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If you designate a beneficiary on a life insurance policy, should you expect your intent to be honored upon your death? You may not be able to if you live in Minnesota or more than half of the nation’s other states. So said the Supreme Court today—despite the plain language of Constitution’s Contracts Clause, which categorically prohibits states from passing “any … Law impairing the Obligations of Contracts.” The case was Sveen v. Melin. The decision was 8-1, Justice Elena Kagan writing for the Court. The dissent by Justice Neil Gorsuch goes to the heart of the matter. (For an overview of the Contracts Clause, see chapter 3 in Bob Levy and Chip Mellor’s The Dirty Dozen.)

The decision’s syllabus nicely summaries the facts:

Mark Sveen and respondent Kaye Melin were married in 1997. The next year, Sveen purchased a life insurance policy, naming Melin as the primary beneficiary and designating his two children from a prior marriage, petitioners Ashley and Antone Sveen, as contingent beneficiaries. The Sveen-Melin marriage ended in 2007, but the divorce decree made no mention of the insurance policy and Sveen took no action to revise his beneficiary designations. After Sveen passed away in 2011, Melin and the Sveen children made competing claims to the insurance proceeds. The Sveens argued that under Minnesota’s revocation-on-divorce law, their father’s divorce canceled Melin’s beneficiary designation, leaving them as the rightful recipients. Melin claimed that because the law did not exist when the policy was purchased and she was named as the primary beneficiary, applying the later-enacted law to the policy violates the Constitution’s Contracts Clause. The District Court awarded the insurance money to the Sveens, but the Eighth Circuit reversed, holding that the retroactive application of Minnesota’s law violates the Contracts Clause.

So the question before the Court was the relatively simple one of whether the Minnesota legislature could, with its revocation-on-divorce law, retroactively change the terms of the contract.

In holding that the legislature could do so, the Court found, remarkably, that the law “does not substantially impair pre-existing contractual arrangements” and that it “is designed to reflect a policyholder’s intent—and so to support, rather than impair, the contractual scheme.” Speaking of presumptions, the Court added that “[l]egislative presumptions about divorce are now especially prevalent—probably because they accurately reflect the intent of most divorcing parties … [since] most divorcees do not aspire to enrich their former partners.”

Justice Gorsuch would have none of this. His dissent begins with the paradox at the heart of the Court’s reasoning:

The Court’s argument proceeds this way. Because people are inattentive to their life insurance beneficiary designations when they divorce, the legislature needs to change those designations retroactively to ensure they aren’t misdirected. But because those same people are simultaneously attentive to beneficiary designations (not to mention the legislature’s activity), they will surely undo the change if they don’t like it. And even if that weren’t true, it would hardly matter. People know existing divorce laws sometimes allow courts to reform insurance contracts. So people should know a legislature might enact new laws upending insurance contracts at divorce. For these reasons, a statute rewriting the most important term of a life insurance policy—who gets paid—somehow doesn’t “substantially impair” the contract. It just “makes a significant change.”

As Justice Gorsuch goes on to note, this case brings to the fore a fundamental problem with the Court’s deference to the legislature’s presumptions. For as Kay Melin testified, she and her former husband “agreed (repeatedly) to keep each other as the primary beneficiaries in the respective life insurance policies … not only because they remained friends but because they paid the policy premiums from their joint checking account.”

Today’s decision is only one of far too many that illustrate how a court can play fast and loose with plain constitutional text to get a result that cannot be squared with that text. Read the opinion—it’s short, as opinions go—for the details. For 11 other examples of such legal legerdemain, read the Levy-Mellor book, available from Cato.

Class action tolling means suspending time limits on future lawsuits while a class action suit is pending. This is distinct from class action trolling which is when the Ninth Circuit adopts a deliriously liberal rule and dares the Supreme Court to reverse it. 

Both phenomena were involved in today’s unanimous Supreme Court opinion in China Agritech v. Resh. In the 1974 case of American Pipe & Construction v. Utah the Court had adopted a rule permitting individual claimants to file otherwise-tardy actions after a court had declined to certify a class action. The American Pipe rule is itself decidedly indulgent toward the class action device, but it took the Ninth Circuit to take a crucial extra step off the Santa Monica pier by holding that the late-arriving claimants should themselves be able to ask for certification as a class action. After all, the first try at certification might have been based on a flawed legal strategy or incomplete factual record. Why not give our friends in the bar a second bite?  

Or a third bite, or an nth: in fact the case that reached the high court was the third class action in a row attempted on the same underlying facts, a securities dispute. To almost everyone but the Ninth Circuit, the resulting danger was clear enough: without any real need to accept “no” for an answer, class action lawyers could just come back again and again with new tame plaintiffs until they find a judge willing to grant certification, the step that tends to guarantee a payday in the class action business. 

Today’s unanimity is significant. On procedural and jurisdictional issues, at least, today’s liberal wing on the Court has sometimes been willing to unite with the Rehnquist-Scalia-Roberts wing to recognize and rein in the dangers of lawyer-driven overlitigation, the tactical use of lawsuits as a weapon, and so forth. Justice Ruth Bader Ginsburg, who wrote today’s opinion, has more than once joined and sometimes led such coalitions. By contrast, Justice Sonia Sotomayor has often been found alone and out on a limb in favor of a more litigation-friendly position, which happened again today: she joined in a concurrence agreeing that the Ninth Circuit had gone too far but seeking to limit the Court’s holding to securities suits governed by the Private Securities Litigation Reform Act of 1995 (PSLRA). 

The Senate might want to quiz future liberal nominees – yes, there will be such – on whether they more favor the Ginsburg or the Sotomayor approach to these issues.

From the St. Johnsbury, Vermont Caledonian Record:

On May 28 Gov. Phil Scott signed a bill to impose an individual mandate on all Vermonters to have state-approved health insurance. The mandate takes effect in 2020. A working group will recommend the necessary penalties for non-compliance by November.

The United States Congress eliminated the penalty tax for not having government–approved ObamaCare health insurance. So the governor and legislative leaders believe they must impose some kind of state penalty to prevent healthy people from departing the individual market insurance pool.

Who are the healthy? Primarily our young people.

And why must they be forced, on pain of penalties, to buy what for them is seriously overpriced health insurance? Because our state government doesn’t want to have to raise tax dollars to subsidize the far higher premiums of older and sicker people.

After all, why raise taxes to make a state insurance scheme work, when the government can simply force young healthy people to pay for the subsidies for their grandparents?

It’s not as if twenty-somethings are richer than sixty-somethings. They aren’t. Most of them are starting out in their working life at the lower end of the pay scale, often paying off college debts, maybe starting a family and trying to buy a home.

No matter. Our government will cheerfully hammer them to hold down the premiums for people who are near the top of their earning careers, have already raised their kids, and paid off their mortgages…

A Democratic legislature passed a sweeping Individual Health Effort Tax mandate in 2005. Republican Gov. Jim Douglas vetoed it. Here’s what the penalty menu was: “Individuals who are not otherwise covered, and who refuse to participate in the Plan, will be sanctioned by some combination of denial of motor vehicle registration, drivers’ license, homestead property tax exemption, hunting and fishing licenses, and enrollment in any school or college in the state.”

We can’t wait to see a legislator – or a Governor – try to explain this to a room full of young voters.

HT: Ethan Allan Institute founder and vice president John McClaughry.

Some people are skeptical of taking specific statements President Trump makes too seriously/literally, and I can understand why. Nevertheless, in the midst of mostly aggressive trade rhetoric, every now and then he calls for more trade liberalization. This is from Trump’s Saturday press conference at the G7 meeting:

Q Mr. President, you said that this was a positive meeting, but from the outside, it seemed quite contentious. Did you get any indication from your interlocutors that they were going to make any concessions to you? And I believe that you raised the idea of a tariff-free G7. Is that —

THE PRESIDENT: I did. Oh, I did. That’s the way it should be. No tariffs, no barriers. That’s the way it should be.

Q How did it go down?

THE PRESIDENT: And no subsidies. I even said no tariffs. In other words, let’s say Canada — where we have tremendous tariffs — the United States pays tremendous tariffs on dairy. As an example, 270 percent. Nobody knows that. We pay nothing. We don’t want to pay anything. Why should we pay?

We have to — ultimately, that’s what you want. You want a tariff-free, you want no barriers, and you want no subsidies, because you have some cases where countries are subsidizing industries, and that’s not fair. So you go tariff-free, you go barrier-free, you go subsidy-free. That’s the way you learned at the Wharton School of Finance. I mean, that would be the ultimate thing. Now, whether or not that works — but I did suggest it, and people were — I guess, they got to go back to the drawing and check it out, right?

In fact, Larry Kudlow is a great expert on this, and he’s a total free trader. But even Larry has seen the ravages of what they’ve done with their tariffs. Would you like to say something, Larry, very quickly? It might be interesting.

