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Ronald Reagan’s legacy-defining tax cuts passed through Congress in 1981 and 1986 with broad Democratic support. The Tax Cuts and Jobs Act of 2017 on the other hand, failed to garner a single Democratic vote before President Trump signed it into law. In the latter case, the lack of concomitant spending cuts might allow one to frame this opposition as an act of fiscal prudence on the part of the Democrats. But the counterfactual - that if the legislation had also included a scaling back of Medicare benefits and a partial Social Security privatization then the Democrats would have leaped on board - strains credulity.

More likely, Democratic opposition is motivated, at least in part, by an increasingly ideological commitment to a European style social welfare state. Many Western European governments collect 40% or more of their GDP in taxes, while the United States collects just over half of that figure. In urging us to emulate the European model, the progressive left wing of the Democratic party not only downplays the perverse economic effects of higher taxes, they have taken to morally justifying progressive taxation as the “fair share” owed to society by those who have been successful in the private sector, on account of the government-provided goods and services which undoubtedly necessary to that success.

In 2011, U.S. Senate candidate Elizabeth Warren, now among the front-runners for the 2020 Democratic presidential nomination, made this argument explicitly during a campaign event:

I hear all this, you know, ‘Well, this is class warfare, this is whatever.’ No. There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.

In a 2012 campaign speech, President Obama reinforced this sentiment:

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business – you didn’t build that.

These remarks no doubt build upon a foundation of truth: that some basic degree of public goods provision might be necessary to generate the conditions within which the private sector can thrive. But beyond illuminating a very basic economics insight, this line of argumentation falls far short of its goal: to justify progressive taxation as a part of the “underlying social contract” whereby private actors reimburse the government for the goods and services which they utilized en route to their success.

A Tale of Two Commuters

Imagine two commuters living equidistant from a downtown city law firm. One is an attorney at the firm, the other is her secretary. Each drives to work, thereby obtaining some value from the use of public roads. Each, in turn, imposes a roughly equal amount of depreciation on those roads, the cost of which must be defrayed via taxes. But what about the value “built” by each of them once they reach their office?

The attorney will almost certainly command a far higher salary than will her secretary. Insofar as these salaries emerge from a competitive market for labor, they reflect, at least within an order of magnitude, the respective marginal products of these commuters’ labor. But, crucially, the attorney’s higher salary is not attributable to a greater consumption of public goods. She traversed the same roads on the way to work as did her secretary. The two of them rely on the same police and fire departments. They may have even attended the same local, public K-12 schools. The attorney’s higher salary is instead attributable to her command over a set of skills and human capital which are more scarce - and more valuable - on the market than are secretarial skills. The salary differential, and the difference in productivity it reflects, cannot be explained by differential public goods consumption. In each case, some degree of public goods and services may be a necessary complement to these employees’ labor, but they are not sufficient to explain their differential success in earning taxable income. In what way is society justified in expropriating a greater percentage of the attorney’s income because her labor is more productive, and therefore commands a higher salary?

Imagine, next, two rival international shipping companies. They operate an identical tonnage of merchant ships. They make equal use of publicly subsidized port facilities. They make equal use of the protection of the U.S. Coast Guard, and each benefits equally from the placidity of international shipping lanes due to the presence of the U.S. Navy.

Company A has cultivated an efficient corporate culture: its CEO has designed an innovative process for acquiring talented managers, who in turn are capable of literally running a tight ship. Embezzlement and misfeasance are minimized. Company B, on the other hand, is dysfunctional at every level of analysis. The incompetence of its senior executives percolates into inept middle-management, who in turn fail to properly motivate their employees. For every ton of merchandise shipped, each relying to the same degree on the aforementioned public goods, Company B generates less taxable profit than Company A. But Company A’s greater tax burden cannot be attributable to greater public goods consumption by Company A. It is instead attributable to smarter management, more innovative practices, and an overall more functional corporate culture. In what way do Company A’s unique characteristics which make it competitive and profitable justify extracting from it a larger tax burden? These are not society’s contributions, for which the government is entitled to collect additional reimbursement.

The logic of “you didn’t build that” leads unavoidably to the following conclusion: few forms of proportional taxation, and certainly no progressive marginal rates, can be justified on the basis of public goods consumption. Not only does this line of reasoning fail in principle, but it would be utterly compromised during the actual practice of determining fiscal policy. Even if a wise philosopher-king were able to determine the precise percentage of a wealthy individual or a successful firm’s income which was attributable to their use of public goods, our Congress falls far short of that Platonic paragon. The statutory tax rates which emerge from the political process are a function of just that - politics. They reflect the relative balance of power at a moment in time between pro-tax and anti-tax constituencies, imperfectly filtered through their representatives and adulterated by a nauseating amount of interest-group influence. To expect them to reflect, instead, the amount of a person’s wealth which society helped “build” is simply fantasy.

Last year’s Tax Cuts and Jobs Act created “Opportunity Zones,” which are neighborhoods chosen by politicians to receive special tax breaks. The Wall Street Journal recently published on an op-ed and a news story on O-Zones. Here is my unpublished response:  

Steve Glickman provided lobbyist talking points in “Opportunity Is Coming to a City Near You” (Oct. 24), but the reality of the new “opportunity zones” was reported by Peter Grant the same day in “Tax-Break Zones Lure Buyers.”

Grant’s article indicates that the 8,700 tax-favored O-Zones were a get-rich-quick bonanza for current landowners as the tax breaks were rapidly capitalized in prices. Many thousands of landowners saw their property values jump by as much as 50 percent, but that means that many thousands of other landowners just outside the O-Zones got the shaft. Politicians have drawn lines down streets in cities across the nation bestowing wealth to people on one side and bypassing people on the other.

The whole exercise is unseemly and distortionary, and it has set in motion a lobbying frenzy for years to come as landowners near O-Zones will demand that the lines be redrawn. The get-rich bonanza for O-Zone lobbyists has just begun.

_____________________

Here are other commentaries on the new zones:

www.downsizinggovernment.org/opportunity-zones-fuel-corruption

www.downsizinggovernment.org/opportunity-zones-will-help-connected-developers-not-poor

www.downsizinggovernment.org/o-zones-fragment-america

www.cato.org/blog/opportunity-zones-whom

 

One hundred years ago Sunday, at the eleventh hour of the eleventh day of the eleventh month of 1918, the bloodiest war in history ended. In the New Yorker, historian Adam Hochschild writes about the senseless beginning of the war in an “epic chain of blunders, accusations, and ultimatums” and about its senseless end: “In the five weeks since the Germans first requested peace negotiations, half a million casualties had been added to the war’s toll…. Worse yet, British, French, and American commanders made certain that the bloodshed continued at full pitch for six hours after the Armistice had been signed [at 5 a.m., with the news immediately radioed and telephoned to commanders on both sides].”

