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Various news outlets are reporting that, at midnight tonight, special U.S. tariffs on imports of steel and aluminum from Canada, Mexico, and the European Union will go into effect. This action stems (incongruously and capriciously) from two nearly yearlong investigations conducted by the U.S. Department of Commerce under Section 232 of the Trade Expansion Act of 1962, which found that imports of steel and aluminum “threaten to impair the national security” of the United States. This seldom used statute gives the president broad discretion both to define what constitutes a national security threat and to prescribe a course to mitigate the threat. On both counts, President Trump has abused that discretion.

In March, the president announced his intention to impose duties of 25 percent on steel imports and 10 percent on aluminum imports from all countries. But temporary exemptions were granted to some countries in an effort to extort commitments from them to do their part to reduce the U.S. trade deficit (by selling us less stuff and buying from us more stuff) or to agree to U.S. demands in ongoing trade negotiations (South Korea, Canada, Mexico). The Koreans succeeded by agreeing to limits on their steel exports and by upping the percentage of US-made automobiles that can be sold in Korea without meeting all of the local environmental standards. Ah, free trade…

Apparently, the Europeans, Canadians, and Mexicans haven’t bent sufficiently to Trump’s will, therefore those countries—those steadfast allies—constitute threats to U.S. national security and will no longer be exempt from the tariffs, which means that U.S. industries that rely on steel and aluminum (imported or domestic) will be hit with substantial taxes to mitigate that threat. Got it?

This announcement comes on the heels of one made earlier this week regarding the “trade war” with China, which is back on 10 days after Treasury Secretary Steve Mnuchin declared it to be “put on hold.” (I guess it was just a rain delay.) On June 15, the administration will publish the final list of Chinese products—about 1,300 products valued at about $50 billion—that will be hit with 25 percent duties. The Chinese government has published its own list of U.S. exports that will be hit with retaliatory duties in China.

So, as has been the case every day for the past 16+ months, the U.S. and global economies (even as they’ve strengthened) remain exposed to the whims of an unorthodox president who precariously steers policy from one extreme to the other, keeping us in a perpetual state of uncertainty. With the Europeans, Canadians, Mexicans, and Chinese all preparing to retaliate in response to these precipitous U.S. actions, at the stroke of midnight we may finally get the certainty of the beginning of a deleterious trade war.

In a recent Cato Daily Podcast with Caleb Brown, Cato adjunct scholar Andrew Grossman of Baker & Hostetler discusses the “legally aggressive” new round of climate change litigation, in which municipalities in California and Colorado, as well as New York City, have sued energy producers and distributors seeking to recover damages over the release of carbon dioxide into the atmosphere.

As Grossman notes, the idea of suing over the role of carbon emissions in climate change has by this point been tried many times. The most obvious approach would be to sue large industrial emitters of carbon, which is what some state governments did in one of the most prominent cases, filed against electric utilities. In its 2011 AEP v. Connecticut decision, however, the Supreme Court ruled that such outputs were regulated comprehensively and exclusively at the federal level through enactments like the Clean Air Act, and were not subject to an additional level of state regulation through public nuisance claims. Suits on other theories, such as Comer v. Murphy Oil from the Fifth Circuit and the Kivalina case in the Northern District of California, have been launched “to enormous bombast and press attention and they have all bombed out…. Those cases were the low-hanging fruit. Those were the more obvious legal theories if you were going to try to bring this kind of case,” he says.

Now the question is whether litigants can accomplish an end run by instead attacking upstream, pre-emissions activity, specifically the extraction and distribution of fossil fuels destined to be burned. Ambitiously, some of the new suits attempt to apply state common law to activities occurring around the world – to the doings of worldwide corporations such as Royal Dutch-Shell, for example, and to oil production from places like the coast of Norway and its subsequent use by European motorists. Needless to say, many of these processes are comprehensively regulated by the laws of the European Union and its member countries. Doctrinally, then, the new efforts get into even deeper water (so to speak) than strictly domestic claims. From the podcast:

If a court in California is going to go around telling Norway what to do, well, gosh, Norway may not really like that. And what do you do in that instance? It’s not apparent to me how this works. How does the court figure out what Norway’s regulations are and what Norway is doing about this? Who’s going to tell them? I don’t know. What if Norway disagrees with whatever it is that the court decides needs to be done in this case? Does Norway complain to the court? Do they send an ambassador to file a brief or something? I don’t know. This has never happened before. And what if Norway decides that they don’t like whatever it is the court is doing and they’re going to impose, say, reciprocal trade tariffs, or something like that, against the United States on the basis of one of these rulings? Does the court hold them in contempt?

Listen to the whole thing here.

President Trump has signed legislation restoring the right of some terminally ill patients to determine the course of their medical treatment. This “right to try” law builds on legislation enacted by dozens of states. The federal right-to-try law is an important victory for patients and individual liberty. But I worry these gains will not last. Here’s why.

Patients have a fundamental human right to choose their course of medical treatment. But how are patients to know which treatments work and which are just snake oil? The U.S. Congress attempts to solve this problem by empowering the U.S. Food and Drug Administration (FDA) to block drugs from the market until the manufacturers demonstrate, to the FDA’s satisfaction, that the drug is safe and effective for its intended use. At a glance, this seems a reasonable approach to keeping patients safe. In practice, it has been a disaster. 

There are lots of problems with this model of certifying drug safety and efficacy. First, it routinely violates the fundamental human right of all patients to choose the course of their medical treatment. If the FDA blocks the drug you want from the market, or requires so much testing that you cannot afford it, or erects such high regulatory barriers that no one develops the drug you need, the government has violated your fundamental human right to choose your medical treatment.

Second, the FDA faces information asymmetries that make that first problem even worse, as well as result in unnecessary morbidity and mortality. Any government agency charged with keeping drugs off the market until it is convinced they are safe and effective will get a flood of information about its Type I errorsi.e., the harms it causes by approving drugs that end up harming patients. But it will receive far less information about its Type II errorsthe harms it causes by delaying the approval or blocking the development of helpful drugs. This is only natural: it is far easier to identify patients who were harmed by a drug they did use than patients who were not helped by a drug they didn’t use. The latter patients might not even know a beneficial drug exists because it hasn’t been approved yet. Indeed, the drug might not exist, because the FDA made its development uneconomical.

As a result, the FDA focuses almost exclusively on minimizing Type I errors. It does so by requiring manufacturers to conduct expensive and time-consuming clinical trials, so it can more often prevent harmful drugs from going to market. The agency requires more safety and efficacy testing before approving a drug than it would if it had complete information about both types of error. It requires all that additional testing even though doing so results in more harm from Type II errors than the additional testing prevents by eliminating Type I errors. The result is that the FDA’s approval process becomes costlier and longer, and violates the rights of more and more patients.

This next part is crucial. The public, media, and policymakers also receive far more information about the FDA’s Type I errors than its Type II errors, and therefore complain about the former far more than the latter. What this means is: the political forces that determine how the FDA operates reinforce the agency’s bias toward demanding more testing and more-often violating patients’ rights. We can think of the FDA’s standard operating procedure of minimizing Type I errors at the expense of more (and more costly) Type II errors as a kind of political equilibrium created by the information asymmetry the agency and those who control it face with respect to these two types of error. 

So while it is wonderful that President Trump has restored the right of some terminally ill patients to access drugs the FDA has not yet approved, I worry these gains will not last. This legislation does nothing to correct the information asymmetry faced by those who determine whether and when new therapies can reach patients. Inevitably, some drug accessed through this legislation will hurt some patients. When that happens, the same cast of charactersthe FDA, Congress, the media, and the publicwill all focus on those easily identifiable Type I errors. They will demand reforms that prevent further Type I errors. But because they cannot see the even greater Type II errors those reforms will cause, patients will end up both less safe and less free. The pendulum will swing back to the current political equilibrium. 

The only way to protect patient rights and to strike an appropriate balance between Type I and Type II errors is through fundamentaland I mean fundamentalreform of safety and efficacy certification for medical technologies. Read more here.

Correction: The article “Trump’s New Insurance Rules Are Panned by Nearly Every Healthcare Group that Submitted Formal Comments” claimed the Trump administration proposes allowing short-term health insurance plans “to turn away sick people.” In fact, federal law already allows short-term plans to turn away sick people, and to our knowledge not even opponents of the administration’s actual proposal have proposed changing that feature. We regret the error.

The article claimed the Trump administration’s short-term plans proposal would weaken consumer protections. In fact, the proposal would strengthen consumer protections by allowing short-term plans to shield enrollees who fall ill from medical underwriting—a consumer protection the Obama administration prohibited these plans from offering. We regret the error.

The article described groups that advocate forced health care subsidies as “patient and consumer advocates,” but withheld that designation from patient and consumer advocates who oppose forced health care subsidies. We regret allowing ideology to creep into our reporting.

Finally (we hope), the article identified the financial interests of groups supporting the Trump administration’s proposals, but not the financial interests of groups opposing them. We regret our failure to follow the money.

