself and expand its scope and scale. Unlike old soldiers, the IMF has not faded away. It has grown even larger and even more powerful. And, in the process of acquiring more power, it has become more political. First, there were the oil crises of the 1970s. They allowed the IMF to rapidly reinvent itself. Those shocks, it was asserted, “required” more IMF lending to facilitate, yes, balance-of-payments adjustments. And more lending there was: in real (read: inflation adjusted) terms IMF lending more than doubled from 1970 to 1975, and increased by 58% from 1975 to 1982. With the election of Ronald Reagan in 1980, it appeared that the IMF’s crisis-driven opportunism would finally be reined in. Yet, with the onset of the Mexican debt crisis, the political elites asserted that more IMF lending was required “to prevent financial contagion, more widespread debt crises, and bank failures.” Surprisingly, that rationale was used by none other than President Reagan, who personally lobbied 400 out of 435 congressmen to obtain approval for a U.S. quota (capital contribution) increase for the IMF. IMF lending ratcheted up again, increasing by a stunning 27% in real terms during Reagan’s first four years in office. And then came the 1990s, a decade of explosive growth for the IMF. The collapse of Communism provided an opportunity that was too good to be true. Currency crises in Mexico, Russia, Turkey, Brazil, Argentina, and Asia added fuel to the fire that allowed the firefighters at the IMF to expand their balance sheet and create even more jobs for the boys. And as they say, the show just goes on and on, with the IMF playing the role of a hydra. While the IMF’s ability to survive near-death experiences and thrive would not have surprised the British historian C. Northcote Parkinson, author of the 1957 classic Parkinson’s Law, it is quite remarkable in light of the IMF’s performance. As Harvard University’s Robert Barro put it, the IMF reminds him of Ray Bradbury’s Fahrenheit 451 “in which the fire department’s mission is to start fires.” Barro’s basis for that conclusion is his own extensive research.  His damning evidence finds that: ·     A higher IMF loan participation rate reduces economic growth. ·     IMF lending lowers investment. ·     A greater involvement in IMF programs lowers the level of the rule of law and democracy. And if that’s not bad enough, countries that participate in IMF programs tend to be recidivists. In short, IMF programs don’t provide cures, but create addicts. For a clear picture of the addiction problem (read: recidivism), review the chart below. It lists the number of IMF programs that 146 countries have participated in. Haiti leads the pack with 27 programs. Since Haiti joined the IMF in 1953, it has averaged about 2.4 years between new IMF programs. Argentina is another heavy hitter. It joined the IMF in 1956 and is now hooked on its 22nd IMF program. That’s a new program every 2.8 years on average. More broadly, the list of countries with the ten highest number of loan programs includes 27 countries. These countries account for 42% of the total number of IMF loan packages, indicating recidivism. Moreover, these repeat offenders gobble up a disproportionate amount of the IMF below-market rate loans, accounting for 60% of the total. The IMF should have been mothballed and put in a museum long ago. After all, its original function was buried in 1971, and its performance in its new endeavors has been less than stellar. But, a museum for the IMF is not in the cards. Even reform is hard to imagine. Indeed, all attempts to reform and downsize the IMF have ended up expanding its scope and scale. Just look at what has been accomplished since the blue-ribbon Meltzer Commission. About all we can do is realize that the IMF is a political hydra with an agenda to serve the wishes of the political elites who allow it to grow new heads. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
  • History Is an Ugly Business    (Doug Bandow, 2019-07-26)
    Doug Bandow The San Francisco School Board recently confronted perhaps the greatest crisis in the city’s history. Forget fire, earthquake, fear of Japanese attack, and murder of the mayor by a disgruntled ex-city councilman. Washington High School sports an extensive mural of the first president’s life. By a radical Russian-born artist, Victor Arnautoff, the depiction includes Washington as slaveholder and Indian-killer. Earlier this year, a “Reflection and Action Group,” presumably a Bay Area staple, denounced Arnautoff for glorifying “slavery, genocide, colonization, manifest destiny, [and] white supremacy.” The Russian Community Council of the United States then weighed in on his behalf. The educrats consulted, emoted, and finally decided. They will spend $600,000 to paint over the murals — a project that will require an environmental impact statement. (The other alternative was to panel over the existing images.) The result distressed New York Times columnist Bari Weiss, who called the implications “chilling.” But this is merely the latest iteration of a growing battle over history. Although the height of the frenzy over Confederate memories is over, this struggle is likely to go on for years. In some southern states Confederate flags fly over government buildings, appear on state license plates, are embedded in state seals, or are otherwise officially displayed. Confederate images are included in seven state flags. After the horrid Charleston, South Carolina, church shooting four years ago, South Carolina lowered the secessionist republic’s symbol, which had flown over the State House. Redrawing state flags has proved to be a more challenging process, however. The fact that the ancients and merely old typically do not conform to our standards of morality and decency does not mean that they should be discarded. Many statues commemorate individuals who served the Confederate cause. The memorials have been vandalized, covered, and moved. Others remain, desecrated by some and venerated by others. Isolated statues on private property pose the least challenge. Dramatic poses in public spaces are the most emotionally charged, such as the Robert E. Lee monument in Charlottesville, Virginia. Some statues have become part of the landscape, defining an area or even a city. Richmond’s Monument Avenue may be the most dramatic vista of Confederate statuary around. Taking down “Marse Robert” and his compatriots would transform the look and feel of what was once the Confederacy’s capital, a reality that cannot be wished away. Different, but even more dramatic, is Georgia’s Stone Mountain, a state park with massive carvings of Lee, Thomas “Stonewall” Jackson, and Jefferson Davis. Names are slightly less controversial. The South is filled with roads, schools, and other sites named after Lee, Jackson, Davis, and others. For northern Virginia, where I live, such labels are deeply embedded. Changing names might create emotional pain, but normally is not overly costly. A Texas school named after Lee just dropped the Robert E., creating a generic nickname to reduce the rebranding expense. A Tulsa, Oklahoma, school did the same but was pushed to do more, so it made a second switch to Council Oak, on the theory that no one could criticize a historic local tree. Oklahoma City substituted Adelaide for Robert E. at one school, also cutting the expense while honoring a worthy but not particularly famous local philanthropist. The case against Lee and other Confederates is that they fought for slavery and were racists and traitors. Whatever their personal virtues — if, according to the reigning zeitgeist, any are imaginable — no sensitive, modern-minded person could want to honor them. While Confederates have borne the brunt of the recent historical assault, they are not alone. Baltimore had a statue controversy over one of its more famous — or, these days, infamous — citizens, Roger B. Taney. His reputation was sealed with his awful opinion as Supreme Court Chief Justice in the Dred Scott case. Then there is President Andrew Jackson, scheduled to be displaced from the $20 bill. He was a slaveholder and oppressor of Indians. On top of that, he was a nasty dude known to hold a grudge. Moreover, as the San Francisco mural case demonstrates, America’s Founders are not immune from the historical assault. Charlottesville announced that it would no longer celebrate slaveowner Thomas Jefferson’s birthday, April 13. Instead, the city is changing the holiday to March 3 and renaming it Liberation and Freedom Day to celebrate the day northern forces arrived in 1865 as the Civil War neared its end. Of course, that is a notably modern interpretation of the event, not felt by the majority of residents at the time. The early American leaders were a bunch of white men, most of them enmeshed in their slave-holding society as beneficiaries or enablers if not owners themselves. The colonists’ treatment of Native Americans often looked genocidal. Women had only a minimal public role — they could not vote, of course — and limited employment opportunities. The Framers eloquently spoke on behalf of liberties denied to many. Why should any of them, except perhaps the relatively pure John Adams and Alexander Hamilton, be honored? We should end the history wars. The importance of learning the past should be obvious. The fact that the ancients and merely old typically do not conform to our standards of morality and decency does not mean that they should be discarded. If it is true that the San Francisco mural “traumatizes students,” as claimed by some, then the kids desperately need to view it. If George Washington’s career renders students sleepless, then how would they view the behavior of most of the leaders of other countries at the time? And what would they think of much of the 20th century, when the world was supposed to have entered a more advanced progressive age? While we can all appreciate the sanitized national myths that today shape people’s understanding of America, we should know the truth. Only then will we be equipped to learn appropriate lessons and do better in the future. Events and people usually are more complex than the storybook versions most people learn. Consider the Confederacy. Secession was about slavery — for the seven deep-South states that originally left. But the four outer Southern states remained until President Abraham Lincoln called for troops to invade the South. In effect, the Confederate latecomers fought over the issue of coercion — put bluntly, the national government’s plan to kill people who wanted to leave the political union. Moreover, most Northerners saw themselves as fighting against secession, not for abolition. Indeed, had the war ended as Lincoln desired, with a quick victory or two, slavery would have survived — contained, no longer allowed in new territories, but retaining millions of people in bondage. Personalities are also complex. Even most Unionists were not determined abolitionists who believed in human equality; support for white supremacy was very broad. There were reluctant secessionists and enthusiastic unionists whose racial views diverged little from those of more ardent Confederates. Consider Marylanders, who were divided more by the issue of slavery than racism. The newly elected speaker of the Maryland legislature has proposed removing a plaque placed by the Maryland Civil War Centennial Commission that was intended as “evidence for remembrance of the nearly 63,000 native sons who served in the Union forces and the more than 22,000 in those of the Confederacy in the War Between the States,” all of whom “tried to do their duty as they saw it.” This is very un-PC today, but in fact Maryland was a slave state, no fount of support for freeing slaves. Lincoln helped hold the state in the union through mass arrests of secessionists. John Merryman, the subject of a famous case involving Abraham Lincoln’s illegal suspension of habeas corpus, was from Maryland. Many anti-slavery politicians, such as Pennsylvania’s Rep. David Wilmot, author of the celebrated “Wilmot Proviso” barring slavery from territories acquired after the Mexican-American War, wanted to constrain the institution’s reach in order to keep new lands free for white laborers. There were “free” states, including Lincoln’s Illinois that did not welcome free African Americans: Illinois passed highly restrictive “Black Laws” or “Black Codes.” Plenty of northern military officers viewed African Americans as an unpleasant problem. Much like the Emancipation Proclamation, the Union military’s policies were hostile to slavery to the degree that slavery enabled the South to fight. Some critics have singled out Montgomery Blair, a prominent Maryland Unionist after whom schools have been named. He served in Lincoln’s cabinet but was unfriendly to African American leaders and opposed the Emancipation Proclamation. Even Lincoln, who detested slavery, nevertheless made clear that his emphasis was not liberation of slaves but preservation of the Union, which he would choose even if that required the institution’s survival. This complicated reality should remind us of the danger in judging people of their times by modern standards. To be sure, a heroic few stood against an immoral zeitgeist. John Quincy Adams, when serving in the House of Representatives after being defeated for the presidency, made himself into a virtual pariah battling slavery. And William Lloyd Garrison used his newspaper The Liberator to torment almost anyone who did not join his crusade against the evil “peculiar institution.” Nevertheless, how many whites in 1860 were able to break free of their times and see slavery for the moral horror that it was? One may feel dismay that otherwise admirable figures — Lee or Jackson, or, more controversially, Davis (he honorably served the U.S. as military officer, secretary of war, and U.S. Senator) — could not understand what we now see clearly. But should one demonize them for doing so? Especially since so many of their Northern countrymen held similar views? And does one judge a single opinion or an entire career? Two years ago, Annapolis took down the Taney statue, which had been erected in 1887. Today he is derided as author of the infamous Dred Scott decision. That case will inevitably define his legal career. Yet he also defended civil liberties during the Civil War and had a lengthy public career, which included state office as well as U.S. attorney general and treasury secretary, and many legal observers praise his judicial tenure despite Dred Scott. Moreover, he disliked slavery and freed the slaves he had inherited before he was appointed to the Supreme Court. Frankly harder to justify is the veneration of Woodrow Wilson and Theodore Roosevelt. Wilson was a vicious racist elected five decades after the Civil War. (He also took America into an unnecessary, murderous war in which America had no vital interests.) Roosevelt was a war-mongering imperialist who hardly hesitated in supporting genocidal wars against “inferior” peoples. He was vice president to William McKinley, the president who launched the Spanish-American War. That war included the conquest of the Philippines, whose people did not invite the U.S. to take control. The subsequent campaign to suppress Filipino independence fighters was as brutal as that of the Spanish against Cuban insurgents and resulted in an estimated 200,000 civilian deaths. Who among these leaders deserves a monument? Then there is Franklin Delano Roosevelt. He did nothing to desegregate the U.S. military, ordered the round-up of Japanese Americans, refused to accept Jewish refugees (consider the tragic fate of Jewish passengers on the St. Louis), and turned Russian émigrés and Soviet prisoners and refugees over to Joseph Stalin at the conclusion of World War II. These are significant blots on his record. At least American history is fairly young. Go back in European or Asian history, and whom can one properly memorialize? Virtually every monarch, politician, soldier, intellectual, cleric, and citizen held hideous views by modern standards. Ancient Greece was a slaveholding society. Most of Roman history involved murderous military operations by an imperialist empire. Centuries later it was the European powers that established colonial empires; some were better than others, but none exhibited much concern for the lives or dignity of those who were conquered. Most wars were over plunder and prestige, for which innumerable lives were sacrificed. Who among the leaders venerated in country after country was not complicit in, if