Cato senior fellow and historian Jim Powell wrote about the blunders and consequences of World War I in his book Wilson’s War: How Woodrow Wilson’s Great Blunder Led to Hitler, Lenin, Stalin, and World War IIHe summarized his argument in Cato Policy Report four years ago:

World War I was probably history’s worst catastrophe, and U.S. President Woodrow Wilson was substantially responsible for unintended consequences of the war that played out in Germany and Russia, contributing to the rise of totalitarian regimes and another world war. 

Indeed World War I was a catastrophe, a foolish and unnecessary war, a war of European potentates that both England and the United States could have stayed out of but that became indeed a World War, the Great War. In our own country the war gave us economic planning, conscription, nationalization of the railroads, a sedition act, confiscatory income tax rates, and prohibition. Internationally World War I and its conclusion led directly to the Bolshevik revolution, the rise of National Socialism, World War II, and the Cold War. 

On this weekend as we celebrate the end of this tragedy we should mourn those who went to war, and we should resolve not to risk American lives in the future except when our vital national interests are at stake.

Welcome to the Defense Download! This new round-up is intended to highlight what we at the Cato Institute are keeping tabs on in the world of defense politics every week. The three-to-five trending stories will vary depending on the news cycle, what policymakers are talking about, and will pull from all sides of the political spectrum. If you would like to recieve more frequent updates on what I’m reading, writing, and listening to—you can follow me on Twitter via @CDDorminey.  

  1. Navy can’t build fast enough to reach 355 in time. So how will it get there?,” David Thornton. The Navy’s 30-year shipbuilding plan calls for an increase to a 355-ship force—but it seems that the plan misjudged the shipbuilding industry’s capacity to produce ships on the service’s desired timeline. Simply put, the 355-ship Navy will either require an adjustment to the plan with a slower production model, or the government will have to expand shipbuilding capacity (which is neither cheap nor easy). 
  2. Nuclear modernization programs could face renewed scrutiny in Democrat-controlled House,” Rachel Cohen. When the election on Tuesday flipping the House, it created a valuable opportunity for Democrats to exert influence on the defense budget—including the long-term nuclear modernization program. 
  3. Saudi Arabia’s War in Yemen. I want to bring your attention to this is upcoming event hosted by the Cato Institute featuring Rep. Ro Khanna, Kate Kizer from Win Without War, Scott Paul from Oxfam America, and myself—with John Glaser from Cato moderating. Register via the link to join us on December 7th. 

The other day, I wrote about the disadvantages of state and local governments issuing general obligation debt. Those governments currently have more than $3 trillion in overall debt outstanding. Government borrowing enriches financial firms, encourages corruption, and magnifies the ultimate tax burden that citizens will bear for the related spending.

It is prudent and practical for states to operate with very little debt, as Idaho, Wyoming, and a few other states have shown.

Here is an inspiring editorial in The Gazette, published in Janesville, Wisconsin, home of outgoing House Speaker Paul Ryan. Walworth County is near Janesville.

Local government officials everywhere take note: Walworth County is proving you can run a government and undertake capital projects without carrying any debt.

The concept—saving money instead of issuing bonds to pay for something you need—is radical in our debt-happy society.

Walworth County has been debt free since March, despite the construction of a $24 million health and human services building.

Taxpayers will be rewarded with a 2.8 percent drop in the tax levy—no small trick at a time of rising inflation and interest rates.

The county’s recent decision to pay off $9.1 million in debt while resisting the temptation to borrow is particularly praiseworthy. As a result, Walworth County might be the only debt-free county in Wisconsin.

Think about the significance of Walworth County’s accomplishment: It is spending within its means while saving money in anticipation of future needs.

It’s unheard of, for example, for a school district to save the money it will need for a new school. School district referendums calling for more bonding are as predictable as they are numerous.

Many of these referendums pass because taxpayers don’t realize they’re paying far more than the advertised price for a project, as Chris Edwards, director of tax policy studies at the Cato Institute, noted in his Monday column. He describes bonding as a hidden tax.

If Walworth County had decided to issue bonds to pay for its health and human services building (assuming a 4 percent interest rate over 30 years), taxpayers would have had to fork over nearly $23 million in interest, including an estimated $550,000 in underwriting and advisory fees, according to a municipal bond calculator at the website for Municipal Capital Markets Group.

By planning ahead, Walworth County is saving taxpayers millions of dollars.

Any unit of government wanting to follow Walworth County’s lead needs to be forewarned: Saving for a future project requires discipline and clear communication with voters. Many of the fiscal challenges this nation faces are a result of politicians viewing the world in one- or two-year increments, from one election to the next. Unfortunately, politicians don’t plan to be in office when the bills come due and the financial wreckage becomes apparent.

But once in a while, politicians surprise us by exercising restraint. When that happens, like a comet’s orbit approaching the sun, we should all take notice. Kudos to Walworth County for demonstrating government can function debt free.

 

A split Congress could affect Donald Trump’s negotiating strategy vis-à-vis North Korea, but the legislative branch’s impact will mostly come at the margins of U.S. policy. Trump’s control over the two major levers of U.S. pressure on North Korea—sanctions implementation and the military—means that he has significant discretion over negotiations with Pyongyang. By controlling the sources of U.S. pressure, Trump can adjust either and impact negotiations with little concern for what Congress thinks or wants. Congress does have the ability to prevent either extreme outcome of war or peace, but neither of these seem likely given the current conditions on the peninsula.

The two primary ways the new Congress could influence North Korea policy is through investigations and appropriations. House investigations could absorb much of Trump’s time and political capital, making it harder for him to find the time to negotiate with North Korea. Appropriations battles between the White House and Capitol Hill could restrict the former’s latitude in talks with Pyongyang, but any potential restrictions are unlikely to suffocate the president’s efforts. For better or worse, the executive branch in general and Trump in particular will be able to deal with North Korea as they see fit, even with a Democrat-controlled House.

An additional but very uncertain way that the midterms could affect U.S. policy toward North Korea is by creating a window of opportunity for both Trump and Kim Jong Un. If Trump comes away from the midterms thinking his prospects for re-election are grim, then he may push harder to break the current impasse in negotiations in order score a major foreign policy win that he can point to on the campaign trail. Likewise, Kim could take a similar lesson from the midterms and try to maximize diplomatic gains while Trump is still in the White House if Kim thinks a new president would want to return to a “maximum pressure”-like policy. There is no guarantee that the two leaders will have this interpretation, however, and even if they did they may decide that continued engagement is not worthwhile.

 

In this election, journalists following the immigration beat will focus on the outcomes of individual races. Dave Brat, the Virginia nativist whose defeat of House Majority Leader Eric Cantor in 2014 doomed hopes of immigration reform, lost in a previously safe GOP seat. Democrats blew out Corey Stewart in Virginia and Lou Barletta in Pennsylvania, the most anti-immigrant Senate candidates. Kris Kobach, the author of state anti-immigrant laws across the country, cost Republicans the governorship in Kansas.

