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That’s the thesis of a Washington Post opinion piece titled, “Why replacing Obamacare is so hard: It’s fundamentally conservative” by Northwestern University professor Craig Garthwaite. A lot of ObamaCare supporters find this claim appealing. If true, then it makes them look moderate and open to compromise, and makes ObamaCare’s conservative opponents look duplicitous and partisan. But is it true?

No. Not by a long shot.

I’m not a conservative. (I was, once, in my youth, but I’m feeling much better now.) So I will let the editors of National Review explain what a conservative approach to health reform is, as they did in this unsigned 2007 editorial. Spoiler alert: it’s a far cry from ObamaCare.

Against Universal Coverage

By The Editors — June 21, 2007

The Democrats running for president are competing over whose health-care plan gets closest to “universal coverage.” The Republican presidential candidates, meanwhile, have been mostly silent. Their inattention to the issue is a mistake. A great many voters are anxious about health care, and better government policies could alleviate that anxiety. The Republican candidates have an opportunity to present a distinctively conservative set of reforms.

Those reforms should begin with the rejection of the goal of universal coverage. Deregulating health insurance would make it more affordable, and thus increase the number of Americans with coverage. But to achieve universal coverage would require either having the government provide it to everyone or forcing everyone to buy it. The first option, national health insurance in some form or other, would either bust the budget or cripple medical innovation, and possibly have both effects. Mandatory health insurance, meanwhile, would entail a governmental definition of a minimum package of benefits that insurance has to cover. Over time, that minimum package would grow more and more expensive as provider groups lobbied the government to include their services in the mandate.

The health-care debate has centered on the uninsured. That so many people do not have health insurance is a consequence of foolish government policies: regulations that raise the price of insurance, and a tax code that ensures that most people get their insurance through their employer. If you don’t work for a company that provides health insurance, you’re out of luck. People locked out of the insurance system still have access to health care. But they often end up in emergency rooms because they did not receive preventive care.

For most people, however, it is another aspect of our employer-based health-care system that causes the most trouble: the insecurity it creates. People worry that if they switch jobs, they will lose their health insurance. They worry that their company will cut back on health benefits. Universal coverage is not necessary to address these worries. Making it possible for individuals to own their health-insurance policies themselves, rather than getting them through their companies, would solve the problem. It would also reduce the political momentum behind socialized medicine.

Most universal-coverage plans accept the least rational features of our health-care system — its reliance on employer-based coverage and on “insurance” that covers routine expenses — and merely try to expand that system to cover more people. Republicans should go in a different direction, proposing market reforms that make insurance more affordable and portable. If such reforms are implemented, more people will have insurance.

Some people, especially young and healthy people, may choose not to buy health insurance even when it is cheaper. Contrary to popular belief, such people do not cause everyone else to pay much higher premiums. Forcing them to get insurance would, on the other hand, lead to a worse health-care system for everyone because it would necessitate so much more government intervention. So what should the government do about the holdouts? Leave them alone. It’s a free country.

As part of the 100 Day Action Plan on economic issues that the U.S. and China negotiated back in May, there was agreement by both sides to liberalize trade in a few areas.  It was a relatively minor set of issues, but nonetheless there was some real progress.  The Trump administration likes to tout exports, not imports, so in their remarks about the agreement, they tended to focus on areas of interest to U.S. exporters.  To provide some balance, I’m going to take it upon myself to tell everyone about some import liberalization the U.S. carried out as part of this agreement.  

In the agreement, the U.S. said it would start to allow imports of certain Chinese chicken products:

The United States and China are to resolve outstanding issues for the import of China origin cooked poultry to the United States as soon as possible, and after reaching consensus, the United States is to publish a proposed rule by July 16, 2017, at the latest, with the United States realizing China poultry exports as soon as possible.

This past week-end, a Washington Post story indicated that these imports are now underway:

The first known shipment of cooked chicken from China reached the United States last week, following a much-touted trade deal between the Trump administration and the Chinese government.

The Post article has a lot of fearmongering in it.  The online title is “The dark side of Trump’s much-hyped China trade deal: It could literally make you sick.”  And the article says, “consumer groups and former food-safety officials are warning that the chicken could pose a public health risk, arguing that China has made only minor progress in overhauling a food safety regime that produced melamine-laced infant formula and deadly dog biscuits.”

But before anyone panics, there is also this from the article:

Because cooking kills bacteria and viruses, including the one that causes bird flu, processed poultry is considered “tremendously safer” than raw chicken, said Richard Raymond, who served as undersecretary of agriculture for food safety from 2005 to 2008.

Anyway, the Chinese exporters will have a pretty big incentive to ensure the safety of the products:  If there are health and safety problems, consumers won’t buy them (and the U.S. government might restore the ban). 

It remains to be seen what is coming from the Trump administration on trade policy more generally.  But it’s nice to see a bit of import liberalization, especially given the protectionist rhetoric we keep hearing.

Back in April, I shared a new video from the Center for Freedom and Prosperity that explained how poor nations can become rich nations by following the recipe of small government and free markets.

Now CF&P has released another video. Narrated by Yamila Feccia from Argentina, it succinctly explains - using both theory and evidence - why spending caps are the most prudent and effective way of achieving good fiscal results.

Ms. Feccia covers all the important issues, but here are five points that are worth emphasizing.

  1. Demographics - Almost all developed nations have major long-run fiscal problems because welfare states will implode because of aging populations and falling birthrates (Ponzi schemes need an ever-growing number of new people to stay afloat).
  2. Golden Rule - If government spending grows slower than the private sector, that reduces the relative burden of government spending (the underlying disease) and also reduces red ink (the symptom of the underlying disease).
  3. Success Stories - Simply stated, spending caps work. She lists the nations that have achieved very good results with multi-year periods of spending restraint. She points out that the U.S. made a lot of fiscal progress when GOPers aggressively fought Obama. And she shares the details about the very successful constitutional spending caps in Hong Kong and Switzerland.
  4. Better than Balanced Budget Amendments or Anti-Deficit Rules - The video explains why policies that try to target red ink are not very effective, mostly because tax revenues are very volatile.
  5. Even International Bureaucracies Agree - Remarkably, the International Monetary Fund (twice!), the European Central Bank, and the Organization for Economic Cooperation and Development (twice!) have acknowledged that spending caps are the most, if not only, effective fiscal rule.

I touch on some of these issues in one of my chapters in the Cato Handbook for Policymakers. The entire chapter is worth reading, in my humble opinion, but I want to share an excerpt echoing Point #4 that I just shared from Ms. Feccia’s video.

There’s a very practical reason to focus on capping long-run spending rather than trying to balance the budget every year. Simply stated, the “business cycle” makes the latter very difficult. …when a recession occurs and revenues drop, a balanced-budget mandate requires politicians to make dramatic changes at a time when they are especially reluctant to either raise taxes or impose spending restraint. Then, when the economy is enjoying strong growth and producing lots of tax revenue, a balanced-budget requirement doesn’t impose much restraint on spending. All of which creates an unfortunate cycle. Politicians spend a lot of money during the good years, creating expectations of more and more money for various interest groups. When a recession occurs, the politicians suddenly have to slam on the brakes. But even if they actually cut spending, it is rarely reduced to the level it was when the economy began its upswing. Moreover, politicians often raise taxes as part of these efforts to comply with anti-deficit rules. When the recession ends and revenues begin to rise again, the process starts over—this time from a higher base of spending and with a bigger tax burden. Over the long run, these cycles create a ratchet effect, with the burden of government spending always reaching new plateaus.