not an implementer of, slavery, misogyny, discrimination, corruption, imperialism, brutality, aggression, racism, and much more? Do any of them deserve remembrance if they fall short of today’s progressive values? Go to Paris and visit the Hôtel des Invalides. The centerpiece of this building complex is Napoleon’s sarcophagus surrounded by memorials to his great victories, of which the French obviously are enormously proud. It is a beautiful and impressive display. Yet the dictator and self-proclaimed emperor launched multiple military campaigns to dominate Europe. Estimates of total deaths in his wars range from 3.2 to 6.5 million people, including hundreds of thousands or even millions of civilians. Imagine if Germany today similarly celebrated Kaiser Wilhelm — after all, he was also an esteemed monarch defeated only by an overwhelming international coalition — or Adolf Hitler. It is important to apply similar standards even when inconvenient. The Confederates were traitors, it is said. True, but Lee saw his primary loyalty to state rather than nation, and he, along with so many others, believed the Constitution allowed secession. To be fair, their position was disproved not intellectually but on the battlefield. Go back to the War of 1812, and it was the New England states that talked of secession. Did mooting that possibility disqualify them from future statuehood? Before that the Republicans, most notably James Madison and Thomas Jefferson, promoted state resistance to Federalist repression through the Alien and Sedition Acts. Should we tear down statues of anyone who advocated such treasonous courses? And then there are the American revolutionaries. Let us be clear: George Washington was an ostentatious traitor. He served in the British Army and owed allegiance to the king. But he took up arms against his sovereign. Of course, he had the good fortune to end up on the winning side both then and in history’s judgment. Had the war ended differently, he could have been hung with a British rope and excoriated by textbooks later used in Britain’s American commonwealth. Military victory doesn’t change the moral judgment that he was a traitor (and slaveowner, of course). And what of those who defended slavery while opposing secession? During an earlier crisis, President Jackson threatened war against South Carolina when it talked of nullification and secession. He was a nationalist, but he directed his fervor for union, not abolition. Still, learning history and recognizing reality do not require celebrating all events, causes, or people. It makes sense to look back and decide that particularly egregious examples of who or what we once venerated do not warrant such, or perhaps any, respect today. In Colfax, Louisiana, there is a memorial to the 1873 slaughter of some 150 African Americans (many members of the state militia) by a white mob/militia. This was racist murder, pure and simple. Nor is America alone in struggling with these issues. Near Pretoria, South Africa, stands the Voortrekker Monument, a grand memorial to the early (white) Boers. The history celebrated is real, had extraordinary consequences, and reflected fortitude. Yet the ultimate result was horrid for those conquered or displaced. And many of the images contained therein are, shall we say, grotesquely offensive to black Africans. Several possible principles for American monuments suggest themselves. Images representing a state should promote unity. Confederate history should not be featured in state flags, fly over government buildings, or otherwise adorn official facilities. Statues to once-venerated — and still much-respected — figures should be evaluated based on importance and context. As people’s views and standards evolve, it may make sense to remove or relocate some public monuments. In other cases, we should evaluate figures’ personal and public virtues and how the common understanding of the cause for which they fought has changed. The more embedded in the landscape — on battlefields or Richmond’s Monument Avenue — the better the case for leaving them, though perhaps with additional explanations. Privatization is another remedy, moving decisions outside of politics. Schools and buildings should be freely renamed to figures who or causes that best reflect a community’s desires and values. These may change over time. There is no reason to presume that a name that fit a school founded years or decades ago is appropriate today. America’s Founders matter still — otherwise there would be no nation — but the Civil War recedes ever more in consciousness and consequence. One could say much the same of the generals and politicians of World War I and many other figures in U.S. history. All sides should de-escalate their rhetoric and behavior. It should surprise no one that African Americans see the Confederacy differently than descendants of Southern aristocracy do. More light than heat would be useful, with mutual forbearance, understanding, and respect more common. When the cost of being right becomes socially divisive and even violent, the battle’s price is probably too high. As for San Francisco and George Washington, America’s first president was flawed like every other man. He continues, however, to stand especially high because he exhibited the extraordinarily rare quality of willingness to step away from political power. That willingness was necessary for the American experiment to succeed. For that he deserves our continued thanks, no matter what other faults he exhibited. Doug Bandow is a Senior Fellow at the Cato Institute and a former Special Assistant to President Ronald Reagan.
  • The Ever-Political IMF Meddlers Give Boris Johnson Unsolicited Advice    (Steve H. Hanke, 2019-07-26)
    Steve H. Hanke No sooner than Boris Johnson put his foot over the threshold of 10 Downing Street, the International Monetary Fund (IMF) offered its unsolicited advice to the newly elected Tory Prime Minister. Johnson won the right to replace the hapless Theresa May by pledging to remove Britain from the EU by October 31, 2019, “deal or no deal.” Enter the IMF. In a preemptive strike, the Philosopher Kings threw cold water on the idea of a no deal, asserting that it would be a disaster. Talk about entering a domestic quarrel without an invitation. But, such meddling is nothing new for the IMF. Indeed, a bipartisan Congressional commission (The International Financial Advisory Commission, known as the Meltzer Commission) concluded in 2000 that the IMF interferes too much in the domestic politics of member countries. Just recall the IMF’s involvement in toppling Indonesian President Suharto in 1998. This scandalous episode was confirmed by no less than former U.S. Secretary of State Lawrence Eagleburger. I would add that the IMF propensity to interfere has become much more pronounced since the days of the last great Managing Director of the IMF Jacques de Larosière (1978-1987). In short, IMF programs don’t provide cures, but create addicts The IMF, which was born in 1944, was designed to provide short-term assistance on the cheap to countries whose currencies were pegged to the U.S. dollar via the Bretton Woods Agreement. When these countries found themselves running short of foreign exchange (read: U.S. dollars), they could obtain balance-of-payments assistance from the IMF. This was the IMF’s rather straightforward original, narrow remit. But, in 1971, when President Richard Nixon closed the gold window, the Bretton Woods exchange-rate system collapsed. And, with that, the IMF’s original purpose was swept into the dustbin. However, since then, the IMF has used every rationale under the sun to reinvent itself and expand its scope and scale. Unlike old soldiers, the IMF has not faded away. It has grown even larger and even more powerful. And, in the process of acquiring more power, it has become more political. First, there were the oil crises of the 1970s. They allowed the IMF to rapidly reinvent itself. Those shocks, it was asserted, “required” more IMF lending to facilitate, yes, balance-of-payments adjustments. And more lending there was: in real (read: inflation adjusted) terms IMF lending more than doubled from 1970 to 1975, and increased by 58% from 1975 to 1982. With the election of Ronald Reagan in 1980, it appeared that the IMF’s crisis-driven opportunism would finally be reined in. Yet, with the onset of the Mexican debt crisis, the political elites asserted that more IMF lending was required “to prevent financial contagion, more widespread debt crises, and bank failures.” Surprisingly, that rationale was used by none other than President Reagan, who personally lobbied 400 out of 435 congressmen to obtain approval for a U.S. quota (capital contribution) increase for the IMF. IMF lending ratcheted up again, increasing by a stunning 27% in real terms during Reagan’s first four years in office. And then came the 1990s, a decade of explosive growth for the IMF. The collapse of Communism provided an opportunity that was too good to be true. Currency crises in Mexico, Russia, Turkey, Brazil, Argentina, and Asia added fuel to the fire that allowed the firefighters at the IMF to expand their balance sheet and create even more jobs for the boys. And as they say, the show just goes on and on, with the IMF playing the role of a hydra. While the IMF’s ability to survive near-death experiences and thrive would not have surprised the British historian C. Northcote Parkinson, author of the 1957 classic Parkinson’s Law, it is quite remarkable in light of the IMF’s performance. As Harvard University’s Robert Barro put it, the IMF reminds him of Ray Bradbury’s Fahrenheit 451 “in which the fire department’s mission is to start fires.” Barro’s basis for that conclusion is his own extensive research. His damning evidence finds that: A higher IMF loan participation rate reduces economic growth. IMF lending lowers investment. greater involvement in IMF programs lowers the level of the rule of law and democracy. And if that’s not bad enough, countries that participate in IMF programs tend to be recidivists. In short, IMF programs don’t provide cures, but create addicts. For a clear picture of the addiction problem (read: recidivism), review the chart below. It lists the number of IMF programs that 146 countries have participated in. Haiti leads the pack with 27 programs. Since Haiti joined the IMF in 1953, it has averaged about 2.4 years between new IMF programs. Argentina is another heavy hitter. It joined the IMF in 1956 and is now hooked on its 22nd IMF program. That’s a new program every 2.8 years on average. More broadly, the list of countries with the ten highest number of loan programs includes 27 countries. These countries account for 42% of the total number of IMF loan packages, indicating recidivism. Moreover, these repeat offenders gobble up a disproportionate amount of the IMF below-market rate loans, accounting for 60% of the total. The IMF should have been mothballed and put in a museum long ago. After all, its original function was buried in 1971, and its performance in its new endeavors has been less than stellar. But, a museum for the IMF is not in the cards. Even reform is hard to imagine. Indeed, all attempts to reform and downsize the IMF have ended up expanding its scope and scale. Just look at what has been accomplished since the blue-ribbon Meltzer Commission. About all we can do is realize that the IMF is a political hydra with an agenda to serve the wishes of the political elites who allow it to grow new heads. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
  • There Must Be Consequences for North Korea’s New Missile Tests    (Eric Gomez, 2019-07-25)
    Eric Gomez The test firing of what appear to be two North Korean ballistic missiles highlights the flaws of Donald Trump’s style-over-substance approach to nuclear diplomacy with North Korea. The failure of the Trump administration to get Kim Jong Un to agree to anything more substantial than broad-brush statements about denuclearization is becoming a greater liability. Washington should take care not to overreact to this latest missile test, but letting Kim off the hook entirely would also be very unwise. Trump’s diplomatic engagement with North Korea has emphasized high-profile meetings with Kim that have been heavy on symbolism but light on substance. Working-level discussions did take place between the June 2018 summit in Singapore and the February 2019 summit in Hanoi but stopped after the latter ended in failure. Trump and Kim apparently agreed to restart working-level talks when they met for a “handshake summit” last month, but this diplomatic thaw could now be in jeopardy. The test firing of what appear to be two North Korean ballistic missiles highlights the flaws of Donald Trump’s style-over-substance approach to nuclear diplomacy with North Korea. While Kim has, at various times, promised to dismantle his nuclear testing facility and a space rocket launch site, and freeze intercontinental ballistic missile testing, none of these pledges have been formalized through a joint statement or other diplomatic agreement. Trump made a similar, vaguely defined promise that the United States would stop conducting certain military drills with South Korea. Kim has tried to use the lack of a formal agreement to his advantage by being highly critical of U.S. actions and flexible with his own actions. North Korea has loudly condemned U.S.-South Korean military exercises as violating the spirit of Trump’s verbal commitments to cancel the exercises, even though the drills have been reduced in size and scope. Meanwhile, Kim can say that he is upholding his promise of no ICBM testing even as he tests other ballistic missiles that can threaten U.S. and South Korean military forces on the peninsula. Trump’s inability to secure an official version of Kim’s promises means that Kim can easily force Trump into a dilemma, as he did with the recent missile test. Reacting too strongly to the tests risks collapsing diplomacy entirely, but a nonreaction could embolden Kim to flirt with breaking more promises in the future. Both leaders could quickly begin pointing fingers at one another for violating the spirit of their agreement at the Singapore summit because the letter of that agreement is so open ended. This dynamic is likely to continue if Trump and his negotiating team stay stuck on style over substance. This is not to say that the summitry has been a total failure. Leader-to-leader diplomacy is especially important when dealing with a state like North Korea, where so much political power is concentrated in one person. However, recent events show the problems that occur when diplomacy fails to produce substantive agreements. It becomes very easy for expectations about progress to be out of sync with reality, which can cause summits to unravel without agreements and encourage the parties to push the envelope in destabilizing ways. Trump and other senior officials shouldn’t be afraid to express their concern with the missile test, and the upcoming U.S.-South Korea exercise should proceed as planned. At the same time, the Trump administration should make it clear that it wants to negotiate with North Korea and is prepared to discuss security guarantees, including adjustments to military exercises. The goal of this approach would be to show Kim that there is a way for him to get what he wants, but it will only happen via diplomacy and not provocations. Kim probably won’t like such a response, but he would face costs for rejecting such an offer. An escalation such as an ICBM launch or nuclear test would risk killing negotiations with the United States entirely. Such actions would also strain relations with China and Russia, who have been willing to support Kim’s diplomatic efforts but supported tougher United Nations sanctions when Kim was stoking tensions in 2017. Beijing and Moscow could keep the North’s economy afloat by loosening sanctions enforcement, but this wouldn’t allow Kim to make much progress on his domestic priority to improve the North’s economy. Diplomacy with North Korea is messy and it wouldn’t be surprising for many people in the United States to start questioning the point of negotiating in the wake of the North’s latest provocation. But while Trump’s diplomatic approach has significant flaws and leaves much to be desired, there is still value in trying to manage the North Korean problem through diplomacy. This latest setback should cause the administration to adjust, but not abandon, its approach. Eric Gomez is a policy analyst with the Cato Institute.