But the two most important outcomes of this election are in the big picture. First, nativists have officially squandered their last, best chance to restrict legal immigration. There may never be another moment like the one in 2017 and 2018, where the House, Senate, and White House were all controlled by Republicans with nativist agendas. They held multiple votes in the House and Senate on various measures to make legal immigration cuts, and all their efforts went down in flames.

The second outcome is even more important: the House of Representatives is now the most pro-immigrant that it has been since the 19th century. Current House Democrats would not only pass the broadest legalization in the history of the United States—they also would greatly expand legal immigration. No elected House Democrat is opposed to legalization, even if they would want it paired with some enforcement measures. 

The last Democratic House from 2007 to 2010 did pass the Dream Act for a very small portion of the illegal population—only a subset of the Dreamers qualified—but it didn’t even reach a majority of the House (216, not 218, voted yes). House leadership lost 38 “blue dog” Democrats and got the votes of just five Republicans. Today, the Dream Act would easily pass the House with more than a dozen Republicans voting for it, even after moderate-Republican losses.

The last Democratic-majority House could not—and did not—pass any comprehensive immigration reform bill that would offer a path to citizenship for most illegal residents or expand legal immigration. From 1995 to 2006, the GOP majority bookended its tenure by passing the two harshest immigration enforcement bills since the 1920s: the Sensenbrenner enforcement bill in 2005 and the Illegal Immigration Reform and Immigrant Responsibility Act in 1996.

Except for one Congress from 1933 to 1994 Democrats controlled the House and during that time the House did pass several bipartisan immigration bills, a mix of expansive and restrictive measures. The Immigration Act of 1990 expanded legal immigration, while hiring more Border Patrol Agents. The Immigration Reform and Control Act of 1986 provided for amnesty, but it was generally seen as a restrictive measure (which is why most of the Hispanic Caucus voted against it) because it made it illegal to hire someone without a valid photo ID, which naturally led to discrimination against Hispanic workers.

Prior to that, a Democratic-majority House passed the Refugee Act of 1980 which increased legal immigration for refugees. The Cuban Adjustment Act of 1966 legalized the status of Cubans who made it to the United States, and the Immigration Act of 1965 replaced the old national origin quotas and expanded legal immigration (though more than anyone expected at the time). Before 1965, House Democrats did only very slight liberalizations, ending the Asiatic Bar Zone and allowing some Jewish refugees to resettle in the United States. They mostly maintained the restrictive system created by Republicans in the 1920s.

House Democrats today would not just protect every expansive immigration measure enacted from 1965 to 1990—they would greatly build upon them if they could reasonably expect them to be signed into law. The starting place for reform for them is the 2013 comprehensive immigration reform bill, H.R. 15, a version of which the Senate had passed. At the time, every House Democrat except two cosponsored the legislation. The bill would legalize more than 8 million illegal residents and at least double permanent legal immigration.

However, the bill also had some provisions that are unlikely to remain. In particular, while it expanded immigration overall, it ended the Diversity Visa Lottery and cut so-called “chain migration,” two issues that President Trump has championed. Because the lottery disproportionately benefits African immigrants—who Trump reportedly referred to as coming from “shithole” countries—many Democrats are now opposed to repealing it as a matter of principle.

Rather than cutting family-sponsored immigration, Democrats will seek to expand it. The legalization provisions were also very restrictive, covering just three quarters of the illegal resident population. Democrats would certainly go further now. Especially after seeing how their colleagues did in this midterm, the remaining moderate Republicans would likely sign onto these measures if tied to stricter enforcement.

As importantly, this House will have the backing of the most pro-immigration general public in recorded history. More Americans oppose cuts to immigration and favor expanded immigration than at any point since at least 1965. Because the Senate is still in GOP hands, however, Democrats will have to focus on chipping away at the numerous legal immigration restrictions and enforcement measures that the Trump administration has implemented or has plans to implement. Republicans would be wise to work with them in a bipartisan manner.

President Trump has repeatedly called for an immigration system like Canada’s. Unlike the president’s plans for immigration, however, the Canadian government announced last week that it would increase legal immigration by 13 percent from 310,000 in 2018 to 350,000 new legal permanent residents in 2021. This amounts to 0.9 percent of its 2021 population. By contrast, the United States allowed a rate of 0.3 percent of its population in 2017.

Figure 1 provides the breakdown of the Canadian and U.S. immigration rates right now by type of immigration. In 2017, Canada permitted virtually the exact same rate of family-sponsored immigration, double the rate of humanitarian immigration, and 11 times the rate of economic-focused immigration as the United States did. If the U.S. rate remains steady as it has, America will fall further behind in the international competition for labor. 

Legal Immigration to Canada and the U.S.
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Despite the overwhelming focus on economic-based immigration, Canadian immigrants are not more educated than U.S. immigrants, as I’ve described before. Canada is also not unusual in having a higher immigration rate. As I’ve written before, most other wealthy countries have higher immigration rates than the United States does. 

Unless the United States adjusts its outdated immigration quotas, these disparities will only increase. Yet President Trump has endorsed proposals to cut legal immigration in half, meaning that Canada would be allowing in on a per-capita basis five times more immigration than the United States. Indeed, every proposal supported by the president so far has amounted to reduction in legal immigration. Cutting legal immigration would harm economic growth and make America less competitive economically.

If Congress wants to emulate Canada, it would double humanitarian immigration and increase economic-focused immigration by tenfold or more, while not cutting family-sponsored immigration as the president has suggested

On November 2 the Food and Drug Administration announced the approval of Dsuvia, a sublingual tablet containing the powerful fentanyl analog, sufentanil. Sufentanil has been used for years in the hospital setting, primarily in intravenous form for anesthesia. It is roughly 5 to 10 times more potent than fentanyl, and thus has a significant overdose potential. The FDA reached this decision following a 10-3 vote in favor of the drug’s approval by the Anesthetic and Analgesia Drug Products Advisory Committee (AADPAC), based on data from multicenter trials. It was not approved for outpatient use, but for use only in medically supervised settings, and may be of particular benefit to military health care practitioners.

FDA Commissioner Gottlieb’s announcement stated:

Dsuvia, which was previously approved by the European Medicines Agency in July under the brand name Dzuveo, has some unique features in that the drug is delivered in a stable form that makes it ideally suited for certain special circumstances where patients may not be able to swallow oral medication, and where access to intravenous pain relief is not possible. This includes potential uses on the battlefield. For this reason, the Department of Defense (DoD) worked closely with the sponsor on the development of this new medicine. This opioid formulation, along with Dsuvia’s unique delivery device, was a priority medical product for the Pentagon because it fills a specific and important, but limited, unmet medical need in treating our nation’s soldiers on the battlefield. The involvement and needs of the DoD in treating soldiers on the battlefield were discussed by the advisory committee.