MR. KUDLOW: One interesting point, in terms of the G7 group meeting — I don’t know if they were surprised with President Trump’s free-trade proclamation, but they certainly listened to it and we had lengthy discussions about that. As the President said, reduce these barriers. In fact, go to zero. Zero tariffs. Zero non-tariff barriers. Zero subsidies.

It’s hard to know what to make of this “free-trade proclamation,” because reducing trade barriers is what many other countries have been promoting, and Trump keeps resisting. That’s what TPP was, and that’s what NAFTA is. So how is everyone supposed to react to his call for such broad trade liberalization? One possible reaction, which may or may not be productive, is that the other G7 leaders should accept his proposal, publicly endorse it, and suggest a date to begin negotiations. 

The Canadians can do this in the context of the NAFTA talks. The EU could propose new transatlantic trade talks. Japan could remind Trump about the TPP, or agree to bilateral talks. (And everyone seems to accept that subsidies have to be negotiated multilaterally, so maybe the better idea is to propose that this all be done at the WTO, rather than through bilateral talks.)

Unfortunately, I don’t think there is much hope of convincing Trump and his trade team that their view of trade deficits is misguided (we can line up a thousand economists to explain why it is misguided, but it won’t change their minds). However, I can imagine that talk of specific tariffs, barriers, and subsidies could be helpful here. Those do exist and are a problem. Trump may genuinely believe there is an imbalance, with Canadian, EU and Japanese tariffs, trade barriers, and subsidies far outweighing U.S. ones. A negotiation would be an opportunity to show him the reality. When he points to Canadian agriculture tariffs, the Canadians can point to U.S. agriculture subsidies. When he points to European auto tariffs, the Europeans can point to U.S. truck tariffs. And then they can keep going down the list: Buy America procurement policies, the Jones Act, barriers to trade in legal and medical services, anti-dumping abuses, etc.

Now, I’m not saying there is a great chance of success on any of this. Most likely, the best we could hope for is that these talks go about the same as other talks, with a little progress on a few tariffs, trade barriers, and subsidies. That’s the nature of these things. But Trump just called for going “tariff-free,” “barrier-free,” and “subsidy-free,” and it seems to me that taking him up on this may be better than the alternative, which right now looks like it could be escalating tit-for-tat tariffs.

I was crushed by Charles Krauthammer’s moving announcement here.  

When I was just out of college–many years ago now–I worked briefly as his research assistant.  He was as kind and generous in person as he is sharp and incisive in print.  What a blow to lose his wit, independence, and integrity.  

Some people want schools to have lighthearted, warm environments. Some want them to delve into social commentary, even if it is uncomfortable. Some students just want to wear what they want to wear. And some people either don’t want any of those things, or disagree when lines have been crossed. Here come the battle trends for May.

  • Lighthearted or Wrong-Headed? “It’s all fun and games until someone loses an eye” is a warning I heard a lot when I was a child. But it turns out we don’t all agree when fun and games turns into something more serious. In May we saw three conflicts that revolved around when someone trying to have fun may have crossed lines, and public school authorities punished them. In South Carolina a white teacher was recorded in a viral video standing on the desk of a sleeping, African-American student and pulling his hair, among other things. The district reportedly forced the teacher to retire, to the consternation of many parents and even the student’s father, who said he “felt like the incident was done in humor.” The teacher was reinstated after her lawyer and district council met to discuss the matter. In Texas, a principal had a tradition of having children come to her office on their birthdays to receive a voluntary, symbolic spanking. It elicited at least three objections, and the principal discontinued the practice. Parent Heather Redder liked the tradition, and said some people are “not used to a small town community… People that move here from the big city, they don’t realize, and they’re not used to this.” Finally, a senior prank went wrong in Independence, Missouri, when a student posted a Craigslist ad selling his high school “due to the loss of students coming up.” The ad was referring to graduating students, but district officials saw it as a potential threat and punished the prankster, forbidding him to walk at graduation. The ACLU came to his defense. “In the hometown of U.S. President Harry Truman and in a place named after one of our nation’s key principles, ‘freedom,’ we hope that the district reconsiders its position and encourages the freedom of speech of our nation’s next generation of leaders,” said ACLU Missouri legal director Tony Rothert.
  • Social Commentary, Or Promoting Violence? Since the horrific Parkland school shooting, gun violence has become a scorching political topic. But where is the line between commenting on violence and promoting it? Two districts saw division over the appropriateness of art commenting on gun violence. In Leander, Texas, some parents objected to the middle school showing the video for the social commentary song “This is America” by Childish Gambino, in which among other targets Gambino is shown shooting a church choir. One father said, “a lot of stuff that’s shown is true but it’s just not right to show to a middle school environment.” In Tacoma, Washington, a principal who is also a rapper was the focus of conflict over lyrics that some thought promoted school shootings. “Give me a reason just to load up a rifle, Pull the fire alarm in the lobby of my high school,” went some of the words. “Leave the halls bloody like a high noon tycoon.” Objected one parent: “No one in a position of authority who is mentoring or monitoring our children, my children, anyone’s children, should be glorifying shooting up a school.” The principal said he wasn’t trying to glorify violence, but to tell a “story of something that happened to a young person that inspired and caused him to commit acts of violence.”
  • Dress Codes: Contending over what is acceptable to wear in school is constant, and remained so in May. In two states we saw officials telling girls to cover up lest they be distracting to boys, or maybe just not live up to community norms of propriety. We also saw a student get punished—and subsequently sue his district—for refusing to remove a t-shirt that read, “Donald J. Trump Border Wall Construction Co.” and “The Wall Just Got 10 Feet Taller.” The shirt violated the dress code prohibiting “clothing decorated with illustrations, words, or phrases that are disruptive or potentially disruptive, and/or that promote superiority of one group over another.” Said the student’s lawyer, “If people are offended by his shirt - that’s their right to be offended. But it’s also his right to have his opinion, as well.” In Montana, there was a lengthy standoff over a Confederate flag sweatshirt. Finally, May saw a battle over a student who had enlisted in the Army and wanted to wear an Army sash at graduation. The request was denied, but not without a struggle. It came down to the student’s pride in her accomplishments and country versus a school’s need to maintain order. While defending the district’s patriotism, the district superintendent said “the rule is in place to prevent student’s writing the silly ‘Hi, Mom’ on the hat and goofy things. We’re trying to keep our graduations somewhat dignified.”

As always, the monthly battles weren’t restricted to these trends. We also witnessed trouble over revolutionary themed prom tickets, disposing of pest animals, evolution, and more. And we had two surveys on our Facebook page. The first asked whether pulling the sleeping student’s hair was “OK” for the teacher to do. 21 percent of respondents said yes, 79 percent no. The second asked about constantly contested territory, the student vaeldictory speech that exalts God, stemming from this skirmish. We asked, “Should valedictorians be able to thank God in a public school graduation speech?” Three quarters of respondents answered yes, one quarter no.

Back in a month with the June Dispatch, then maybe the fighting will subside during summer vacation. Maybe…

Having no specific legal definition, “hate speech” is a vague term. It is generally understood to mean speech that expresses hateful or bigoted views about certain groups that historically have been subject to discrimination. Concerned by the impact of hate speech on vulnerable populations, social justice advocates see sense in restricting this type of speech.

However, these types of laws often fall hardest on the very people they are intended to protect. Nadine Strossen explores this idea in her new book, Hate Speech: Why We Should Resist It with Free Speech, Not Censorship. (Hereafter all page citations are to this book).

Strossen draws attention to the fact that prohibitions of “hate speech” are characterized by unavoidable vagueness and overbreadth.  A law is “unduly vague” (and unconstitutional) when people “of common intelligence must necessarily guess at its meaning.” “Hate speech” laws are inherently subjective and ambiguous in their language, with the use of words like “insulting,” “abusive,” and “outrageous.” Specific to laws about speech, vagueness “inevitably deters people from engaging in constitutionally protected speech” (69).

One person’s “hate speech” is another’s anti-“hate speech.” Strossen cites many examples in which certain religious views are assailed as “hate speech” against LGBT individuals, while critiques of those religious views are attacked as anti-religious “hate speech.”

This issue is also prevalent on campus, exemplified by a situation at Harvard University in which a group of students hung a confederate flag from their dorm room. In response, other students hung swastikas from their windows.

Strossen notes the irony of the situation:

Of course, the swastika is deeply identified with Hitler’s anti-Semitic and other egregiously hateful ideas, not to mention genocide. However, the Harvard Students who hung the swastika were trying to convey the opposite message, condemning the racism that the Confederate flag connoted to them by equating it with swastika. So should these swastika displays count as “hate speech”—or as anti- “hate speech” (78-79)?