  • Let Intersex Individuals Choose Their Destiny    (Jeffrey A. Singer, 2019-07-24)
    Jeffrey A. Singer Well-intentioned parents sometimes let doctors make unalterable and potentially tragic changes to their babies’ bodies. The practice of performing “normalizing” surgery on infants born with what clinicians call “intersex” or disorders of sexual development has been going on since the 1960s. Being born intersex is still a complicated and rare circumstance, and with it comes many tough questions. What’s clear, however, is most of these individuals deserve time to answer those question for themselves. Before the 1960s, parents of intersex children made their best guess and assigned a sex to their children, raising them according to gender norms. Oftentimes these children experienced harassment and discrimination as they grew to adulthood, but many had happy and successful lives. The California Senate is considering a bill requiring postponement of non-lifesaving surgery to change the sex characteristics of an intersex minor until that individual becomes old enough to give informed consent. Most medical scientists believe approximately 1.7 percent of babies are born intersex. A prospective study reported in June found the incidence of babies being born with “ambiguous genitalia,” one form of intersex in which the baby is born with genitals where it is unclear if the baby is a boy or girl, is 1 in 1000. But intersex is on a spectrum. Some babies have both male and female gonadal tissue or reproductive organs, and some can be “mosaic,” where some of their cells have one combination of sex chromosomes while other cells have a different combination. Some types of intersex don’t become evident until the child matures. The rationale behind intersex surgery is to “normalize” the baby by surgically redesigning their genitals and/or removing organs or tissue of one of the two sexes, hoping to spare the child from psychological stress and stigma while maturing. However, there is little evidence that growing up with atypical genitalia leads to psychosocial disorders. A significant number of children will develop a different gender identity than the one chosen for them by their parents, so surgically assigning their gender as babies runs the risk of severe trauma later in life. Furthermore, many adults who had intersex surgery as children later suffer from sexual dysfunction,including severe pain or difficulties with arousal during intercourse. The American Academy of Family Practice opposes genital surgery in intersex children except in cases where an imminent threat to life must be averted—for example, correcting a defect that prevents the baby from urinating. A July 2018 declaration from its Board of Directors claimed that intersex genital surgery can lead to an increase in substance abuse disorders and suicide and stated, “Scientific evidence does not support the notion that variant genitalia confer a greater risk of psychosocial problems.” Three former U.S. surgeons general from Republican and Democrat administrations issued a statement in 2017 condemning intersex surgery except in cases where a threat to life was imminent without an intervention, saying surgery should “be deferred until children are old enough to voice their own view about whether to undergo surgery.” This not only makes sense medically—it makes sense morally. When a non-life-or-death decision is made by doctors or parents to subject a child to surgery that can permanently impact their entire future adult happiness, it is a violation of the autonomy and sovereignty of that individual to proceed without informed consent. Because there is no imminent threat to life, parents should raise intersex children in a gender-neutral manner and allow them to identify with whichever gender they feel more comfortable—or both—leaving the decision up to them as to surgically correcting ambiguities once they reach the age of consent. In many cases intersex adults feel happiest as intersex. For all of the above reasons, the World Health Organization and the United Nations condemn intersex surgery except in life-threatening situations until the child is old enough to give informed consent. In 2015 Malta became the first country to outlaw the practice in children. Now California might become the first state in the U.S. to do so. The California Senate is considering a bill (SB 201) requiring postponement of non-lifesaving surgery to change the sex characteristics of an intersex minor until that individual becomes old enough to give informed consent. It is important to respect parental rights. A high threshold must be met in order to permit the government to expand its scope in parental medical decision-making. Yet parents’ rights to make decisions about their children’s bodies are already limited in several situations. Parents aren’t entitled to abuse their children, sell them to other people, or refuse to let them have lifesaving procedures. They should not be allowed to infringe on their right to choose their own sexual destiny. Dr. Jeffrey A. Singer practices general surgery in Phoenix, Arizona and is a Senior Fellow at the Cato Institute.
  • The Terrifying Rise of Authoritarian Populism    (Tom G. Palmer, 2019-07-24)
    Tom G. Palmer Governments described as populist are now in power in Poland, Hungary, Mexico, and Turkey. Italy and Greece are governed by multiparty populist coalitions, while populists of the left or right are partners in coalition governments in seven other European Union countries. Venezuela is in free fall thanks to the confiscationist policies of a populist government. Brazil has an outspoken populist president. And the ongoing Trumpist takeover of the Republican Party isn’t just a populist spectacle in itself; it has also helped fuel a surge of left-wing populism among the Democrats. Those movements espouse a variety of programs across a wide range of political landscapes. What do they have in common? Historians and political scientists have argued for decades about what exactly populism is, and they haven’t always come to the same conclusions. The political theorist Isaiah Berlin warned in 1967 that “a single formula to cover all populisms everywhere will not be very helpful. The more embracing the formula, the less descriptive. The more richly descriptive the formula, the more it will exclude.” Nonetheless, Berlin identified a core populist idea: the notion that an authentic “true people” have been “damaged by an elite, whether economic, political, or racial, some kind of secret or open enemy.” The exact nature of that enemy—“foreign or native, ethnic or social”—doesn’t matter, Berlin adds. What fuels populist politics is that concept of the people battling the elite. Envy and resentment are driving collectivist impulses around the world. The Princeton political scientist Jan-Werner Müller proposes another characteristic: “In addition to being antielitist, populists are always antipluralist,” he argues in 2016’s What Is Populism? (University of Pennsylvania Press). “Populists claim that they, and they alone, represent the people.” In that formulation, the key to understanding populism is that “the people” does not include all the people. It excludes “the enemies of the people,” who may be specified in various ways: foreigners, the press, minorities, financiers, the “1 percent,” or others seen as not being “us.” Donald Trump casually expressed that concept while running for president, declaring: “The only important thing is the unification of the people, because the other people don’t mean anything.” During the Brexit campaign, Nigel Farage, then-leader of the United Kingdom Independence Party, predicted “a victory for real people.” Apparently, those who voted against Brexit didn’t just lose; they weren’t real people to begin with. Not every formulation of populism looks like that. The historian Walter Nugent, for example, argued in 1963’s The Tolerant Populists that America’s historical Populist Party was no more anti-pluralist than its opponents. In Populism’s Power, released the same year as Müller’s book, the Wellesley political scientist Laura Grattan offered a definition of populism that has room for pluralist, inclusive movements. But it is the Berlin-Müller brand of populism that is currently surging in Ankara, Budapest, and Washington, threatening individual liberty, free markets, the rule of law, constitutionalism, the free press, and liberal democracy. The policies promoted by those governments vary, but they reject two related ideas. One is pluralism, the idea that people are variegated, with different interests and values that need to be negotiated through democratic political processes. The other is liberalism—not in the narrow American sense of the political center-left, but the broader belief that individuals have rights and the state’s power should be limited to protect those rights. Populists can be “of the left,” but they need not be motivated by Marxian ideas of class conflict or central planning. They can be “of the right,” but they are distinctly different from old-school reactionaries who yearn for a lost world of ordered hierarchies; if anything, they tend to dissolve old-fashioned classes and social orders into the undifferentiated mass of The People. Or they can reject the left/right spectrum altogether. As the French populist leader Marine Le Pen put it in 2015, “Now the split isn’t between the left and the right but between the globalists and the patriots.” Populists frequently believe that the true will of the authentic people is focused in one leader. Hugo Chávez, Venezuela’s late populist president, put it bluntly: “Chávez is no longer me! Chávez is a people! Chávez—we are millions. You are also Chávez! Venezuelan woman, you are also Chávez! Young Venezuelan, you are Chávez! Venezuelan child, you are Chávez! Venezuelan soldier, you are Chávez! Fisherman, farmer, peasant, merchant! Because Chávez is not me. Chávez is a people!” Turkey’s leader, Recep Tayyip Erdoğan, once responded to a lone opposition voice by thundering, “We are the people! Who are you?” And then there’s Donald Trump’s less dramatic declaration that “I am your voice!” Populists may seek power by democratic means, but that does not make them liberal. They often campaign against limits on the power of the people, especially independent judiciaries and other checks on the executive. Populists can be socialist or nationalist or both, they can be “pro-business” (crony capitalist) or “pro-labor” (crony unionist), but they share the idea that society must be put under some sort of control, exercised by a leader or a party that represents the true people and is fighting against their enemies. The Children of Carl Schmitt Antagonism, thus, is foundational to the populist mentality. And the central theorist of antagonism was Carl Schmitt, a German philosopher of the Nazi era—he is sometimes called the “crown jurist of the Third Reich”—who has had a strong influence on both the hard left and the hard right. In The Concept of the Political (1932), a relentless critique of classical liberalism and constitutional democracy, Schmitt sought to displace the ideal of voluntary cooperation with the idea of conflict. The “specific political distinction to which political actions and motives can be reduced,” Schmitt wrote, “is that between friend and enemy.” The contemporary theorists who have taken this notion up include the left-wing populist Chantal Mouffe and her husband, Ernesto Laclau, author of On Populist Reason (2005). Laclau, whose ideas have influenced populist governments in Greece and Argentina and populist opposition movements across Latin America and Europe, applies Schmittian thinking directly. Indeed, he goes further than Schmitt, treating enmity per se as the very principle of power. Where Schmitt, a virulent anti-Semite, identified the Jews as the perpetual enemy, Laclau’s hostility can be directed against anyone. For Laclau, a populist movement is a collection of otherwise unrelated unmet “demands” aggregated by manipulative populist leaders. The demands are all different, but they are unified in a movement that constitutes “the people.” The designation of “the enemy of the people” is a strategic matter, a means of assembling a coalition powerful enough to be united under a leader for the purpose of seizing state power. The final and most toxic ingredient is “affective investment”—that is, emotional engagement. What unites the otherwise disparate and inchoate demands, Laclau says, is the group’s adoration of the leader and hatred of the enemy. Íñigo Errejón, a leader of the leftist Podemos populist party in Spain and an enthusiastic defender of Venezuela’s regime, builds his populism explicitly on the idea that collectivities are created by positing an enemy against which the people must struggle. In his case, the enemy is “the casta, the privileged.” When asked who the casta are, Errejón responded: “The term’s mobilizing power comes precisely from its lack of definition. It’s like asking: Who’s the oligarchy? Who’s the people? They are statistically undefinable. I think these are the poles with greatest performative capacity.” Mouffe described the choice of target as essential to building the “sort of people we want to build.” By identifying The Enemy, The People is constructed. It’s Not the Economy, Stupid The old standby explanation of populism is that it is a predictable response to economic oppression. Thus, the socialist pundit John Judis argues in 2016’s The Populist Explosion: How the Great Recession Transformed American and European Politics that populism rose in response to “the skewed distribution of jobs and income that neoliberal economics had created over the prior decades.” Yet populists have surged in popularity or come to power in countries with very dissimilar economic conditions, including some with low unemployment and relatively high economic growth. Nor is the rise of populism a matter of age, with older people supporting right-wing nationalist populists and younger people supporting liberal cosmopolitanism: Plenty of young people have been voting for populist parties and candidates. Nor is the populist vote explained robustly by income levels. The British political scientists Roger Eatwell and Matthew Goodwin point out in their 2018 book National Populism: The Revolt Against Liberal Democracy (Pelican) that a common driver in “national populism” is not falling wages but “relative deprivation—a sense that the wider group, whether white Americans or native Brits, is being left behind relative to others in society, while culturally liberal politicians, media and celebrities devote far more attention and status to immigrants, ethnic minorities and other newcomers.” Rapid change in the status of groups, notably through immigration, causes many people to experience relative downward mobility and to feel that the status of their group is threatened. When Britain voted to withdraw from the European Union, Eatwell and Goodwin write, polling data showed Remainers “talking endlessly about economic risks while Leavers were chiefly concerned about perceived threats to their identity and national groups.” (Brexit is a complex question, of course, and some classical liberals supported it because they feared an unaccountable E.U. bureaucracy. But the movement for Brexit was driven far more by populist concerns than by liberal ones.) In the U.S., a deciding factor in Trump’s victory was the estimated 9 percent of voters who cast ballots for Obama in 2012 and then switched to Trump, according to survey data analyzed by George Washington University political scientist John Sides. Among white Obama voters who had not been to college, the share who later voted for Trump was a whopping 22 percent. As that past support for Obama suggests, their votes for Trump can’t be reduced to a simple story of racial backlash. Nor was it a simple matter of economics: For the most part, those voters’ incomes and living standards are higher than those of their parents. But a common motivation for their support for Trump seems to be insecurity about their social status. A 2016 Brookings Institution survey showed that 66 percent of non-college-schooled American whites “agree that discrimination against whites is as big a problem today as discrimination against blacks and other minorities.” Anxiety about status—in this case a perception of an inversion of the status quo—seems to be a major factor, certainly much bigger than ideological racism. As political scientist Karen Stenner argued based on extensive data in her 2005 book The Authoritarian Dynamic, threats to “collective rather than individual conditions” trigger authoritarian “groupiness,” i.e., populism. Here’s where classical liberals need to do some serious thinking. A mainstay of arguments for free markets is that when people’s incomes rise at different rates, the important thing is that they’re all rising. Even most left-wing egalitarians accept some inequality, as long as it’s necessary for the poor to become less poor. The philosopher John Rawls argued in A Theory of Justice, for instance, that inequalities can be just if they are to the “greatest benefit of the least advantaged,” because then, even the least well off could not complain. But human beings are concerned about more than how well they’re doing relative to how well they did in the past. They also care about how well they’re doing compared to others. They care about hierarchies and social status. Relative status is quite different from absolute well-being. Libertarians have for many years celebrated the rise in status of women, racial minorities, immigrants, openly gay people, and others who had for very long periods of time suffered from low social status. Well, when it comes to relative social status, if some rose, others had to fall. And who perceived themselves as falling? White men without college degrees. It isn’t just onetime outsiders rising in comparative status. As