The announcement was met with criticism from numerous quarters, including Anesthesiology Professor Raeford Brown of the University of Kentucky, who chairs the AADPAC, Senator Edward Markey (D-MA), and the advocacy group Public Citizen. They questioned the need for the development of a new and potent opioid in the presence of the opioid overdose crisis, and raised concerns about the potential for the drug’s diversion to the black market for non-medical users. These objections were trumpeted by the media.

The concerns raised by critics are unfounded. According to the Drug Enforcement Administration, most fentanyl and fentanyl analogs found on the streets are in an illicit powdered form, made in labs overseas and smuggled into the US via the mail, Fedex, and UPS, or using Mexican drug cartel infrastructure. While much of it is mixed in with heroin or cocaine, many dealers own pill presses and press the powder into counterfeit oxycodone or hydrocodone pills that are sold to unsuspecting nonmedical users. That’s how the artist known as Prince died. He liked to use Vicodin (hydrocodone) recreationally. Records show he never obtained any prescriptions from doctors. His dealer sold him what was believed to be Vicodin but was actually counterfeit and made from fentanyl, which caused his overdose death.

Recrudescent opiophobia now evokes positions held at the zenith of President Nixon’s war on drugs. The fact remains that opioids can be highly effective in treating pain, especially in the acute setting. Hysteria-driven policy should not stifle innovations in this or other forms of pain management.

Commissioner Gottlieb also stated in the FDA announcement:

We owe an answer to patients with medical pain, and the innovators who take risks to develop products to help address their needs. We owe it to Americans who want the FDA to do our part to help end one of the biggest addiction crises of modern times, while we carefully balance these grave risks against patient needs.

Commissioner Gottlieb made the right call here.

Maine Governor Paul LePage announced that he will be moving to Florida at the end of his term.

LePage is a staunch fiscal conservative and has received an “A” on the past three Cato fiscal policy report cards. He fought for spending and tax cuts throughout his tenure, and he often decried the negative effects of big government.

Why is LePage moving to Florida? One of the reasons is that Florida has lower taxes than Maine:

I’ll tell you very, very simply: I have a house in Florida. I will pay no income tax and the house in Florida’s property taxes are $2,000 less than we were paying in Boothbay … At my age, why wouldn’t you conserve your resources and spend it on family (rather) than spend it on taxes?

Why indeed.

Florida has the most net in-migration of any state in the nation, as discussed in this study. It has no income or estate tax. Its state and local tax burden is much lower than the burdens in the Northeast. Maine is high-tax state, but New York is even worse. I wonder whether Governor Andrew Cuomo is considering Florida when he retires?

Relative to personal income, Florida runs its government at just half the cost of New York’s. Half the cost! That is like a Honda dealer trying to sell the Accord for $50,000 while the Toyota dealer across the street has the Camry for $25,000. It wouldn’t make any sense.

Perhaps the 2017 Tax Cuts and Jobs Act is on Paul LePage’s mind. Because of the law, millions of households will become more sensitive to tax differences between the states. That may prompt an increased outflow of people from higher-tax to lower-tax states.

How should high-tax states respond to the outflows? It’s straightforward. They should run leaner governments with more efficient services to give taxpayers more value for their money. The Accord may have some features that the Camry doesn’t, but that would not double the cost.

WCBS NewsRadio New York reports

Two New York lawmakers are working to draft a bill that would propose a social media check before a gun purchase.

Brooklyn Borough President Eric Adams and state Sen. Kevin Palmer’s proposal would allow authorities to review three years of social media history and one year of internet search history of any person seeking to purchase a firearm.

True, “free speech and gun rights complaints are likely to come up” – no kidding! – but Adams says it’s a way to identify persons who “not suitable to hold and possess a firearm.” 

The two are hoping to identify any hate speech on social media profiles, which are often revealed only after someone is arrested in a mass shooting.

The only way to make this proposal better – by which I mean worse – would be to arrange for New York to quarter troops on the homes of applicants with especially bad social media postings. That way the sponsors could achieve a straight flush of Bill of Rights violations.

Days before the 2018 midterms, 60% of Americans say that health care is very or extremely important to how they plan to vote in this year’s elections, according to a new Cato 2018 Health Care Survey of 2,498 Americans. These numbers are driven primarily by Democratic voters with 86% who say this issue is especially important to them—in fact, 56% say the issue is “extremely important” to them. Independent (33%) and Republican voters (21%) are far less likely to say this is an “extremely” crucial issue for their vote this Tuesday.

 FIND FULL POLL RESULTS HERE

These results are consistent with analysis of 2018 campaign ads, which finds Democrats have made healthcare the centerpiece of their case to voters. About half of Democratic ads have featured health care issues compared to less than a third of Republican ads. At the core of the debate is what to do with pre-existing condition regulations embedded in the Affordable Care Act (ACA) that prevent health insurers from denying coverage or charging higher premiums to people with pre-existing conditions. Much of the public debate centered on pre-existing condition protections assume that these regulations enjoy widespread public support. However, these protections lose public support when voters learn about their costs, finds the Cato 2018 Health Care Survey.

The survey first replicated the results from myriad other surveys finding a majority (65%) of Americans favor regulations that prohibit insurance companies from refusing to cover, or charging higher premiums to, people with pre-existing conditions, while 32% oppose. However, support plummets when Americans are faced with likely consequences of these regulations. 

Support drops 20 points to 44% in favor and 51% opposed if pre-existing condition protections limited people’s access to medical tests and treatments. Similarly, 44% would favor and 50% would oppose if these regulations harmed the delivery of high-quality health care. Support drops 18 points to 47% in favor and 48% opposed if these regulations limited people’s access to top-rated medical facilities and treatment centers. Some may dismiss these potential costs as improbable; however, research finds these are likely consequences from the incentives these regulations create for the health care industry. It is for this reason that we investigate how the public evaluates these costs.

Compared to quality reductions, Americans are more prepared to pay higher taxes or premiums in exchange for keeping regulations that prevent insurers from denying coverage or charger higher premiums to people with pre-existing conditions. About half (51%) would favor and 44% oppose if these regulations raised taxes and 49% would favor and 47% would oppose if they drove up premiums. 

These results follow a familiar pattern identified in the Cato 2017 Health Care Survey that asked about each of these pre-existing condition protections separately. However, in this year’s survey we improve the desirability of these regulations by offering them as a bundle. Even still, when faced with the realistic costs of these mandates, public support plummets. 

Taking a look among partisans, we find that without any mention of costs, 83% of Democrats, 55% of independents, and 52% of Republicans initially support pre-existing condition protections. However, independents and Republicans turn against these regulations if they increase the cost of health insurance (66%, 55%), reduce access to medical tests and treatments (59%, 58%), harm the quality of health care people receive (57%, 55%), reduce access to top-rated medical facilities and treatment centers (57%, 55%), or increase taxes (57%, 57%). Democrats are less swayed by these trade-offs; however, they are least willing to sacrifice the quality of health care in exchange for keeping the pre-existing condition regulations (42%). Instead, majorities of Democrats are willing to have less access to medical tests (57%), or top-rated medical facilities (61%), or pay higher premiums (67%) or taxes (72%). Some differences in how partisans answer these questions may depend, perhaps, on how believable these costs seem to respondents rather than how acceptable they are. For instance, since Democrats are most enthusiastic about these regulations, they may be less likely to believe that they could harm the quality of care.