It’s not that I want to belabor this point, but the bottom line is that it is very difficult to amend a country’s constitution (at least in the United States, but presumably in other nations as well).

So if there’s going to be a major campaign to put a fiscal rule in a constitution, then I think it should be one that actually achieves the goal. And whether people want to address the economically important goal of spending restraint or the symbolically important goal of fiscal balance, what should matter is that a spending cap is the effective way of getting there.

The Department of Housing and Urban Development (HUD) will spend $10 billion this year on “community development,” including Community Development Block Grants (CDBGs). The grants to state and local governments are for such things as repairing streets and subsidizing neighborhood businesses. There is no constitutional or practical reason why the federal government should be involved in such local activities.

Furthermore, a new city-by-city analysis by Politico shows that CDBG spending is disbursed with little regard to actual “need” or “fairness.” 

San Francisco will get $19-a-person in community development block grants this year, while Allentown, with twice the poverty and less than half of the median income, will draw a per-capita allotment of $17.53….Community development block grants rely on outdated, 1970s formulas that have increasingly shuttled dollars to wealthy places like Newton, Mass., while other locales in need, such as Compton, Calif., go wanting.

Tad DeHaven found similar problems with the program. He noted, “CDBG spending has gradually shifted from poorer to wealthier communities over time…It should not be the role of the federal government to redistribute income between regions, but even if it was, the CDBG program is not very good at it.”

President Donald Trump’s 2018 budget proposes to eliminate the CDBG program, saying “the program is not well-targeted to the poorest populations and has not demonstrated results.” Good for the president.

There is no sound reason for the federal government to fund the CDBG program or hundreds of other local subsidy programs. As I discuss here, these programs generate bureaucratic waste, undermine political accountability, and stifle policy innovation in the states. 

The federal aid system generates no net value—it is simply a roundabout way of funding local activities. Taxpayers in San Francisco mail checks to the IRS to fund the CDBG program. Their money flows through the HUD bureaucracy, and then is dished out to bureaucracies in Harrisburg and Allentown, with some trickling down to local residents and businesses. Meanwhile, taxpayers in Allentown are also mailing checks to the IRS to fund the CDBG program. Their money flows through the HUD bureaucracy, and then is dished out to bureaucracies in Sacramento and San Francisco, with some trickling down to local residents and businesses.

What is the point of that?

There is none—other than to empower the well-paid political and bureaucratic elites in all three levels of government, and in the derivative lobby groups. The federal aid system thrives not because it benefits the American people, but because it benefits governments and lobbyists.

For more information, see herehere, and here.

Illinois law mandates that non-union public-sector workers like Mark Janus pay money for union collective-bargaining activities that they do not support. Collective bargaining in the public-sector often involves advocacy of quintessentially political questions, such as the amount of public worker wages, pensions, and other benefits that will be paid for with the public’s tax money. Thus, these government-compelled exactions—“agency fees”—give these workers a Hobson’s choice: Either sacrifice your First Amendment rights and fund political advocacy you may not like, or find other employment.

The Supreme Court upheld the constitutionality of these fees in Abood v. Detroit Board of Education (1977), but has since questioned Abood’s reasoning in Knox v. SEIU (2012) and Harris v. Quinn (2014). Two terms ago, the Court in Friedrichs v. California Teachers Association (2016) seemed primed to overrule Abood, but the untimely passing of Justice Antonin Scalia left the Court to split 4-4 on the question. This case deals with the same question that was presented in Friedrichs: Should Abood be overruled and public-sector agency-fee arrangements be declared unconstitutional? Following the Abood precedent, a federal district court understandably dismissed Janus’s case, which ruling the U.S. Court of Appeals for the Seventh Circuit quickly upheld. Cato and the National Federation of Independent Business Small Business Legal Center are now supporting Janus in petitioning the Supreme Court to reconsider Abood once again. We focus on the embedded issue of whether stare decisis—a doctrine that argues for generally letting precedent lie even if wrong—should prevent the Court from overruling Abood.

Stare decisis is a prudential policy designed to promote predictable and consistent legal principles, not a mandatory edict to blindly follow past decisions. This is especially true in cases involving constitutional rights. Indeed, the Supreme Court has repeatedly held that stare decisis is at its lowest ebb when constitutional rights are at stake, because it is exceptionally difficult—if not impossible—to correct constitutional cases. Moreover, judges can get the law wrong. And when past judges or courts get the law wrong, current judges and courts have a duty to correct misapplications of the law. This is what happened in Abood. The Supreme Court has made clear in subsequent cases that when government majorities compel people to subsidize speech with which they disagree, those laws are subject to the highest form of judicial scrutiny—which the rationales put forth in Abood cannot overcome. Furthermore, Abood doesn’t even meet the traditional justifications for applying stare decisis. These factors—including whether reliance interest have built up around the decision, and whether the decision has become unworkable—favor overruling Abood. No one relies on having their First Amendment rights abridged and it is nearly impossible to draw a line between what’s political and what’s not in public-sector collective bargaining. Abood has caused serious infringement of people’s core constitutional rights for over 40 years. In that time, millions of public workers have had millions of dollars taken from them to further causes that they don’t support.

The Supreme Court should take this case and reaffirm that the First Amendment protects against compelled speech and association of this kind.

I receive lots of daily health-policy newsletters. This morning, one of them exhibited an all-too-common misunderstanding and bias about how health-insurance markets work.

The setting is the “Consumer Freedom Amendment” Sen. Ted Cruz (R-TX) has offered to the Senate GOP’s bill to rewrite ObamaCare. Contrary to what the Republican Party has pledged for seven yearsa pledge that presidential candidate Donald Trump even put in writingthe Senate bill would not repeal the health-insurance regulations that are behind ObamaCare’s rising premiums, race-to-the-bottom coverage, and collapsing insurance markets. The Cruz amendment would keep those regulations on the books, but allow consumers to purchase insurance that does not include all of ObamaCare’s hidden taxes and coverage mandates. In effect, it would separate the market. Currently healthy enrollees would opt for the lower-cost “Freedom Option” coverage, which would stay with them once the developed expensive illnesses. Currently sick enrollees would opt for ObamaCare-compliant plans. Premiums for ObamaCare-compliant plans would rise even more than they already have, essentially turning ObamaCare’s Exchanges into high-risk pools that would require lots of government subsidies to keep afloat.

Enter one of my daily newsletters, which matter-of-factly reported:

Of course, everyone paying into the system for those who most need care is the way insurance is fundamentally supposed to work.

Of course! I hear this sort of thing all the time. Now, there is a charitable interpretation that would render this particular phrasing just barely true, but I am fairly sure that interpretation is not what the author intended to convey. Instead, the sentence glosses over a distinction so crucial that entire insurance markets hang in the balance. And it does so in a way that presents the (legitimately disputed and controversial) pro-ObamaCare ideology as an of-course-this-is-fundamentally-true fact.

Fundamentally, insurance markets are a system of subsidies. People with the same ex ante (i.e., before-the-fact) risk of needing medical care pay into the system to subsidize the few in that group who will develop expensive medical needs. We know insurance is supposed to work this way, because of what happens when you try to pool together people with different ex ante health risks at the same premium: the system of subsidies collapses. (See: state-level experiments with community rating, ObamaCare’s CLASS Act, the child-only market under ObamaCare, U.S. territories under ObamaCare, and Exchanges in dozens of counties). Risk-based premiums, exclusions for preexisting conditions, and other measures that ObamaCare supporters hate are actually consumer protections. They exist to keep that system of subsidies stable, so it can keep doing the most good possible by subsidizing people who become sick.