Last year, Republican legislators stood up to the behemoth of housing lobbying groups which exert heavy pressure on the public process by curtailing the so-called third rail of tax policy, the mortgage interest deduction.

Last week’s Joint Committee on Taxation (JCT) tax expenditure estimates are a reminder last year’s tax reform effectively reduced the deduction. According to JCT, the mortgage interest deduction will decline 38 percent this year. By 2019 the deduction will fall almost 50 percent from its 2017 levels.

The reformed deduction applies to $750K in mortgage debt for loans. This is a change from its former configuration, where the deduction applied to $1.1 million in mortgage debt. The act grandfathers in existing homeowners who bought under the assumption they would be able to use the deduction before mid-December. 

Though industry lobbyists predicted the sky would fall, it hasn’t happened. That’s unsurprising if you follow economic research on the mortgage interest deduction.

For one thing, research suggests the mortgage interest deduction has no impact on homeownership rates. Last year Nobel Prize-winning economist and co-founder of the Case-Shiller housing index Robert Shiller argued capping the deduction would have a “rather small effect” on homeownership rates and the housing market.

Indeed, since tax reform U.S. homeownership rates have stayed flat and the number of houses sold this year is greater than the number sold during the same season last year. Meanwhile, “home-price growth showed no sign of slowing down” despite predictions by some economists home prices would fall as a result of reform. It makes sense housing market indicators haven’t changed, given very few homes are sold in excess of $750K and housing supply is tight even at the top of the market.

The sky isn’t falling, and JCT estimates show the mortgage interest deduction is on its way out. That’s good news for the housing market and prospective homeowners.

Gun control advocates like to accuse legislators of being “afraid of the NRA,” implying that reason and principle have nothing to do with their legislative decisions. In the same way, Jackie Kucinich, in a column in The Daily Beast, suggests that the failure of Congress to pass CARA 2.0 (Comprehensive Addiction and Recovery Act) is due primarily to the lobbying clout of the American Medical Association, pointing to its status as the “seventh highest lobbying spender in 2017.”  

The article quotes opioid reform advocate Gary Mendell as saying “the AMA will resist anything that regulates healthcare”—an interesting opinion about an organization that supported passage of the Affordable Care Act, one of the deepest regulatory intrusions into American health care in half a century. Over the years, the AMA’s seeming reluctance to mount a principled defense of patient autonomy and freedom of choice in healthcare—perhaps fearing it may jeopardize the cartel it lobbied so hard to establish over the past century and a half—has led to an exodus of many disillusioned members. It is estimated that less than 17 percent of the country’s doctors belong to the special interest group today.

But on this one, the AMA gets it right. It opposes the “one-size-fits-all” imposition of the 2016 opioid prescribing guidelines issued by the Centers for Disease Control and Prevention; guidelines that many noted addiction medicine specialists have criticized as not-evidence based. The AMA maintains the CDC expressly meant for its guidelines to be suggestive “rather than prescriptive.” Other scholars have pointed out that the CDC’s suggestions were based upon “Type 4 evidence,” defined as evidence in which “one has very little confidence in the effect estimate, and the true effect is likely to be substantially different from the estimate of the effect.”  The AMA emphasizes the guideline’s statement, “Clinical decision making should be based on a relationship between the clinician and patient, and an understanding of the patient’s clinical situation, functioning and life context.”

When health care providers read and interpret these guidelines, they understand them to be informational, nonbinding, and inconclusive. But that’s not how politicians “do science.”

There is no evidence that prescription limits reduce overdose deaths. In fact, as the prescription rate has dropped dramatically since its peak in 2010, overdose rates are in turn rising

Kucinich seems to agree with the politicians who interpret the CDC guidelines as implying that a more than 3-day supply of prescription opioids is a major force behind addiction. But that is not a precise and critical reading of the guidelines. In fact, as Dr. Nora Volkow, Director of the National Institute on Drug Abuse pointed out in a 2016 New England Journal of Medicine article, “Addiction occurs in only a small percentage of persons who are exposed to opioids — even among those with preexisting vulnerabilities.” Cochrane systematic studies in 2010 and 2012 show a roughly 1 percent incidence of addiction in chronic non-cancer pain patients, and a January 2018 study of 568,000 “opioid naïve” patients given prescriptions for acute post-surgical pain found a “total misuse” rate of 0.6 percent. 

The AMA is actually a little late to the party. Numerous other specialists in the management of pain and addiction have criticized for months the tendency of politicians to codify the recommendations of the CDC. Even the Food and Drug Administration Commissioner, Scott Gottlieb, has expressed concerns. Announcing plans to hold a public meeting on July 9 on “Patient-Focused Drug Development for Chronic Pain,” Dr. Gottlieb set forth “the goal of providing standards that could inform the development of evidence based guidelines.”  

The article quotes Sen. Joe Manchin (D-WV) accusing his colleagues of being “too scared to take on the AMA.” My hope is that they may be finally responding to evidence and accounts from health care practitioners and patients who have spent months appealing to reason over dogma.

If you aren’t paying attention to the debate over short-term health insurance plans, you should. It’s a mixed-up, muddled-up, shook-up world where Republicans are pushing to expand consumer protections, Democrats are fighting to block them, and the public debate has it exactly backward.

In this morning’s Wall Street Journal, I explain:

ObamaCare premiums keep skyrocketing. Rate hikes as high as 91% will hit many consumers just before Election Day. Maryland insurance commissioner Al Redmer warns ObamaCare is in “a death spiral.”

So-called short-term health plans, exempt from ObamaCare’s extensive regulations, are providing relief. Such plans often cost 70% less, offer a broader choice of providers, and free consumers to enroll anytime and purchase only the coverage they need.

But there’s a downside. When enrollees fall ill, either their premiums spike or they lose coverage, leaving an expensive ObamaCare plan as the only alternative. Markets solved that problem decades ago via “renewal guarantees,” which allow enrollees who get sick to keep paying the same premiums as healthy enrollees.

For more than two decades, Congress has consistently tried to prevent sick patients from being to medical underwriting. Yet in 2016, the Obama administration did exactly the opposite. It issued a regulation that exposed enrollees in short-term plans to medical underwriting after they got sick:

In 2016, in an effort to force people into ObamaCare plans, the Obama HHS shortened the maximum duration for short-term plans from a year to three months and banned renewal guarantees. The National Association of Insurance Commissioners complained this reduced consumer protections and exposed the sick to greater risk, including the risk of having no coverage.

The Trump administration has proposed reversing the Obama rule and allowing short-term plans to offer both 12-month terms and renewal guarantees that allow enrollees who get sick to keep paying the same premiums as healthy enrollees (i.e., no more underwriting). Both of these proposals are consumer protections that would protect the sick from medical underwriting and in some cases protect the sick from losing coverage entirely. 

Believe it or not, Democrats are opposing these consumer protections! I am tempted to say their opposition is inexplicable, but it’s all-too explicable. Democrats want to prevent short-term plans from offering these consumer protections because they fear consumers will find short-term plans more attractive than ObamaCare. Democrats are literally trying to stop Republicans from expanding consumer protections because they would rather protect ObamaCare. 

Democrats want to make short-term plans as unattractive as possible because they worry that otherwise, ObamaCare’s risk pools will suffer as healthy people leave ObamaCare plans for short-term plans. That was the purpose of limiting short-term plans to just three months. But back in 2016, the National Association of Insurance Commissioners explained the Obama rule’s attempt to cripple short-term plans won’t help ObamaCare:

If the concern is that healthy individuals will stay out of the general pool by buying short-term, limited duration coverage there is nothing in this proposal that would stop that. If consumers are healthy they can continue buying a new policy every three months. Only those who become unhealthy will be unable to afford care, and that is not good for the risk pools in the long run.

Indeed, Democrats’ opposition to allowing short-term plans to offer renewal guarantees betrays a fundamental misunderstanding of how renewal guarantees work. As I explain in my Wall Street Journal oped:

Prohibiting renewal guarantees hurts ObamaCare’s risk pools by forcing enrollees who develop expensive illnesses to switch to ObamaCare plans. Allowing renewal guarantees would improve ObamaCare’s risk pools by giving expensive patients an affordable, secure alternative—just as renewal guarantees kept expensive patients out of state-run high-risk pools before ObamaCare. 

How many expensive patients could renewal guarantees keep out of ObamaCare’s risk pools? More than you might think. Allowing short-term plans to offer renewal guarantees would also free insurers to sell renewal guarantees as a stand-alone product–at a cost roughly 90 percent below that of ObamaCare plans. Insurers could market these products not only to the 50 million or so non-elderly people without employer-sponsored insurance. They could also offer them, as they had just begun to do in 2009, to the 175 million Americans with employer-sponsored coverage. Renewal guarantees could thus improve the outlook of ObamaCare’s risk pools by keeping potentially millions of expensive patients out of ObamaCare plans.

Presented with the opportunity to expand consumer protections in a manner that could even save taxpayers money, many administration wouldn’t bother with annoying questions about whether they actually have the legal authority to do it. Fortunately, HHS has such authority, as I explain at length in comments I filed on the Trump administration’s proposed rule on short-term plans. Long story short, HHS can allow renewal guarantees in short-term plans because federal law grants the agency no authority to regulate renewal guarantees, much less to ban them. 