Higher-income Americans are more willing than low-income Americans to make trade-offs, such as shouldering higher premiums or having less access to top-rated medical facilities, to keep the pre-existing condition regulations. For instance, 61% of Americans earning more than $80,000 a year say they’d pay higher premiums to keep these regulations. In contrast, about a third (38%) of Americans earning less than $40,000 a year agree; instead, 56% oppose paying higher premiums for this reason. Nearly 6 in 10 (57%) of people earning more than $80,000 a year say they’d accept having less access to top-rated medical facilities compared to 35% of Americans earning less than $20,000 a year.

Short Term Plans

The survey also asked Americans about new federal rules that allow consumers to purchase alternative health insurance plans that don’t comply with ACA-mandates. The survey finds that majorities support new federal rules that allow consumers to purchase alternative plans, like short-term plans, even when confronted with likely trade-offs.

First, the survey presented respondents with only the anticipated benefits of the new federal rules. Doing so finds that 77% of Americans support new federal rules that allow consumers to purchase health insurance plans that cost 50% less and offer greater choices of hospitals and doctors than current plans and would cover 2 million more uninsured people. 

Support drops to 64% in favor and 31% opposed if these rules meant that some people would purchase insurance policies that cover fewer services than current plans. For instance, these new plans would not be required to cover services like mental health and prescription drugs. 

One reason why such plans have lower premiums is they do not have to comply with ACA pre-existing condition regulations and thus may exclude people, or offer limited services to people, with expensive medical conditions. These lower premiums could draw people who use fewer medical services out of the ACA-compliant plans and thus increase premiums for those who remain in those plans and are not eligible for subsidies. Nevertheless, the survey finds that 59% would continue to favor while 35% would oppose these new rules if they caused premiums to rise for some people who purchase insurance plans in the individual market.

These rule changes are popular among partisans with 77% of Democrats and 86% of Republicans in support. Majorities of Democrats and Republicans continue to favor allowing people to purchase non-ACA compliant plans even if doing so means people would not have as many services covered (58% and 71%) or if doing so increased premiums for unsubsidized people in the individual market (63% and 65%).

The Path Forward

The survey also asked Americans how they felt policymakers should approach health care reform going forward. A majority (55%) of Americans believe that the “better way” to sustainably provide high-quality affordable health care is through expanding free-market competition among insurance companies, doctors, and hospitals. Thirty-nine percent (39%) think that more government regulation of insurance companies, doctors, and hospitals is more likely to provide affordable coverage. These numbers are virtually unchanged from last year’s health care survey.

Independents (54%) and Republicans (79%) agree that more free-market competition rather than more government management of health care is more likely to lead to affordable coverage. However, a majority (60%) of Democrats think more government management is the key. Despite these partisan differences, majorities or slim majorities of whites (58%), African Americans (53%) and Hispanics (51%) believe more free market competition can better provide affordable health care than more government control.

Implications

These results do not support the widespread misperception among the political punditry that pre-existing condition regulations are necessarily and universally supported by voters across the political spectrum. Voters like benefits but not costs. And some costs are more acceptable to voters than others. Democratic accountability demands that we understand if voters are willing to bear the necessary trade-offs and costs in exchange for establishing a new policy, regulatory protection, or social program. But first, pollsters have to ask.

Full survey results found here.   Sign up here to receive forthcoming Cato Institute survey reports.   The Cato Institute 2018 Health Care Survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online October 26-30, 2018 from a representative national sample of 2,498 Americans 18 years of age and older. The margin of error for the survey is +/- 2.66 percentage points at the 95% level of confidence.

 

Speaking last week at a National Opioid Summit in Washington, DC, Attorney General Jeff Sessions reported opioid prescriptions fell another 12 percent during the first eight months of 2018, saying ‘We now have the lowest opioid prescription rates in 18 years.” Some of this was no doubt the result of the chilling effect that prescription surveillance boards have had on the prescribing patterns of physicians. For example, Sessions announced the Trump administration has charged 226 doctors and 221 medical personnel with “opioid-related crimes,” and this has not gone unnoticed by health care practitioners.

Sessions also pledged to meet the goal of a 44 percent overall reduction in the production of opioids permitted by the Drug Enforcement Administration. The DEA, which sets quotas on the production of opioids by US manufacturers, began the process with a 25 percent reduction in 2016 and another 20 percent reduction in 2017. This has led to shortages of injectable opioids in many hospitals, affecting the delivery and quality of care.

Meanwhile, the DEA reported in a Joint Intelligence Report that overdoses in Pennsylvania continued to rise, with 5,456 fatal overdoses in 2017, a 65 percent increase over 2015. Only 20 percent of those overdoses involved prescription opioids, with most deaths involving multiple drugs in combination—usually fentanyl, heroin and cocaine, as well as counterfeit prescription opioids (usually made of illicit fentanyl and heroin pressed into pills). The report stated heroin and fentanyl were found in 97 percent of Pennsylvania’s counties.

Prescription opioids were also responsible for just 20 percent of the fatal overdoses in Massachusetts in 2015, where researchers at Boston University reported last week in the American Journal of Public Health that Opioid Use Disorder among people over age 11 grew to 4.6 percent of the population that year. 

The Massachusetts Department of Public Health reports a modest tapering in the fatal overdose rate, from 2,154 in 2016 to 2,069 in 2017, and estimates up to 1,053 have occurred in the first 6 months of 2018. During the first quarter of 2018, 90 percent of those deaths involved fentanyl, 43 percent involved cocaine, 34 percent involved heroin, and 20 percent involved prescription opioids. Fentanyl is responsible for sustaining the death rate in Massachusetts at near-record levels.

What jumps out of these numbers is the fact that efforts to get doctors to curtail their treatment of pain have not meaningfully reduced the overdose rate. They have just caused non-medical users of opioids to migrate over to more dangerous heroin and fentanyl. Fentanyl and heroin—not prescription opioids—are now the principal drugs behind the gruesome mortality statistics. 

Addressing the overdose crisis by focusing on doctors treating patients aims at the wrong target. And patients are suffering—often desperately— in the process. The cause has been drug prohibition from the get-go. If policymakers can’t muster the courage to admit and address that fact, then they should at least put the lion’s share of reform efforts into mitigating the harmful unintended consequences of prohibition. I wrote about this here.