The idea that everyone should pay the same premium regardless of risk arises because left-of-center folks want to cram additional, hidden subsidies into the insurance system. They want to do this rather than create explicit taxes and transfers because, as Jonathan Gruber taught us, there is not sufficient political support for explicit taxes and transfers. But again, when you force insurers to cover unlike risks at the same premium, insurance markets collapse. So ObamaCare throws tons of money at insurers—with everything from the individual mandate to risk-adjustment—in the hope of preventing a collapse. Sometimes it prevents a collapse. Sometimes, not so much.

The above sentence therefore amounts to saying, “Insurance is fundamentally supposed to work exactly like ObamaCare supporters want, with mandates and lots of government subsidies, not like its opponents say.”

That’s what the news tells me, anyway.

Broadway Journal reports that theater professionals are very concerned about the Trump administration’s no-doubt-idle threats to defund the National Endowment for the Arts:

“It’s important money for us,” said Jeffory Lawson, the managing director of the Chelsea-based Atlantic Theater Co. As with any lost funding, replacing those grants would be challenging, he said. And beyond dollars, the NEA confers a stamp of approval for a project, which is appealing to other donors. It’s “a highly competitive grant application,” he said, that’s reviewed and rated largely by theater professionals. “It’s not just a bureaucrat making a decision.” (The NEA claims that $9 in private donations follow every $1 it grants.)

I don’t know why people who prize their independence, and are very proud these days to be defying the government in their plays and public comments, are so eager for a “stamp of approval” from that very government. In fact, I’ve written about that problem before, such as in this 1995 speech to the Delaware Center for Contemporary Arts:

Government funding of anything involves government control. That insight, of course, is part of our folk wisdom: “He who pays the piper calls the tune.” “Who takes the king’s shilling sings the king’s song.”

Defenders of arts funding seem blithely unaware of this danger when they praise the role of the national endowments as an imprimatur or seal of approval on artists and arts groups. Jane Alexander says, “The Federal role is small but very vital. We are a stimulus for leveraging state, local and private money. We are a linchpin for the puzzle of arts funding, a remarkably efficient way of stimulating private money.” Drama critic Robert Brustein asks, “How could the NEA be ‘privatized’ and still retain its purpose as a funding agency functioning as a stamp of approval for deserving art?”

In 1981, as conservative factions battled for control of the National Endowment for the Humanities, Richard Goldstein of the Village Voice explained the consequences this way:

The NEH has a ripple effect on university hiring and tenure, and on the kinds of research undertaken by scholars seeking support. Its chairman shapes the bounds of that support. In a broad sense, he sets standards that affect the tenor of textbooks and the content of curricula….Though no chairman of the NEH can single-handedly direct the course of American education, he can nurture the nascent trends and take advantage of informal opportunities to signal department heads and deans. He can “persuade” with the cudgel of federal funding out of sight but hardly out of mind.

I suggest that that is just the kind of power no government in a free society should have….

On NPR this morning, an activist complained …  saying, “My ancestors didn’t fight for the concept of official history in official museums.” But when you have official museums, or a National Endowment for the Arts serving as a “seal of approval” for artists, you get official history and official art—and citizens will fight over just which history and which art should have that imprimatur.

“Stamp of approval,” “ripple effect,” “ ‘persuade’ with the cudgel of federal funding”—all of this is asking the federal government to pick winners, not just in automobile or energy companies, but in art and literature. Is that really a model for independent artists?

 

I was wrong. When the Every Student Succeeds Act passed in late 2015, I identified two ambiguities I thought were most ripe for exploitation to keep the federal boot hovering over public schools: the requirement that states have “challenging” curricular standards and that standardized tests be given “much greater” weight in accountability systems than non-academic measures.

Certainly, DC may still seize upon these words to extend control. But according to a Friday New York Times report, it is the law’s call for “ambitious” student performance goals—a term not defined in statute—that the Trump administration, which I thought would be highly deferential to states (wrong again!), is citing to reject state plans:

In the department’s letter to Delaware—which incited the most outrage from conservative observers—[Acting Assistant Secretary for Elementary and Secondary Education Jason] Botel took aim at the state’s plan to halve the number of students not meeting proficiency rates in the next decade. Such a goal would have resulted in only one-half to two thirds of some groups of students achieving proficiency, he noted.

The department deemed those long-term goals, as well as those for English-language learners, not ambitious, and directed the state to revise its plans to make them more so.

And so we remain pretty much where we were under the Obama administration in education, and where we are with every law that leaves it to regulatory agencies to fill in the meaning of crucial terms: with states, localities, and the people at the mercy of bureaucrats and secretaries. Government increasingly of men and not laws.

Alas, this bureaucratically dictatorial state of affairs is okay with some people in DC. In an exchange this weekend, a former Obama administration spokesman lauded the regulatory process as a “transparent” and “consistent” way to “fill in the blanks left by the law”:

If only there were some process by which the federal government could fill in the blanks left by the law in a transparent, consistent way

— Matt Lehrich (@mattlehrich) July 7, 2017

Really? I sure can’t see how the regulatory process is “transparent” in any meaningful sense. Here is the web page to follow the ESSA regulatory process, and here is the “Notice of Final Regulation” for just one part of the ESSA. Read it all over. Now imagine every parent—with a full-time job, soccer practices to get the kids to, maybe even a desire for some leisure time—trying to read and influence every regulation for ESSA.

Done imagining? The painful reality, of course, is that making law by regulation is even more beyond the ability of an average American to follow and influence than the writing of actual laws. The ESSA itself is almost 400 single-spaced pages long.

Loads of atrocious problems are at work here—no apparent concern for whether the governed can know and understand the laws governing them; legislators sloughing off their responsibilities to bureaucrats—but underlying it all has been widespread disregard for the Constitution and its clear delegation of only specific, enumerated powers to the federal government, none of which mention education.

I was wrong about the specific opening by which the ESSA might be used to maintain federal control over the nation’s public schools. But in stating that federal control is itself unconstitutional, and rule by bureaucrats especially egregious, I remain clearly in the right.

Great moments in public employee unionism, as recorded in the Battle Creek (Mich.) Enquirer

A battle is brewing at Western Michigan University this summer between a group of hungry goats and a labor union.

The 400-member American Federation of State, County and Municipal Employees has filed a grievance contending that the work the goats are doing in a wooded lot is taking away jobs from laid-off union workers.

A spokeswoman said the university had brought in a crew of the nimble-footed ruminants “to clear undergrowth in a woodlot, much of it poison ivy and other vegetation that is a problem for humans to remove….Not wanting to use chemicals, either, we chose the goat solution to stay environmentally friendly.”

The goats are already ahead of schedule in their task of clearing 15 acres before the fall semester – unless the National Labor Relations Board gets mad and decides to charge in.

A year ago in this space I discussed one of the more disturbing things then-candidate Donald Trump was saying on the campaign trail, his threats against the business interests of Washington Post owner Jeff Bezos, whose paper has been consistently critical of Trump. Trump mentioned tax and antitrust as issues on which Amazon, the company founded by Bezos, might find its status under review. I quoted Wall Street Journal columnist Holman Jenkins: “Mr. Trump knows U.S. political culture well enough to know that gleefully, uninhibitedly threatening to use government’s law-enforcement powers to attack news reporters and political opponents just isn’t done. Maybe he thinks he can get away with it.” 