If HHS acts swiftly to allow short-term plans to offer renewal guarantees, it can make affordable, secure health insurance options available right about when ObamaCare’s next round of premium hikes will hit consumers. 

 

Reversing course yet again, this morning President Trump declared that he will indeed impose 25 percent tariffs on $50 billion of imports from China. He also announced plans to publish new restrictions on investments by Chinese persons and entities, which will take effect, presumably, in early July. The president seems to thrive on the uncertainty and chaos that his version of leadership churns out on a daily basis, but whether any of this actually happens is anyone’s guess.

The administration is right to be concerned about China’s mercantilist technology policies, but it seems to have no clue about how to mitigate the problem. Tariffs will do nothing to address China’s promotion of national champion industries, nor will it dissuade intellectual property theft of forced technology transfer policies. They will disrupt global supply chains and make Americans, Chinese, and many others around the world less well off than they are today.

For over a decade, Washington and Beijing have been waging a tit-for-tat technology trade war, which has come into clearer focus during the Trump administration. There are far better options than tariff wars to make competition in the technology space more market-oriented and mutually beneficial, including by negotiating a bilateral free trade agreement.

Our primary federal civil rights statute, colloquially called “Section 1983,” says that any state actor who violates someone’s constitutional rights may be sued in federal court. This remedy is crucial not just to secure relief for individuals whose rights are violated, but also to ensure accountability for government agents. Yet the Supreme Court has crippled the functioning of this statute through the judge-made doctrine of “qualified immunity.” This doctrine — at odds with both the text of the statute and the common law principles against which it was passed — immunizes public officials who commit illegal misconduct, unless they violated “clearly established law.” That standard is incredibly difficult for civil rights plaintiffs to overcome, because courts generally require not just a clear legal rule, but a prior case on the books with functionally identical facts.

In Allah v. Milling, 876 F.3d 48 (2d Cir. 2017), the Second Circuit used qualified immunity to shield prison officials who kept an inmate, named Almighty Supreme Born Allah, in dungeon-like, solitary confinement conditions for seven months — all because Mr. Allah had once asked a question about why prison inmates were being denied access to commissary. For this “offense,” Mr. Allah was placed in “Administration Segregation” for over a year, most of which he spent in solitary confinement. He spent 23 hours a day alone in his cell, was handcuffed and shackled anytime he was removed from his cell, and forced to shower in leg irons and wet underwear. To make matters worse, Mr. Allah was, at this time, merely a pretrial detainee who had yet to be convicted of a crime.

Mr. Allah brought a civil rights claim against these prison officials and won a judgment of $62,650 at trial. On appeal, the Second Circuit unanimously agreed that the defendants had violated Mr. Allah’s constitutional rights. The Supreme Court’s decision in Bell v. Wolfish, 441 U.S. 520 (1979), makes clear that pretrial detainees cannot be subject to punitive restrictions, and that extreme restrictions unsupported by any legitimate governments are inherently punitive. The Second Circuit held that the prison officials here lacked any legitimate interest in throwing Mr. Allah in solitary confinement, and thus violated his due process rights.

Yet a majority of the panel still granted immunity to the defendants — and denied Mr. Allah redress for his injuries — solely because “Defendants were following an established [prison] practice,” and “[n]o prior decision of the Supreme Court or of this Court … has assessed the constitutionality of that particular practice.” That analysis is flatly at odds with existing precedent; even the Supreme Court has rejected the idea that overcoming qualified immunity requires a prior case dealing with the very action at issue. Indeed, in Safford Unified School District #1 v. Redding, 557 U.S. 364, 377 (2009), the Court explicitly stated that “there is no need that ‘the very action in question [have] previously been held unlawful.’” 

But more importantly, this case throws into sharp relief the legal, practical, and moral infirmities with qualified immunity in general. Mr. Allah’s petition directly asks the Court to reconsider its qualified immunity jurisprudence, and the Cato Institute has filed an amicus brief in support of this request. This brief is part of Cato’s ongoing campaign to challenge qualified immunity — a doctrine that lacks any legal basis, vitiates the power of individuals to vindicate their constitutional rights, and contributes to a culture of near-zero accountability for law enforcement and other public officials.

Online election ads are the hot topic in Washington these days. From Russian Facebook ads featuring Jesus and Satan arm-wrestling or a multicolored, many muscled Bernie Sanders, to Cambridge Analytica’s probably bogus claims of dastardly psychological manipulation, there is great consternation as to whether social media is being abused to the detriment of democracy. These concerns are not limited to our shores: see, for instance, Facebook and Google’s controversial recent decision to remove ads related to Ireland’s constitutional referendum on abortion.

Into the fray now steps the Federal Election Commission, which proposes to define for the first time how election ads on social media and other internet platforms will be regulated under the campaign finance laws. The FEC has put forward a pair of options, one of which would require as a default that online ads ahead to the same strictures as radio, TV, and newspaper ads, with very limited wiggle room to adapt disclaimers to the nature of internet platforms. An alternative proposal would allow more adaptation but still take up as much as 10% of a given ad as a default. Cato has submitted a comment, expressing our view that the FEC should give special weight to the burden on First Amendment rights imposed by excessive disclaimer requirements. As Justice William Brennan (no right-wing extremist) explained, “compelling the publication of detailed … information that would fill far more space than the advertisement itself would chill the publication of protected … speech and would be entirely out of proportion to the State’s legitimate interest in preventing potential deception.”

The proliferation of online media has democratized the marketplace of ideas as quickly as an electron speeds down a wire. Unfortunately, our regulatory state still moves at an analog pace. The FEC should thus tread lightly in imposing strictures that will hamper innovation and clutter our screens with information that does little to actually inform the few who would even take the time to read it. The right of citizens to communicate the message of their choice is at the core of the freedom of speech. Any burden placed on it must intrude as little as possible. 

To the extent the FEC feels that guidance should be given, we encourage it to consider the least restrictive means available, consistent with the right of free expression protected by our founding document. We have confidence that the American people can fairly assess the arguments presented in the marketplace of ideas, and believe that drowning them in warnings and provisos will do more to the clutter up that marketplace than illuminate it. 

Washington Capitals fans (including this writer) were overjoyed last Thursday night when the team defeated the Tampa Bay Lightning to move onto the National Hockey League’s Stanley Cup Final. But for some Caps fans, that joy soured a bit the next morning when they discovered that Las Vegas oddsmakers have made Washington the underdog in the championship series against the Vegas Golden Knights (VGK).

The VGK have odds of 10/13 to win the series, meaning gamblers would have to bet $13 on the Knights to win $10 (plus the return of their original wager) if the Knights win the series. The Caps are $11/10, meaning a $10 bet would yield $11 if Washington captain Alex Ovechkin hoists Lord Stanley’s Cup. The numbers against the Capitals aren’t lopsided, but they’re a decided nod to the VGK.

Caps fans are a notoriously gloomy, self-afflicted lot given the team’s playoff history, so it’s not surprising they quickly found the cloud surrounding Thursday’s silver lining. Betting odds—basically, futures—are commonly thought to represent the collective intelligence of the marketplace and that wisdom apparently says the Caps’ history of playoff heartbreak will continue.

Or maybe not.

In an article in the forthcoming summer issue of my journal Regulation, economist Ike Brannon discusses bookmaking (the art of setting betting lines)—both legal and illegal—in light of the recent Supreme Court decision striking down a federal law prohibiting most states from legalizing sports gambling. (The article will be available at www.cato.org/regulation in a few weeks.) Borrowing from the work of Wake Forest University economist Koleman Strumpf, who has studied illegal sports gambling extensively, Brannon points out some features of bookmaking that should encourage Caps fans—and should interest anyone who is intrigued by this market-driven process.

One thing that observers should immediately notice is that if the Caps and VGK odds are converted to a standard probability scale between 0 and 1, the sum of those probabilities is greater than 1: 0.65 + 0.45 = 1.10. Part of that amount over 1 is the “vigorish” (also known as the “juice”), the cut that bookies take for providing their services. Stumpf’s research indicates the vig from illegal sports books is about 10% of the bet, while legal books’ is much lower—sometimes as little as 2%.

If we factor in a vig of 5%, the odds-equivalent that the VGK will win the Cup decreases to 0.62. Of course, the Caps’ odd-equivalent probability also decreases to 0.43. So, Caps fans still seem to be right to be gloomy.

But if we add up these two new probabilities, we still get a sum greater than 1. This is where things get very interesting—and possibly in a very important way for legal sports gambling. And, I might add, a bit more encouraging for Caps fans.

Brannon, again borrowing from Strumpf, explains that backroom bookies have long practiced “price discrimination” for hometown teams. That is, they tweak their odds to take advantage of passionate local sports fans who will bet on “their” team at odds or point spreads that are worse than a fair estimate of the probability that the team will win. I suspect bookies sometimes do the opposite for opponents of the hometown team, in an effort to attract some opposing-team money even at generous odds. As a result, bookies often have significantly different odds for a local game than Las Vegas does. These odds aren’t the pure wisdom of the local market, but also its passion for the hometown team.