Deciding what should count as “hate speech” leaves room for decision-makers to err or disagree about whether an expression constitutes “hate speech.” This arbitrariness of these laws on campus means that “…all members of the campus community face enforcement that is unpredictable and inconsistent at best, and arbitrary, capricious, and discriminatory at worst” (77).

Moreover, “given the pervasiveness of individual and institutional bias,” the government is likely to enforce “hate speech” laws, as it has other laws, to the disadvantage of the disempowered and those with unpopular ideas. David Cole, ACLU legal director reiterates this point:

Here is the ultimate contradiction in the argument for state suppression of speech in the name of equality: it demands protection of disadvantaged minorities’ interests, but in a democracy, the state acts in the name of the majority, not the minority. Why would disadvantaged minorities trust representatives of the majority to decide whose speech should be censored (81)?

Strossen observes this phenomenon even in countries with established democratic governments. Take Canada, for example, which is more willing to restrict certain forms of speech than the United States. The Canadian Supreme Court explains the word “hatred,” (as used in their laws) as “unusually strong and deep-felt emotions of detestation, calumny and vilification”; and “enmity and extreme ill-will … which goes beyond mere disdain or dislike.” How confident would you be in distinguishing between speech that conveys “disdain,” which not punishable, and speech that conveys “detestation” or “vilification,” which is punishable? The consequence of this innate vagueness and overbreadth is illustrated in the following case:

Canadian customs seized copies of a book being imported from the United States because it was dangerous, racist and sexist. The book was Black Looks: Race and Representation by bell hooks, African-American feminist scholar who was then a professor at Oberlin College. hooks describes the impact of this decision in “Outlaw Culture: Resisting Representations”:

It seemed ironic that this book, which opens which opens with a chapter urging everyone to learn to “love blackness,” would be accused of encouraging racial hatred. I doubt that anyone at the Canadian border read this book: the target for repression and censorship was the radical bookstore, not me…it was another message sent to remind radical bookstores—particularly those that sell feminist, lesbian, and/or overtly sexual literature—that the state is watching them and ready to censor.

Thus, “hate speech” laws are enforced against the certain groups they try to protect. We must resist solutions that embrace censorship, as hate speech laws fall hardest on those they aim to protect. Instead, we should favor the liberal solution, more speech:

Just as free speech always has been the strongest weapon to advance reform movements, including equal rights causes, censorship always has been the strongest weapon to thwart them. That general pattern applies to “hate speech” laws, even though they are adopted to advance equality (81).

I have previously written that no one knows how long legal immigrant workers will have to wait for permanent residency (i.e. green cards) in the United States, particularly from India where the wait times are the longest. But now U.S. Citizenship and Immigration Services (USCIS) has released the number of applicants for each category, so we can compute rough estimates of the number of years it will take people applying today to receive their green cards.

Table 1 provides the data. As of April 20, 2018, there were 632,219 Indian immigrants and their spouses and minor children waiting for green cards. The shortest wait is for the highest skilled category for EB-1 immigrants with “extraordinary ability.” The extraordinary immigrants from India will have to wait “only” six years. EB-3 immigrants—those with bachelor’s degrees—will have to wait about 17 years. The biggest backlog is for EB-2 workers who have advanced degrees. At current rates of visa issuances, they will have to wait 151 years for a green card. Obviously, unless the law changes, they will have died or left by that point.

Table 1: Indian Immigrants Waiting for Green Cards (Approved Petitions for Alien Worker)*

  Primary Spouse & Children Total Share Waiting 2017 Visas Issued Share of Visas Projected Wait EB-1: Extraordinary ability







6 Years

EB-2: Advanced degrees







151 Years

EB-3: Bachelor’s degrees







17 Years

Grand Total








Source: U.S. Citizenship and Immigration Services; Annual Visas from U.S. Department of State; *As of April 20, 2018 with Priority Date On or After May 2018 Department of State Visa Bulletin; Note: Spouses & children are based on USCIS’s estimate of the ratio of primary to dependent applicants

As Table 1 shows, the green card allocation is not based on the length of the backlog, so 69 percent of the backlog is in the EB-2 category, but it received only 13 percent of the green cards issued in 2017. There are two reasons for this. First, each category is guaranteed a minimum of 40,040 green cards, so the allocation between categories does not adjust when one category has higher demand than the others. Second, EB-2 is currently subject to the per-country limits—previously discussed here—that prevent Indian immigrants from receiving more than 7 percent of the green cards issued in the category.

For employment-based green cards, the per-country limit only applies in full force when the category is filled up, meaning that if some green cards would go to waste, Indian immigrants can receive above the per-country limit of 7 percent. For this reason, Indian immigrants received nearly 18 percent of the total green cards issued in the EB-3 category in 2017. The last time the per-country limits fully applied in EB-3 was in 2012. The demand in EB-2 is so high from other countries right now, however, that EB-2 immigrants from India received only about 7 percent of the total.

This inconsistency in the application of the per-country limit raises an important caveat to the calculations above. If the per-country limits end up not applying fully for EB-2 during some future years, they could receive their green cards before the next century. For example, if they received the same number of green cards as EB-3 workers did in 2017, they would have to wait “only” 65 years, rather than 151 years as projected in Table 1 based on the number of issuances in 2017. On the other hand, if the per-country limits end up applying fully for EB-3 workers after 2018, they could end up having to wait more than 40 years, rather than 17 years.  

It’s worth emphasizing that the per-country limits are still discriminating against EB-3 Indians. Only once every other national who wants a green card in that category gets one do they get relief, so tens of thousands of immigrants from other countries are still bypassing them in line, even though Indians have waited longer. The absurd wait times for Indian immigrants highlights the importance of ending this pointless discrimination in the legal immigration system—which the Fairness for High Skilled Immigrants Act (H.R. 392)—but Congress shouldn’t just adopt a spread-the-pain policy either. It should increase the number of green cards issued as well.

story in today’s Wall Street Journal discusses the latest report from the Organization for Economic Cooperation and Development on ”prime age” (25-54) labor-force participation rates among its 35 member countries through the last quarter of 2017. While the US rate has improved, it remains below the average OECD rate, lagging behind such developed countries as Japan and the UK. What’s puzzling is why the authors of the report decided to weigh in on the opioid overdose issue.

Noting that per capita opioid prescriptions in the US are “significantly higher” than in other OECD countries, the report finds that participation rates for all adults (not limited to prime age) vary from state to state. The rate was lowest in West Virginia at 53 percent, and highest in North Dakota at 71 percent. It mentioned that opioid prescription rates are “generally higher” in those states with lower labor participation rates, leading it to declare that the use of opioid drugs “appears to be connected” to labor market conditions.

The number of opioid prescriptions has been dropping steadily in the US since it peaked in 2010. In fact, high-dose opioid prescriptions are down over 41 percent. An April 2018 report from the American Medical Association trumpeted a 22 percent decrease in opioid prescriptions between 2013 and 2017. 

The false narrative dominating the media and driving opioid policy blames opioid abuse and overdoses on doctors addicting their patients to pain pills. The near quadrupling of the sales of prescription opioids between 1999 and 2014 is often used to help make the case. 

Yet correlation does not imply causation. The AMA made note of this in its April report on the dramatic drop in prescriptions when it stated:

It is notable that every state has experienced a decrease, but this is tempered by the fact that deaths related to heroin and illicit fentanyl are increasing at a staggering rate, and deaths related to prescription opioids also continue to rise. These statistics again prove that simply decreasing prescription opioid supplies will not end the epidemic.

Data from the Centers for Disease Control and Prevention show that overdoses—especially from fentanyl and heroin—continue to soar as prescription rates decline on the state level as well. 

The principle that correlation does not imply causation also applies to the observations in the OECD report.

The OECD report mentions that the overall labor-force participation rate tends to be lower in states where disability rates are higher. And West Virginia is a leader among states with respect to the percentage of its population on Social Security Disability benefits at 3.9 percent. It therefore points to a “possible connection between drug use and disability,” adding “addiction ultimately impairs participation.” It is certainly reasonable to expect that patients disabled by chronic severe pain conditions will be prescribed opioids. But there is no evidence that opioid use increases disability rates. In fact, Cochrane systematic studies in 2010 and 2012 found an addiction rate of approximately 1 percent in chronic non-cancer pain patients on long-term opioids. And many chronic pain patients are gainfully employed but have to stop working when they are cut-off from their opioids and their pain becomes debilitating. 

As I have written here and here, the overdose crisis was never about doctors and patients. It has always been primarily the result of non-medical users accessing drugs in the dangerous black market that results from drug prohibition.

Because correlation does not imply causation the OECD report carefully avoids drawing conclusions by using phrases like “appears to be connected” and “generally higher.” But its allusion to a connection between opioid prescribing and the labor participation rate is intellectually irresponsible and seems a gratuitous attempt to patronize the opioid policy establishment.