Mr. Trump is now fighting a very public grudge match against cable network CNN, which as it happens is one of the enterprises affected by the pending AT&T-Time Warner merger. (Time Warner is CNN’s parent company.)  During the campaign, Trump criticized the merger, but in March he nominated to head the Department of Justice’s antitrust division Makan Delrahim, a veteran antitrust lawyer who seemed to take a more benign view. “The sheer size of it, and the fact that it’s media, I think will get a lot of attention,” Delrahim had said in an interview on Canadian TV in October, before the election. “However, I don’t see this as a major antitrust problem.”

On Wednesday the New York Times reported that some close to the President, at least, were looking at options: 

White House advisers have discussed a potential point of leverage over their adversary, a senior administration official said: a pending merger between CNN’s parent company, Time Warner, and AT&T. Mr. Trump’s Justice Department will decide whether to approve the merger, and while analysts say there is little to stop the deal from moving forward, the president’s animus toward CNN remains a wild card.

And then yesterday Alex Pfeiffer of the Daily Caller reported

The White House does not support the pending merger between CNN’s parent company Time Warner and AT&T if Jeff Zucker remains president of CNN, a source familiar with President Trump’s thinking told The Daily Caller.

Maybe reports based on unnamed sources are better ignored. Or maybe they’ll prove accurate, and we’re facing a White House that – like the late Sen. Edward Kennedy of Massachusetts, or disgraced Illinois Gov. Rod Blagojevich – is not above using the resources of government in an effort to oust owners or editors from unfriendly press outlets.

Either way, I’ll repeat what I wrote in this space five years ago: 

One moral is that we cannot expect our First Amendment to do the whole job of protecting freedom of the press. Yes, it repels some kinds of incursions against press liberty, but it does not by its nature ward off the danger of entanglement between publishers and closely regulated industries, stadium operators, and others dependent on state sufferance. That’s one reason there’s such a difference in practice between a relatively free economy, where most lines of business do not require cultivating the good will of the state, and an economy deeply penetrated by government direction, in which nearly everyone is subject to (often implicit) pressure from the authorities. 

The Trump administration’s approach to North Korea’s nuclear weapons and ballistic missile development has been almost exclusively an emphasis on military confrontation. The latest eruption of escalatory actions and rhetoric is in keeping with the norm.

Following Pyongyang’s successful testing of an inter-continental ballistic missile (ICBM) this week, Trump referenced “some pretty severe things that we are thinking about” in response. Gen. Vincent K. Brooks, commander of U.S. forces in South Korean, warned ominously that “it would be a grave mistake for anyone” to doubt our willingness to use military force in response to North Korean “provocation.” UN Ambassador Nikki Haley said in a statement that we will use “our considerable military forces…if we must, but we prefer not to have to go in that direction.” Finally, U.S. and South Korean forces “fired a barrage of guided-missiles into the ocean” off the east coast of the Korean Peninsula, as a show of force.

Many Americans believe the hardline approach to North Korea is wise because peaceful negotiations, in Eli Lake’s words, have been used by Pyongyang “to buy time and extract concessions from the West.” Diplomacy doesn’t work on the intransigent North Korea, we’re told.

But that conflicts with the historical record. According to Stanford University’s Siegfried S. Hecker, the record from the Bill Clinton and George W. Bush administrations shows that “Pyongyang was willing to slow its drive for nuclear weapons” but “only when it believed the fundamental relationship with the United States was improving, but not when the regime was threatened.”

This is a crucial point. For decades, Washington’s general approach has involved economic sanctions, military encirclement, and regular threats of preventive war. In this environment, and without good faith overtures from Washington, North Korea is going to continue to insist on having the ability to deter invasion or attack by the United States or its allies.

We came close  to real progress in the 1990s. The imperfect “Agreed Framework,” struck by Pyongyang and the Clinton administration, froze Pyongyang’s nascent nuclear program and opened it up to inspections in exchange for economic and diplomatic concessions from Washington. It held promise of sustainable de-escalation.

But problems arose. In Hecker’s retelling, the agreement:

was opposed immediately by many in Congress who believed that it rewarded bad behavior. Congress failed to appropriate funds for key provisions of the pact, causing the United States to fall behind in its commitments almost from the beginning. The LWR [light-water reactor] project also fell behind schedule because the legal arrangements were much more complex than anticipated. The Agreed Framework, which began as a process of interaction and cooperation, quickly turned into accusations of non-compliance by both parties.

Nevertheless, the Agreed Framework continued to be the basis for constructive diplomacy. According to Mike Chinoy, a senior fellow at the University of South California’s U.S.-China Institute, “Despite North Korean frustration at U.S. delays in providing much of the promised assistance, the political thaw reached a high point in 2000” when the two countries issued a joint communique “pledging that neither would have ‘hostile intent’ towards the other.” Chinoy continues:

Then Bush took office. After a review of Korea policy, Bush declined to reaffirm the communique pledging “no hostile intent.” Meanwhile, leading conservatives in his administration — Vice President Dick Cheney, Defense Secretary Donald Rumsfeld, Undersecretary of State John Bolton and others — actively sought to torpedo the Agreed Framework. The president labeled North Korea a member of the “axis of evil,” along with Iran and Iraq. In mid-2002, a U.S. intelligence determination that North Korea had taken initial steps to acquire the capability to make a uranium bomb was used by the conservatives as an excuse for Washington to pull out of the 1994 framework deal.

In the following months, Kim watched as U.S. troops toppled Saddam Hussein while the Bush administration, in the name of the “war on terror,” expounded a doctrine of regime change for rogue states. Rumsfeld formally proposed making regime change in Pyongyang official U.S. policy, while Bolton warned Kim to “draw the appropriate lesson” from Iraq.

With the Bush administration’s abrogation of the Agreed Framework, North Korea announced its withdrawal from the Nuclear Non-Proliferation Treaty, kicked out inspectors, and became determined to obtain deliverable nuclear weapons in order to avoid the fate of Iraq’s Saddam Hussein, and later Libya’s Muammar Gadhafi.

Would Pyongyang have permitted improved relations with the U.S. and South Korea and forfeited its nuclear ambitions under sustained diplomacy? It’s hard to say. The Bush administration suspected early on that North Korea was exploring uranium enrichment, which would have violated the spirit but not the letter of the Agreed Framework. But the fundamental issue is that North Korea’s perception of its threat environment is existential. They believe – not without reason – that the survival of the regime is at risk unless they possess a credible nuclear deterrent.  

Given the progress they have now made, de-nuclearization is no longer really in the cards. Nor is there a viable military option (even a minor surgical strike is expected to unleash a massive war involving potentially a million deaths, and that’s if it doesn’t go nuclear). The United States must simply learn to live with a nuclear North Korea. Diplomatic efforts should focus on de-escalation measures, as recently suggested by Russia and China, and freezing Pyongyang’s weapons development where it is, in exchange for economic and diplomatic concessions from the U.S.

But before any of that, we need to get beyond this myth that diplomacy isn’t an option. 

The House of Representatives recently passed the No Sanctuary for Criminals Act (H.R. 3003) and Kate’s Law (H.R. 3004) to tighten immigration enforcement in response to the fear that illegal immigrants are especially likely to commit violent or property crimes.  Both laws stem from the tragic 2015 murder of Kate Steinle by an illegal immigrant named Juan Francisco Lopez-Sanchez after he had been deported multiple times. 

Debates on the House floor over both bills veered into the social science of immigrant criminality.  The majority of research finds that immigrants are less likely to be incarcerated than natives and that increases in their population in local areas are correlated with lower crime rates – even for illegal immigrants.