Charles Murray lays out in his 2012 book Coming Apart: The State of White America, 1960-2010, a decline in our collective emphasis on certain traditional virtues—hard work, marriage, and the like—has opened a gulf between college-schooled elites and high-schooled nonelites. The resentment felt by one side of the divide is, unfortunately, often matched by the arrogance and condescension shown by the other, which merely accentuates the resentment. Similar divisions are happening in other countries as well, and they seem to be a major driver of populist sentiment. Pew Research Center surveys conducted in 2017 in 15 countries identified ethnocentrism and perceptions of national decline as characteristic of populist voters. In Germany, for example, 44 percent of the populist Alternative for Germany (AfD) party’s supporters say that life is worse than it was 50 years ago for people like them, compared to only 16 percent of other Germans. While data vary across countries and, as Berlin pointed out in 1967, no one factor can explain all populist movements, such fears of national decline and group status are common, especially in Europe and the U.S. The most important driver in Europe and the U.S. seems to be immigration and what Eatwell and Goodwin in National Populism call “hyper ethnic change”—that is, rapid change in the ethnic mix of a society, with multiple ethnicities joining the social order. (Some Americans have experienced feelings of dislocation and threat to their place in society upon seeing that their old Piggly Wiggly store has been replaced by a mercado with Mexican flags. It’s not the experience of ethnic pluralism that seems to be the problem but the fear that other ethnicities will eventually displace them.) The percentage of U.S. residents who were foreign-born reached 13.7 percent in 2017, the highest percentage since 1910, when it was 14.7 percent. Moreover, since the Immigration and Naturalization Act of 1965, which abolished national quotas and favored family reunions, higher percentages of immigrants have been coming from Asia, Africa, Central America, and the Middle East, accentuating ethnic differences with the native-born population. The Alternative for Germany, which started as a movement against the euro and has morphed into a populist anti-immigrant party, has drawn increasing support from less-schooled voters from the former states of East Germany. Such voters perceive their status as having fallen in recent decades, and they fear immigration far more than do more-schooled voters and those in the Western part of the country, which has seen far more immigration. In fact, the AfD support was strongest in those regions of the East that had seen the least population growth due to migration; people in those places feel that they are being left behind, and they blame immigrants, whom they see more on television than in their neighborhoods. Similar analyses can be applied to Britain, France, Sweden, and other democracies that have seen surges of populism. Hyper ethnic change is profoundly unsettling to many people, and it is helping to drive populist political responses. One can dismiss such reactions as irrational or small-minded, but many people feel them nonetheless. Moreover, many people are not satisfied with improvements in their conditions if they perceive others—especially outsiders—as doing even better. Envy and resentment have long been drivers of anti-libertarian movements, and they seem to be back in a big way. The problem is exacerbated by the increase of welfare-state transfer payments and benefits, which outsiders are believed to exploit or threaten. I fear that we may be entering an age of authoritarian “groupiness” and that the consequences will be terrible for freedom and prosperity. Not to put too fine a point on it, but the rise of far-right and far-left authoritarian populist movements today is more than a little reminiscent of Europe in the 1930s. The Libertarian Response To take on such populist ideas, we must start by understanding them. If fear regarding immigration trends is driving a larger fear of liberal democratic capitalism, one response is to ensure that immigration procedures are (accurately) perceived as orderly rather than as invasive. Attitudes toward both the Syrian refugees fleeing a catastrophic war and the current situation on the United States’ southern border have arguably been shaped for the worse by a failure to fashion more systematic and orderly solutions, entailing a right to work legally, for example. The reason so many people choose to cross into the U.S. illegally, and in risky ways, is that it’s extraordinarily difficult to obtain a visa at an American consulate and travel by bus or car through a legal port of entry. Those who enter without permission or overstay their visas are less likely to go home, as was previously common, when they are not sure they’ll be able to return to work again in the future. A functioning and efficient guest worker program—one that allows people to easily take temporary jobs in the United States and then return home to their families with the wealth they’ve rightfully acquired—could help calm the worries of American citizens who balk at the idea that throngs of foreigners are forcing their way across the border. But is there anything libertarians, the vast majority of whom remain outside the halls of power where immigration policy is set, can do? One idea is to push back against the idea that trade is a zero-sum game. Your benefit need not come at my expense. What is good for Germany can be good for France, if Germans and Frenchmen trade goods and services rather than bullets and bombs. Immigrants who arrive to work enrich the people among whom they work. Negative-sum games can be transformed into positive-sum games by establishing the right institutions: property, contract, and voluntary trade. Trade has improved the well-being of Americans, of Germans, of Kenyans, of everyone. Libertarians also need to take a hard look at our own rhetoric. Trying to divide humanity into taxpayers and tax eaters, as if there were some easy way in a modern society to distinguish the two groups neatly and unambiguously, feeds into populist hatred and rage. By all means cut subsidies, but demonizing the recipients as enemies of the people, as mere parasites, contributes to a climate of resentment, hatred, revenge, and conflict that undermines the framework for peaceful, voluntary cooperation on which liberty rests. Thinking about the world in terms of friends vs. enemies channels energy into collectivism and demagoguery. To stop authoritarian populism, it’s important not to promote the mentality of enmity that enables it. Tom G. Palmer is a senior fellow of the Cato Institute and the vice president for International Programs of the Atlas Economic Research Foundation.
  • How a 40-Year-Old Federal Law Is Speeding Gentrification    (Diego Zuluaga, 2019-07-24)
    Diego Zuluaga The five blocks of 11th Street NW between Harvard Street and Park Road in Washington, D.C., have changed a lot in the past few years. Like other parts of the Columbia Heights neighborhood, what was once a lower-income African American and Hispanic area is now dotted with hipster bars and restaurants popular with new 20- and 30-something residents. Shiny “For Sale” signs emblazon the front of renovated townhouses, some selling for well over $1 million. Clearly the buyers of those townhomes require incomes sufficient to afford mortgages of $800,000 or more. But under federal law, when the banks make those loans, they can claim credit for lending to the poor. And those outdated lending rules have created a situation in which, instead of making mortgages to the disadvantaged, federal law is actually fueling the gentrification of urban neighborhoods like Columbia Heights — and helping drive out the very residents the law was designed to protect. The law in question is the Community Reinvestment Act, which was enacted in 1977 to bring bank lending to historically underserved communities. Given a history of persistent credit discrimination against minorities going back to the New Deal, that is a laudable goal. Evidence is building that loans meant for poor residents are actually going to the affluent buyers pushing them out. The way it works comes down to ratings. The federal regulators who oversee the CRA — the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Reserve Board — look at how much banks are lending to low-income borrowers (those who earn less than 80 percent of median income in their metropolitan area) and to those in low-income census tracts (below 80 percent of the area’s median income). The regulators assign a rating to each bank and take this rating into consideration when deciding on banks’ applications to expand or merge. Bad CRA performance can cost a bank billions of dollars in forgone business opportunities. While the goals of the CRA are worthy, policymakers should care about its consequences, since there is no guarantee that the additional credit will reach historically marginalized communities who otherwise would not get it. The nation’s capital has by some measures experienced the most intense gentrification process of any major American city. A full 22 percent of the capital’s census tracts have seen the arrival of significant numbers of new and more affluent residents since 2000 — a greater proportion than any other U.S. metropolitan area. And in Washington, D.C., most CRA lending appears to be going not to the underserved but to the people gentrifying their neighborhoods. Of the more than $1.3 billion of CRA-eligible mortgage loans made in Washington in 2017, 65.5 percent went to borrowers whose incomes exceed 80 percent of the local median. Yet these mortgages earn banks CRA points because the borrowers reside in one of D.C.’s 88 eligible census tracts. The five blocks of 11th Street described earlier are among them, as they belong to a tract where the median family income ($48,621 in 2017) is only around 50 percent of the D.C. median ($95,995). Yet few of the low-income families living in those blocks could afford to borrow $800,000 for a home. Instead, it is more likely that home will go to a new, more affluent resident. Not only that, but a bank will get CRA points regardless of whether the borrower is truly underserved. It is tempting to blame banks for the preponderance of higher-income borrowers among CRA-eligible loans. But the fault lies with the incentives created by CRA regulations themselves. Banks are supposed to lend in low-income areas without incurring additional risk. Absent this safeguard, public policy would cause banks to make ill-advised loans, leaving taxpayers to pick up the eventual tab. Even with the statutory language, some evidence has accumulated over the years showing that the CRA does sometimes encourage risky lending. But by directing credit to higher-income “gentrifiers” in CRA-eligible areas, banks can meet the letter of the CRA without increasing the amount of likely losses on their balance sheets. This practice may, however unwittingly, end up accelerating the displacement of poorer residents. Consider, for example, that in five tracts in D.C.’s Park View and Petworth neighborhoods, more than 80 percent of mortgage loan volume in 2017 went to borrowers earning more than the CRA threshold, even though all of these tracts have median incomes well below that threshold. Can the CRA change to more effectively bring sound credit to low-income borrowers? Not easily. Politicians and bureaucrats are not well-placed to weigh credit risk against profitability and social value, as the most recent financial crisis showed. In the run-up to 2008, successive administrations and congressional acts gradually ratcheted up the share of mortgages guaranteed by Fannie Mae and Freddie Mac that went to low-income borrowers. The consequence was a $317 billion bailout and an explosion in foreclosures. To be sure, there are ways in which CRA regulations can be made more transparent and less onerous. Allowing banks to pay third-party providers such as online lenders and community organizations to fulfill their CRA obligations would simplify compliance, encourage these firms to specialize in underserved areas, and put an explicit price on the costs that the CRA imposes on the financial sector. This price would reflect, among other things, any additional risk involved in CRA lending. Furthermore, a system of tradable obligations would modestly improve upon the present structure of bureaucratic CRA assessments, which account for 7.2 percent of bank compliance costs. Yet even such a reform would not address the CRA’s bias in favor of higher-income residents. For that reason, the usefulness of the CRA should be reconsidered altogether. The spread of large bank branch networks and the rise of nonbank lending since the 1990s have changed the landscape that the CRA’s drafters inhabited. Today, online lenders and credit unions, neither of which are subject to the CRA, make a greater share of their loans to low-income borrowers than banks do. Furthermore, credit discrimination against protected classes can be better addressed by other laws, such as the Fair Housing and Equal Credit Opportunity acts. Thus, repealing the CRA would not foreclose access to affordable credit by vulnerable communities. It was never the goal of the CRA to promote lending to high-income borrowers who can get it without the help of Uncle Sam. Yet that is where much CRA lending now goes. Today, innovation and competition are doing a better job of promoting financial inclusion than a four-decade-old law. Diego Zuluaga is a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives.
  • Donald Trump, the Profligate President    (Michael D. Tanner, 2019-07-24)
    Michael D. Tanner I realize that concern about the deficit and the debt is no longer fashionable in Washington. Democratic candidates for president are engaged in a ruthless game of one-up-manship over who can propose the most costly and unsustainable new spending program. In the meantime, Republicans, from the president on down, have adopted Rush Limbaugh’s new mantra that worries about the debt are “bogus.” Even the so-called Freedom Caucus spends far more effort defending the president’s latest tweet than in defending fiscal responsibility. Yet even by these rather pathetic standards, the $1.37 trillion budget deal reached this week by President Trump and bipartisan congressional leaders stands out for its total abdication of fiscal discipline. The deal throws out the last vestiges of spending caps that were put in place as part of the two-year budget agreement. Those caps have proven largely ineffective — Congress has repeatedly waived them — but this year’s agreement would exceed those caps by $320 billion over the next 2 years. Actual total spending will rise by some $49 billion. There is no attempt to establish priorities — everyone just agreed to spend more. Defense spending will rise by $22 billion, but domestic discretionary spending will go up by even more, roughly $27 billion. And, as for addressing the urgent need for entitlement reform (the majority of federal spending), not a peep. Neither the president nor his party has displayed any interest in reining in spending. Moreover, the deal runs through 2021, thereby protecting politicians in both parties from having to do their jobs during an election year. At least they have their priorities in place. The deal also includes a two-year waiver for the debt limit, removing any possible leverage against future reforms. As bad as the deal looks on its face, its even worse in context. With only 2 months left in this fiscal year, the deficit has already hit $747 billion, a 23 percent increase since last year. It will almost certainly top $1 trillion by year’s end. From here, it is likely simply to grow worse. The national debt has reached $22 trillion, a $3 trillion increase since President Trump took office. That’s a Barack Obama level of red ink — but during an economic expansion, not a recession. Of course, some might blame increased deficits on the 2018 tax cut, and there’s some truth to that. Indeed, the tax cut has not “paid for itself” through increased growth. But the real villain is increased government spending. It is estimated that, by the end of his first term, Trump will have increased discretionary spending by 22 percent. We now pay more in interest on the debt than we spend on education and military personnel. By 2028, interest payments are expected to reach $914 billion annually. Over the next ten years, net interest cost will total around $7 trillion. Regardless of political ideology, everyone should recognize that interest payments are simply throwing money down a hole. Worse, none of this includes the unfunded liabilities of entitlement programs such as Social Security and Medicare. According to Social Security’s own trustees, the program’s future shortfalls exceed $43 trillion. Medicare’s unfunded liabilities are harder to pin down but likely run into the tens of trillions of dollars. The real U.S. debt could easily run more than $100 trillion in all. Democrats look at this and say, “let’s spend more.” Republicans look at it and say, well, “let’s spend more.” It is true that the U.S. economy has proven more resilient than some of us thought. Warnings of an imminent financial disaster have proven premature. Yet it is axiomatic that that which cannot go on forever eventually stops. Eventually the sugar high of deficit spending will wear off, and there will be real consequences for the economy. One thing we’ve learned about Trump is that he revels in the idea that whatever he does is the “biggest ever.” Still, “biggest deficit ever, “most debt in history,” and “most profligate president ever” may not be superlatives to which he should aspire. Michael Tanner is a senior fellow at the Cato Institute and the author of The Inclusive Economy: How to Bring Wealth to America’s Poor.