Welcome to the Defense Download! This new round-up is intended to highlight what we at the Cato Institute are keeping tabs on in the world of defense politics every week. The three-to-five trending stories will vary depending on the news cycle, what policymakers are talking about, and will pull from all sides of the political spectrum. If you would like to recieve more frequent updates on what I’m reading, writing, and listening to—you can follow me on Twitter via @CDDorminey

  1. Bolton Calls National Debt ‘Economic Threat’ to US,” Toluse Olorunnipa. Hot off the presses! National Security Advisor John Bolton calls for significant cuts to discretionary spending in order to get the country back on the path of fiscal sustainability. The new trajectory? Bolton, and the President himself, have called for defense spending to be cut or levelled off in the short-term—a radical change from the administration’s previous two budgets. 
  2. In The Shadow of Reagan’s Legacy, Trump Is Failing,” Alexandra Bell. This article talks about why Reagan negotiated the INF treaty that President Trump is trying to dismantle and juxtaposes Reagan’s belief in arms control as a stabilizing force against the current administration’s actions. 
  3. The Nation Needs A 400-Ship Navy,” Thomas Callender. In the interest of showing the true breadth of this field, I’ve included this new report by the Heritage Foundation that calls for an increase over the adminstration’s current 355-ship plan for the Navy. Building to a 400-ship Navy will require $4-6 billion more annually than is already allocated, during a time of competing priorities and sky-high debt (see first article). 
  4. Mattis wants to boost fighter readiness. Here’s how industry could help,” Valerie Insinna. Last month, Secretary Mattis said that he’d like to get fighter readiness up to 80 percent—this would include all the F-35, F-22, F-16, and F/A-18 fighter jets. Readiness has been a rallying cry from the Pentagon for several years, but if Mattis intends to put his money where his mouth is, that could mean fewer dollars for new procurement projects in favor of upgrading and sustaining current platforms. 

Proposition 10 on the California ballot would empower local governments around the Golden State to institute more and stricter rent control. Rent control laws infringe on landlords’ rights of property and contract; as critics point out, they also have a long history of making housing shortages worse, discouraging both the construction of new rental units and maintenance of the old while making it harder for newcomers to find a place to live. 

Though once favored in voter surveys, Proposition 10 has sagged lately, well behind in one poll and ahead in a second by only 41-38 with 21 percent undecided.  But advocates of liberty (and all who prize the lessons of Economics 101) shouldn’t get complacent.  Aside from the imponderables of turnout and momentum – first-time voters still lean toward the proposition, which has been endorsed by Bernie Sanders and the DSA – even a defeat for 10 could still leave the door open to future legislation in Sacramento working some of the same changes. Gubernatorial front-runner Gavin Newsom, for example, declares himself a supporter of rent control in principle and might preside over the passage using the conventional legislative process of what could get billed as a compromise measure with supposedly less radical provisions. 

It’s true that many California localities, the Bay Area especially, are experiencing skyrocketing housing costs. That has a lot to do with intense demand to live and work in places like Silicon Valley and San Francisco, and even more to do with the tight regulatory lid on new residential construction that artificially suppresses the supply of dwellings in the state generally and especially in desirable communities and near the coast. By shifting the blame for the resulting situation to owners of existing rental units, rent control would make it even less likely that Bay Area and coastal governments will take the one measure that would be effective against spiraling housing costs, namely legalizing much more new construction. 

As a classic instance of an infringement on economic liberty that often results in dire practical consequences over the long term, rent control has been a subject of interest to Cato from the institute’s earliest years and ever since then, in output ranging from multiple legal briefs, through a classroom treatment (at Libertarianism.org, by Howard Baetjer), to Ryan Bourne’s recent piece on Jeremy Corbyn’s plans to reimpose rent control in Britain, to.  Two papers from recent years:  

* “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco” (Research Briefs in Economic Policy no. 109, April), by Rebecca Diamond, Timothy McQuade, and Franklin Qian of Stanford University. To quote the summary in Cato Policy Report this summer, the authors “study the effects of a 1994 San Francisco ballot initiative that provided rent control for small multifamily housing built before 1980. They find that any benefits to tenants of rent-controlled properties were counterbalanced by landlords reducing the supply of housing in response to the law.”

* “Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge, Massachusetts” (Research Briefs in Economic Policy no. 9, 2014), by David H. Autor, Christopher J. Palmer, and Parag A. Pathak (“Our bottom line estimate is that the end of rent control added $2 billion to the value of the Cambridge residential housing stock over the ensuing decade following rent-control removal.”)

By the way, the chief group pushing Proposition 10 has been a Los Angeles-based nonprofit called the AIDS Healthcare Foundation. If you wonder what the rent control issue has to do with AIDS or healthcare, let that serve as a reminder to be extra-careful with your charitable giving, no matter how commendable or uncontroversial a group’s name or mission may sound.

 

 

 

 

Many commentators have recently written and said that members of the migrant caravan and Central American immigrants in general are diseased.  Former Immigration and Customs Enforcement agent David Ward claimed that the migrants are “coming in with diseases such as smallpox,” a disease that the World Health Organization (WHO) certified as being eradicated in 1980.  One hopes Mr. Ward was more careful in enforcing American immigration law than in spreading rumors that migrants are carrying one of the deadliest diseases in human history nearly 40 years after it was eradicated from the human population.  But even on other diseases, Ward and others do not have a compelling argument.

WHO has national estimates of vaccination coverage rates by country and type of vaccine.  It’s unclear whether vaccination coverage rates include immigrants, but they definitely include those born in each country as of 2017.  Vaccination coverage rates for the United States were unavailable for Tuberculosis and one of the polio vaccines (IPV1) while the IPV1 vaccine coverage rate is also unavailable for Costa Rica.  We shouldn’t expect vaccination rates to be the same in all countries for at least two reasons.  First, some diseases are more prevalent in certain climates so the requirement for vaccination there can be lower or higher.  Second, vaccines have a positive externality so there is less of an individual incentive to become vaccinated as all of the benefits are not internalized to the individual who receives the shot.  I expect the first reason to be more important than the second as enough benefits are internalized for the net-benefit of a vaccine to be positive (yes, vaccines are great) while many of the governments in these countries strongly encourage or mandate vaccination. 

Figure 1 shows that average vaccination rates for Tuberculosis (BCG), Diphtheria, Pertussis, & Tetanus (DTP1), Diphtheria, Pertussis, & Tetanus (DTP3), Hepatitis B (HepB_BD), Hepatitis B (HepB3), Haemophilus Influenzae (Hib3), Polio (IPV1), Measles 1st Dose (MCV1), Measles 2nd Dose (MCV2), Streptococcus Pneumoniae (PCV3), Polio (Pol3), Rubella (RCV1), and Rotavirus (RotaC).  The United States is in the middle of the pack with an 89 percent average vaccination coverage rate. 

 

Figure 1 Average Vaccination Coverage Rates
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The following figures all show the vaccination coverage rates for different vaccines in Central American countries relative to the United States.  In some figures, some countries are excluded because there are no WHO estimates of their vaccination rates.  The United States does not have the highest vaccination coverage rate for any vaccine reported below.  Perhaps members of the migrant caravan have lower vaccination rates than their fellow countrymen or they are carrying other serious contagions that cannot be vaccinated against.  But for most of these illnesses below, you have more to fear from your fellow Americans than from Central Americans.

