Policy Institutes

Former White House economist Gary Cohn expressed concerns yesterday that Trump’s tariffs would erode the benefits from tax reform. Since the on-again-off-again 25 percent tariffs on imports from China are—as of 3:23pm, Friday, June 15, 2018—“on again,” let me share this back-of-the-envelope analysis that shows why Cohn’s concerns are justified.

Certainly, the additional profits expected from the reduction in corporate rates from 35 to 21 percent could be entirely wiped out for the manufacturing sector. In 2017, according to Census Bureau data, the pre-tax profits of the U.S. manufacturing sector were $691 billion.  At 35 percent, the taxes on paper would be $242 billion.  At 21 percent, the average tax bill is $145 billion.  So, roughly speaking, the reduction in rates is estimated to be worth about $97 billion in terms of 2017 profits.

Well, in 2017, the value of U.S. goods imports was $2.33 trillion. Commerce Department data show that half of that value was comprised of intermediate goods (raw materials, production inputs, capital equipment)—the purchases of producers, not households. In other words, approximately $1.17 trillion of imports are U.S. costs of production.

If a tariff of, say, 10 percent were imposed on these imports, the cost of production for manufacturers would rise, roughly speaking, by $117 billion. That’s a $117 billion reduction in profits. Meanwhile, assuming foreign governments responded in kind and hit U.S. exports with 10 percent tariffs, manufacturing revenues also would take a hit.  U.S. exports of manufactured goods in 2017 amounted to $1.24 trillion.  Again, roughly speaking, that 10 percent tariff would reduce U.S. manufacturing revenues by $124 billion.  That, too, reduces profits.

The combined effect of the increased costs and reduced revenues comes to a $241 billion reduction in profits (a 35 percent reduction in manufacturing’s 2017 pre-tax profits). So, ceteris paribus, a 10 percent across-the-board tariff would reduce the U.S. manufacturing sector’s profits by about 35 percent.  With that kind of “downturn” in profitability, from where would the resources come to make capital investments, build new production facilities and R&D centers, and to offer new employment opportunities?

Let’s apply this ball park estimate to the actual situation on the ground. The tariffs Trump has already imposed or announced (steel and China tech products—leaving out aluminum, washers, and solar panels) subject $100 billion of imports to tariffs of 25 percent. The retaliation so far announced (by China, Canada, Mexico, and the EU) is commensurate—it will be approximately 25 percent on $100 billion of U.S. exports.  So, at the moment, $200 billion of U.S. trade is in the crosshairs.

But a new Trump investigation into the national security implications of auto and auto parts imports could add another $600 billion of trade to the mix—$300 billion of imports hit with 25 percent duties and $300 billion of retaliation. The president wants to get the investigation completed before the election in November, so we could be up to $800 billion of U.S. trade by year’s end.  (That’s 20 percent of all U.S. goods trade, by the way.)  

So, 25 percent duties assessed on $800 billion of trade, approximately half of which would be U.S. manufacturing inputs and U.S. manufactured exports comes out to a combined $100 billion hit on the sector’s profits (25 percent of $400 billion).  That eclipses the $97 billion gain from the corporate rate reduction.

While this is all bad news for the economy, I wonder whether the tax-reform advocates who held their noses and excused Trump’s trade transgressions because tax reform would make everything right will start to speak out. Paging Larry Kudlow, Steve Moore, and Art Laffer.

 

 

 

 

 

Would hate speech laws reduce discrimination, violence, and psychic injuries to vulnerable groups? Nadine Strossen says they would not in her new book, Hate Speech: Why We Should Resist It with Free Speech, Not Censorship. She believes we have insufficient evidence to conclude that “hate speech” in general harms others, and even less evidence that constitutionally protected “hate speech” does so.  

Naturally, proponents of “hate speech” laws blame expression for anti-social attitudes and conduct. Strossen maintains that we should refrain from censorship on the basis of expected effect, “simply because it might have bad effects.”  The perceived harmfulness of any given utterance is context contingent, depending largely on variables like location, tone of voice, relationship between speaker and listener, and personality characteristics.

Strossen draws attention to a study conducted by Laura Leets of Stanford University. Leets recruited Jewish and LGBT college students to read several anti-Semitic and homophobic slurs all drawn from real situations. The subjects then answered questions about how they would have responded if they themselves had been the targets of these messages. Interestingly, a common response by the students was that the “hate speech” would have had “no effect” upon them in either the short run or the long run. Many of the participants also expressed the belief that the speaker was motivated by ignorance, “and therefore should be the object of pity, not anger” (124).