  • Making the Case for the People's Republic of China    (Doug Bandow, 2019-07-24)
    Doug Bandow Visiting the People’s Republic of China cannot help but impress. Over the past half century China has gone from impoverished pariah to incipient great power. East Asia essentially is the PRC and the others. Beijing’s rise is the chief reason America’s “unipolar moment” after the end of the Cold War turned out to be only a moment. The rise of China certainly is the most important international event since the Soviet Union’s collapse. However, Soviet communism appears to be only a historical interlude, which formally lasted barely 74 years. The PRC’s impact is likely to last far longer. Beijing’s potential influence is heightened by the role of the Chinese diaspora around the globe. Even during Imperial China’s great weakness, Chinese civilization lived on in part through this larger Chinese community. In general, these members have applauded the PRC’s success as attributable more to a broader conception of China than the communist state particularly. Recent protests in Hong Kong should be seen by Beijing not as an occasion to crack down, but as an opportunity to showcase the PRC’s virtues. Carefully nurturing this wide circle of support would enhance Beijing’s political influence and soft power around the globe. The desire to see China, which today happens to be in the form of the PRC, succeed creates a friendly global constituency. Only India possesses a similarly extended network. Yet the current government in Beijing risks losing this asset. The PRC appears to be running up against an even greater commitment to liberal values by Chinese whose loyalty upon which it was counting. In 2017 President Xi Jinping asserted that “Blood is thicker than water” when speaking of Taiwan and Hong Kong. He promised to “develop and strengthen the ranks of patriots who love our country,” by which he meant in the form of the PRC. However, ethnic Chinese in both of these territories are demonstrating a very different view of patriotism. For instance, the Taiwanese public, and especially young people, are moving away from any identification with the government in Beijing. Support for reunification is at the vanishing point. Even more significant may be events in Hong Kong. Never independent, never democratic, never sovereign, this Special Administrative Region nevertheless has a population which appears to be drifting away from China’s current government. There never has been a vote on the territory’s future, but one suspects that control by Beijing would not triumph, almost irrespective of the alternative offered. When a fourth of the population turns out to demonstrate against legislation perceived as facilitating rendition to the PRC, their view is anything but “blood is thicker than water.” What, then, for Beijing to do? China has the military power to impose its will in both cases. But the cost of doing so would be huge. The PRC would wreck the territories it sought to absorb. Beijing would sacrifice much of its ethnic Chinese support network around the world. People who cheered when Hong Kong returned to China from the United Kingdom would be appalled if the returned territory was despoiled. The PRC would destroy its carefully cultivated reputation for patient, reasoned, and measured action. China would shred its business appeal: foreign companies would see the mainland as well as Hong Kong as a less hospitable commercial location. While the West likely would eschew a military response, it would have little choice but to act. Diplomatic isolation and economic sanctions would be inevitable. Moreover, the PRC’s neighbors would grow more anxious and even hostile, likely increasing their own defense efforts as well as movement toward larger nations, including India, Japan, and especially America. These effects would last much longer than the impact of the 1989 crackdown in Tiananmen Square. Then the PRC was far weaker and less significant internationally. Moreover, the events were seen as wholly internal. Today repression in Hong Kong and conquest of Taiwan would be seen as international acts by a far stronger and more dangerous China. A host of global relations would be disrupted for a significant period. By no measure would the benefits match the costs. Lesser forms of coercion would not likely have much positive effect. People willing to demonstrate are unlikely to be moved by “patriotic education” on behalf of a government they distrust. Mandating respect for the Chinese national anthem would merely create another arena for calculated disobedience. Once free, people would more firmly resist attempts at social engineering. Instead, President Xi and the rest of the Chinese leadership need to focus on making prospective rule by Beijing into an attractive option for those who expect more than shared blood. The PRC’s economic success has been extraordinary. In a much faster time that the Roman Empire, Spanish Empire, United Kingdom, or America, China has become a leading state with global influence. The leadership needs to make the case — and demonstrate the latter’s truth in action — for accepting Beijing’s leadership. That surely includes increasing trust in the PRC’s commitment to one country, two systems. Also needed are specifics on how submersion of such small political communities within the Chinese colossus would benefit them. The perspective of China’s leaders reflects their presence on the global stage; residents of Hong Kong and Taiwan start from a very different point, concerned about preserving their much more personal homelands. Lest the need to persuade seem humiliating, it would stand the PRC leadership in good stead in dealing with the rest of the world. A number of President Xi’s initiatives, including China Dream and the Belt/Road project, have been greeted skeptically. Fair or not, such doubts are best met by better arguments and examples. Such as provided by increased support in Hong Kong and Taiwan. All great nations face serious challenges. What matters most is surmounting them. Recent protests in Hong Kong should be seen by Beijing not as an occasion to crack down, but as an opportunity to showcase the PRC’s virtues. The ability to persuade others to follow is the ultimate test of leadership. Doug Bandow is a senior fellow at the Cato Institute.
  • Don't Lump Boris Johnson Together with Donald Trump    (Ryan Bourne, 2019-07-23)
    Ryan Bourne It was a dreary end to a dreadful premiership. Theresa May’s final “reflections” speech last week was as devoid of insight as one might expect given her government’s sorry record. “Worried about the state of politics,” she showed little contrition for her failings. The former prime minister grasped for the grand sweep of recent history in lieu of so few personal achievements to highlight. That underwhelming performance underscores why British Conservatives have gone “all-in” on the maverick former mayor of London Boris Johnson as their new leader and prime minister. The eccentric zip-lining, soccer-bruising, blond, shaggy-haired former journalist is seen as the antithesis of May’s sterility, given his Ronald Reagan-esque optimism. British politics corrects abruptly to perceived failure. Such has been the catastrophe in Conservative fortunes under May (a lost majority, a 24-percentage point collapse in polling numbers from peak, a failure to deliver Brexit and a complete breakdown in functioning government); Conservatives saw fundamental change as their only salvation. Johnson’s policy record and disposition is much closer to David Cameron-style social liberalism than to Trump or May. Johnson is the anti-May, with differences far beyond character. Where she was unwilling to countenance leaving the European Union without an withdrawal agreement, Johnson is committed to Brexit “do or die” by Oct. 31. Where May struggled with public exposure, Johnson can reach beyond politicians and speak directly to the public. Where she has proven an electoral liability, Johnson is a proven winner, having seen off the hard-left Ken Livingstone twice in mayoral elections in liberal London. The Labour party and liberal commentators in the United States try to lump Johnson in with President Trump as some sort of populist whipping up hatred and fear. But Johnson’s policy record and disposition is much closer to David Cameron-style social liberalism than to Trump or May. Trump’s inaugural address talked up threats to America. On the campaign trail he bemoaned the death of the American Dream. May didn’t go that far, but her pessimistic worldview saw a Britain infested with burning injustices for the government to fix. That resulted in busybody policy. Her government is widely ridiculed for seemingly banning activities every week. May’s authoritarian streak was personified by a deeply illiberal immigration policy. She championed capping net migration with a crude target and creating a “really hostile environment” for illegal immigrants, replete with “Go Home” vans deployed in highly concentrated ethnic minority neighborhoods. As home secretary, she oversaw the Windrush scandal, which resulted in legal migrants from the 1970s denied rights and in some cases even deported wrongfully. Johnson’s instincts, in contrast, are liberal and permissive. He’s an optimist, pro-free trade and pro-immigration. He even actively championed the idea of an amnesty for illegal immigrants during the Brexit referendum campaign. Today he wants a shift to an Australian-style points-based immigration system, which former May staffers oppose. Yes, Johnson takes traditional conservative positions on many issues. He is partial to a tax cut, skeptical about new economic regulation and libertarian on the nanny state. This itself marks a sharp break from May, who continually distanced herself from Thatcherism. But Johnson is no slavish disciple to free-market economics. As mayor of London, he championed the Living Wage and had a penchant for large infrastructure projects. Newspaper reports suggest he might even now expand social insurance for old-age care. What perhaps marks him out most though is an inherent buoyant attitude about the future. After years of media and self-inflicted gloom associated with Brexit-induced uncertainty, he sees the many positives Britain has to build on. The working age employment rate is at record levels and inflation is at target. Real earnings are growing robustly and the public deficit has been mostly eliminated. If Johnson can deliver Brexit and move on, the foundations for economic prosperity and defeating Jeremy Corbyn are strong. Johnson is seen as the change agent to deliver. Why, then, do many consider him some unacceptable, hard-right populist demagogue? The simple answer is Brexit — the key dividing line in British politics. Johnson was a key part of the Leave campaign, and some cannot forgive what they consider a monumental national mistake. They are willing to ignore their own eyes and ears on his socially liberal record because they have convinced themselves that Brexit is necessarily a nationalist, xenophobic pursuit by definition. True, some of his detractors find his journalistic contributions intolerable too. Like Trump, his past comments about gay people or burqas making people “look like letterboxes” can offend. But Johnson was a key proponent of same-sex marriage legislation. His comments about burqas came within an article making the case against banning them, as Denmark had.J Johnson’s opponents might console themselves that his premiership could be short-lived. His willingness to leave the European Union without a deal is not supported by the House of Commons, and so October could see a parliamentary no-confidence vote, his defeat and a general election. Yet whatever your views on Brexit and the likelihood for his government and electoral success, it’s bizarre to consider him some right-wing zealot. In contrast to May, Ryan Bourne is the R. Evan Scharf chair for the public understanding of economics at the Cato Institute and was formerly head of public policy at the Institute of Economic Affairs in London.