Nationwide transit ridership continued its downward spiral with April 2018 falling 2.3 percent below the same month in 2017, according to data released yesterday by the Federal Transit Administration. Commuter-rail ridership grew by 3.5 percent, but light-rail, heavy-rail, hybrid rail, streetcar, and bus ridership all declined. The biggest decline was light rail at 5.5 percent.

April’s drop was smaller than the 5.9 percent year-over-year decline experienced in March because April 2018 had one more work day (21 vs. 20) than April 2017, while March 2018 had one less work day. As a result, 16 of the fifty largest urban areas saw transit ridership grow in April 2018, compared with just four in March. Considering that most transit ridership takes place on work days, anything less than a 5 percent growth is not something to be proud of. Only Pittsburgh, Providence, Nashville, and Raleigh saw ridership grow by more than 5 percent.

The most catastrophic losses were in Boston (24.4%), Cleveland (14.4%), and Milwaukee (10.8%). Ridership fell by more than 5 percent in Miami-Ft. Lauderdale, Dallas-Ft. Worth, Atlanta, Tampa-St. Petersburg, St. Louis, Orlando, Charlotte, and Richmond. These losses follow steady declines since 2014 and, in some urban areas, as far back as 2009.

To help people understand the numbers, I’ve posted an enhanced data file that includes all the raw, month-to-month data in columns A through GW and rows 1 through 2116. The enhancements include summing the monthly data into annual data in columns GX through HN, then comparisons of percentage changes from 2017 to 2018 for January-April and April alone in columns HR and HS. The enhanced spreadsheet also has totals by major modes in rows 2118 through 2124; by transit agency in rows 2131-3129; and by the 200 largest urbanized areas in rows 3131 through 3330. All these summaries are done on both the transit ridership (UPT) worksheet and the vehicle revenue miles (VRM) worksheet.

In attempting to explain away recent declines, some transit advocates claimed it was just buses that were losing riders – the implication being that more cities should built rail transit, which requires both higher taxes and increasing debt. But the claim that only bus ridership was falling wasn’t true when they made that claim and it isn’t true today.

More recently, transit advocates have claimed that the reason ridership is falling is because transit agencies have been offering less service. A study from the urban planners at McGill University concluded that a reduction in bus miles “likely explains the reduction in ridership observed in recent years in many North American cities.” Again, the implication is that agencies need to spend more money.

In fact, I’ve been saying for years that reduced service is an important factor in declining ridership. But what the transit advocates haven’t admitted is that this is mainly a problem in cities with expensive rail transit: the cost of building and maintaining rail systems often forces agencies to cut back on bus service. Significantly, the McGill study only looked at 22 urban areas in the United States, all of which have rail transit. They left out, for example, San Antonio, which increased revenues miles of bus service by 2.7 percent in the first four months of 2018 yet saw a 3.1 percent decline in ridership.

The real problem with transit finances is not that agencies don’t have enough money but that they have too much money and spend it the wrong way, namely on fixed infrastructure improvements such as light rail or dedicated bus lanes that look good politically but do little or nothing for transit riders. For example, the CEO of Dallas Area Rapid Transit likes to brag that Dallas has “the longest light-rail system in North America.” But building a rail empire didn’t prevent – and probably accelerated – the decline in transit’s regional share of commuting from 2.8 percent (according to the 1990 Census) before they build light rail to 1.7 percent in 2016 (according to the American Community Survey).

At least some of the decline in transit ridership has different causes in different cities. Deteriorating service in regions with older rail systems – New York, Chicago, Washington, Philadelphia, Boston, and San Francisco-Oakland – has cost those systems ridership. Decisions to cut bus service in order to build rail in Los Angeles and many other urban areas has cost riders in those areas.

The one thing almost all urban areas have in common, however, is the growth of ride-hailing services such as Uber and Lyft since 2012. If, as surveys suggest, a third of ride-hailing users would have otherwise used transit, then these services account for well over half the losses in transit ridership. Those ride-hailing services aren’t going to go away; in fact, their advantage over transit will be multiplied many times as they substitute driverless cars for human-driven cars.

The transit industry is dying because the alternatives to transit are increasingly superior. More money won’t save the industry, and the last thing a dying industry needs to do is go more heavily into debt to try to save itself. In the short run, agencies can experiment with low-cost improvements in bus service so that their systems better serve the needs of transit riders. In the long run, however, they need to back out of transit services that fewer and fewer people are using without leaving a legacy of debt and unfunded pension and health-care obligations; in short, to die with dignity.

As if central banks’ powers and balance sheets haven’t grown quite enough since the outbreak of the subprime crisis, we’ve been hearing more and more calls for them to expand their role in retail payments, by supplying digital money directly to the general public.

Some proposals would have central banks do this by letting ordinary citizens open central bank accounts, while others would have them design and market their own P2P “digital currency.” Either sort of central bank digital money would, the plans’ supporters claim, be just as convenient as today’s dollar-denominated private monies. But central bank digital money would also have the distinct advantage of being just as safe as paper money.

Earlier this week the FT’s Martin Sandbu jumped onto the central bank “ecash” bandwagon, in an article prompted by the recent disruption of Visa’s European payments network. That disruption, Sandbu wrote, supplied “one of the strongest considerations in favour of introducing official electronic money.”[1]

Sandbu’s argument is just one of many that have been offered for allowing central banks to supply ecash. But it’s representative of the rest in at least one crucial respect: like them, it may seem solid enough at first glance. But upon closer inspection, it turns out to be full of holes.

Central Banks and Computer Glitches

Absent a crisis of confidence, the most likely causes of a private payments system disruption are (1) hacking and (2) a software or hardware breakdown. It appears that a computer hardware failure was to blame for Visa’s European troubles, although hacking was suspected at first.

Payments systems operated by central banks are similarly dependent on computer hardware and software, and are for that reason also vulnerable to both hacking and equipment failures. That’s the first — and far from trivial — flaw in Sandbu’s argument. Within the last two years, for example, hackers have used malware to steal millions from the central banks of Russia and Bangladesh. In the latter case the money came straight out of the Bangladesh Bank’s account at the New York Fed. Had it not been for a stroke of good luck, the bank’s losses —  $101 billion, about a third of which was eventually clawed back — would have been far greater. During the same period hackers also managed to plant a digital “bomb” into the software of the Saudi Arabian Monetary System.  Back in 2014, a computer failure at the Bank of England held up thousands of payments, including many by persons trying to close on new homes. So much for the perfect safety of central bank digital money.

If all electronic payments systems are vulnerable to computer-related failures, is there any way to protect oneself against them? In fact there are at least two ways. One is to avoid putting all one’s payments eggs in one basket, by keeping multiple credit cards and bank accounts, and by subscribing to PayPal or other independent payment service providers. Of course, keeping funds at a central bank would be another way to diversify, were it allowed. But with so many private-market options out there, it’s absurd to suppose that people can’t protect themselves from payment system glitches unless central banks themselves enter the electronic cash business.

The other option is to keep some good old paper money on hand. Moreover, that’s the only option, apart from resort to barter, that would help in the case of a truly global electronic payment system breakdown, however that might happen. (A cosmic ray shower, perhaps.) But far from being an argument for having central banks enter the electronic payments fray, this far-fetched scenario is a good reason for having them to stick to supplying paper money.

A Flight to E-Cash?

Besides claiming that central bank ecash would protect its holders from the risk of a payments-system breakdown, Sandbu suggests that it would “force a move towards higher reserve requirements for banks,” and perhaps even toward full-reserve banking. Allowing central banks to supply digital money to the general public could, in other words, lead spontaneously to the same outcome proponents of the Vollgeld initiative are hoping to achieve in Switzerland by means of next week’s referendum. This would happen, Sandbu says, because the public’s ready access to such cash would result in “a massive flight from deposits to safer official money.” To allow for this contingency, without having to resort to massive last-resort lending, central bankers would have to see to it “that banks hold enough reserves for the purpose up front.”

Most people would consider a policy change that’s capable of triggering massive bank runs a bad idea. But so far as Sandbu is concerned, increasing the likelihood of such runs is just a convenient way to put paid to fractional-reserve banking, of which he evidently disapproves. Like most critics of fractional-reserve banking, he doesn’t say who will supply the credit commercial banks can no longer offer once they convert to a full-reserve basis. Also like them he appears to appreciate neither the synergies between deposit taking and lending that account for their coexistence since the beginnings of banking nor the fact that, if fractional reserve banking systems sometimes appear fragile and unstable even when not threatened by direct competition from central banks, we often have other misguided bank regulations (including under-priced government guarantees) to thank for it.