Up till now, legal Las Vegas bookmakers have had no opportunity to borrow this practice from their black market brethren—at least, not at the major-league level because no major league teams operated in the city. Legal gambling in Las Vegas has been dominated by out-of-towners. But this is the inaugural season of the VGK and local residents have embraced the team—and are betting on them to win. So the VGK line likely reflects in part the Las Vegas bookmakers price-discriminating against their friends and neighbors.

There’s a bit of early evidence that this is happening. Offshore oddsmakers don’t have this opportunity to price discriminate on North American sports (unless they adjust their odds in light of location indicators of their online customers), so the offshore odds may be more “accurate” than the Vegas odds. I haven’t found a good online summary of offshore odds for the Caps-VGK series, but the documented odds for Game 1 are closer on the offshore books than the Las Vegas books (though they still favor the VGK, who will be the home team in that game).

This could have some interesting ramifications in the next few years. For instance, the National Football League’s Raiders franchise has announced that it plans to move from Oakland to Las Vegas as early as 2019. When that happens, Las Vegas will have to weigh the pros and cons of price-discriminating on games in one of the most gambled-upon sports.

The more important ramification involves the the expected legalization of sports gambling in locations across the United States. Will those locations likewise price-discriminate against their local teams? If so, it could create some profitable arbitrage opportunities.

Shrewd sports gamblers might try a strategy where they bet against a team in that team’s home market, AND bet against the opposing team in its home market. That way, the gamblers would be on the “good” side of the price-discriminated odds regardless of a game’s outcome, thus reducing their losses and increasing their winnings. In theory, this should be a money-making strategy.

Gamblers don’t use this strategy currently because the sizeable vig from black market bookies syphons off the arbitrage profits. But the much lower vig offered by legal sports books would seemingly make this strategy a winner. Of course, bookies—legal and illegal—are careful to avoid giving customers opportunities to regularly “beat the house”—so it will be interesting to see what they’ll do to block this strategy.

Returning to Capitals fans, here’s the good news: if we interpret the Las Vegas odds in light of Brannon and Strumpf, then it would seem the market actually has a much better appraisal of Washington’s chances of raising the Cup sometime in the next few week. So, Washington sports fans, buck up, and Let’s Go Caps!

The Stimson Center’s new study group report found that the federal government spent about $2.8 trillion on counterterrorism (CT) activities since 9/11.  The report seeks to account for all federal government spending on CT efforts divided into the four broad categories of defense emergency and overseas contingency operations, war-related state/USAID, other foreign aid, and government-wide Homeland Security.  The defense emergency and overseas contingency operations spending category accounts for about $1.7 trillion or over 60 percent of the $2.8 trillion spent.  War-related state/USAID and other foreign aid account for a relatively small $138 billion and $12 billion, respectively.  Government-wide Homeland Security spending makes up the rest at $978.5 billion since 9/11.

The big question the report does not attempt to answer is: Was all that spending worth it?  Did that spending result in fewer people killed by terrorists on U.S. soil?  One of the distinguished study group members is my Cato Institute colleague John Mueller who has spilled much ink trying to estimate the effectiveness of CT spending.  Mueller provides some back of the envelope estimates to answer the question of whether this CT spending was worth it in his recent panel discussion on the Stimson Center’s report.  After talking with Mueller, I decided to add some more analysis to show that an unreasonably large number of American lives would have to have been saved for the costs of CT spending to be justified.

For the costs of CT spending to equal the benefits in terms of the value of lives saved, it would have to have saved 188,740 lives, or 11,796 lives per year, since 9/11.  Narrowing down to just domestic CT spending on government-wide Homeland Security projects shows that spending on just that set of subprograms would have to have prevented the murder of 65,233 people, or 4,077 per year, to break even.  From 2002 through 2017, my latest estimate is that 172 total people were murdered on U.S. soil by all terrorists (Islamic, non-Islamic, domestic, U.S.-born, foreign-born, white supremacists, etc.).  Thus, all CT spending would have to have saved 1,097 times as many lives as were actually taken by terrorists in attacks on U.S. soil for the costs of CT spending to equal the benefits in terms of lives saved.  Focusing on just government-wide Homeland Security CT spending shows that it would have to have saved 379 times as many lives as were actually killed in terrorist attacks on U.S. soil to break even.  It is difficult to estimate a counterfactual but it would take a very creative imagination to honestly believe that post-9/11 CT spending actually saved that many lives by preventing terrorist attacks.

Methodology

The first step is estimating the value of a statistical human life to compare with the cost of CT spending.  This is an emotional and fraught way to measure human life.  As a father and a husband, I understand this emotional reaction very well but the fact remains that if the government spends more than the statistical value of life to save a life through enhanced CT, then that means that other people died because of neglected safety in other areas.  As a hypothetical example, suppose the value of a statistical life is $15 million.  If the government spends $30 million to save one life by spending on X then that means that one person, at least, died who did not have to if that money was spent where it would save more lives.  Thus, spending that amount of money on reducing the risk of X results in more deaths than otherwise would have occurred.  Although emotional and hard to calculate, estimating the statistical value of life can help policymakers save more lives.  The death of human beings is the largest and most significant cost of terrorism but not the only one as other forms of destruction are also costly but relatively minor compared to death.  For the purposes of simplicity, I will focus on the cost in terms of human life.   

As I wrote in 2016, the Department of Homeland Security (DHS) produced an initial estimate that valued each life saved from an act of terrorism at $6.5 million, then doubled that value (for unclear reasons) to $13 million per life saved.  Adjusting for inflation raises that estimate to about $7.5 million.  Hahn, Lutter, and Viscusi use data from everyday risk-reduction choices made by the American public to estimate that the value of a statistical life is $15 million.  I use $15 million in this blog post as it is the largest number.

The second step is dividing the value of CT spending by the statistical value of life estimate to see how many lives would have to have been saved for that spending to equal the benefits.  I copy this method directly from Chasing Ghosts by John Mueller and Mark Stewart and their other important work on this topic

The third step is comparing the above results to the number of people who were actually murdered on U.S. soil in terrorist attacks.  Using the same methods as this policy analysis and including native-born attackers reveals that there were 172 people murdered in terrorist attacks on U.S. soil from 2002 through 2017.  That includes people murdered by terrorists of every ideology including Islamists, white supremacists, environmental extremists, and others regardless of where they were born.  

Results

The first column in Table 1 shows that 188,740 lives would have to have been saved by all CT spending for the value of that spending to save an equivalent value in terms of human life.  The second column of Table 1 focuses on domestic Homeland Security CT spending, a subset of all CT spending, as it is most directly related to saving lives on U.S. soil.  To break even, domestic CT spending on Homeland Security would have to have saved 65,233 lives from 2002 through 2017 to break even (Table 1).    

 

Table 1

Number of Lives Saved for Counterterrorism Spending to Break Even

 

All CT Spending

Homeland Security CT Spending

Spending $2,831,100,000,000 $978,500,000,000 Statistical Value of Human Life $15,000,000 $15,000,000 Lives Saved to Break Even 188,740 65,233 Actual Terrorist Murders 172 172

Source: Author’s calculations.

If you assume that the value of statistical lives saved is equal to the cost of all CT spending, then you must also assume that all CT spending prevented at least 99.9 percent of all deaths that would have occurred in terrorist attacks on U.S. soil after 9/11 that were prevented.  If you just focus on domestic Homeland Security spending during that time and assume that the value of statistical lives saved is equal to the cost of CT spending, then you must assume that it prevented at least 99.7 percent of all deaths that would have occurred as a result of terrorist attacks on U.S. soil that were prevented. 

To put those numbers in context, about 250,000 Americans were murdered in non-terror homicides during that time.  There would have to have been about 1.4 murders in non-terror homicides for each person killed in a terrorist attack on U.S. soil for the cost of all CT spending to equal the value of human life saved in prevented attacks.  For only Homeland Security spending, there would have to have been about 2.9 murders in non-terror homicides for each person killed in a terrorist attack on U.S. soil for the cost to break even.  Does anyone believe that CT spending saved that many lives? 

Other Costs

The new Stimson Center study group report is a marvelous attempt to measure the nearly impossible-to-gauge extent of federal CT spending after 9/11.  Although the report is a good estimate of the direct amount of federal spending on CT, it does not represent the full cost.  Here are just a few additional costs that would have to be included to estimate such a number: 

  • State and local government CT spending.
  • The lost economic activity that would have occurred without expensive CT regulations.
  • The opportunity cost of this spending, including tax cuts or deficit reduction (the report hints at this as it mentions the death toll from opioids).
  • The trade and immigration restrictions promulgated after 9/11. 
  • The American military casualties in the War on Terrorism.
  • The foreign casualties in the War on Terrorism.
  • The increased numbers of deaths from consumers choosing riskier forms of travel rather than submit to the expensive, burdensome, and annoying demands of the TSA at airports.
  • Deaths that could have been prevented by redirecting CT spending toward other safety-enhancing policies.