  • Hong Kong Enters China's Danger Zone    (Doug Bandow, 2019-07-22)
    Doug Bandow The great game of international chicken that did not occur in the 1980s was the United Kingdom holding a referendum on Hong Kong’s future rather than negotiating with China. Territorial legislators generally opposed the handover to Beijing while London consciously refused to consult the residents. Had Hong Kongers voted for independence or continued UK control, then Deng Xiaoping’s government, early in the reform process and only shortly beyond a costly conflict with Vietnam, would have hesitated to use military force to retake the territories. However, it is hard to imagine a later Chinese government not revisiting the issue and refusing to accept no for an answer. Hong Kong, essentially stolen by the world’s then dominant imperial power from the enfeebled Qing Dynasty, was reclaimed by the People’s Republic of China to great fanfare in 1997. Even many ethnic Chinese around the world were proud to see what they conceived of as historic China rather than the ephemeral PRC overcome yet another humiliation inflicted by the West. Beijing promised to preserve the unique character of what became a Special Administrative Region for a half century. Hong Kong would be an anomaly, an outpost of liberty and tolerance in what remained a dictatorship capable of great violence, as in Tiananmen Square in 1989. And for years the PRC largely kept its bargain. A journalist friend said that in the early years Chinese authorities may have intervened less in his field than had British colonial administrators. To Beijing, unruly citizens staging sometimes violent demonstrations on behalf of principles barred in the mainland are a great embarrassment and even a threat. However, that world changed in 2014. And while Beijing is the source of growing restrictions, it is Hong Kong’s own activists—call them simultaneously impassioned and irresponsible—who accelerated a process that otherwise might have taken much longer. Misjudging their own leverage, democracy protestors set in motion forces that could result in political cataclysm. Wat is needed is mutual forbearance, which appears to be absent on both sides. Hong Kong always was an anomalous creature, combining territory seized by London with additional land leased for ninety-nine years. As a colony Hong Kong enjoyed liberal rather than democratic governance. That made it difficult for London to advocate a democratic transformation as it prepared to relinquish control. Moreover, Deng’s government would never have agreed to forgo its claim and the failure to agree would have created a dispute almost certain to explode violently at some future point. However, the autonomous Special Administrative Region muddled along successfully for years. There were moments of challenge: in 2003 mass demonstrations forced the SAR government to back down and shelve national security legislation which would have threatened civil liberties. However, Beijing generally exercised its influence discreetly and lightly. Until five years ago, anyway. Then the city’s government, always responsive to the PRC, planned to adjust election law with a small nod, but not much more, toward democracy. In the Basic Law drafted as part of the turnover agreement negotiated with the UK, Beijing promised that “the ultimate aim is the selection of the Chief Executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures.” So the city executive proposed allowing a citywide vote, while restricting nominations to candidates approved by a body dominated by PRC allies. That violated the spirit, though perhaps not the letter, of the Basic Law. But that was to be expected. No sane person could imagine the PRC establishing a full democracy in territory under its control. Beijing might be persuaded to open up the nominating process a bit but could never be convinced to sacrifice ultimate control. However, the Umbrella Revolution broke out. It consisted of nearly three months of youth-dominated protests that even closed public areas and roads for seventy-seven days. Had demonstrators been prepared to temper their demands, they might have won some concessions, but instead the activists insisted on full democracy; the government eventually broke up the protests and pushed forward with its plan. In the city legislature democracy advocates managed to block approval of any changes, leaving an even less democratic system. The protestors’ tactics divided residents, angering some sympathetic with their objectives. Further erosions in Hong Kong’s autonomy followed. For instance, in 2015 several publishers critical of the PRC were arrested/kidnapped by Chinese authorities, apparently violating SAR and international law. However, nothing was done in response. That the people of Hong Kong are ultimately ruled by Beijing may not be fair, but it is reality. And no outside power is going to come to their aid. American legislators might issue supportive statements, but Washington cannot—and won’t try to—force the PRC to grant Hong Kong rights not possessed by anyone else ruled by Beijing. To best protect residents’ freedoms, activists should pursue the strategy most likely to keep China disinterested in the territory’s internal affairs. Alas, filled with more passion than prudence, democracy campaigners did precisely the opposite. In 2016 several independence-minded legislative victors modified or augmented their oaths of office, primarily to highlight their contempt for the PRC. That set in motion an unsurprising if unexpected cascade of events. Their pledges were ruled invalid. After properly retaking their oaths Beijing applied pressure to block the members from taking their seats in the Legislative Council. Worse, the Xi government used the National People’s Congress to tighten the oath-taking requirement, forbidding a second attempt, and disqualify candidates who backed independence, which Beijing defined broadly. The city authorities then challenged the election of additional democracy activists and barred the candidacies of others. Unfortunately, popular sentiments were divided, since many residents objected to what looked to be juvenile publicity-seeking. Since then several Umbrella Revolution leaders were convicted and imprisoned. The legislature is considering legislation pushed by Beijing to criminalize showing disrespect to China’s national anthem (especially common at sporting events). And, most controversially, Chief Executive Carrie Lam advanced extradition legislation that was triggered by an incident involving Taiwan but would most obviously make it easier for the PRC to seize dissidents and critics. (Official safeguards obviously would not bind the Beijing authorities,) Her intentions might have been innocent but vast numbers of Hong Kongers did not trust her. A series of massive demonstrations reaching an estimated two million people, more than a quarter of the territory’s population, followed. The latter caused Lam to suspend the legislation. Protest leaders demanded that she withdraw the bill and resign. She refused and her advisers said that there would be no more concessions, a position undoubtedly cleared with Beijing. Demonstrations continued, including a violent takeover of the legislative chamber and later clashes—termed “riots” by Lam. These episodes are likely to spark a tough, if delayed, reaction, since the local government, with Beijing on its mind, has responded most sharply to protests. In fact, the police commissioner called a press conference to denounce the demonstrators’ “irresponsible behavior” and justify his force’s response. Residents’ frustrations are understandable, since their liberties are at great risk. Hong Kong’s unique status looks likely to disappear much sooner than the 2047 promised by the Deng government. However, the more radical people’s demands and violent their actions, the greater the acceleration of Beijing’s control. And the greater the cost the PRC will be willing to accept to enforce its will. In 1997 Hong Kong mattered greatly economically to China. The colony then was a critical access point for Western trade and investment to the PRC. The mainland was undeveloped; most cities were little sophisticated. Shanghai’s business community barely existed and Pudong’s commercial district was in its infancy. The territory offered assurance and protection for Western firms hesitant to trust an impoverished communist state, not long removed from mindless revolutionary violence and barely into what promised to be a lengthy reform process. Beijing could not afford to kill the golden goose. Today the PRC attracts trade and investment directly. Hong Kong’s share of China’s GDP has dropped dramatically. The SAR still matters, but an economic crisis there would not likely spark investment flight elsewhere in the PRC. For the Xi government politics increasingly is taking precedence over economics in Hong Kong. To the extent one can discern Chinese public attitudes toward the territory, it is that residents are spoiled, acting as if they are entitled to far more than what the vast majority of Chinese receive. One well-connected Chinese official with whom I spoke when visiting China earlier this month argued that the protests were inexplicable, since Hong Kongers had been afforded so many privileges. No doubt Beijing’s leadership feels the same, but even more so: unruly citizens staging sometimes violent demonstrations on behalf of principles barred in the mainland are a great embarrassment and even a threat. The PRC naturally blames others for unrest in Hong Kong: Foreign Minister Wang Yi said it was “highly alarming that Western forces have been stirring up trouble and provoking confrontation in an attempt to undermine Hong Kong’s peace and stability.” However, the Great Firewall has enough leaks that the truth will get through to many on the mainland. So far, Beijing has been willing to stand down when necessary. The Umbrella Revolution was allowed to run its course, but with no concessions granted. Once public passions eased, the Xi government is thought to have spurred the SAR’s increasingly tough response to democracy protestors, jailing them and barring their legislative candidacies. There were few political obstacles: Residents were divided and there were no mass protests. However, Lam’s extradition legislation triggered a political crisis highlighted by the PRC’s chief nightmare: mass popular demonstrations. Her suspension of the bill is believed to have been approved by the Xi government. The CCP is supposed to represent the people, so their demonstrations against the communist mainland are beyond embarrassing. Beijing wanted the protests defused as quickly as possible. But Xi and CCP cannot so easily ignore the latest violent actions. Officials who I talked to said they saw the violent takeover of the legislative chamber as a serious breakdown in law and order. And retaliation will meet less Hong Kong public resistance if, as in the past, such activities receive as much public criticism as support. Expect the protests to shrink and eventually be suppressed, with force if necessary. And the leaders to face prosecution after a “decent interval,” so to speak. Indeed, every new raucous round makes a tougher crackdown more likely. Beijing cannot justify democracy slightly abroad but not at home. The regime loses whenever it feels forced to grant concessions in response to public protests. Popular resistance undermines the PRC’s carefully cultivated international image; unruly events disrupt the order so desired and carefully established by the CCP. The Xi government’s greatest fear is the virus spreading to the mainland. Although the regime appears stable, no Chinese leaders want to repeat Tiananmen Square. Beijing still has good reason to avoid violence, which would further drive the young into more forceful opposition. Coercion in Hong Kong would end any hope of peaceful reunification with Taiwan. Although China views the SAR as a domestic matter, other nations would see the issue in light of the PRC’s international commitments accompanying Hong Kong’s transfer. Moreover, a violent crackdown would enhance already significant concerns over Chinese assertiveness regarding territorial issues in the South China Sea and elsewhere. The PRC’s neighbors likely would accelerate their efforts to constrain Beijing. Nevertheless, the Xi government clearly is concerned about its own authority and future. There are limits to the challenges to its rule that it is prepared to accept. The demonstrators’ turn toward violence risks crossing a red line. Passion is important in politics, but in a case where the stakes are so great prudence is even more vital. In the 1980s London avoided playing chicken with the lives of millions of Hong Kongers. That almost certainly was the right decision. Activists today should exercise similar restraint, rather than bet residents’ freedom on radical action. How best to preserve their liberties and for the longest time possible should be given the utmost priority, even if that means taking a more restrained approach when the stakes are lower and avoiding gratuitous offense with little upside. The West can help, but private criticism is likely to be more effective than public censure. Washington could inform Beijing that sacrificing Hong Kong’s unique attributes would end U.S. trade preferences for the territory. Asian and European states should similarly communicate the price that China would pay for abandoning its official commitments alongside the transfer. The business community should add its voice, warning the Xi government against triggering a commercial exodus from the SAR. The PRC is becoming a central challenge for American foreign policy. Hong Kong adds yet another complication. Washington must be realistic in recognizing what it can achieve to preserve liberty in the territory, just as the UK was realistic in what it could demand when returning Hong Kong to Beijing. Politics is the art of the possible, especially in such a complicated and sensitive case as Hong Kong. Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan.
  • 1984: China Edition    (Doug Bandow, 2019-07-21)
    Doug Bandow What to say when a Chinese colleague you admire tells you he is barred from traveling abroad since, as the border guard explained to him, the government believed he might “threaten national security.” This indignity followed a ban on his work. The injustice to him—an advocate of peaceful reform, not counterrevolutionary violence—is great. But the embarrassment for what purports to be a great power should be even greater. What does President Xi Jinping’s government so fear from someone who even when free to write was obscure in China and abroad? Could the slightest sign of dissent really destroy a putative global hegemon? Sadly, authoritarian injustice is not new to China. A better question is, when in that nation’s lengthy but tragic history have people been free? Only the form of oppression has changed. Closing the Chinese mind would be tragic at any time. But especially now, since the end of Maoism had offered hope of a new and better future. The Chinese people deserve the opportunity to think for themselves. Once a great empire, China turned inward, dominated by status and hierarchy. The regime later fell victim first to the Europeans and later to the Japanese, who occupied “concessions” and seized territory. In the early twentieth century the emperor was ousted, but much of the country fell under the control of competing warlords. The later authoritarian Nationalist government enjoyed only incomplete authority. Then the country was ravaged by a brutal invasion by Japan, followed by a barbarous civil war. A revolutionary communist regime took power in 1949 and proclaimed the founding of the People’s Republic of China. Dissent disappeared as the new rulers focused on consolidating control and punishing enemies, real and imagined. Then, in 1956, Chinese Communist Party Chairman Mao Zedong announced his Hundred Flowers Campaign. He explained: “The policy of letting a hundred flowers bloom and a hundred schools of thought contend is designed to promote the flourishing of the arts and the progress of science.” Alas, the leadership quickly reversed course after complaints flooded in. Critics suffered and the crackdown intensified as part of the Anti-Rightist Campaign. Mao then concocted the Great Leap Forward to transform the rural nation. Millions perished as even senior CCP officials were afraid to tell the chairman the truth about his disastrous policies. Eventually the Red Emperor was criticized, and he launched the Great Proletarian Cultural Revolution to destroy his enemies and restore his influence. Anyone suspected of harboring traditionalist or capitalist heresies faced humiliation, prison and even death. The madness, which triggered a veritable civil war in some regions, came to a full stop only after Mao’s death. The country had been ravaged. In 1981, after the new leader Deng Xiaoping shifted the PRC onto a reform course, the CCP officially concluded that the Cultural Revolution was “responsible for the most severe setback and the heaviest losses suffered by the Party, the country, and the people since the founding of the People’s Republic.” Market-oriented reforms resulted in a very different China. Not free, but substantially freer. Then the 1989 slaughter of pro-democracy protestors in Tiananmen Square and subsequent purge of political reformers within the Chinese leadership ended hopes of substantial political liberalization. Nevertheless, some space remained for dissenting thoughts. Over the years academic conferences were held and exchanges were arranged. Western books were published. Organizations formed to push reform. Journalists