But would the mere appearance of central bank ecash really provoke “a massive flight from [private bank] deposits”? It’s true that, so long as they aren’t promising to peg their currencies to some other national currency, central banks can’t default: to break a promise, one has to make one in the first place. But given the widespread presence of deposit insurance, and the fact that certain banks are considered Too Big To Fail, most readily-transferable commercial bank deposits (the sort for which ecash is a close substitute) are either explicitly or implicitly insured. Of approximately $12 trillion in U.S. demand deposits, for example, just over $7 trillion are insured, while much of the remainder consists of deposits held at the very largest U.S. banks.

It follows that, if there’s to be a massive switch from from commercial bank deposits to central bank ecash, it will have to be inspired, not merely by that alternative’s safety, but by its other features, including its convenience and interest return.

Central Banks Make Poor Competitors

Might central bank ecash dominate privately-supplied alternatives along these other dimensions? It might, but only if central banks cheat.

Let’s start with interest. Commercial banks’ main business consists of attracting deposits and figuring out how to invest them profitably. Competition compels them to seek high risk-adjusted returns (or, if they’re Too Big to Fail, to seek high returns regardless of risk), and to share those returns, less their overhead and operating expenses, with their depositors. Central banks, in contrast, are not supposed to be looking out for high returns.  Instead, their assets typically consist of relatively safe and low-yielding securities, high-grade commercial paper, foreign exchange, and gold. To the extent that central banks extend credit, they extend it (with occasional, and often controversial, exceptions) to financial firms only, not to earn a profit, but to secure financial stability. It’s owing in part to this crucial difference between central and commercial banks that any public substitution of central bank money for commercial bank money is likely to result in a decline in total lending.

Most monetary policy experts would not want to change these limitations on central banks’ ability to profit by their investments. Nor do I suppose that Mr. Sandbu is an exception. After all, to the extent that central bank portfolios resemble those of ordinary commercial banks, they cease to be particularly safe institutions; and even if holders of their liabilities are not themselves directly exposed to the risks they take, taxpayers are. Allowing central banks to emulate commercial banks, not only by being able to supply digital money to the general public, but by taking on similar risks, would defeat the purpose of having them serve as suppliers of uniquely safe exchange media. In the limit, so far as transferable deposits are concerned, it would  mean having a single, TBTF commercial-qua-central bank instead of today’s mix of TBTF and not-TBTF commercial banks. If that sounds like an improvement to you, you’re not thinking hard enough.

If they’re to avoid excessive risk taking, on the other hand, central banks can only manage to pay competitive returns on their ecash in one of two ways. They can operate so much more efficiently than commercial banks that they are able to more than compensate for their lower-yielding assets, or they can take advantage of their monopoly rents to subsidize their ecash business. The first possibility is far-fetched. The second isn’t. But as it amounts to a form of predatory pricing, the effect of which would be to drive central banks’ more efficient private rivals out of business, permitting it would be entirely contrary to the public’s welfare.[2]

If neither the safety nor the return on central-bank supplied ecash is likely to convince droves of bank depositors to switch to it, central banks might still encourage them by making their ecash easier to transact with than private substitutes. But this, too, is a tall order. Central banks have no experience in retail payments or in otherwise dealing with the general public: even the paper currency they produce is supplied to bankers only, who see to its retail distribution. Central bankers would therefore have to build their retail experience and facilities, whether online or brick-and-mortar, from scratch. In the meantime, they’d be competing head-on with commercial banks and other firms long and aggressively engaged in the business. Here again, the prospects for success seem dim, unless central banks resort to cross-subsidies to fund product-quality improvements, thereby gaining market share at taxpayers’ expense.

A Conflict of Interest

In suggesting that central bankers will find it difficult to out-compete commercial bankers unless they cross-subsidize their retail products, I am of course assuming that commercial banks and other private payment service providers will themselves remain as capable as ever of making their own products attractive to the public, by offering relatively attractive returns or otherwise.

Regulations can, however, severely limit the attractiveness of private monies, thereby making potential central-bank supplied ecash appear relatively more attractive. Examples of such regulations include high reserve requirements, other bank portfolio requirements, and usury laws. By making such regulations onerous enough, regulators could slant the digital-money playing field in central banks’ favor, thereby overcoming central bankers’ inherent disadvantages to usher in Sandbu’s ideal of a world in which central bank ecash is king.

But far from making Sandbu’s proposed reform appear more promising, the possibility in question supplies another reason for viewing it as a very bad idea. That’s because central bankers are among the regulators of private digital money suppliers. For that reason, allowing them to compete with such suppliers creates a conflict of interest, posing the risk that central banks’ regulatory actions will be influenced by their desire to preserve or enhance their share of the market for digital money.

Hello, Central Bank E-Cash; Goodbye Payments Innovation

Finally, Sanbu, like many other boosters of central-bank ecash, blithely overlooks the chilling effect his proposed reform could have on future payments innovations. That we have private sector innovators to thank for the very existence of electronic money, starting with Western Union’s first telegraphic wire transfer in 1871, is (or ought to be) well known. We have them to thank as well for just about every other payments innovation, from checking accounts and lines of credit to ATMs, debit cards, PayPal, and cryptocurrency. For that matter, paper money itself appears to have been a private innovation, in China first of all, and much later in Europe, where London’s goldsmiths were issuing “running cash” notes more than a decade before the Bank of Sweden and Bank of England entered the market, which they later took over with the help of legislation that forced other banks to quit the business. How many of these private-market innovations would have happened had the innovators known that they were competing head-on with central bankers who might replicate their innovations whilst resorting to cross-subsidy financed predatory pricing to beat them at their own game?

There’s more than a little irony in proposals like Sandbu’s that would reward private sector payments innovators for their successful payments innovations by allowing central banks to employ those very innovations to assume a monopoly of retail payments. But irony is the least of it: the plan runs a very grave risk of putting the kibosh to future, desirable payments innovations. After all, once their monopolies of ecash are established, and assuming that they can resort to cross-subsidies to keep them, central banks will be under no competitive pressure to innovate. So while the prospect of their monopolizing retail payments today, using today’s leading-edge digital payments technology, may not seem all that unappealing, the prospect that they might go on employing roughly the same technology a century from now is considerably less so. Yet the possibility can’t be lightly set aside.

Paradoxically, appointing more innovation-inclined central bankers won’t necessarily help. Innovation is risky; indeed, it’s so risky that innovations fail more often than they succeed. When that happens in the private sector, the costs are born by the owners of the innovating firms. But when it happens in government (or quasi-government) agencies, taxpayers end up footing the bill.

All this is of course mere theory. But if you need empirical evidence, consider the U.S. Postal Service’s attempts at innovation, including its attempts to pioneer e-mail. Perhaps central banks will somehow avoid the challenges that ultimately scuttled the USPS’s efforts. But I wouldn’t bet money on it.


[1] Sandbu has since been joined at the FT by Martin Wolf, who first endorses Switzerland’s Vollgeld Initiative, and then suggests that allowing “every citizen to hold an account directly at the central banks” would work just as well. The Economist also endorsed the plan recently, prompting this rejoinder by Scott Sumner.

[2] The interest rate paid by the Fed on bank reserves has itself typically exceeded corresponding rates on short-term Treasury securities, thanks to its holdings of higher-yielding long-term securities, and hence to its having taken on considerable duration risk. Otherwise the Fed would presumably have had to subsidize those interest payments using seigniorage revenue from its currency monopoly.

[Cross-posted from]

Last week, Trump trade adviser Peter Navarro wrote the following in a USA Today op-ed:

A poster child for the success of President Trump’s tax, trade and worker-training policies in lifting the spirits — and incomes! — of American workers will be a new aluminum mill. This new aluminum mill will be built in Ashland, Ky., in the midst and mists of Appalachia’s rugged mountains, in one of our nation’s most poverty-stricken areas. 

Ashland is located in Boyd County off Route 60, on the banks of the Ohio River, bordering West Virginia and Ohio. It was once a booming steel, oil and coal town — until the steel mills in the area started closing down, Ashland Oil moved its headquarters to the Cincinnati region, and the coal mines began to shutter. 

Today, Boyd County suffers from a declining population and a debilitating opioid epidemic. But help — not just false hope — is on the way.  

The new $1.5 billion aluminum rolling mill that will soon be built — with a groundbreaking on Friday — will cover 45 acres. This state-of-the art mill will create up to 1,800 construction jobs and about 500 permanent positions in a county where the unemployment rate is almost 40% higher than the national unemployment rate.