Conclusion

The new Stimson Center study group report found that the cost of CT spending is gargantuan.  The cost of a government program is only one metric necessary to gauge whether it should exist as we must also consider the benefits it produces.  The number of lives that would have to have been saved for the cost of CT spending to equal the benefits, whether overall or just on Homeland Security, would have to be outrageously and unreasonably high for this expenditure to make sense.  By diverting government resources from other areas that would have boosted safety, even under the most negative conditions where the marginal cost saved is equal to the statistical value of life, assumes that hundreds of thousands of Americans died because of this increased CT spending who otherwise would have lived due to improved safety elsewhere.   

 

 

 

 

 

 

 

 

 

Herman Gundy stands convicted of violating a law that, for all intents and purposes, doesn’t exist. You may recall from high school civics that the Constitution separates the powers of the federal government among three coordinate branches. You may also recall from “Schoolhouse Rock” that a bill becomes a law after it’s passed by the two houses of the legislative branch and signed by the president. Unfortunately for Gundy, things are no longer so straightforward.

The Sex Offender Registration and Notification Act (SORNA) set up a national system of sex offender registration and made it a crime for sex offenders to fail to register with local authorities when they moved to a new state. While serving time on a federal drug charge, Gundy was transferred from prison in Pennsylvania to a halfway house in Brooklyn. According to the government, that counted as interstate travel sufficient to trigger reporting obligations of which he was never advised.

Gundy’s appeal of the conviction, to be heard by the Supreme Court this fall, addresses an odd facet of SORNA: while Congress laid out in detail those persons who would be required to register in the future, it did not determine who would have to register if the conviction occurred before SORNA was passed in 2006. Congress delegated that question to the Attorney General, and gave no guidance on how the determination should be made. Gundy’s sex offense is among those that predate SORNA, and therefore he was convicted of failing to register not based on anything Congress wrote in any law, but based on an administrative regulation written by the Attorney General.

Assigning such a determination to the executive branch raises a long-dormant canon of constitutional interpretation, the nondelegation doctrine. The basic idea is simple: the Constitution vests legislative power in the legislative branch and the legislature can’t delegate the power to write laws to a different branch. It’s a principle recognized by Chief Justice John Marshall in the first decades of the republic—indeed, its roots can be found in enlightenment thinkers such as Locke and Montesquieu—and reaffirmed in many Supreme Court opinions. The separation of powers means, at the very least, that the powers must remain separate.

But despite the Court often affirming the importance of the nondelegation doctrine in the abstract, the justices have disapproved of delegations in only two cases, both decided in 1935. While the doctrine is purportedly alive, many now treat it as the Black Knight of constitutional law, forever asserting “I’m not dead, yet.”

Perhaps this time is different. The Court’s cases say that delegations can be approved as long as Congress provides an “intelligible principle” to guide the delegated discretion, but here there is no principle, intelligible or otherwise. The statute empowers the executive branch to do as it likes, with no standards to follow. This case, therefore, presents an excellent opportunity for the Court to protect the separation of powers in an area where it has otherwise been skittish.

The doctrine of separation of powers is not some mere appeal to procedural formality, but a guarantee of our rights as citizens. The English jurist William Blackstone defined tyranny as the vesting in a single body of “the right both of making and of enforcing the laws…wherever these two powers are united together, there can be no public liberty.” It is this tyranny the Constitution was partially designed to prevent. The Cato Institute, joined by the Cause of Action Institute, has filed a brief supporting Gundy, arguing the Court should overturn his conviction and ensure that, as John Adams put it in his draft of the Massachusetts Constitution, “[t]he executive shall never exercise the legislative and judicial powers…to the end it may be a government of laws and not of men.”

Drawing attention to rising gas prices this week, Senate Minority Leader Charles Schumer (D-New York) called for President Trump to ease pain at the pump by leveraging his relationships with key OPEC leaders as well as the presidential bully pulpit to exert pressure on oil companies. “These higher oil prices are translating directly to soaring gas prices, something we know disproportionately hurts middle- and lower-income people,” the senator added.

While his apparent belief that gas prices are determined more by the whims of corporate leaders than market forces is severely misguided, Sen. Schumer’s stated concern for the welfare of American consumers is welcome. Rather than rely upon President Trump’s ability to cajole foreign and corporate leaders into lowering the cost of gas, however, Sen. Schumer should introduce legislation to repeal the Jones Act.

Passed in 1920, the Jones Act mandates that ships which transport goods between domestic ports be U.S.-built, U.S.-flagged, and at least 75 percent U.S.-owned and crewed. Such strictures, in turn, raise transportation prices by eliminating access to cheaper options which do not meet these requirements. This cost increase reverberates throughout the economy, with few parts harder hit than the energy sector. Although the total cost of the distortions imposed upon this key industry is unknown, anecdotal evidence suggests that it is significant. Consider:

  • A 2014 Congressional Research Service report found that the purchase price of U.S.-built tankers is “about four times the price of foreign-built tankers, and U.S. crewing costs are several times those of foreign-flag ships.” Given such a cost structure it’s no surprise the report also found that shipping crude oil from the Gulf Coast to the Northeast on Jones Act-compliant tankers costs roughly three times greater than shipping the oil a longer distance to Canada on foreign-flagged ships ($5 to $6 per barrel versus $2 per barrel). Professor James Coleman of Southern Methodist University, meanwhile, points out that refineries in this part of the country “pay more than three times as much to ship oil from Texas rather than from West Africa or Saudi Arabia.” 
  • 1999 Government Accountability Report (GAO) report stated that, incredibly, the cost to ship oil from Alaska’s North Slope aboard foreign-crewed and built ships to the U.S. Virgin Islands—which is exempt from the Jones Act—was approximately three times less than to the Gulf Coast on Jones Act vessels ($2.35 per barrel versus $7.15 per barrel).
  • A 2013 GAO report noted that “representatives of airlines purchasing jet fuel for use in Puerto Rico told us that they typically import fuel to the island from foreign countries, such as Venezuela, rather than from Gulf Coast refineries.” This occurs, the report added, “because of difficulty in finding available Jones Act vessels to transport jet fuel and, when vessels are available, the high cost of such shipments compared to shipping the product from foreign countries.”
  • According to the CEO of the Overseas Shipping Group, a provider of energy transportation services, the cost of hiring a Jones Act ship for crude service is about three to four times higher than using a foreign-flagged vessel. 

This is but a sample of the costs imposed by the Jones Act, which drives up the price of gas and all manner of goods purchased by Americans. If Sen. Schumer and his fellow Democrats are serious about their desire to ease the financial burden placed on Americans by the rising cost of oil, scrapping or deeply reforming this nearly 100-year-old law would be an excellent place to start.

Alexandria, Virginia’s city council successfully increased the meals tax on restaurants in its jurisdiction on May 10th. The Council’s plan is to dedicate the meals tax revenue to building affordable housing.

There are a variety of issues with the city council’s plan to increase taxes and provide affordable housing.

First, the tax is supposed to help low and moderate income Alexandria residents, but restaurant taxes are regressive: the shares of after-tax income spent on meals away from home by households in the lowest, second-lowest, second-highest, and highest income deciles are 20.4 percent, 7.9 percent, 4.4 percent, and 3.8 percent, respectively.

That means the meals tax would likely collect five times the share of after-tax income from low-income households as high-income families, as Michael F. Cannon points out in a recent Alexandria Times letter to the editor. In short, the meals tax is a regressive tax parading as a progressive measure.

Furthermore, the meals tax signals Alexandria believes it can tax and spend its way out of housing affordability problems. With as high as Alexandria housing prices are, Alexandria has no practical hope of doing that.

The median Alexandria, Virginia sale price in 2017 was over half a million dollars, and in certain neighborhoods like Potomac Yard / Potomac Greens, the median sale price is greater than three-quarters of a million dollars. The meals tax raises less than $5 million annually, which could provide 10 median Alexandria homes annually.

But Alexandria has more serious housing affordability problems than limited tax revenue. Like other cities, the cost of housing is driven by restrictive regulation. If residents wonder why the supply of affordable housing in Alexandria is dwindling, they need look no further than the city zoning map and the associated zoning ordinance.

Figure I: City of Alexandria Zoning Map

 

A substantial portion of Alexandria property is zoned for single family residential, shown in pale yellow above. In a high demand place like Alexandria, just outside restrictively zoned Washington, D.C. this land would likely voluntarily be put to a higher use (e.g. multi-family residential) in the absence of the regulation.

It is true that portions of Old Town are zoned for townhomes, shown in dark yellow. But most of Old Town falls within a historic district, which means that substantial change is nearly impossible and redevelopment is subject to extensive regulation and oversight from city boards and commissions. In fact, the city has a 200 page design guideline guidebook on the special considerations associated with development in this historic downtown area alone.