A national survey of incoming first-year college students conducted by the UCLA Higher Education Research Institute found that “the entering freshman class of 2015 ranks among the most ambitious” in the areas of student activism, political and civic engagement. The study notes that this particular class of incoming first-years had witnessed “protests and outcries on college campuses and in communities” in response to “local incidents of bias and discrimination.” These students did not respond to “hate speech” and bias crimes with withdrawal and depression, but rather with engagement and dialogue. Such speech seems to foster political engagement within the larger community, a necessary component of a healthy democracy.

Although these studies focus on college students, Strossen notes that resources for developing one’s ability to resist the potentially negative effects of hateful speech are available to all. These tools include cognitive-behavioral therapy techniques for reducing anxiety or other negative reactions that might result from stressful situations (including exposure to “hate speech”), education about utilizing social media to respond to “hate speech,” and providing access to supportive organizations and other resources. Education and other responses may turn a negative experience into a hard-won moment in personal growth.

Strossen also addresses the question of whether “hate speech” fosters hateful and discriminatory attitudes and actions among those who hear it. She notes that “a comprehensive review of social science research about the potential links between media messages and audience behavior concluded that the effects on audience behavior are ‘weak and affect only a small percentage of audience members’” (127).

We should keep in mind that speech does not force people to act badly. Those who hear extreme utterances are responsible for their subsequent actions. British writer Kenan Malik remarks:

Racists are, of course, influenced by racist talk. It is they, however, who bear responsibility for translating racist talk into racist action. Ironically, for all the talk of using free speech responsibly, the real consequence of the demand for censorship is to moderate the responsibility of individuals for their actions.

If creators were held responsible for the anti-social acts that some individuals committed after viewing the material, “certainly neither the Bible nor the Qu’ran” would be safe, as “both have been accused of instigating countless individual and mass crimes” (128).

In summary, we should not outlaw speech because it might have bad effects. This approach would allow government to punish speech because it disfavors the speaker or the message without directly acknowledging this motive. Moreover, “given the endless array of speech about public concerns that could have such an impact, any other rule would largely muzzle democratic discourse” (127).

 

This the third post in series on Nadine Strossen’s new book, Hate Speech. The first and second posts may be found here and here.

In his Election Day tweet attacking Rep. Mark Sanford, President Trump declared that Sanford’s opponent, Katie Arrington, “is tough on crime and will continue our fight to lower taxes.” Well, maybe. She doesn’t mention either issue on her campaign website. (In fact, she has nothing but bland buzzwords about any issue.)

This tweet is typical. It seems like very time Trump tweets an endorsement or a criticism of a candidate, he calls the candidate “strong (or weak) on crime.” I count 60 Trump tweets since his inauguration that use the word “crime.” Some complain that he is being investigated for a “made up, phony crime” or charge Hillary Clinton with “many crimes.” But most seem to relate to a candidate: Dan Donovan is “strong on Borders & Crime.” Kevin Cramer of North Dakota is “strong on Crime & Borders.” Doug Jones is “WEAK on Crime.” Adam Laxalt is “tough on crime!” “Chuck and Nancy…are weak on Crime.” Ralph Northam is “weak on crime.” Also “VERY weak on crime!” “Keep our country out of the hands of High Tax, High Crime Nancy Pelosi.” And so on.

It’s not obvious that this makes political sense. Candidates aren’t talking much about crime, perhaps because they recognize the substantial decline in crime rates. In numerous Gallup polls over the past year, only 2 to 4 percent of Americans have identified crime as the country’s most important problem. Though about 50 percent of people say they worry a great deal about crime when asked that question directly.

But here’s the thing. Crime in the United States is in fact way down

Here’s a long-term look at the most visible crime, homicide:

 

Here’s a picture of broader crime rates:

And yet, as the same source illustrated, at the very time when crime rates had fallen steadily and substantially for 20 years, 68 percent of Americans said the national crime rate was getting worse. (Crime rates continued to fall after 2011, though there was an uptick in murders in 2015 and 2016. The rate appears to have fallen in 2017.)

Of course, the president is better informed than average Americans. Surely White House staff have explained the crime statistics to President Trump. So why does he talk about “this American carnage” and pound away at the “crime” issue when endorsing candidates who never talk about it? Perhaps it’s part of his continuing use of racially charged language. Perhaps “crime and borders” is just shorthand for the kinds of social change he thinks his voters fear. Or maybe it reflects the fact that he grew up in New York City during a time of sharply rising crime. We all get ideas in our youth (“American cars aren’t well made”) that may stick with us even us as the facts change.

Whatever the reason, it seems curious that he so often cites “strong and crime” as the reason to support political candidates who haven’t talked about crime.

 

Many of you are probably suffering from tariff fatigue right now. Every day, there is a new tariff in the news. Tariffs on Canada, tariffs on the EU, tariffs on China; tariffs on industrial products, tariffs on agricultural products; retaliatory tariffs by Canada, the EU and China; tariffs in effect today, tariffs going into effect soon. It’s hard to keep track of it all.