 

Figure 2 Tuberculosis (BCG) Vaccination Coverage Rates
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Figure 3 Diphtheria, Pertussis, & Tetanus (DTP1) Vaccination Coverage Rates
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Figure 4 Diphtheria, Pertussis, & Tetanus (DTP3) Vaccination Coverage Rates
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Figure 5 Hepatitis B (HepB_BD) Vaccination Coverage Rates
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Figure 6 Hepatitis B (HepB3) Vaccination Coverage Rates
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Figure 7 Haemophilus Influenzae (Hib3) Vaccination Coverage Rates
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Figure 8 Polio (IPV1) Vaccination Coverage Rates
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Figure 9 Measles 1st Dose (MCV1) Vaccination Coverage Rates
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Figure 10 Measles 2nd Dose (MCV2) Vaccination Coverage Rates
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Figure 11 Streptococcus Pneumoniae (PCV3) Vaccination Coverage Rates
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Figure 12 Polio (Pol3) Vaccination Coverage Rates
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Figure 13 Rubella (RCV1) Vaccination Coverage Rates
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Figure 14 Rotavirus (RotaC) Vaccination Coverage Rates
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Center for a Free Economy president Ryan Ellis writes in the Washington Examiner that President Trump “has caved to the socialists” by proposing to set the prices that Medicare pays for certain drugs at a percentage of the prices that foreign governments set for those drugs:

Unfortunately, rather than fighting the socialists, the president has decided to become one with them — at least when it comes to prescription drugs. After spending most of this year rightly condemning governments in Europe and elsewhere for ripping off Americans by imposing below-market price controls on drugs, Trump and [Secretary of Health and Human Services Alex] Azar basically surrendered to the price controls and announced we would be adopting them ourselves…

By letting the foreign price controls serve as a reference price control here, Trump has put us down the same path of scarcity and rationing all too often seen in the rest of the developed world.

The purpose of Trump’s proposal is indeed to reduce the prices Medicare pays for these drugs. Medicare currently pays much more for these drugs than government-run health systems in other nations.

Beyond that, Ellis’s oped crystallizes everything conservatives get wrong about drug pricing and Medicare purchasing in general. A few clarifications:

  1. No one knows what the “right” price is for any drug. We need market prices because they create incentives that naturally and always push prices in the right direction. 
  2. Medicare’s administered (read: ouiji-board) prices are indeed price controls, but not in the usual meaning of the term. They do not restrain prices anywhere but within the Medicare program.
  3. Medicare’s administered/controlled prices are not market prices, any more than other governments’ administered/controlled prices are market prices. 
  4. The Trump proposal would merely change the way Medicare comes up with the prices it pays for drugs. Those prices would not be any more “price-controlled” after the Trump proposal than they were before. They would just be lower–if the proposal achieves its stated goal, that is, which may or may not happen (more below).
  5. Conservatives who argue Medicare should not pay less than it currently does for drugs need to address the paradox inherent in their argument that, in order to restrain government and have a free economy, government must spend more. In order to fight socialism, taxes must be higher.
  6. One cannot import a price control. That’s not how they work. A government can either impose price controls on its own populace, or not. It cannot import the coercion another government exerts on its own citizens.

Ellis is correct when he writes, “Markets do a much better job reducing drug prices than government price controls do, and they do it while making prescription medicines widely available to patients, as opposed to rationed due to scarcity.” But the end result of these misunderstandings and misconceptions is that conservatives end up crowding out markets and/by opposing efforts to reduce government spending. This is why the Left believes, with justification, that when it comes to health care conservatives are just a bunch of cronyists.

Another irony: the more likely impact of Trump’s reference-pricing scheme is that prices in other nations would rise, which is exactly what Ellis says he wants.

Overcharged by Cato adjunct scholars Charlie Silver and David Hyman is the antidote to this strand of un-conservative conservative thinking. 

Power Problems is one year old! In our first year, the podcast has covered a lot of ground, from the death of the Iranian nuclear deal to the defense budget, trade policy and nuclear weapons. Surprising no one, we’ve spent way too much time talking about the Middle East and the curious foreign policy perspectives now emanating from 1600 Pennsylvania Avenue.

But as we head into the second year of our podcast, we’d like to get some feedback from our listeners, so we can give you more of what you enjoy. To help us out, please take a couple of minutes and fill out a quick survey on the podcast. You can find the survey here.

If you’re not already a listener, and want to hear what we’re all about, you can hear myself, Trevor Thrall, and a selection of guests from across the political spectrum discussing top foreign policy issues biweekly. You can find us on iTunes, Stitcher or via the Cato Audio app. 

Thanks for your feedback, and thanks for listening to Power Problems! 

President Trump recently said, “I’m a nationalist. OK? I’m a nationalist.”  Trump didn’t give a definition of what a nationalist is or what that ideology entails.  Fortunately, political theorist Yoram Hazony recently wrote The Virtue of Nationalism where he attempted to define and present a persuasive argument in favor of nationalism.  This was a worthy goal as nationalism is currently a popular political ideology.  The time is right for a book that defines nationalist and coherently and consistently makes the case for it.  Unfortunately, The Virtue of Nationalism is not that book. 

Other reviewers have identified its many problems, so instead of writing another review, I’m going to list some ridiculous claims that Hazony makes in his book and some of the logical implications of those claims.  Those claims and implications are numbered below and come from his book and I identify them as one or the other.  They are my summaries of his claims and NOT direct quotes.

1.  Nationalists can’t do the bad things that nationalists are most known for, according to Hazony’s definition.

Early in his book, Hazony wrote that he “will not waste time trying to make nationalism prettier by calling it ‘patriotism,’ as many do in circles where nationalism is considered something unseemly.”  True to his word, Hazony wasted zero-time conflating nationalism and patriotism, the latter being different and mostly positive.  He just wasted most of his book arguing that any nation-state that attempts to conquer other nations is not really a nation-state. 

According to Hazony, a nation is combination of “a number of tribes with a common language or religion, and a past history of acting as a body for the common defense and other large-scale enterprises” (18) and that “the world is governed best when nations are able to chart their own independent course, cultivating their own traditions and pursuing their own interests without interference” (3). 

Hazony contrasts nation states with imperialist states that have universal ideals that he claims leads to conquest.  Thus, nation-states cannot seek to conquer other nation-states as that would make them imperialist states because they do not respect the independent course of other nations.  According to Hazony, a state cannot be a nation-state and imperialist (dominating or seeking to dominate other nations) at the same time due to his unique definition that conveniently excludes the “bad” nation-states.  In my reading of the literature on nationalism, historian Douglas Porch was more likely correct when he wrote: “Colonialism was not, as Lenin claimed, ‘the highest stage of capitalism.’ Rather it was the highest stage of nationalism.”