The review process isn’t only heavy-handed in the historic district. In Alexandria, there are around 25 citizen boards managing architectural, archaeological, environmental, historical, urban design and related planning considerations for proposed development. This number excludes task forces with other specific planning functions, like determining parking standards for new development.

In general, multi-family residential is only allowed on Alexandria’s fringe, shown in orange. These implicit limits on housing supply and affordable housing design contained in Alexandria’s zoning code matter more than a meals tax garnering around $5 million annually ever will.

That’s because density limits, design guidelines, and historic districts substantially inflate housing costs. Academic research estimates zoning increases the cost of housing by 30-50% in some restrictively regulated coastal cities.

Developers will build new housing units if given the opportunity. And when housing supply meets the demand for housing, housing affordability will improve as outlined in detail in Zoning, Land-Use Planning, and Housing Affordability, a recent Cato policy analysis paper.

Alexandria’s city council doesn’t understand housing affordability. This feature makes them similar to other local and state governments in the U.S.  But if Alexandria genuinely wants to solve the affordability problem it will need a new strategy that prioritizes relaxing regulation and streamlines the development process.

A modified version of the article was originally published in the Alexandria Times

“Is the Phillips Curve Dead?” asked Princeton economist Alan Blinder in a May 3 Wall Street Journal article. The former Vice-Chairman of the Fed noted that “the correlation between unemployment and changes in inflation is nearly zero… Inflation has barely moved as unemployment rose and fell.”

For a veteran Ivy League Keynesian like Blinder to doubt the Phillips Curve was doctrinal heresy, comparable to a monetarist asking if money matters or a supply-sider wondering aloud if a 91% tax rate is better than a 28% rate.

Wall Street Journal columnist Greg Ip later explained the dilemma and expanded it: “Standard models of the economy are built on a simple relationship: When unemployment goes down, inflation eventually goes up. That relationship, dubbed the Phillips Curve, has looked sickly for years. In Japan, it may be dead.”  Unemployment is 2.5% in Japan, yet inflation is 1.1% and only 0.4% if we leave out energy and food (“core” inflation).  For that matter, the unemployment rate is 2.0% in Singapore yet inflation is 0.2%.

Paul Samuelson and Robert Solow first fabricated a “Phillips Schedule” in 1960 using a wage-push notion of inflation and U.S. data from 1934 to 1958.  Leaving aside the Great Depression and WWII price controls, they concluded “it would take more like 8 per cent unemployment to keep money wages from rising. And they would rise at 2 to 3 per cent per year with 5 or 6 per cent of the labor force unemployed.”  Despite caveats that this relationship might shift, American economists soon began speaking of a trade-off between lower unemployment and higher inflation, notably the alleged necessity to tolerate 4% inflation in order to get unemployment down to 4%.  Those statistical goals were replaced with others (the curve was said to have shifted), but such Phillips Curve trade-off never went away.

“Pushing the Economy Up the Phillips Curve” in Brad DeLong’s 2002 Macroeconomics textbook, for example, says because of “the Federal Reserve’s expansionary monetary policy… unemployment fell from 7 percent in 1986 to 5.4 percent in 1989.  As unemployment fell inflation rose from 2.6 percent in 1986 to 4.4 percent in 1989.”   Although that 3-year span is described as a short-term relationship, any student could be forgiven for thinking that if you want 2.6% inflation you’ll have to settle for 7% unemployment, but if you prefer 5.4% unemployment you’re likely to end up with higher (4.4%) inflation.  [In reality, no Phillips Curve could explain why PCE inflation briefly fell from 3.5% in 1985 to 2.2% in 1986, or why it recovered to 4.3% in 1989].

As Blinder and Ip observe, however, the Phillips Curve is embarrassingly out of touch with international and domestic evidence.  Yet the Federal Reserve’s “standard models of the economy,” like those of the Congressional Budget Office, remain critically dependent on it. They have no other inflation theory.

Rather than basing monetary policy on actual inflation data, diehard Phillips Curve loyalists assume that low unemployment is such a fool-proof indicator of invisible inflation that the Federal Reserve must now raise interest rates repeatedly and preemptively – with the unspoken goal of pushing unemployment up above the CBO’s current 4.73% estimate of the non-accelerating rate (NAIRU).

The late Bill Niskanen and I wrote an obituary for the Phillips Curve sixteen years ago.  Instead of the presumed negative relationship whereby a low unemployment rate supposedly causes to accelerate, we found “a strong positive relationship between the inflation rate and the unemployment rate two years later.”

Don’t take our word for it.  Look at the graph.

The blue line is the monthly adult unemployment rate, excluding teens.  The red line is a smoothed year-to-year trend in “core” PCE inflation, leaving out energy in particular to reveal that the 1970s inflations were definitely not just oil shocks.  

On any given month, the year-to-year trend of inflation would be mostly composed of old 11-months of old news, unlike the current jobless rate.  That makes it even more obvious that core inflation was rising well before the big spikes in unemployment in 1974-75 and 1980-82, and that inflation rose alongside high and rising unemployment (i.e., “stagflation”).  Inflation causes high unemployment, which does not mean low unemployment causes inflation.

As Blinder noted, there has been no significant change in overall inflation since 2000, regardless of the oil price spike in 2008.   On the contrary, with the exception of three recessions (one very bad), the period since 1983 mainly shows a long decline in inflation that was usually matched by long periods of falling unemployment. 

The Phillips Curve has finally been revealed as a stubborn old 1958-60 theory that cannot predict inflation but does predict that high inflation will end in high unemployment.

In justifying President Trump’s travel ban to the Supreme Court last month, his attorneys repeatedly referenced a confidential report. They told the Court that this “extensive” analysis of “every country in the world” resulted from a “worldwide multi-agency review” and proves that the president did not act with religious animus. Yet they refuse to release it, and the information that they have released about it refutes their claim that it was extensive. In fact, it was far from rigorous.

In response to a lawsuit by the Brennan Center for Justice in New York, the government disclosed that its final secret report filed in September was just 16 pages with a one-page attachment. Yet the president claims it reviewed “more than 200 countries,” meaning it covered each country in less than a tenth of a page. On a typical 600-word page, that’s fewer than 60 words—significantly shorter than this paragraph—to review the identity systems, information practices, and security situation in every country in the world.

We now know that this 60-word average is actually too generous for most countries because the government has said that the report included the information on the eight targeted countries and the explanation for the ban contained in the president’s 12-page travel ban order. If it dedicated the other five pages solely to the non-travel ban countries, this would leave just 16 words for each. “The Democratic Republic of the Congo” would use a third of its word allotment on its name alone.

Such a bizarre result raises the distinct possibility that the entire review of the non-travel ban countries may have been included in the one-page attachment to the report intriguingly entitled “assessment of countries’ information-sharing capabilities and vetting procedures.”

In any case, to fully appreciate how absurd it is to claim that this 17-page report was exhaustive, consider that the State Department issues an annual report on terrorism including details of the policies and situation in most countries in the world. Last year’s report was 447 pages. The travel ban has nine such factors that the government claims to have extensively studied, yet its entire 17-page report is 4 percent as long.

Beyond its length, contradictions in the known contents of the report further raises the suspicion that the government might be misstating its conclusions. The president’s order tells us that the report laid out nine criteria against which it assessed every country, and it then summarizes the report’s findings for each of the banned countries. Yet in several cases, its findings show that countries on the list were assessed against stricter criteria.

For instance, the being-a-terrorist-safe-haven criterion was increased to having any terrorists active in the area for Chad, or being a source of terrorist threats for Iran—neither of which are terrorist safe havens, according to the State Department. Not having an electronic passport was increased to not having one that is recognized internationally for Somalia, while regularly refusing deportees—little cooperation—was increased to anything less than full cooperation with deportees for Libya.

These subtle raisings of the bar occurred even while nine actual terrorist safe havens got a pass, along with a dozen countries that regularly refuse deportees and dozens more that have no electronic passport at all. It appears that the government’s secret report arbitrarily raised the bar for travel ban countries.

The point is not whether these criteria are legitimate. What matters is whether the Supreme Court can believe the government’s claims about its report.

During oral arguments, Solicitor General Noel Francisco told Justice Sonya Sotomayor that the president’s animus against Muslims couldn’t have affected the process because the agencies were able “to construct and apply this neutral standard to every country in the world.” Sotomayor challenged him, asking why the report was not available for them to review. Francisco only responded that the justices “owe” the president “a very strong presumption that what is being set out there is the truth.”

Yet the length of the report by itself gives the justices a very good reason to conclude that the government’s report did not actually assess every country in the world in 16 words or less. At the same time, the inconsistency between the stated criteria and the criteria actually applied to the travel ban countries casts doubt on the claim that the report’s standard was, in fact, neutral.

Maybe the president could rebut this impression, but any presumption that he had in his favor at the outset should be forfeited based on what we know now. The best evidence indicates that his “extensive” review simply never happened.