reported on official misdeeds. Censorship was tough but not complete. Although open opposition to the CCP was verboten, the Chinese leadership appeared to accept the need for an intellectual safety valve to help dissipate popular dissatisfaction. Many Americans, myself included, hoped that the PRC’s immersion in the international economic system would encourage further expansion of the freedom of Chinese to debate ideas and ultimately control their political future. Although the CCP showed no willingness to relax its control, intellectual space appeared to grow a bit and liberty expanded in some important areas, such as religion. Even if progress was slow, measured against the Maoist era China had liberalized significantly. Then President Xi Jinping took over in March 2013. His overriding objectives have been to assert China’s power internationally and the CCP’s authority internally. As such, he challenged the West and liberal ideas. To many American policymakers, the PRC’s increasingly aggressive foreign policy poses the greatest threat. China’s neighbors and even more distant countries around the world, including in Europe, also are nervous about Beijing’s intentions. However, the PRC threatens not fundamental American security, but long-standing influence in East Asia, a very different issue. Moreover, far from being a grandmaster of geopolitics, Xi blundered badly: China’s aggressive overreach and malign meddling encouraged its neighbors and others to cooperate against it. They should bear the greatest responsibility in constraining its behavior. In dealing with Xi’s government the Trump administration focused on economic issues. The PRC has taken advantage of open Western economies, but Washington needs to seek a better balance without blowing up a mutually advantageous relationship—and which creates powerful incentives for both sides to eschew military conflict. Although core security concerns require effective redress, the U.S. is not going to be able to fundamentally transform domestic Chinese economic policy. The trade deficit is a foolish distraction, which Beijing would much prefer to focus on. Then there is increasing assault on human rights. Xi tagged Western liberalism as a threat and insisted that constitution and law must be subservient to the CCP. He broke down internal party constraints, jailing former politburo members and initiating a broad, though politically-oriented, assault on corruption. He removed the two-term presidential limit, opening the possibility of life-time rule. And he wrote his “thoughts” into the constitution, a privilege previously accorded only Mao. President Xi used his steadily accumulating power to crush the slightest dissent. Cameras make the PRC an open surveillance state. A “social credit” system is being used to reward and punish citizens for their loyalty, or lack thereof, to the communist system; those who fail the test could be barred from purchasing air or train tickets. Academic exchanges have been curtailed, with higher approval required for universities to invite foreigners to events. NGOs have been closed and websites have been deactivated. Internet censorship has been tightened. Those voicing unacceptable thoughts on social media are admonished by a call or visit from security officials. Publications have been transformed or closed and the media has abandoned any attempt at independence. Oversight of book publishing has gone from the government to the CCP’s propaganda department. Religious persecution has risen as Beijing seeks to forcibly “Sinicize” different faiths. Party cells are being established in businesses and political education is being reinstated in schools. A million or more Uighurs and members of other groups have been forced into harsh reeducation camps. Beijing is slowly squeezing the civil and political freedoms long accorded residents of Hong Kong. Taken together, these actions suggest an extraordinary agenda, seemingly recreation of the sort of totalitarian state last seen under Mao. This is a dramatic retreat for the Chinese people, at least those not at the pinnacle of Chinese politics. People know everything they communicate on WeChat, the Chinese messaging service, is monitored. Foreign visitors take “burner” laptops and phones to protect against hacking. Visitors in some cities have been warned to exercise care in what they say in their hotel rooms. To build up their social credit people participate in exercises praising the CCP. People exhibit greater wariness in any conversation that veers toward sensitive subjects, which have multiplied under Xi. In short, the Chinese mind is closing. The harm to individuals is clear. The opportunity to learn, understand, judge, explore and decide is denied to most everyone. Acting on one’s beliefs in wide swaths of life is now verboten. At its worst, Xi’s system would turn Chinese citizens into government automatons, economically productive but intellectually empty. The cost to the Chinese system also is great, though harder to measure. Far from being confident and assured, the PRC’s leaders evidently believe they are at risk from even the most modest criticism. Sharply restricting people’s access to information and opportunity to debate may help shield the regime from attack, but probably increases popular cynicism. Repression also restricts access to information and inhibits creative thought, a likely drag on future economic and technological innovation. Such controls also encourage China’s best students, entrepreneurs, academics, and others to seek study, work, and refuge abroad. Moreover, every time the regime tightens the screws it sows the seeds of future disobedience, undermining the very party authority Xi desires to strengthen. For instance, use of Virtual Private Networks, or VPNs, is forbidden but widespread; college students, at least, are well aware of what they are officially forbidden to access. Moreover, censorship has moved far beyond the political. Beijing closed websites viewed as raunchy and in poor taste. Such creeping totalitarianism may well antagonize people who had reluctantly accommodated regime restraints on political discussion and activity. Xi’s attacks on religion are particularly problematic from the PRC’s perspective. There are more Christians than CCP members, demonstrating that religion meets a need the party cannot address. No serious believer will allow his or her faith to be “Sinicized.” Left alone, most Chinese Christians would be unthreatening citizens, focused on family, church, and community. Bar them from worshipping God as they believe necessary, and they will become active and hostile. In this way religious Chinese, whose faith transcends any claim by any CCP official, may pose the most serious long-term threat to communist hegemony. Yet repression will only inflame resistance. Closing the Chinese mind would be tragic at any time. But especially now, since the end of Maoism had offered hope of a new and better future. The Chinese people deserve the opportunity to think for themselves. Of course, despite the assumption that Xi is forever, his rule will end and his changes might not be permanent. He appears to be simultaneously on the summit and at the precipice. The PRC faces significant demographic, economic and political challenges. The ongoing economic slowdown may significantly complicate the task of Xi and the other residents of Zhongnanhai. At the same time the West’s ability to forcibly open the Chinese mind is minimal. Proposed sanctions would be a feel-good policy, unlikely to cause a rising power to yield. Nevertheless, Xi and other top officials should consider the instructive experiences of Hong Kong and Taiwan: Greater repression instills hatred rather than affection. In those lands Beijing’s attempts to suppress dissent increased people’s determination to protect their liberties and values. The PRC’s economic and military strength ensures a growing share of global leadership. However, its assault on intellectual freedom demonstrates Beijing is not yet fit to lead. Washington’s best policy remains engagement with China, avoiding economic war and military conflict that could devastate both sides. But Americans should remember the nature of the regime which they currently face. Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan.
  • It's Time to Expel Turkey From the Western Alliance    (Ted Galen Carpenter, 2019-07-19)
    Ted Galen Carpenter Ankara’s purchase of Russian S-400 missiles, despite the vehement objections of the United States and other NATO members, has led to new calls to expel Turkey from the alliance. Such calls have surfaced before, mostly in response to the country’s mounting authoritarianism under President Recep Tayyip Erdogan, but this time the anger is deeper and more widespread. Moreover, the complaints stress not only Ankara’s domestic misdeeds but also worries that NATO has a dangerously unreliable partner on security policy. Washington’s decision to oust Turkey from further participation in the F-35 fighter program certainly reflects U.S. uneasiness. The issue of Turkey’s autocratic behavior raises fundamental questions about NATO’s standards and priorities in the 21st century. During the Cold War, the alliance’s goals were straightforward. Deterring possible Soviet aggression was the primary mission. Securing greater unity among Western Europe’s democracies, preventing the re-nationalization of defenses and consolidating the United States’ security commitment to Europe followed close behind. Turkey no longer is a credible or desirable ally on the basis of either political values or security considerations. A strong internal commitment to democracy was desirable but not essential for membership. Indeed, one of the founding members, Portugal, was an outright autocracy under President António Salazar. When Turkey and Greece became members in 1952, standards of internal governance became even less rigorous. Turkey’s military was a key power behind the scenes until the beginning of the 21st century, despite the prevalence of ostensible civilian rule. Greece became a full-blown dictatorship for seven years when a cabal of colonels seized power in 1967. Yet there were no serious moves to ostracize, much less expel, either country. Maintaining the alliance’s security solidarity was deemed too important to tolerate such a disruption. In the post-Cold War era, though, Western leaders routinely portray NATO not merely as a military alliance but also as a league of democracies. Turkey’s mounting domestic repression has become an acute embarrassment. Erdogan has consolidated an alarming degree of power in the office of president, undermined the country’s once-independent judiciary, arranged for political cronies to purchase the most influential media outlets, and jailed hundreds of independent journalists and political opponents. He used an abortive military coup in July 2016 as a pretext to purge the military, the courts and the educational system of individuals he considered adversaries. Although elections continue to be held — including a crucial one last month in which voters chose an Erdogan opponent as the mayor of Istanbul — it is increasingly difficult to consider Turkey a genuine democracy. Even more worrisome, other NATO members are showing similar signs of authoritarianism, although not as far advanced. Viktor Orban, Hungary’s prime minister, has adopted a variety of measures to harass political opponents and weaken the independence of the country’s judiciary and media. He also has expressed personal admiration for autocratic political systems, such as those in Singapore, China and Russia. Poland’s right-wing government is taking steps to bring that country’s judiciary under partisan political control and stifle public criticism of regime policies. Such developments mean that Western leaders must determine whether NATO is purely a security organization or whether members also must abide by fundamental standards of human rights and democratic governance. Turkey indisputably is failing to live up to such standards, and the trends in both Hungary and Poland are alarming. NATO’s leaders cannot evade the question of the alliance’s identity much longer. Given Ankara’s external conduct, the other NATO members also cannot avoid the question of whether Turkey is a reasonably reliable security partner. The S-400 purchase was an ostentatious snub of alliance policy. Among other problems, it is unlikely that those weapons can be integrated into NATO’s overall air defenses. Moreover, the missile deal is simply the latest example of Erdogan’s growing rapprochement with Vladimir Putin’s government. It is increasingly doubtful, for example, whether Ankara will continue to support the array of economic sanctions that the Western powers imposed on Moscow to retaliate for Putin’s annexation of Crimea. Washington is reluctant to support Turkey’s expulsion from NATO or otherwise sever security ties with Ankara. U.S. leaders have long considered that country a linchpin on NATO’s southeastern flank and a vital player in the volatile Middle East. Continued U.S. access to the Incirlik air base also is seen as a crucial element of Washington’s force-projection capabilities throughout that region — an especially important consideration as U.S. relations with Iran continue to deteriorate. But while Incirlik is a valuable military asset, it is not irreplaceable. Washington also deploys powerful, carrier-based aircraft. Moreover, there is no certainty that Ankara would permit use of the base for any mission Washington wished to pursue. That uncertainty is likely to grow if U.S. and Turkish interests and policy preferences continue to diverge. In any case, access to Incirlik is not a sufficient reason for the United States to support retaining an authoritarian member in what purports to be a democratic alliance. It certainly is not an appropriate reason for retaining an unreliable, duplicitous security partner. Turkey no longer is a credible or desirable ally on the basis of either political values or security considerations. The United States and NATO need to part ways with Ankara. Ted Galen Carpenter is a senior fellow in defense and foreign policy studies at the Cato Institute.
  • Evidence Clearly Supports School Choice    (Adrian T. Moore, Corey A. DeAngelis, 2019-07-19)
    Adrian T. Moore and Corey A. DeAngelis Florida families are lucky. They have access to better education opportunities for their children through the Sunshine State’s five private school choice programs. And the most rigorous evidence suggests that these choices are good for students and their communities. Let’s take a look at the data. The best studies on the effects of school choice are “random assignment” where the kids who go to charters and who don’t are chosen at random from all applicants. The majority (10) of the sixteen such studies of private school choice programs find positive effects on student test scores overall or for subgroups. Only two of the 16 evaluations find negative effects on student test scores. And it’s worth noting that both of the studies finding negative effects on test scores evaluated the same group of students in the heavily regulated Louisiana Scholarship Program. The remaining four studies do not find statistically significant effects on students’ test scores. But studies finding no difference in test scores across sectors imply a positive taxpayer return-on-investment because voucher funding amounts are almost always below per pupil funding levels in traditional public schools. For instance, the most recent federal evaluation of the D.C. voucher program found that students achieved the same math and reading outcomes for about a third of the cost. But, of course, we shouldn’t only focus on the evidence linking school choice to standardized test scores. After all, researchers have found that test scores might be weak proxies for long-term success. It turns out that the non-test-score outcomes lean much more positive for school choice, perhaps because families care about much more than test scores. Nine rigorous studies link private school choice programs to “student attainment”—graduating from high school and going to college. Seven of the nine studies find positive effects overall or for subgroups of students. For example, two evaluations of the Florida Tax Credit Scholarship Program (FTC) have found positive effects on college enrollment. Two of the nine existing studies find no effects. Zero find negative effects. With school safety a major concern in Florida now, six rigorous studies link private school choice to student safety. Every single study finds statistically significant positive effects on safety. For example, the most recent federal evaluation of the D.C. voucher program found a 35 percent increase in the likelihood students reported being in “very safe” schools. But these results shouldn’t surprise us very much. Families care about their children’s safety more than anyone else. But that’s not all. The preponderance of the most rigorous evidence also suggests that private school choice improves civic outcomes, reduces crime, and leads to racial integration. What’s more - the evidence clearly shows the children left behind in traditional public schools also benefit from school choice competition that causes improvement in those schools. And all of these benefits come at lower costs to taxpayers. The evidence leans heavily in favor of educational freedom. Florida families are lucky to be able to choose schools that lead to better long-term outcomes for their children and the communities in which they reside. Adrian Moore is the Vice President at Reason Foundation and lives in Sarasota. Corey DeAngelis is the Director of School Choice at Reason Foundation.