For the sake of the people in that region, I hope the mill does get built and is very successful. But just for fun, I took a closer look at this “poster child” aluminum mill. Its actual origins paint a very different picture. In May of 2017, a WSJ op-ed entitled “The Mill That Right-to-Work Built” explained how Craig Bouchard, the CEO of the company building the mill, chose Ashland, KY as the site:

[A past experience with owning a steel factory] soured him on organized labor, and it’s one reason he was determined to build his new aluminum plant in a right-to-work state, where workers can’t be compelled to join a union. Before choosing Ashland, he drew up a list of 24 potential sites. The logistics favored Ashland, and Kentucky offered $10 million in tax incentives as well as low-cost electricity. But Mr. Bouchard says he was prepared to build elsewhere had Kentucky’s Republican governor, Matt Bevin, not signed right-to-work legislation in January.

Mr. Bouchard says one of the plant’s advantages will be freedom from rigid union work rules and retiree legacy costs, which handicap many American steel and aluminum manufacturers. “There’s only one way to build a big business in these industries today, and it is greenfield,” he says. “You have to start from scratch. No unions, therefore no pension legacies.”

There are more details in an April 2017 article in Ashland’s Daily Independent:

Bouchard said his company’s interest in locating the massive plant in Kentucky piqued after the state passed its controversial right-to-work legislation.

Bouchard said he spoke with [Governor Matt] Bevin “right after” the state passed right to work, which happened in January, and Bevin remained persistent for weeks in promoting cities and regions across the state. The company narrowed its field of candidates down to 12 cities in Kentucky, and 12 cities in another state Bouchard refused to name.

Last winter, CSX Corporation cut 101 jobs at its facility in Russell. A year before, AK Steel Ashland Works sliced its payroll by 633 workers through a mass layoff still in effect. The steel mill now employs about 200. Some of the laid-off steelworkers have fled the Tri-State region in search of a new lifeblood, but a majority still cling to hope and remain with their families.

Bouchard said the AK Steel situation “did play a factor.” He said he knows the AK Steel executives well, and some of his companies have been a supplier or customer of the major American steel provider in the past.

“It’s a great company, and their employees are always well trained. I feel for those families, I think the AK Steel executives feel for those families, we’re going to put some of them back to work.”

There seem to be a lot of reasons – right to work, state tax breaks, available labor – for the company’s decision to build an aluminum mill at that time and in that place. Trump’s trade (and other) policies do not appear to have played much of a role.

Immigration and Customs Enforcement (ICE) has for years worked tirelessly to portray its duties as working to protect Americans from criminals. Yet from 2009 to February 2017, only about half of ICE’s removals were of people who had committed any crime at all. Even of those who committed a crime, the most serious offense for 60 percent of them was a victimless crime—most commonly an immigration offense, traffic infraction, or vice crimes like illicit drugs.

This post relies on ICE data published in response to a Freedom of Information Act request and now available online. The data breaks down all ICE removals from 2009 to February 2017 by the most serious criminal conviction committed by the immigrant. The criminal categories are broad, but the general trend is clear: ICE primarily removed criminals who committed crimes without a private victim (i.e. not the government or “society”). Just 12 percent committed violent crimes—and just 0.6 percent were convicted of murder or sexual assault. In addition, as Figure 1 shows, 47.7 percent of those ICE removed had no criminal conviction at all.

Figure 1: Immigrants Removed by ICE by Criminal Conviction, FY 2009-FY2017*

Immigrants and Type of Convictions

Source: Immigration and Customs Enforcement; *Through February 2017

In addition to immigrants that it arrests in the interior of the United States, ICE handles removals of some immigrants—primarily Central Americans—who were originally apprehended by Border Patrol. Roughly half of all removals during this time originated at the border. Most of the removals of noncriminals come from these referrals. But even after taking out these border apprehensions, nearly a quarter of all removals from the interior during that time still had no criminal conviction.

Figure 2 depicts the distribution of convicted immigrants within the four categories—violent crimes, property crimes, crimes with possible victims, and crimes without victims. As I have explained before, most violent crimes were assaults, which include simple assaults defined by the FBI to include assaults “where no weapon was used or no serious or aggravated injury resulted” and include “stalking, intimidation, coercion, and hazing” where no injuries occurred. The FBI excludes simple assault from its definition of violent crime, but ICE fails to break down this category, so we cannot.

Figure 2: Immigrants Removed by ICE by Criminal Conviction, FY 2009-FY2017*

Source: Immigration and Customs Enforcement; *Through February 2017

The plurality of property crimes were larcenies, which include “thefts of bicycles, motor vehicle parts and accessories, shoplifting, pocket-picking, or the stealing of any property or article that is not taken by force and violence or by fraud.”

DUIs made up the majority of the “possible victims” category. ICE data on removals fail to separate DUIs from other less significant traffic offenses. In order to do so, I used the share of traffic offenses that were DUIs among immigrants arrested by ICE in 2017. The “possible victims” category also includes some nebulous categories like “privacy,” “threats,” and disturbing the peace, which are undefined in the ICE report. Nonviolent sex crimes include statutory rape as well as lewd behaviors in public. Fraud and forgery could have victims or they could be crimes where immigrants allow their family members to use their identities to obtain work in the United States.

Family offenses include “nonviolent acts by a family member (or legal guardian) that threaten the physical, mental, or economic well-being or morals of another family member” that aren’t classified elsewhere (e.g. violating a restraining order). Kidnapping convictions generally arise from custody disputes between parents over children, so I included them in this category.

Victimless offenses were traffic infractions that were not DUIs, immigration offenses such as entering the country illegally, or “vice” crimes (drugs, sex work, or alcohol). Immigration “crimes” include illegally entering the country, reentering after a deportation, falsely claiming U.S. citizenship, and smuggling. Obstruction offenses mainly include parole and probation violations or failure to appear in court. They also include “general crimes” mainly comprising conspiracy offenses and money laundering related crimes.

ICE should deport criminals who threaten Americans, but when it strays into removing people who are contributing to America’s economy and society, it treads on our freedom of association and harms the country. ICE needs to have its priorities redirected toward keeping America safe from criminals whose offenses actually have victims and not those who are simply seeking a better life here.

Immigrants Removed By ICE by Most Serious Conviction, FY2009-17

Property rights shouldn’t be relegated to second-class status. Yet 30 years ago, in Williamson County Regional Planning Commission v. Hamilton Bank, the Supreme Court pronounced a new rule that a property owner must first sue in state court to ripen a federal takings claim. As illustrated by Knick v. Township of Scott, this radical departure from historic practice has effectively shut property owners out of federal courts without any firm doctrinal justification.

Rose Knick owns 90 acres in Scott Township in western Pennsylvania, a state known for its “backyard burials.” In 2012 a new ordinance required all “cemeteries” be open and accessible to the public during daylight hours. It also allowed government officials to enter private property to look for violations. In 2013, township officials entered Ms. Knick’s property without her permission and—after finding old stone markers on her property—cited her for violating the cemetery code. Fines are $300-600 per infraction per day.

Ms. Knick took the township to court; the state court dismissed her claims as improperly “postured” because the township had not yet pursued civil enforcement to collect the fines. When she then turned to federal court, the district court dismissed her constitutional claims, citing Williamson County’s state-litigation requirement. The U.S. Court of Appeals for the Third Circuit affirmed this Kafkaesque process, but the Supreme Court agreed to further examine the case. Cato has now filed a brief supporting Ms. Knick, joined by Prof. Ilya Somin, the NFIB Small Business Legal Center, Southeastern Legal Foundation, Beacon Center, and Reason Foundation. (This follows an earlier brief that we filed in support of Supreme Court review.)

The failed attempt to gain meaningful judicial review of a facially unconstitutional ordinance showcases the unique challenges faced by property owners asserting takings claims. If filing in state court, the best they can hope for is review from a judge who may be friendly to the government defendants responsible for the taking. And when pursuing that state-court remedy, property owners face the possibility of “removal” by defendants to federal court—where that court then dismisses the claims precisely because the property owner failed to fully pursue state litigation! Adding insult to injury, if a property owner complies with Williamson County’s requirement by seeking redress in state court, but receives an unfavorable decision, a combination of procedural barriers prevents federal courts from revisiting the claims.

The Fourteenth Amendment, which explicitly protects life, liberty, and property, cannot tolerate this state of affairs. And there is no reason to believe that this anomalous treatment of takings claims is what the Reconstruction Congress had in mind when, in the face of pervasive state abuse, it enacted the federal statute (42 U.S. § 1983) that guarantees access to federal forums to vindicate federal constitutional rights.

As an unsound and impractical rule, Williamson County’s state-litigation requirement has earned a burial of its own in the graveyard of discarded precedent.        

A consistent criticism of Cato’s immigration-welfare research is that we compare the welfare consumption of all immigrants to all natives. Our method means that we consider the U.S.-born children of immigrants as natives, even when they reside in a household with foreign-born parents. Our critics contend that this undercounts immigrant welfare consumption because those children would not exist here without the immigrants coming in the first place. Thus, they claim, the welfare consumption of the U.S.-born children of immigrants should be combined with that of their immigrant parents in order to produce an accurate total assessment of immigrant welfare costs.