Jason Richwine recently published a short criticism of a new brief that Robert Orr and I wrote about immigrant and native benefit levels and use rates for means-tested welfare and entitlement programs.  This is another in a long series of blog post responses between those who support different methods for measuring native and immigrant welfare consumption so the response is wonky and does not revolve around a central question.  The title of Richwine’s criticism is “Obfuscating the Immigrant-Welfare Debate.”  Below, Richwine’s comments will be in quotes and my responses will follow.

“A few years ago I noted that ‘the amnesty movement has turned the political numbers game into an art form, systematically obscuring the trade-offs inherent in immigration policy.’ The movement has reached new heights of obfuscation with Alex Nowrasteh and Robert Orr’s Cato Institute study, ‘Immigration and the Welfare State.’”

Richwine hid half of our title: “Immigration and the Welfare State: Immigrant and Native Use Rates and Benefit Levels for Means-Tested Welfare and Entitlement Programs.”  Our entire title is important to defusing many of Richwine’s other complaints later in his piece.  The charge of obfuscation is serious but cutting off three-quarters of the words in our title does not enhance clarity.

“The Nowrasteh-Orr study says that’s all wrong. In fact, immigrants receive 39 percent less in welfare benefits than natives on a per capita basis. How is this possible? By including Social Security and Medicare as ‘welfare,’ for starters.”

As the title of our brief states, we included entitlement programs as part of the welfare state.  As we further explained in the first two sentences in our brief, we included them because they accounted for about 65 percent of all federal benefits outlays in 2016.  It is impossible to discuss the welfare state or the impact that immigrants have on it without including entitlement programs because they comprise its largest share.

It is normal to count entitlement programs like Social Security or Medicare as part of the welfare state.  Proponents of a larger welfare state like Jonathan Chait and Matt Bruenig consider Social Security to be part of the welfare state.  Even welfare-state skeptics like Robert Samuelson and others include it under the umbrella of the welfare state.

Many people use the term “welfare” to describe programs that they dislike while they use other terms to describe programs that they approve of.  Means-tested welfare programs fall into the former category, especially for conservatives, while entitlement programs fall into the latter.  Some may find that rhetorical distinction interesting, but it is not relevant in an analysis of how immigrants impact the welfare state and the myriad benefits it pays out.

“Lumping contributory entitlements with means-tested benefits is incredibly misleading in a group comparison. If I told you that Group A receives more food stamps than Group B, you could infer that a larger proportion of Group A is struggling economically and has turned to the taxpayer for support. By contrast, if I told you that Group X receives bigger Social Security checks than Group Y, then Group X probably earned higher wages, worked longer, contributed more to Social Security, and received a lower return on those contributions. Notice the difference there?”

There are several reasons to write the type of brief that Orr and I did.  One is to provide some evidence for one variable in a larger estimate of how immigrants affect the budget deficit.  The entire welfare state, including entitlement programs, is an important component of the cost side of immigration.  However, the consumption of means-tested welfare and entitlement programs is necessary but not sufficient to understand their fiscal impact as the taxes paid by them and by others because of a larger economy must also be counted and compared to alternative policies.

Richwine doesn’t seem concerned with the fiscal effects of immigration in his criticism but that question does concern him elsewhere.  Richwine’s flawed 2013 report for the Heritage Foundation on the estimated net-fiscal cost of amnesty finds that retirement programs (overwhelmingly Social Security and Medicare) account for 61 percent of the total increase in benefit outlays for amnestied illegal immigrants over a 50 year period.  Legitimate estimates of the fiscal impact of immigrants also reveal how important Social Security and Medicare are over any length of time when estimating the net fiscal impact of immigration.  If we care about how immigrants affect the national debt and immigrant consumption of retirement programs are a major source of outlays, then our analysis should include programs like Social Security and Medicare. That is just one good reason to include entitlement programs in analyses like these.

“Under the Nowrasteh-Orr model, an immigrant could be cashing a TANF check, shopping at the grocery store with food stamps, paying for doctors’ visits through Medicaid, living in a subsidized rental unit, heating it with energy assistance — and all the while be counted as receiving ‘less welfare’ than a native retiree who contributed to Social Security and Medicare his whole career and never once used a means-tested program. This is sophistry.”

Richwine writes as if Social Security and Medicare are like 401(k) programs where workers contribute and then draw down their own accounts in retirement. In reality, Social Security taxes the currently-working and then redistributes that revenue toward the currently-retired, which is why Social Security is running a deficit that is set to balloon over the next decade and continue to do so for the foreseeable future.  As a net present value, Social Security currently has about $34.2 trillion in unfunded liabilities over the infinite horizon and $12.5 trillion over the next 75 years.  Individual beneficiaries have to work a certain number of years to get benefits but the taxes they individually pay come nowhere close to covering the benefits they receive – just like other welfare state programs.

Orr and I also think that the dollar value of benefits received matters.  If immigrants use a wide number of cheap welfare programs then the cost can still be below that of natives who use only the more expensive entitlement programs.  Since entitlement programs are such an overwhelming portion of the American welfare state and they are facing a catastrophic funding shortfall, excluding them produces an incomplete welfare-state cost estimate.

“Social Security favors immigrants, as they have somewhat shorter careers, lower average incomes, longer lifespans, and appear to benefit more from spousal coverage. One study from the Social Security Administration calculated that late-Baby Boomers born in the U.S. will lose money to the system. Their Social Security contributions are greater than their benefits, such that participation ultimately results in a 0.4 percent tax on their lifetime earnings. Foreign-born participants, by contrast, receive a 1.2 percent subsidy from the system. (Illegal immigrants are actually pushing down the overall subsidy by paying into the system without being eligible to collect benefits. For legal immigrants, the subsidy is greater than 1.2 percent.) And that’s just Social Security. Medicare is even more progressive in its funding and payout structure, so it confers even greater net benefits on people with shorter careers and lower wages.”

Richwine omitted half the major findings in that paper.  According to that paper, immigrants are less likely to qualify for Social Security than natives are but, when they do, they receive a greater subsidy from the program.  The paper is limited entirely to those immigrants who receive benefits and excludes the tax contributions of those who do not receive benefits.  Richwine’s own wording here obfuscates far more than it clarifies. His statement could easily be interpreted as claiming that immigrants as a group harm the fiscal solvency of entitlement programs.  Let us be clear: Taxes paid by immigrants subsidize natives’ retirement benefits on net.

Furthermore, the paper that Richwine cites explains that Social Security is a welfare program that transfers tax revenue to poorer retirees.  As the authors write, “because of Social Security’s progressive benefit structure, more recent immigrants would be expected to have higher relative returns.”  Richwine cannot have it both ways.  He cannot claim that Social Security is a retirement system unlike welfare and that it is a progressive wealth redistribution program that favors poor immigrants.

“Entitlements aside, why do immigrants and natives appear to use about the same amount of means-tested benefits in the chart above? Because U.S.-born children of immigrants are counted in the native category. So if an impoverished immigrant signs up her U.S.-born child for Medicaid (or any other means-tested benefit), this would be considered native use of the welfare system. Treating parents as economic units separate from their dependent children is simply incorrect, as any program for children benefits the parents who are otherwise responsible for them.”

Eligibility for Medicaid benefits is determined by the individual characteristics of the beneficiary just as they are for most means-tested welfare and entitlement programs.  But including U.S.-born children of immigrants in the same household headed by an immigrant is not good enough to achieve Richwine’s goal.  All of the U.S.-born children of immigrants, including multiple generations of adult citizens living in independent households, must also be considered for his preferred accounting of benefit consumption to be accurate.  That is a considerably more difficult statistical task, but one that Orr and I are currently working on.  We do not know how that will turn out, but we will report the findings when (if) we arrive at a result derived by defensible methods.

Regardless, if you want to count the U.S.-born children of immigrants as a welfare cost of immigration then there is no good reason not to also count their grandchildren, great-grandchildren, and successive generations.  After all, very few Americans would be here today without any immigrants since the 1500s.  Any method that includes nearly all Americans as immigrants is transparently absurd.  We make the easiest and most defensible choice here: counting consumption by the immigrants.

“More broadly, it illustrates the unwillingness of advocates to give a single inch on any talking point.”

A criticism of previous Cato research on immigrant welfare use is that we limited it to the poor by comparing poor immigrant use rates and benefit levels to those of poor native-born Americans.  We did this to compare the actual populations that are eligible for means-tested welfare programs.  Because of that criticism, our primary model in this brief was to compare all immigrants to all natives without adjusting for age or poverty.  Under that adjusted method, we found that immigrants individually consume 39 percent less in welfare and entitlement benefits than natives.  Our second model adjusts for age and poverty.  It produced a smaller estimated difference in benefit-use between natives and immigrants.  However you feel about the conclusions reached in our brief, it is unfair to say that we have not given a single inch as we took previous criticisms to heart and adjusted our research accordingly. 

Our brief is transparent, we clearly explain our methods, and the entitlement programs fit neatly under the welfare state umbrella.  It is up to the readers to make their own judgment as to the quality of our research.  All we ask is that they read the entire piece with an open mind – including all of the title.