Despite that wealth of empirical evidence, a two-year-old Fox News piece entitled “Elusive Crime Wave Data Shows Frightening Toll of Illegal Immigrant Criminals” by investigative reporter Malia Zimmerman was offered as evidence of illegal immigrant criminality.  Ms. Zimmerman’s piece makes many factual errors that have misinformed the public debate over Kate’s Law and the No Sanctuary for Criminals Act.  Below, I quote from Ms. Zimmerman’s piece and then respond by describing her errors and what the actual facts are.

“Statistics show the estimated 11.7 million illegal immigrants in the U.S. account for 13.6 percent of all offenders sentenced for crimes committed in the U.S. Twelve percent of murder sentences, 20 percent of kidnapping sentences and 16 percent of drug trafficking sentences are meted out to illegal immigrants.”

Ms. Zimmerman writes that those statistics are for “crimes committed in the U.S.” but they are actually only for some federal sentences in 2014 and not nationwide figures according to a report by the U.S. Sentencing Commission that is the primary source of these figures.  Prisoners incarcerated in federal prisons account for roughly 10 percent of all prisoners in the United States while the other 90 percent are held in state and local prisons and jails for being convicted of breaking state and local laws.  Illegal immigrants convicted of an immigration offense are held in federal prison.  Thus, illegal immigrants are overrepresented in federal prison because the federal government enforces immigration laws but only a small fraction of all those incarcerated for “crimes committed in the U.S.” are in federal prisons.  

Ms. Zimmerman’s claim that 12 percent of murder sentences were meted out to illegal immigrants in 2014 shows just how misleading it is to rely on partial federal data to make a point about nationwide crime.  This U.S. Sentencing Commission lists only 75 murderers sentenced to federal prison in 2014, a mere 0.5 percent of the 14,249 nationwide murders committed that year in the United States.  Of those 75 murderers, Zimmerman claimed that nine were illegal immigrants.  The small number of murderers sentenced to federal prison are not representative of the other 99.5 percent of murders elsewhere in the same year and certainly don’t prove that illegal immigrants are more likely to be criminals.  The federal government does not convict many people for murder, kidnapping, or drug trafficking because those are primarily the purviews of state and local governments.  The figures for kidnapping and drug trafficking are similarly unrepresentative because they are only for federal sentences and not those sentences to state or local incarceration.

Furthermore, it appears that Ms. Zimmerman just copied these numbers from a Breitbart blog post written by Caroline May on July 7th, 2015 despite her claim that “FoxNews.com did review reports from immigration reform groups and various government agencies, including the U.S. Census Bureau, U.S. Sentencing Commission, Immigration and Customs Enforcement, the Government Accountability Office, the Bureau of Justice Statistics and several state and county correctional departments.”  Ms. May claims to have information that parses the U.S. Sentencing Commission by the legal status of the immigrant offender but it is not publicly available.  Regardless, Ms. May did clearly state that the U.S. Sentencing Commission “data only deals with federal offenders sentenced under the Sentencing Reform Act of 1984 (SRA) and does not include other categories like state cases, death penalty cases, or ‘cases initiated but for which no convictions were obtained, offenders convicted for whom no sentences were yet issued, and offenders sentenced but for whom no sentencing documents were submitted to the Commission [emphasis added].’”  Ms. Zimmerman should have also included that vital detail.  

“In the most recent figures available, a Government Accountability Office report titled, ‘Criminal Alien Statistics,’ found there were 55,000 illegal immigrants in federal prison and 296,000 in state and local lockups in 2011.”

Ms. Zimmerman misread the GAO report in several places.  First, she got the years wrong.  The 55,000 figure is the number of criminal aliens incarcerated in federal prison in 2010, not 2011.  The 296,000 criminal alien incarcerations in state prisons and local jails is for 2009, not 2011. 

Second, Ms. Zimmerman misreported the definition of a criminal alien which she claimed were all illegal immigrants.  The GAO report claims that there were 55,000 criminal aliens in federal prison in 2010 and it defines criminal aliens as “[n]oncitizens who are residing in the United States legally or illegally and are convicted of a crime.”  This is an important distinction because there were about 22.5 million foreigners living in the United States in 2010 without citizenship but only about half of them were illegal immigrants.  By lumping them together, Ms. Zimmerman makes illegal immigrants seem more crime prone and legal immigrants less crime prone. 

Third, the 296,000 figure was the estimated total number of incarcerations of illegal immigrants over the course of the entire year of 2009, not the number of illegal immigrants incarcerated.  An example will help illustrate this point: If a criminal alien was incarcerated for 10 short sentences, released after each one, and then incarcerated after each one then that single alien would account for 10 incarcerations under the SCAAP figure. 

The American Community Survey (ACS) reports the number of incarcerated immigrants at a specific time.  For instance, in 2009 the ACS reported that there were 162,579 criminal non-citizen aliens incarcerated in federal, state, and local adult correctional facilities – almost half of the 296,000 incarcerations under SCAAP.  Thus, the total number of people incarcerated over the course of a year is very different from the number of prisoners incarcerated at any one time.  Virtually everyone reporting the number of prisoners or those incarcerated in the United States at any given time uses the ACS method of focusing on a slice of time. 

The GAO reports that there were 160,348 American citizens incarcerated alongside the 54,718 criminal aliens in federal prison in 2010.  The Bureau of Justice Statistics reports different figures of 179,435 American citizens incarcerated alongside 30,336 criminal aliens.  Historical Bureau of Prison data is unavailable but there were about 40,000 criminal aliens incarcerated in May 2017 alongside 147,419 U.S. citizen prisoners.          

“Hundreds of thousands of illegal immigrant criminals are being deported. In 2014, ICE removed 315,943 criminal illegal immigrants nationwide, 85 percent of whom had previously been convicted of a criminal offense.”

Ms. Zimmerman again misunderstood and misquoted these statistics.  Only 56 percent of ICE’s 315,943 removals in 2014 were previously convicted of a crime, not the 85 percent that she wrote.  She misunderstood page seven of the 2014 ICE report on removals.  That report does state that 85 percent of all removals from the interior of the United States had previously been convicted of a crime.  However, ICE only removed 102,224 people from the interior of the United States that year while the rest were removals of unlawful immigrants apprehended at the border. 

Many of the previous criminal convictions were for immigration offenses and not violent and property crimes.  The 2014 ICE report stated that they “conducted 213,179 removals of recent border crossers.  Many of those apprehended along the border had prior criminal or civil immigration violations in the United States.” 

“[A]n internal report compiled by the Texas Department of Public Safety … showed that between 2008 and 2014, noncitizens in Texas – a group that includes illegal and legal immigrants – committed 611,234 crimes, including nearly 3,000 homicides.”

That quote is maddeningly unspecific and the original report is unavailable.  Facts about the Texas Department of Public Safety (DPS) report come from this blog written by J. Christian Adams at PJ Media but that sheds little light.  I found a similar blurb published on the Texas DPS website that describes similar-looking statistics over different years and what the numbers actually mean.  If that blurb and the missing Texas DPS report reported statistics in the same way then the “611,234 crimes, including nearly 3,000 homicides” are actually a count of the total number of lifetime charges filed against all of the noncitizens arrested in Texas from 2008 to 2014.  They are not a count of the total number of crimes committed by illegal immigrants from 2008 to 2014.  Thus, a hypothetical noncitizen charged with a dozen different homicides but who was never actually convicted and who was arrested between 2008 and 2014 would account for 12 out of the 3000 homicide charges.  Only a fraction of the charges mentioned in the blurb actually resulted in convictions which is likely the case with the unavailable Texas DPS report too.  If the Texas DPS report presented its statistics in the same way as the updated Texas DPS blurb then noncitizens did not commit “nearly 3,000 homicides” from 2008 to 2014. 