2. Hitler and the Nazis were not nationalists.

Following his definition of nationalism, Hazony repeatedly claims that the Nazis were not really nationalists.  I know of no other serious historian of the Third Reich or other thinkers on nationalism who would go so far as to say that Hitler or the core ideology of the National Socialist German Workers Party weren’t nationalists.  They were, of course, nationalists.  The first point of their political platform was: “We demand the unification of all Germans in the Greater Germany on the basis of the people’s right to self-determination.”  The evidence that the Nazis considered themselves nationalists, that others considered them nationalists, and that they fit into the scheme of nationalism is so massive that it would be silly to run through it all. 

Hazony should have just argued that not all nationalists are Nazis and that very few of them have achieved or even attempted to achieve that level of evil – which would be perfectly reasonable and true statement!  Not all nationalists are Nazis (very few are, in fact), so this would have been a very reasonable acknowledgment for him to make that would barely even rise to the level of a concession.  Carlton Hayes wrote a useful taxonomy of nationalism with Nazism on one extreme and liberal nationalism on the other.  There was no need for Hazony to make the blatantly false historical claim that the Nazi’s weren’t nationalists in order to argue in support of nationalism in the modern world.

3. Europe has never had nation-states, even during the age of nationalism.

This is an implication of Hazony’s unique definition of nationalism and nation-states, not something that Hazony explicitly wrote in his book.  According to his unique definition, there were no nation-states in the so-called age of nationalism in Europe.  During the age of European nationalist in the 19th and 20th centuries, France, the United Kingdom, Spain, Portugal, the Netherlands, Germany, Italy, Belgium, Denmark, and other nation-states were imperialists too.  They conquered colonies and overseas territories populated by non-nationals that they ruled with ghastly humanitarian consequences.

If Nazi Germany was not nationalist because it conquered other countries, then surely those European nation-states in the age of nationalism were also not nationalist because they conquered other countries.  I asked Hazony about this and his response was unsatisfying (Figure 1). 

Figure 1

Twitter Exchange Between Yoram Hazony and Alex Nowrasteh

 

 Source: Alex Nowrasteh’s Twitter Account on September 19, 2018.

 4.  Nationalism has nothing to do with race or ethnicity (page 20 of his book).

Hazony makes this claim specifically about the ancient Israelites.  I’m not a Torah scholar so he may be correct in that specific case.  However, many other nation-states are explicitly defined by ethnicity.  The Latin root of nationalism is natio, which means tribe, ethnic group, race, breed, or other divisions by birth.  Hazony’s definition that a nation-state forms from “a number of tribes with a common language or religion, and a past history of acting as a body for the common defense and other large-scale enterprises” is highly correlated with ethnicity, to say nothing of the historical inaccuracy of his theory.  There is much research arguing that there is a link between ethnicity and nation. 

Hazony could have argued that nation-states can also be formed by civic attachments too, thus widening the definition as many modern scholars do so they can avoid the ugly implications of arguing for a race- or ethnicity-based nation-state.  However, Hazony specifically wrote that nations formed along civic lines are systematically unstable and impossible to hold together, at best temporary, and that they function poorly relative to nation-states created with the ethnicity-correlated attributes above (156-157).  The United States, Switzerland, Canada, Australia, and New Zealand are four wealthy states that are functioning very well despite not being nation-states under his strict definition.

5.  Nation-states are governed by consent, not coercion. 

 Hazony makes this claim several times in his book.  Nation-states have police, courts, military, and other institutions to coerce individual compliance with its law and rules just as every government does.  Perhaps governments in nation-states require less coercion to govern well as they are more homogeneous, thus theoretically making it easier to reach more broadly held policy consensuses that require less coercion.  But that would be an empirical claim that Hazony does not address that is doubtful given the large and complex legal enforcement apparatuses of nation-states.     

6.  Tribes voluntarily combined to form modern nation-states.

As mentioned earlier, Hazony claims that nations are formed by tribes that voluntary combine.  Economic historian Mark Koyama thoroughly debunked this claim far better than I could have, so please read his review.  My only additional comment on this is that a thorough listing and description of all the historical situations where Hazony’s claim does not hold would fill many, many volumes and describe the history of virtually every country.  

We are living in a time of renewed nationalism.  Whether this is a temporary blip or a long-term shift remains to be seen, but there is a scarcity of modern books, articles, or other writings that can competently explain that political ideology and make the case for it.  Hazony’s book fails for many reasons, but his insistence on defining nationalism in such a specific way that excludes virtually all nation-states that have ever existed should be a big red flag to anybody interested in this topic.

The latest attack on international institutions by the Trump administration distinguishes itself by being quite obscure: It’s about postage. It also may have more of a basis than most of the administration’s complaints about trade. 

The administration is concerned about the Universal Postal Union (UPU), a specialized agency of the UN. The UPU was established by the Berne Treaty of 1874 and became a UN agency in 1948. The administration has taken issue with the “terminal dues” rates issued by the UPU, under which, the administration argues, the United States has been subsidizing the shipping costs of foreign suppliers in certain countries, including China, when they send goods to the United States. The basic story is as follows (some good background is here).

When companies or individuals ship goods abroad, they use their domestic postal service to send the item. When that item arrives in the foreign country, the postal service of the shipping country makes a payment to the postal service of the destination country in the form of “terminal dues.” These “terminal dues” are set by the UPU and are designed to cover the destination country’s portion of the transportation costs – basically an agreed upon reimbursement rate to transport the item to the recipient.

The Trump administration’s concerns relate to the “terminal dues” rates set through the UPU for less wealthy countries, such as China. These countries’ rates are set very low, and do not necessarily cover the actual costs of shipping (and are sometimes significantly less than the rate American companies pay to ship within the United States). What this means in practice is that American taxpayers are sometimes subsidizing the transport costs of American companies’ foreign competition. It appears, then, that there is some legitimacy to the administration’s concerns about unfairness. 

Of course, as is often the case with the Trump administration, its approach to the problem is confrontational and perhaps risks inflaming tensions. The administration has, yet again, decided to use a threat of withdrawal from a treaty as a negotiating tactic, taking steps to withdraw from the UPU. Perhaps the withdrawal threat will force quick action to change the fee structure at the UPU, although there are some risks. Pulling out of the treaty would give the United States the flexibility to set our own transport rates, but it would also mean that we lose the power to stop others from charging us higher rates in return, while doing away with a mechanism that was designed to reduce, and streamline, transaction costs. In essence, the administration’s approach could lead to a postal “trade war.”

Are there alternative approaches? A Bloomberg editorial board piece sets out what they think may be a workable solution: having the administration look for a compromise on a postal rate during the broader trade negotiations with China. Of course, there would have to be some negotiations going on for this to work.

If it weren’t for all of the other aggressive trade actions taken by the Trump administration, this issue might be more easily addressed. Because it is part of a larger package of contentious moves, it might get lost in the mix of all the real and perceived trade slights the administration is complaining about. In calmer times, this might be a simpler problem to fix.

Thanks to Logan Kolas for research assistance with this post.

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