Trade headlines are getting more and more absurd. The Commerce Department apparently will investigate whether car imports impair national security and thus require a 25% tariff, which one trade lawyer said would prompt “pant-wetting laughter — followed by retaliation” among U.S. trading partners. Although maybe, as the linked article suggests, this is all just to put pressure on Mexico during the NAFTA talks, so who knows if it means anything. It’s very hard to say what is going on or where any of this is going. Perhaps, then, this would be a good time to take a break from the headlines and consider some more general trade issues.

I was reading a recent New Yorker article entitled “Is Capitalism a Threat to Democracy?” and, not surprisingly, I came across a lot of points that irritated me. In crafting a letter to the editor, it occurred to me that if I wanted it published, it would be better to focus on just one issue rather than send them a long list of complaints. Here’s the letter I sent, as published:

In Caleb Crain’s essay about whether capitalism poses a threat to democracy, he discusses Robert Kuttner’s views on the impact of free trade but leaves out a key consideration (Books, May 14th). Beyond the impact that free trade has on Americans, its benefits for the developing world should not be ignored. Hundreds of millions of people have been helped out of poverty by an American-led system of trade liberalization. Perhaps this will not convince American voters, but it should count for something.

That was the version as edited by the New Yorker. The letter I sent was a little different, in that I had a parenthetical as follows: “Perhaps this will not convince American voters (although if it were ever pointed out to them, they might approve), … “

One of the things Donald Trump has shown us is that you can say unorthodox things and change the debate, as it turns out people believe things we were not aware of. This can be a bad thing, but I can imagine that it might also be a good thing. What if we had a politician who explained how Americans benefited from free trade, and then also noted that free trade had helped bring hundreds of millions of people in other countries out of poverty. Isn’t it likely that many people would think that was pretty good? Couldn’t that actually generate support for free trade?

Of course, there may be a group of people that doesn’t care about things that happen outside of the United States, and are suspicious that helping non-Americans must mean hurting Americans. But don’t most people care a little about what happens elsewhere? I hope so, but I suppose we’ll never know, because the issue of helping others through free trade is almost never mentioned. It’s just not a significant part of the public debate. As a result, we really have no idea if Americans care about this, and whether it could generate more support for free trade. It would be nice if someone gave this a try, though. Trump has shown us that unorthodox strategies can work. If someone tried out a positive unorthodox message, we might be pleasantly surprised by the results.

The reviews of HBO’s “Fahrenheit 451” haven’t been so good, but at least the publicity should lead more people to read a great dystopian novel. Talking about the book many years later, Bradbury said, “I wasn’t worried about freedom, I was worried about people being turned into morons by TV…the moronic influence of popular culture through local TV news and the proliferation of giant screens and the bombardment of factoids.” If only he could see our current culture, where TV news agitates viewers into warring tribes.

But he certainly portrayed a society in which an authoritarian government burns books, and most people have seen it as a powerful warning about censorship. Which makes it particularly ironic, and more significant every day, that Fahrenheit 451 itself was censored – trimmed, expurgated, bowdlerized – by people who no doubt thought they had the best of intentions.

When Bradbury discovered what had been done, he wrote this Coda to the 1979 Del Rey edition. It’s worth reading today. What he said then is still true: “There is more than one way to burn a book. And the world is full of people run­ning about with lit matches.” Read the Coda, then read the book:

About two years ago, a letter arrived from a solemn young Vassar lady telling me how much she enjoyed reading my experiment in space mythology, The Martian Chronicles.

But, she added, wouldn’t it be a good idea, this late in time, to rewrite the book inserting more women’s characters and roles?

A few years before that I got a certain amount of mail concerning the same Martian book complaining that the blacks in the book were Uncle Toms and why didn’t I “do them over”?

Along about then came a note from a Southern white suggesting that I was prejudiced in favor of the blacks and the entire story should be dropped.

Two weeks ago my mountain of mail delivered forth a pipsqueak mouse of a letter from a well-known publishing house that wanted to reprint my story “The Fog Horn” in a high school reader.

In my story, I had described a lighthouse as hav­ing, late at night, an illumination coming from it that was a “God-Light.” Looking up at it from the view-point of any sea-creature one would have felt that one was in “the Presence.”

The editors had deleted “God-Light” and “in the Presence.”

Some five years back, the editors of yet another anthology for school readers put together a volume with some 400 (count ‘em) short stories in it. How do you cram 400 short stories by Twain, Irving, Poe, Maupassant and Bierce into one book?

Simplicity itself. Skin, debone, demarrow, scarify, melt, render down and destroy. Every adjective that counted, every verb that moved, every metaphor that weighed more than a mosquito—out! Every simile that would have made a sub-moron’s mouth twitch—gone! Any aside that explained the two-bit philosophy of a first-rate writer—lost!

Every story, slenderized, starved, bluepenciled, leeched and bled white, resembled every other story. Twain read like Poe read like Shakespeare read like Dostoevsky read like—in the finale—Edgar Guest. Every word of more than three syllables had been ra­zored. Every image that demanded so much as one instant’s attention—shot dead.

Do you begin to get the damned and incredible picture?

How did I react to all of the above?

By “firing” the whole lot.

By sending rejection slips to each and every one. By ticketing the assembly of idiots to the far reaches of hell.

The point is obvious. There is more than one way to burn a book. And the world is full of people run­ning about with lit matches. Every minority, be it Baptist / Unitarian, Irish / Italian / Octogenarian / Zen Buddhist, Zionist/Seventh-day Adventist, Women’s Lib/ Republican, Mattachine/ Four Square Gospel feels it has the will, the right, the duty to douse the kerosene, light the fuse. Every dimwit editor who sees himself as the source of all dreary blanc-mange plain porridge unleavened literature, licks his guillotine and eyes the neck of any author who dares to speak above a whisper or write above a nursery rhyme.

Fire-Captain Beatty, in my novel Fahrenheit 451, described how the books were burned first by minori­ties, each ripping a page or a paragraph from this book, then that, until the day came when the books were empty and the minds shut and the libraries closed forever.

“Shut the door, they’re coming through the win­dow, shut the window, they’re coming through the door,” are the words to an old song. They fit my life-style with newly arriving butcher/censors every month. Only six weeks ago, I discovered that, over the years, some cubby-hole editors at Ballantine Books, fearful of contaminating the young, had, bit by bit, censored some 75 separate sections from the novel. Students, reading the novel which, after all, deals with censorship and book-burning in the fu­ture, wrote to tell me of this exquisite irony. Judy-Lynn Del Rey, one of the new Ballantine editors, is having the entire book reset and republished this summer with all the damns and hells back in place.

A final test for old Job II here: I sent a play, Leviathan 99, off to a university theater a month ago. My play is based on the “Moby Dick” mythology, dedi­cated to Melville, and concerns a rocket crew and a blind space captain who venture forth to encounter a Great White Comet and destroy the destroyer. My drama premieres as an opera in Paris this autumn.

But, for now, the university wrote back that they hardly dared do my play—it had no women in it! And the ERA ladies on campus would descend with ball-bats if the drama department even tried!

Grinding my bicuspids into powder, I suggested that would mean, from now on, no more productions of Boys in the Band (no women), or The Women (no men). Or, counting heads, male and female, a good lot of Shakespeare that would never be seen again, especially if you count lines and find that all the good stuff went to the males!

I wrote back maybe they should do my play one week, and The Women the next. They probably thought I was joking, and I’m not sure that I wasn’t.

For it is a mad world and it will get madder if we allow the minorities, be they dwarf or giant, orangu­tan or dolphin, nuclear-head or water-conversation­ist, pro-computerologist or Neo-Luddite, simpleton or sage, to interfere with aesthetics. The real world is the playing ground for each and every group, to make or unmake laws. But the tip of the nose of my book or stories or poems is where their rights end and my territorial imperatives begin, run and rule. If Mor­mons do not like my plays, let them write their own. If the Irish hate my Dublin stories, let them rent type-writers. If teachers and grammar school editors find my jawbreaker sentences shatter their mushmilk teeth, let them eat stale cake dunked in weak tea of their own ungodly manufacture. If the Chicano intel­lectuals wish to re-cut my “Wonderful Ice Cream Suit” so it shapes “Zoot,” may the belt unravel and the pants fall.

For, let’s face it, digression is the soul of wit. Take philosophic asides away from Dante, Milton or Hamlet’s father’s ghost and what stays is dry bones. Laur­ence Sterne said it once: Digressions, incontestably, are the sunshine, the life, the soul of reading! Take them out and one cold eternal winter would reign in every page. Restore them to the writer—he steps forth like a bridegroom, bids them all-hail, brings in variety and forbids the appetite to fail.

In sum, do not insult me with the beheadings, finger-choppings or the lung-defiations you plan for my works. I need my head to shake or nod, my hand to wave or make into a fist, my lungs to shout or whis­per with. I will not go gently onto a shelf, degutted, to become a non-book.

All you umpires, back to the bleachers. Referees, hit the showers. It’s my game. I pitch, I hit, I catch. I run the bases. At sunset I’ve won or lost. At sunrise, I’m out again, giving it the old try.

And no one can help me. Not even you.

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