In 2014, non-citizens were about 10.9 percent of Texas’ population.  From 2008 to 2014, The FBI’s Uniform Crime Report (UCR) system records 8,551 murders in the state of Texas.  If Ms. Zimmerman’s characterization of the data is correct then non-citizens would have committed 35 percent of all homicides in the state during that time period despite being only about 11 percent of the population – which would be shocking if there was any evidence to back it up.

Ms. Zimmerman’s plethora of factual errors should be corrected in her Fox News piece before they further misinform the public and Capitol Hill.  Ms. Zimmerman is correct that federal and state governments do not consistently record the number of incarcerated illegal immigrants – and that should change – but her numerous errors in interpreting government documents and other bloggers have compounded the harm done by poor government record keeping.     

A new document received by ProPublica under a Freedom of Information Act request demonstrates that the U.S. Immigration and Customs Enforcement (ICE) has adopted a policy that conflicts with both President Trump’s executive order (EO) and public Department of Homeland Security (DHS) guidelines on immigration enforcement. I commented for the story, which you can read here.

The bottom line is that the memo shows that for months, ICE has been requiring agents to arrest all unauthorized immigrants whom they “encounter,” regardless of whether they are otherwise priorities for removal. Previously, ICE had admitted that it sometimes arrests non-prioritized immigrants, but this memo goes much further, requiring them to do so in all cases. This directly contradicts President Trump’s statements about targeting criminal aliens, the text of his EO which creates priorities for removal, and Secretary John Kelly’s department-wide DHS memo that requires that agents be able to retain their discretion over arrests and mandates that they follow the department’s removal priorities when arresting people that they “encounter.” 

President Trump executive order creates prioritization of immigrants for removal. 

Here’s the background. On January 25, President Trump issued Executive Order 13768, “Executive Order: Enhancing Public Safety in the Interior of the United States.” The EO stated, “We cannot faithfully execute the immigration laws of the United States if we exempt classes or categories of removable aliens from potential enforcement.” But it then gave this statement effect by rescinding DHS’s Obama-era immigration enforcement priorities from November 2014 and creating new, much broader ones.

Sec. 5.  Enforcement Priorities.  In executing faithfully the immigration laws of the United States, the Secretary of Homeland Security shall prioritize for removal those aliens described by the Congress in sections 212(a)(2) [various criminal convictions], (a)(3) [security concerns], and (a)(6)(C) [immigration fraud], 235 [people caught while crossing illegally], and 237(a)(2) [various criminal convictions] and (4) [security concerns] of the INA as well as removable aliens who:
(a)  Have been convicted of any criminal offense;
(b)  Have been charged with any criminal offense, where such charge has not been resolved;
(c)  Have committed acts that constitute a chargeable criminal offense;
(d)  Have engaged in fraud or willful misrepresentation in connection with any official matter or application before a governmental agency;
(e)  Have abused any program related to receipt of public benefits;
(f)  Are subject to a final order of removal, but who have not complied with their legal obligation to depart the United States; or
(g)  In the judgment of an immigration officer, otherwise pose a risk to public safety or national security.

These categories are already very broad and could include up to three quarters of all unauthorized immigrants. Nonetheless, they do provide some guidance for officers on who to target for arrest. Under the Trump EO, no one is “exempt” from potential removal, but officers are instructed to use their discretion to focus on those who fit these priorities. Notably absent from this list: every unauthorized immigrant “encountered” by an ICE officer. On February 20, DHS Secretary Kelly publicly signed a memo that spelled out how his department should implement the EO, stating in relevant part:

Thus, in the DHS memo, officers are allowed—i.e. “may”—initiate enforcement actions against removable aliens that they “encounter” but they “should act consistently with the President’s enforcement priorities” and “shall prioritize” those aliens. It also states that the ICE Director may “issue further guidance to allocate appropriate resources to prioritize enforcement activities within these categories—for example, by prioritizing enforcement activities against removable aliens who are convicted felons or who are involved in gang activity or drug trafficking.” Secretary Kelly has interpreted his memo to mean, “just because you’re in the United States illegally doesn’t necessarily get you targeted. It’s gotta be something else.”

ICE memo ignores President Trump’s priorities for removal

However, on February 21, ICE Executive Assistant Director Matthew Albence, who heads up Enforcement and Removal Operations (ERO), quickly issued the above-mentioned memo that claims to implement his agency’s portions of the Trump executive order as well as Secretary Kelly’s memo to the whole department. The relevant portion of that memo reads:

Here ICE has taken the DHS-wide memo and—rather than narrowing it to certain specific categories within the priorities as Secretary Kelly suggested—clearly goes far beyond it, even to the point of violating it. First, by requiring that agents take enforcement actions against anyone they “encounter,” it violates the DHS-wide guideline to not “remove the individual, case-by-case decisions of immigration officers.” Second, it violates the memo and the Trump EO by prioritizing for removal those individuals that the agents “encounter,” above those specifically listed in the Trump EO and DHS memo.

The ICE memo does mention the prioritization but only applies it to detention decisions and “efforts to remove.” How can ICE claim that its “efforts to remove” are targeted against prioritized aliens while also requiring ICE agents to arrest all that they “encounter”? It appears to me that ICE has adopted the view that priorities only apply to its investigations and targeted operations—i.e. “efforts”—while it is free to arrest anyone whom they encounter during those “efforts.” This explains reports of immigrants being arrested who appear to fall outside DHS’s priorities.

In its justification of the memo for the story, ICE claims that “ICE prioritizes the arrest and removal of national security and public safety threats; however, no class or category of alien in the United States is exempt from arrest or removal.” This is a complete non-answer. A category may not be “exempt” from potential arrest, while still being de-prioritized relative to other categories. That is what the memo and EO instruct. Instead, it makes arrests of non-prioritized aliens mandatory if encountered by ICE agents.

ICE is simply creating its own priorities that contradict the secretary’s, yet Congress entrusted the secretary with the responsibility of “establishing national immigration enforcement policies and priorities.” Nothing in the memo delegates to ICE the authority to create new priorities. Indeed, it does just the opposite, instructing ICE to follow the priorities and allowing it only to promulgate memos that narrow the focus of the priorities.

Congress has also advised DHS to prioritize criminal immigrants in recent years. In every Homeland Security appropriations since 2008, the House appropriations committee has stated that the DHS “Secretary shall prioritize the identification and removal of aliens convicted of a crime by the severity of that crime.” In 2015 and 2016, this language was enacted into law. Unfortunately, likely due to the fact that Congress has avoided regular appropriations process, it was not enacted for 2017, but it is a part of the Committee-passed DHS appropriations bill for 2017 and likely will be again in 2018.

In any case, ICE’s practice simply cannot be squared with the public DHS memo or the Trump EO. The memo proves that the agency wants to have as few limits as possible on its authority, and it believes that no one in the White House or in DHS will stop them, even when it ignores their orders. This effect is not new to the Trump administration. ICE flouted the executive actions of President Obama as well. It is new, however, to see that the agency is spelling out its defiance in written instructions to its agents. This makes sense given that the agency’s performance metrics are mainly the quantity of removals, not the quality of removals.