  • How the Supreme Court Undermines Its Own Legitimacy    (Ilya Shapiro, 2019-07-18)
    Ilya Shapiro Another Supreme Court term is in the books. Although the radical right turn that liberals had feared after Justice Brett Kavanaugh’s bruising confirmation fight failed to materialize, there was still plenty of hand-wringing about judicial partisanship and ominous warnings about the Court’s “legitimacy” being in jeopardy. We’ve come to expect this sort of “working the refs” — most notoriously on display ahead of the Obamacare decision seven years ago — a cynical tactic that will continue so long as it appears to be an effective guilt trip against “institutionalist” judges such as Chief Justice John Roberts. Even as the term was less heated than most from the last decade, its final day still featured the latest chapter in Roberts’ neverending quest to preserve the Court’s reputation. The chief cast the key votes (and wrote the controlling opinions) in decisions to 1) remove federal courts from policing partisan gerrymandering, seen as a “conservative” ruling even though both parties do it; and 2) reject a question regarding citizenship for the 2020 Census, in theory allowing the Commerce Department to try again but in practice running out the clock on that maneuver. These moves came after Roberts, who upon Anthony Kennedy’s retirement became the median vote (even if Kavanaugh pipped him as the justice most often in the majority), faced a more-than-whisper campaign that allowing gerrymandering and, especially the census question, would damage the Supreme Court’s “legitimacy.” Joshua Geltzer, executive director of Georgetown’s Institute for Constitutional Advocacy and Protection, warned in a New York Times op-ed that the Court had to “get the census case right” — in other words, rule against the administration — “[f]or the sake of its own legitimacy.” UC Irvine law professor Richard Hasen, who had urged Roberts to “show in these cases that he is above politics,” later despaired that the census case had echoes of Bush v. Gore, the ur-legitimacy-buster where the justices “let politics get in the way of a fair decision.” Ultimately, it’s when justices think about legitimacy that they act most illegitimately. Then there was a meta-piece about the legitimacy of discussing the Court’s legitimacy published in the Washington Post by law professors Leah Litman, Joshua Matz, and Steve Vladeck. The trio argued that conservatives were “hypocritical” to insist that “only a weak-willed, weak-kneed judge would ever deviate from right-wing orthodoxy to preserve the court’s legitimacy” because “[t]he institutional legitimacy of the court is itself essential to the rule of law.” Legal conservatives in this telling are purely results-oriented and don’t hesitate to criticize when they don’t like a ruling. But there’s a difference between doctrinal disagreement, even of the sharp sort practiced by the late Justice Antonin Scalia, and accusing justices of “decisions allowing one side to manipulate the political process to their partisan, anti-democratic advantage.” To be fair, populist conservatives now assail “judicial supremacy,” particularly when it involves district courts’ nationwide injunctions. But their prescription is either for the Supreme Court to cut down on lower-court mischief — how the system is supposed to work — or for Congress to strip jurisdiction over certain types of claims. Or for the administration to become more aggressive in pushing back on judicial rulings. It’s largely an aspirational position, unless you also argue that judicial review is itself improper or that the executive branch should ignore court rulings, which nobody serious does (yet!) but would indeed signal a debate over legitimacy. In any case, modern legitimacy concerns can be traced to three key moments: Bush v. Gore(2000), the battle over Obamacare (2010-2012), and the early Trump era (2016-2018), meaning the combination of Mitch McConnell’s blocking of Merrick Garland and Donald Trump’s winning the presidency while losing the popular vote, thus getting to replace not just Scalia but the swing-vote Kennedy (with a reputationally damaged Kavanaugh at that). In the wake of Bush v. Gore, prominent figures in the progressive legal community rent their garments over the end of the rule of law. In January 2001, 585 law professors signed an ad in the New York Times that decried the decision, foreshadowing the nearly 1500 who signed a letter opposing Jeff Sessions’ nomination as attorney general 16 years later. Neal Katyal, one of Al Gore’s lawyers and later acting solicitor general under President Obama, described George W. Bush’s victory as the Supreme Court’s “immolation”: “By elevating politics over principle, the court revealed itself to be no better than any other institution or actor that touched this election.” Katyal also compared the decision to Dred Scott, in which the Court denied black people citizenship rights, as a time when the Court delegitimized itself while playing politics. Harvard law professor Alan Dershowitz, who wrote a book about the case, argued that the majority’s decision to “substitute their political judgment for that of the people threatens to undermine the moral authority of the high court for generations.” “Unless steps are taken to mitigate the damage inflicted on the Court by these five justices, the balance struck by our Constitution between popular democracy and judicial oligarchy will remain askew,” Dershowitz wrote, presaging today’s populists. Yale law professor Bruce Ackerman, in a piece titled “The Court Packs Itself,” built on Justice John Paul Stevens’ dissenting lament that Bush v. Gore had shaken “the nation’s confidence in the judge as an impartial guardian of the rule of law.” Ackerman suggested that Bush himself was an illegitimate president. “If such a president is allowed to fill the Court, he will be acting as an agent of the narrow right-wing majority that secured his victory in the first place,” so Congress should prevent Bush from appointing new justices like it did during Reconstruction by preventing Andrew Johnson from doing the same by cutting seats. In other words, in a refrain that should sound familiar from the 2020 presidential campaign, restructuring the Court, or preventing a Republican president from adding justices, was the only way to preserve legitimacy. The pushback to these attacks was encapsulated in a concise law review article by University of California, Berkeley law professor John Yoo that was appropriately entitled “In Defense of the Court’s Legitimacy.” Yoo argued that Bush v. Gore would not have a sustained impact on the Court’s legitimacy when viewed through the lenses of public opinion, history, and impartiality. First, it turns out that people’s confidence in the Court remained relatively stable, at least in the short term. Next, Yoo compared the moment to other times when the Court’s legitimacy was in doubt: the early Republic, the Dred Scott era, initial resistance to the New Deal, and the Warren Court’s fight against segregation. “Close inspection of these periods show that they bear little resemblance to Bush v. Gore. The defining characteristic of several of these periods was the persistent, central role of the Court in the political disputes of the day.” Finally, “only by acting in a manner that suggests that its decisions are the product of law rather than politics can the Court maintain its legitimacy.” Yoo noted that the Court wasn’t necessarily restrained here, but federal review of state election procedures isn’t unusual and, after all, Bush v. Gore didn’t “decide any substantive issues — on a par with abortion or privacy rights, for example — that call upon the Court to remain continually at the center of political controversy for years. Instead, the Court issued a fairly narrow decision in a one-of-a-kind case — the procedures to govern presidential election counts — that is not likely to reappear in our lifetimes.” More important than the specific analysis of Bush v. Gore, however — my point isn’t to rehash that debate — is Yoo’s exposition of factors to use in evaluating judicial legitimacy. 1. Public opinion. Because the Court’s authority derives wholly from people following its decisions, public opinion matters. The critic might use data to show that the public has less confidence in the Court, argue that the Court shouldn’t overturn democratically enacted laws, or suggest that justices appointed by a president who didn’t win the popular vote are illegitimate. These sorts of claims can be summed up as: “The Court didn’t rule my way, but the political winds are blowing in my favor, so democracy should win out.” 2. Historical precedent. In what previous circumstances has the Court’s legitimacy been in doubt? Except that when critics rely on historical precedent, they often compare current cases to past ones they feel were wrongly decided or to overturned cases that are so different from the one at hand that the comparison becomes hyperbolic at best, such as comparing the travel ban to Korematsu (Court approval of FDR’s internment of Japanese Americans), Bush v. Gore to Dred Scott, etc. 3. Impartiality. Those who say the Court fails this consideration accuse justices of partisanship, lawless ideology, or bias towards a particular kind of party (for example, big business). These accusations become more common when the Court issues opinions on divisive issues, or, increasingly, if the justices subscribe to a coherent legal philosophy such as originalism — that is, reading the Constitution for the original public meaning its text had when ratified. Arguments on these three grounds are found in every criticism of the Court’s legitimacy, and they’ve been increasingly used since 2001 not just after rulings, but ahead of them, to influence swing votes. Most notable in that regard, at least until Donald Trump came down his escalator, was the Obamacare litigation. The first lawsuit was filed the same day President Obama signed the Affordable Care Act into law in March 2010. At first, the challengers’ legal claims were treated by legal cognoscenti as frivolous sour grapes after losing a political fight. But when rulings started going against the government, the drumbeat of illegitimacy claims began. After a Virginia district court invalidated the individual mandate in January 2011, Yale’s Akhil Amar, who had also been a prominent critic of Bush v. Gore, compared Judge Roger Vinson to Justice Roger Taney, author of Dred Scott, in an op-ed that no longer appears on the L.A. Times’ website. Fast forward to the end of March 2012, when Supreme Court oral arguments did not go well for the government. The New Republic’s Jonathan Cohn argued explicitly that the “legitimacy of the Supreme Court” is at stake, singling out Justice Samuel Alito as being opposed to welfare programs on policy grounds while also appealing to “tens of millions of Americans” and that “nobody has said they want to stop government from providing universal access to health care.” Cohn was neither the last nor most prominent critic calling into question a potential ruling against Obamacare. President Obama himself said it would be “conservative judicial activism,” a sentiment Senate Judiciary Committee Chairman Pat Leahy repeated a month later. The Vermont Democrat further admonished John Roberts from the Senate floor: “I trust that he will be Chief Justice for all of us and that he has a strong institutional sense of the proper role of the judicial branch. It is the Supreme Court of the United States, not the Supreme Court of the Democratic Party or the Republican Party, not the Supreme Court of liberals or conservatives.” Of course, Roberts did switch his vote to preserve Obamacare in NFIB v. Sebelius, on a bizarre taxing-power theory that most people recognize was a “twistification,” his best attempt to uphold the law while not expanding Congress’s regulatory authority. Slate ’s David Franklinwrote that a decision to strike down the law “would have been received by the general public as yet more proof that the court is merely an extension of the nation’s polarized politics.” He also compared the chief to another Justice (Owen) Roberts, who made the “switch in time” in 1937 that started approving New Deal programs. The sad thing about the episode is that the chief justice didn’t have to do what he did to “save the Court.” For one thing, Obamacare was unpopular: particularly its individual mandate, which even a majority of Democrats thought was unconstitutional, according to a national Gallup poll taken a few months before the Court’s ruling. For another, Roberts only damaged his own reputation by making the move after those warnings from pundits and politicians. As Jan Crawford described in breaking the story about his switch, “Roberts pays attention to media coverage. As chief justice, he is keenly aware of his leadership role on the court, and he also is sensitive to how the court is perceived by the public. There were countless news articles in May warning of damage to the court — and to Roberts’ reputation — if the court were to strike down the mandate.” Now, I don’t think that impolitic pressure had much to do with his ultimate vote, but the American public probably does. Indeed, if Justice Kennedy had agreed with the liberals that there are no structural limits on federal power, there would have been disappointment, but it would have been understandable given the conventional left-right rubric. But to lose in an extra-legal way was a sucker punch, belying the idea that there’s a difference between law and politics and that the judiciary is an antimajoritarian check on the excesses of the political branches. Most important, the whole reason we care about the Court’s independence and integrity, its legitimacy, is so it can make the tough calls while letting the political chips fall where they may. Had the Court struck down Obamacare, it would have been just the sort of thing for which the Court needs its accrued gravitas. Instead, we got a strategic decision dressed up in legal robes, judicially enacting a new law. In refraining from making the sort of balls-and-strikes call he’s frequently invoked, Roberts actually decreased respect for the Court, thereby showing why judges shouldn’t play politics. And so we come to the Trump era, where nothing the administration does is seen as legitimate by a large segment of the population, but in the Supreme Court context especially because of the Merrick Garland saga. It’s not surprising that last fall, The Nation published an article asserting “How the Supreme Court Lost Its Legitimacy,” but that’s hardly different from one called “The Supreme Court’s Legitimacy Crisis” in the New York Times. The latter, by Michael Tomasky, argued for the double-illegitimacy of Justices Gorsuch and Kavanaugh because they were nominated by a president who didn’t win the popular vote and confirmed by senators who collectively won fewer votes in their last election than those who voted against them. Sen. Dianne Feinstein, the Judiciary Committee’s ranking member, went on to tweet that Justice Kavanaugh’s confirmation “undermines the legitimacy of the Supreme Court.” Former attorney general Eric Holder likewise tweeted: “The legitimacy of the Supreme Court can justifiably be questioned.” Maybe the Democratic presidential candidates will lead a massive resistance? At least the quant jocks at 538 merely asked the question: “Is the Supreme Court Facing a Legitimacy Crisis?” Their conclusion was that, while the Supreme Court is still trusted more than other institutions, that trust is declining, as are the margins by which justices are confirmed. So what are we to make of all this? Is it simply that where you stand on the question of judicial legitimacy now also parallels where you sit politically? In two words: pretty much. It’s easy to see why people are attacking the Court’s legitimacy when we apply Yoo’s considerations, when big issues are on the docket and we have the culmination of trends whereby divergent judicial theories map onto ideologically sorted parties (something that Justice Sonia Sotomayor noted in an appearance at Princeton last October). And that goes as well for the related debate over stare decisis, the extent to which the Court should refrain from overturning erroneous precedent for legal-stability reasons. For all the gnashing of teeth over Citizens United or Janus, is there any doubt that a progressive majority would act the same way toward conservative shibboleths? Anyway, that’s all overblown. As Adam Liptak and Alicia Parlapiano wrote in their term wrap-up for the New York Times: “When [the Court] overruled precedents, it was in technical cases that attracted little attention.” Moreover, Case Western law professor Jonathan Adler has shown that the Roberts Court overturns precedents at a significantly lower rate than its predecessors. In the end, the only measure of the Court’s legitimacy that matters is not the “playing the refs” nonsense we see each spring but the extent to which it maintains (or rebalances) our constitutional order. As Indiana law professor Luis Fuentes-Rohwer wrote last year in “Taking Judicial Legitimacy Seriously,” “judicial legitimacy is a trope deployed by judges in the pursuit of specific outcomes … a warning about the future and how a judicial outcome may be received, yet a warning that operates more as a boogeyman. It is a criticism, a call for restraint, yet lacking in empirical support.” “The man on the street does not care that the Court appears to side with one party over the other,” Fuentes-Rohwer (no conservative) explained in an update of the Yoo article. “He only cares that the Court follows a principled process.” The reason we have these legitimacy disputes isn’t because the Court is partisan but because it can’t be divorced from the larger political scene, and because sometimes justices seem to make decisions not based on their legal principles but for strategic purposes. The public can see through that. Ultimately, it’s when justices think about legitimacy that they act most illegitimately. Ilya Shapiro is director of the Robert A. Levy Center for Constitutional Studies at the Cato Institute. He also contributes to the Washington Examiner ‘s Beltway Confidential blog.


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