However, other researchers who combine first and second generation welfare-use do not combine these generations correctly. They use the Current Population Survey (CPS) data to measure immigrant household welfare use rates and benefit levels that includes the U.S.-born children of immigrants who live in the household, but they exclude tens of millions of U.S.-born children of immigrants who do not live in their parent’s households. Thus, counting only the children in the immigrant households produces a limited and biased estimate of first and second-generation welfare costs because the vast bulk of means-tested welfare targets households with children. If the second-generation must be included at all, a better approach would be to include second-generation adults as well.

Robert VerBruggen at National Review convinced us to estimate the welfare consumption levels and use rates for immigrants and their children of all ages (the first and second generations) relative to Americans in the third-and-higher generations in 2016. We initially intended to look only at immigrants who arrived in 1968 or later, which is the year that the Immigration Act of 1965 went into effect, but we were unable to limit the CPS sample and their children so precisely. We were also unable to estimate the welfare use rates or benefit levels for Medicaid or Medicare because of myriad data limitations. Figure 1 shows the result of the welfare use rates multiplied by the benefit levels for each generational group for four welfare and entitlement programs. This produces an average per capita welfare cost for each group for each program that combines adults and children.

People in the first and second generations consume an average of 33 percent fewer welfare benefits, per capita, than native-born Americans who are in the third-and-higher generations for these four programs (Figure 1).

Figure 1: Per Capita Welfare Costs by Program for Immigrants and Their Children Relative to Third-and-Higher Generation Americans, 2016

Source: Authors’ analysis of the 2017 Annual Social and Economic Supplement to the Current Population Survey.

We did not adjust Figure 1 for program eligibility. Only counting those aged 65 and above for Social Security means that each person in the first and second generations costs 17 percent less, on average, than each person in the third-and-higher generations.

Attributing the cost of welfare consumed by the entire second-generation to immigrants returns results that are similar to our previous findings. Immigrants, whether one includes their U.S.-born children or not, consume fewer welfare and entitlement benefits than native-born Americans in the third-and-higher generations.

Today’s exceedingly narrow decision in Masterpiece Cakeshop kicks all the big questions down the road. While it’s gratifying that, by a 7-2 vote, the Supreme Court reversed Colorado’s persecution of Jack Phillips – the baker who was happy to serve gay people but would not make a cake for a same-sex wedding – it did so only on the basis that the state commission charged with enforcing antidiscrimination law itself displayed anti-religious animus. That’s an unusual circumstance that’s not necessarily in play in the other wedding-vendor cases that periodically arise. Indeed, the petition of the Washington florist, Arlene’s Flowers v. Washington, is currently pending before the Court; with today’s narrow ruling, the justices can’t simply send that case back to the state supreme court for reevaluation – because, again, today’s rule of decision is case-specific rather than some clarifying First Amendment principle.

Although most of the briefing and commentary surrounding Masterpiece (mine included) focused on the free-speech aspect – Phillips’s main argument was that he was being forced to convey a message he didn’t agree with – the way this ruling ultimately came down wasn’t unexpected given the way that argument went. Indeed, Justice Anthony Kennedy, whom everybody assumed (correctly) was the key to this case, showed flashes of anger at the attitudes shown by certain members of the Colorado Civil Rights Commission. And so, Kennedy concludes in his short opinion (18 pages, most of which is basic recitation of factual and procedural background) that “the Commission’s treatment of Phillips’ case violated the State’s duty under the First Amendment not to base laws or regulations on hostility to a religion or religious viewpoint.”

That holding is joined not just by the so-called conservative justices (John Roberts, Clarence Thomas, Samuel Alito, and Neil Gorsuch), but two of the so-called liberals (Stephen Breyer and Elena Kagan). The other two justices (Ruth Bader Ginsburg and Sonia Sotomayor) disagreed, finding the commissioners’ anti-religious statements irrelevant to the ultimate application of the law.

But can an artistic professional be compelled to produce something for an event he disagrees with? How do we decide what kinds of professions get that kind of First Amendment protection? Does it matter that, unlike in the Jim Crow era, gay couples can get cakes, flowers, and other wedding products and services without having to travel too far? How do religious objections work in cases where the government hasn’t displayed antireligious animus? All of these questions are left for some future case – when potentially Justice Kennedy will no longer be the swing vote.

And on those big issues, when the Court is forced to “go for it” rather than punting, the real action is foreshadowed by the concurring opinions. Justice Gorsuch, joined by Justice Alito, expands on how the Commission was biased not just in commissioners’ statements, but in applying different standards to different cases, depending on whether they agreed with the viewpoint expressed. It’s a characteristically well-written exegesis that goes beyond Kennedy’s bare bones. 

Justice Kagan, joined by Justice Breyer, takes issue with Gorsuch’s characterization of how the Commission operates. While a government body can’t act with anti-religious animus, had the commissioners here not stated their bias “on the record,” it’s clear that Kagan and Breyer would have no problem in finding that someone in the business of making wedding cakes can indeed be forced to make them for same-sex couples (or anyone else).

Meanwhile, Justice Thomas, joined by Justice Gorsuch, goes into the free-speech aspect of the case, showing why Phillips was engaged in expressive behavior whose First Amendment protection can’t be blithely undermined. “Forcing Phillips to make custom weddings cakes for same-sex marriages requires him to, at the very least, acknowledge that same-sex weddings are ‘weddings,’” he explains. “The First Amendment prohibits Colorado from requiring Phillips to bear witness to these facts or to affirm a belief with which he disagrees,” Thomas concludes, citing the Hurley case where the Supreme Court ruled that a parade can’t be forced to allow any comers to march (I’ve cleaned up the quotes).

Oh how I wish that the Thomas concurrence had been the majority opinion. I guess we’ll have to wait for the next case for that.

It’s not a good thing when a random-assignment study—the research “gold standard” because it controls even for unobservable variables like motivation—finds that using a voucher tends to result in lower standardized test scores. All things equal, we’d like scores to go up. But in the second of the latest evaluations of the DC Opportunity Scholarship Program, we saw almost exactly the same results as last year: using a voucher resulted in lower math scores that were statistically significant, and reading scores that were lower, but that could have been due to chance.

Last year I wrote about several reasons the first evaluation in no way condemned school choice, and you can read that here. To quickly reiterate, given both DC’s close proximity to other school systems, and the abundant forms of choice within its borders—a huge charter sector and lots of choice among traditional public schools—the voucher program is but a choice minnow in a lake full of largemouth bass. The breakdown of where students in the control group—families who applied for a voucher and did not get one—ended up going to school starkly reveals this. Even without knowing how many went to chosen traditional public schools, we know a majority still attended schools of choice; 43 percent attended charters and 10 percent private schools.

It is also crucial to note that the voucher program has been repeatedly threatened and stifled politically so it has never had real stability, and it is funded at a small fraction of traditional public schooling in DC, getting well less than half of the per-pupil allocation of traditional public schools. As the report states:

The combination of elements—a program whose funding and support has shifted over time at the federal level, operating within a city that offers ample options for parents to choose schools—makes findings from this evaluation challenging to generalize to other settings, such as voucher programs operated statewide or in settings that currently have limited choice options.

There was one standout bit of good news for the program: As my colleague Corey DeAngelis tackles in depth in an upcoming piece in The Hillbe on the lookout for it in the next few days!—parents and students who used vouchers were much more likely than the control group to perceive that their schools were safe. And the negative test score effects come at a time of burgeoning attention to an apparent disconnect between test scores and other outcomes such as how much education students actually complete. And all of these outcomes ignore the most fundamental reason that choice is crucial: in a plural society, with diverse religions, cultures, ethnicities, and philosophies, true freedom and equality can only be achieved when all people can pursue on an equal basis education consistent with their identities and cherished values. A tiny, inequitably funded voucher program is but a halting shuffle in that direction.

Extreme speech, often called “hate speech,” is back in the news. College students and administrators want to ban it and punish those who utter it. Politicians say that the First Amendment does not protect such speech.  Advocates for minorities demand protection from it.

The prominent legal scholar Nadine Strossen has written a new book on this topic, Hate Speech: Why We Should Resist It with Free Speech, Not Censorship. Our next few blog posts will examine Strossen’s most important claims about hate speech. Be aware, however, that these posts are no substitute for reading the book itself. Strossen has written a book that should be widely read.

Strossen begins by roughly defining hate speech:

The term “hate speech” is not a legal term of art, with a specific definition; rather, it is deployed to stigmatize and to suppress widely varying expression. The most generally understood meaning of “hate speech” is expression that conveys hateful or discriminatory views against specific individuals or groups, particularly those who have historically faced discrimination.