The agency’s defenders will likely claim that it is just “enforcing the law,” but in no other sphere of law do we consider prioritization a failure to enforce the law. We take stock of the seriousness of the offense and allocate resources accordingly. Non-prioritization implies that ICE should spend equal time and resources on arresting non-criminal mothers with U.S. citizen kids as it does on serious violent offenders. That’s not just inhumane. It’s dangerous.

Twice here, yours truly has reported on The Fourth Corner Credit Union’s attempts to get the Kansas City Fed to grant it a master account, so that it could gain access to the Federal Reserve operated interbank payment and settlement system, and thereby supply ordinary banking services to Colorado’s legal marijuana-related businesses.

Although the 1980 Depository Institutions Deregulation and Monetary Control Act (DIDMCA) requires that “All Federal Reserve bank services…shall be available to nonmember depository institutions and such services shall be priced at the same schedule applicable to member banks,” the Kansas City Fed, after dragging its feet for months, summarily turned down TFCCU’s request in July 2015, on the dubious grounds that the National Credit Union Authority had earlier (and almost certainly at the Fed’s behest) denied TFCCU’s request to take part in its Share Insurance Fund — the credit-union counterpart of FDIC deposit insurance. I say “dubious” in part because TFCCU was planning to secure private insurance coverage, but mainly because insurance coverage had never been considered a requirement for having a Fed master account.

Until now, things have worked out badly for TFCCU. Although it sued the Kansas City Fed, the Fed’s lawyers replied with a motion to dismiss the suit, to which TFCCU’s lawyers responded with a counter motion, along with a request for summary judgement. Alas, TFCCU’s efforts came to naught when U.S. District Judge R. Brooke Jackson sided with the Fed. In his nine-page opinion, Jackson insisted that despite TFCCU’s “attempts to give me comfort that, notwithstanding the oath I took to uphold the laws of the United States, I can grant the relief it seeks,” despite federal justice guidelines issued in February 2014, granting banks in states where marijuana-related businesses were legal a green light to do business with them, subject to specific reporting requirements, and despite TFCCU’s stated intent to obey federal law, his hands were tied by the Controlled Substances Act.

Well, recently TFCCU got some good news at last. In a message he sent me last week, Mark Mason, the credit union’s attorney, wrote

I wanted to share the big win with you — we got Judge Jackson’s order vacated by the 10th Circuit Court of Appeals. Judge Bacharach’s opinion agreed 100 percent with our position [that the F]ed must provide all depository institutions access to the payments system and that it has no discretion in that regard.

Judge Bacharach’s well-argued opinion, which is well-worth reading in full, allows TFCCU to proceed with its suit after all. Though not yet a complete victory for the beleaguered credit union, it’s at least a giant step in that direction.

[Cross-posted from Alt-M.org]

The Federal Reserve released the minutes from its June policy-setting meeting yesterday afternoon.  The Federal Open Market Committee (FOMC) minutes reflect an economic outlook consistent with recent public comments made by Fed officials: an improving labor market, confidence that the current path of monetary policy will achieve 2% inflation in the long run, and an expectation that economic growth will continue to rise from the disappointing Q1 figures.

Balance Sheet Reduction

The minutes note that all FOMC participants agreed to the balance sheet reduction program, which was described in more detail in an update to the Fed’s Policy Normalization Principles and Plans following the June policy meeting. In sum, the program suggests that the Fed will limit the reinvestment of the principal of maturing assets on its balance sheet through a series of monthly caps. Initially, the Fed will allow up to $6 billion in Treasuries and $4 billion in agency debt and MBS to roll off each month. Whatever matures above those limits in a given month will continue to be reinvested. Every three months the caps will increase by $6 billion for Treasuries and $4 billion for agency debt and MBS over 12 months until $30 billion of Treasuries and $20 billion of agency debt and MBS are rolling off each month. The Committee anticipates these to be the monthly caps until the balance sheet returns to a new normal that is considerably lower than the present $4.5 trillion level but appreciably higher than its pre-crisis level of around $800 billion.

One new detail revealed in the minutes is that the FOMC seems to be split on when the balance sheet wind down should be announced. Some members want to announce the start date within a couple months while others prefer to wait until late this year. Noticeably absent from the minutes is a discussion about the actual start date for the reduction plan.

The Inflation Target

Another detail of interest is that one FOMC member suggested the Committee’s commitment to a 2% inflation target would be more publicly credible if the Fed allowed for a period of above 2% inflation. Since FOMC minutes don’t name names, we can only speculate that this suggestion came from Neel Kashkari — the only voter to dissent at the meeting, preferring to have held rates steady in June. Many monetary policy analysts have recently suggested that the Fed’s inflation target is asymmetric, meaning that policymakers are much more comfortable undershooting the target than overshooting it.

Financial Stability

FOMC members expressed a range of views on matters related to financial stability.  Some participants are concerned that the current labor market could lead to rapidly rising inflation and increased financial instability, a development that would call for aggressively raising the target range for the federal funds market. Others do not believe previous episodes of labor market inflation dynamics are relevant to today, and are therefore less concerned that low unemployment will cause inflation to increase excessively. Another member believes the financial system is more robust to shocks today than it was before the crisis, but also noted that the FOMC should remain “vigilant” about developments in financial markets.

Interest Rates

The Committee is divided on how the balance sheet reduction will impact the path of interest rates, with some members believing that as securities roll off the frequency of rate increases can slow. Others anticipate that normalizing the balance sheet will not materially affect the path of rate hikes.

Something of concern is that there is no mention of how the FOMC intends to normalize policy in the federal funds market. The minutes contain no discussion of how, when, or if the FOMC will end its policy of paying above market interest on excess reserves, a policy that prevents a traditional federal funds market from emerging.

Another area with a troubling lack of clarity is the Committee’s continued practice of citing a lower than normal neutral (or natural) rate of interest as justification for its policy stance without sharing its estimates of that neutral rate. If monetary policy is supposedly data driven, the Fed should be transparent about the data and estimates it is using.

Conclusion

Overall, as is typical, the minutes reveal little new. The path to normalization is starting to materialize, but with ample room for the Fed to reverse course. While the FOMC will likely announce when balance sheet reductions are to begin, that actual start date is still unclear with lots of flexibility for the Fed to backtrack on ending balance sheet reinvestments. And without a strategy for unwinding interest on excess reserves simultaneously, the path to normalization is fraught with challenges.

[Cross-posted from Alt-M.org]

According to the WSJ, drug-trade-related violence is rising again in Mexico:

On the morning of March 23, gunmen here fired eight shots into a cherry-red Renault Duster SUV, killing newspaper reporter Miroslava Breach as she waited outside her home to drive her 14-year-old son Carlos to school.

A hand-painted sign at the scene said the journalist—known for her investigations into ties between drug gangs and local political machines—was murdered “for having a loose tongue.”

After a few years of declining violence under Mexican President Enrique Peña Nieto, the drug war has come roaring back to life.

Ms. Breach was one of 11,155 people murdered in Mexico in the first five months of 2017, according to government statistics. The pace of murders—about one every 20 minutes—represents a 31% jump from a year earlier, and, by year-end, could rival 2011’s 27,213 homicides for the worst body count in Mexico’s peacetime history.

Why? The story offers multiple reasons, such as increased bloody competition between rival gangs, set off by the arrest of senior leaders. The most interesting hypothesis, however, is this:

There is also a counterintuitive dynamic at work, say scholars of the drug trade: In recent months, voters have thrown out of office allegedly corrupt state and local leaders of President Peña Nieto’s ruling Institutional Revolutionary Party, or PRI. That, in turn, has led to the breakdown of unofficial alliances between drug gangs and politicians—what some are calling a pax mafiosa—that had kept the killings in check.

That is, when governments impose bad laws, corruption that circumvents the laws can have beneficial effects. In this case, violence is costly to traffickers as well as other citizens, so corruption that diminishes prohibition enforcement—de facto legalization—makes it easier for the cartels to operate non-violently.

Everybody’s finding errors in Duke historian Nancy MacLean’s “work of speculative historical fiction” on Nobel laureate James Buchanan and the libertarian movement, Democracy in Chains. I’d feel left out if I weren’t misquoted, so I’m relieved to find my name on page 211. Here’s what MacLean says about me and some of my purported allies:

Now: Did I actually say that the poor and working class are “intent on exploiting the rich”? Or “that they contribute nothing”? Well, here’s what I wrote on pp. 252-53 of The Libertarian Mind, which is the source MacLean footnotes:

Economists call this process rent-seeking, or transfer-seeking. It’s another illustration of Oppenheimer’s distinction between the economic and the political means. Some individuals and businesses produce wealth. They grow food or build things people want to buy or perform useful services. Others find it easier to go to Washington, a state capital, or a city hall and get a subsidy, tariff, quota, or restriction on their competitors. That’s the political means to wealth, and, sadly, it’s been growing faster than the economic means.

Of course, in the modern world of trillion-dollar governments handing out favors like Santa Claus, it becomes harder to distinguish between the producers and the transfer-seekers, the predators and the prey. The state tries to confuse us, like the three-card monte dealer, by taking our money as quietly as possible and then handing some of it back to us with great ceremony. We all end up railing against taxes but then demanding our Medicare, our subsidized mass transit, our farm programs, our free national parks, and on and on and on. Frederic Bastiat explained it in the nineteenth century: “The State is that great fiction by which everyone tries to live at the expense of everyone else.” In the aggregate, we all lose, but it’s hard to know who is a net loser and who is a net winner in the immediate circumstance.

On the preceding pages I introduced James Buchanan and the concept of public choice:

One of the key concepts of Public Choice is concentrated benefits and diffuse costs. That means that the benefits of any government program are concentrated on a few people, while the costs are diffused among many people. Take ADM’s ethanol subsidy, for instance. If ADM makes $200 million a year from it, it costs each American about a dollar. Did you know about it? Probably not. Now that you do, are you going to write your congressman and complain? Probably not. Are you going to fly to Washington, take your senator out to dinner, give him a thousand-dollar contribution, and ask him not to vote for the ethanol subsidy? Of course not. But you can bet that ADM’s corporate officers are doing all that and more. Think about it: How much would you spend to get a $200 million subsidy from the federal government? About $199 million if you had to, I’ll bet. So who will members of Congress listen to? The average Americans who don’t know that they’re paying a dollar each for ADM’s profits? Or ADM, which is making a list and checking it twice to see who’s voting for their subsidy?

I also wrote on page 253 about the “parasite economy,” in which

every group in society comes up with a way for the government to help it or penalize its competitors: businesses seek tariffs, unions call for minimum-wage laws (which make high-priced skilled workers more economical than cheaper, low-skilled workers), postal workers get Congress to outlaw private competition, businesses seek subtle twists in regulations that hurt their competitors more than themselves. 

Let’s be clear: when public choice economists and I talk about “rent seeking” and “concentrated benefits,” and we point to “subsidy, tariff, quota, or restriction on their competitors,” we’re not trying to protect the rich. We’re talking about ways that businesses, unions, and other organized interest groups seek to use government to gain advantages that they couldn’t gain in the marketplace. And when we suggest limiting the power of government to hand out such favors, we are arguing in the interests of workers and consumers.

I do not believe that MacLean’s two very short quotations from The Libertarian Mind and the paragraphs in which she situates them fairly depict my argument in the book. One might even say that she reversed the meaning of “the predators and the prey.” Unfortunately, selective quotation and misrepresentation seem to be MacLean’s M.O., as Steve Horwitz, Phil Magness, Russ Roberts, David Henderson, David Bernstein, Bernstein again, Nick Gillespie, Michael Munger, and others have pointed out.

By the way, Professor MacLean derides me as a writer “subsidized by wealthy donors.” Well, yes, it’s true that the Cato Institute is supported by voluntary contributions, not by tax funding. And donors to organizations – Duke University, NPR, the Sierra Club, Planned Parenthood, the Brookings Institution, the Cato Institute – tend to be well-off. But I assure Professor MacLean that I was absorbing the ideas of John Locke, Adam Smith, F. A. Hayek, the American Founders, and John Stuart Mill long before I discovered that there might be jobs available to write about such ideas.

Although James Buchanan was not involved in the founding of the Cato Institute, as MacLean writes, we are proud that he chose to write frequently for the Cato Journal, speak at various Cato events, and allow us to count him as a Distinguished Senior Fellow. And we regret that he has been so ill treated by a fellow academic.

The First Amendment right to free speech extends far beyond just verbal expression. Some of the most iconic First Amendment cases have concerned the right to make silent but powerful statements, such as wearing a black armband to protest a war, Tinker v. Des Moines (1969), or an impolite shirt to protest the draft, Cohen v. California (1971). As these cases have recognized, what we choose to wear often plays an important role in how we express ourselves.

But in Minnesota, such personal expression has been unjustifiably prohibited. The state completely bans the wearing of any “political badge, political button, or other political insignia” in or around the polling place on election day. When several Minnesota citizens attempted to vote wearing clothes expressing support for the Tea Party movement or buttons reading “Please I.D. Me,” they were told that such apparel violated the law. They sued to overturn the law, but their challenge has twice been rejected by the U.S. Court of Appeals for the Eighth Circuit.

Now those voters have appealed to the Supreme Court. On the eve of our nation’s independence day, Cato, joined by the Rutherford Institute, Reason Foundation, and Individual Rights Foundation, has filed an amicus brief supporting that petition.

We explain just how startlingly far Minnesota’s statute extends. Anything from the word “occupy” to the peace symbol to a donkey or elephant might be construed as a “political insignia,” thereby running afoul of the law. Further, the statute gives election judges the power to ban any materials “promoting a group with recognizable political views.” That means Minnesota voters can’t even feel safe wearing shirts supporting the ACLU, NAACP, or their local union.

No compelling government interest justifies such a sweeping ban. Only once has the Supreme Court upheld a law that regulated speech in the polling place. But in that case, Burson v. Freeman (1992), the law was limited to “the solicitation of votes and the display or distribution of campaign materials.” Because that law specifically targeted electioneering, the Court held that it was narrowly tailored to advance “a compelling interest in protecting voters from confusion and undue influence.”

By instead banning all political insignia, Minnesota has gone vastly beyond Burson. Concerns about the electoral process can’t justify a ban on speech that is unrelated to any issue or candidate on the ballot.

Finally, we explain in our brief that the law is so vague it gives unaccountable election judges far too much discretion in determining what is permissible. So long as Minnesota’s law remains on the books, voters are left unsure whether any given government agent might rule that their Gandhi or Lennon (or Lenin!) shirt is a political stance or just a fashion statement. As a result, even apolitical speech has undoubtedly been chilled by the law, making it unconstitutionally overbroad.

The Supreme Court should take up Minnesota Voters Alliance v. Mansky and strike down Minnesota’s ban on political expression.

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