Let’s posit, as we should, that hateful and discriminatory views are not acceptable in a liberal democracy. What should be done about them?

Perhaps the government should prohibit such speech either by preventing it from being uttered or punishing it severely if it is uttered. On the other hand, the government might allow such speech. The former is the way of the censor, the latter the liberal way of the First Amendment.

Strossen defends the liberal way. She shows that censorial measures are ineffective and do not promote equality. Instead, Strossen, an advocate of social justice, recommends forceful counter-speech and activism. Can counter speech work?

Counter-speech, which “encompasses any speech that counters a message with which one disagrees,” (158) is more powerful than one may think as it encourages reflection and a lasting change in beliefs in those who have made discriminatory remarks or posts.  Strossen shows that refuting discriminatory ideas through more speech, education and apologies can be more effective in curbing these harms of hate speech than censorial measures. For example, in 2009, Megan Phelps-Roper created a twitter to share the beliefs of the church that her grandfather founded, Westboro Baptist. Known for their hateful rhetoric, Megan had been a member since she was a child. On Twitter, she became engaged in several conversations with other users, leading her to question the teachings of the Church and eventually leave.

Today social media makes it even easier for an individual to make discriminatory speech whenever they please but also makes it even easier to instantaneously rebut the idea with counter-speech. Strossen notes:

In 2016, a report was issued about counterspeech on Twitter, coauthored by a group of scholars from the United States and Canada. The report, which included the first review of the “small body” of existing research about online counterspeech, concluded that hateful and other “extremist” speech was most effectively “undermined” by counterspeech rather than by removing it.

Other major platforms agree. Facebook encourages counter-speech, stating: “our key initiatives focus on empowering and amplifying local voices. This includes building awareness, educating communities, encouraging cohesion, and directly countering hateful narratives.”

The targets of such speech are more able than ever to talk back. Strossen notes, “…we have seen increasing social justice advocacy nationwide in recent years, with members of minority groups actively leading and engaging in such efforts” (164). This has happened because of upsurge in instances of counter-speech not the implementation of “hate speech” laws.

Consider also the recent Roseanne Barr incident. Her racist tweet cost her a television show and public humiliation. Counter-speech can shame as well as persuade, and both are effective responses that do not require risks of censorship.

Strossen makes it clear that to protect free speech, one must engage in counter-speech, giving us the opportunity to engage in thoughtful discussion and grow as a community. Her book recalls the famous words of Justice Louis Brandeis in Whitney v. California: 

The fitting remedy for evil counsels is good ones… . If there be a time to expose through discussion the falsehood and fallacies, to avert the evil by the processes of education, the remedy to be applied is more speech, not enforced silence.

After what had become a monthly ritual of delaying the Section 232 steel/aluminum “national security” tariffs for some countries, the Trump administration went ahead and imposed them on Canada, Mexico and the EU as of today. (Retaliation by these countries will follow soon.) There is also now an investigation into whether tariffs should be applied to automobile imports on the same basis. You may wonder, how can the term “national security” be stretched so far beyond issues related to actual national security? Commerce Secretary Wilbur Ross explains why:

Ross … cited an “elaborate definition” laid out in the Section 232 statute and said the tool “isn’t by any means confined strictly to military applications.”

“So, while the label is national security you need to look at the legislation itself, and the question isn’t ‘Is this mainly a military thing?’ It’s obviously mainly not a direct military thing but infrastructure and the economy are what gives you military security,” Ross said, reiterating prior comments.

“So, I know people like to wave the flag: ‘Oh, well you shouldn’t use that definition.’ That definition is what Congress enacted long before Donald Trump became president. And so, the fact that we are utilizing legislation that was passed quite a few years ago shouldn’t surprise anyone,” he said.

He’s right about the broad language of the statute. Take a look at a key provision, in particular the second sentence:

(d) Domestic production for national defense; impact of foreign competition on economic welfare of domestic industries

For the purposes of this section, the Secretary and the President shall, in the light of the requirements of national security and without excluding other relevant factors, give consideration to domestic production needed for projected national defense requirements, the capacity of domestic industries to meet such requirements, existing and anticipated availabilities of the human resources, products, raw materials, and other supplies and services essential to the national defense, the requirements of growth of such industries and such supplies and services including the investment, exploration, and development necessary to assure such growth, and the importation of goods in terms of their quantities, availabilities, character, and use as those affect such industries and the capacity of the United States to meet national security requirements. In the administration of this section, the Secretary and the President shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered, without excluding other factors, in determining whether such weakening of our internal economy may impair the national security.

Thus, under the statute, broad concepts of “economic welfare” get mixed together loosely with national security. Read as a whole, national security should still be the focus of the investigation, but the references to the economy could be abused by an administration looking for excuses to impose tariffs. (And that’s not just hypothetical anymore.)

Of course, the President and the Commerce Department are not required to apply this statutory language so broadly. But they do have the discretion to do so. This makes the fix here pretty obvious: Congress should revise the language in a way that takes away some of that discretion. There are two ways it could do this.

First, delete some of the language that refers to factors not closely related to national security. For example, the whole second sentence quoted above could come out. Such issues are already dealt with through “safeguards” laws (in the U.S., Section 201). There is no need to duplicate this in Section 232.

And second, the statute should make clear that imports from countries with whom the United States has a defense treaty/security alliance do not threaten national security. These countries are our allies, and trading with them does not impair our security. 

Now, it may be that, if Section 232 is amended, the Trump administration would simply move on to other avenues for protectionist abuse. Nevertheless, Section 232 is clearly a problem right now, and it’s worth taking the time to fix it.

The temporary exemptions to the Section 232 tariffs on steel and aluminum granted to Canada, Mexico and the European Union (EU) expire at midnight tonight, and the Trump administration has announced that it will now impose these tariffs. This action makes clear that in addition to flouting the rules based trading system the United States itself established, the Trump administration makes no distinction between foes and allies.

The EU announced its retaliation list earlier, with a 25% duty on 182 products. Today, Canada responded with an announcement that it would levy tariffs of its own, amounting to $16.6 billion. That figure includes a list of 127 potential products for retaliation, from steel and aluminum, to household products like yogourt, coffee, tomato ketchup, and toilet paper, which will face a 25% or 10% surtax. Retaliation won’t take place until July 1st, giving Canada some time to refine this list in the meantime. Mexico announced that it would also seek to impose equivalent measures on items such as steel, lamps, pork legs and shoulders, sausages and food preparations, apples, grapes, blueberries, and various cheeses, among others. Both countries have stated that their countermeasures would stay in place until the U.S. lifts its tariffs. 

Prime Minister Justin Trudeau was firm in calling the 232 tariffs “unacceptable,” going on to say that, “Canada will also challenge these illegal & counterproductive measures under NAFTA Chapter 20 and at the WTO. It is simply ridiculous to view any trade with Canada as a national security threat to the US and we will continue to stand up for Canadian workers & Canadian businesses.” Ridiculous is about right. It is also hard to see how the Trump administration would imagine any other type of response from its allies, whose patience they have surely tested. However, it’s worth remembering that Trump’s team appears to view reality through a rather distorted lens, and somehow thinks these tactics will produce results for the United States.

As a case in point, Commerce Secretary Wilbur Ross suggested that the imposition of tariffs should not prevent negotiations, citing China as an example. Surely, one would hope that the Commerce Secretary knows the difference between imposing tariffs on China as opposed to U.S. allies, but unfortunately, that does not seem to be the case. (As my colleagues and I have mentioned elsewhere, he doesn’t even seem to know the meaning of reciprocity or comparative advantage). In fact, what this episode reveals, in addition to the last year of trade policy uncertainty, is that the United States can no longer be trusted to negotiate in good faith. While Trump might think that keeping people on their toes and wondering “will he” or “won’t he” is somehow a viable strategy, this approach is likely to backfire in the long-run. 

For one thing, imposing tariffs on Canada and Mexico while negotiations on a new North American Free Trade Agreement (NAFTA) are ongoing is reckless. The three countries seemed to be getting very close to a deal this month, but this action may serve to further intensify discord among them. If delivering a truly modernized NAFTA that can better serve the American people was his goal, this strategy will likely do the opposite. Furthermore, our transatlantic partners are even less likely entertain negotiations, especially if they are approached, as French President Emmanuel Macron stated in March, “with a gun to our heads.” 

Yes, it’s true that the impact of the tariffs– even if our closest allies do impose retaliatory measures– may not be felt throughout the entire economy, making it seem like raising tariffs is no big deal. However, the tariffs and the countermeasures will inflict wounds on consumers, businesses, and on specific U.S. exporters, and lead our closest trading partners to look elsewhere for the things they want to buy, and enter negotiations with countries that do so in good faith. “Art of the Deal”? More like “How to Lose Friends and Alienate People.”