The latest is the announcement from USTR today of U.S. tariffs to be imposed on $34 billion of Chinese imports on July 6:

The Office of the United States Trade Representative (USTR) today released a list of products imported from China that will be subject to additional tariffs as part of the U.S. response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property.   

On May 29, 2018, President Trump stated that USTR shall announce by June 15 the imposition of an additional duty of 25 percent on approximately $50 billion worth of Chinese imports containing industrially significant technologies, including those related to China’s “Made in China 2025” industrial policy.  Today’s action comes after an exhaustive Section 301 investigation in which USTR found that China’s acts, policies and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory, and burden U.S. commerce. 

The list of products issued today covers 1,102 separate U.S. tariff lines valued at approximately $50 billion in 2018 trade values.  This list was compiled based on extensive interagency analysis and a thorough examination of comments and testimony from interested parties.  It generally focuses on products from industrial sectors that contribute to or benefit from the “Made in China 2025” industrial policy, which include industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles.  The list does not include goods commonly purchased by American consumers such as cellular telephones or televisions.

This list of products consists of two sets of U.S tariff lines.  The first set contains 818 lines of the original 1,333 lines that were included on the proposed list published on April 6.  These lines cover approximately $34 billion worth of imports from China.  USTR has determined to impose an additional duty of 25 percent on these 818 product lines after having sought and received views from the public and advice from the appropriate trade advisory committees.  Customs and Border Protection will begin to collect the additional duties on July 6, 2018.

The second set contains 284 proposed tariff lines identified by the interagency Section 301 Committee as benefiting from Chinese industrial policies, including the “Made in China 2025” industrial policy.  These 284 lines, which cover approximately $16 billion worth of imports from China, will undergo further review in a public notice and comment process, including a public hearing.  After completion of this process, USTR will issue a final determination on the products from this list that would be subject to the additional duties.

Trying to divine the Trump administration’s true intent with regard to all of its various tariffs is a challenge. One view is that the administration is just negotiating, and it believes it can get the best deal by threatening tariffs, as this will cause our trading partners to offer more in the negotiations. In this view, a threat of duties to be imposed on July 6 is supposed to induce China to make more significant concessions in the ongoing negotiations that have been taking place on the various trade practices noted by USTR above.

There’s not much evidence that negotiating trade agreements in this way is effective, especially with a larger economy like China. In fact, it may make a successful negotiation more difficult. Other countries have their own politics to deal with, and no foreign leader wants to look weak by caving it to American pressure.

Another possibility is that the administration thinks it is good policy for the U.S. to impose tariffs, and while they may talk about negotiations, their real objective is to have higher tariffs. They know others will retaliate, but they think the U.S. wins on balance, maybe in part because they think manufacturing is more important than anything else, and the U.S. tariffs tend to be on manufactured products and related inputs, whereas the foreign tariffs are often on agricultural products.

If this is the adminstration’s intent, the economy may be in for a bumpy ride. The quantity of the imports subject to all of the Trump administration’s various tariffs is getting large (and may get much larger soon if they impose tariffs on auto imports), and the negative impact on the economy may, as Gary Cohn has acknowledged, become apparent once all the tariffs are in effect (the tariffs could even erase the gains from tax reform).

Things are looking pretty bleak right now for U.S. trade policy. Congress could and should step in here, but that does not look likely at the moment. Retaliation by U.S. trading partners might get the administration’s intention, but as noted, the administration may see all the additional tariffs as a win. In the end, the costs of all this to the U.S. economy will become apparent. In the meantime, all Americans will pay a price for whatever it is the administration thinks it is doing.

House Republicans may have worked out a compromise bill between House GOP leadership, some conservatives, and some moderate Republicans that will come up for a vote next week. The compromise dooms an effort by moderates to force a vote on bipartisan legislation that had the most likely chance of passing the House and Senate (though only a slim chance of a presidential signature). The draft bill has leaked, and like any compromise, it is a real mixed 293-page bag. But on net, the bill would make the immigration system worse than it is right now.

Some Very Positive Elements

Indefinitely renewable status: On the positive side, the bill provides a legal status for DACA-eligible people that is indefinitely renewable under the same criteria as DACA itself (i.e. school attendance or high school graduation). This is actually more inclusive than the Dream Act in a way, which offers only a temporary status that imposes additional requirements to be met in order to receive permanent residency. That said, as explained below, this bill restricts the application pool in other ways to result in fewer applicants than other bills including the Dream Act.   

Pathway to citizenship for DACA population & legal immigrant Dreamers: Even better, the new legislation would provide a pathway to citizenship for some DACA recipients and some legal immigrant Dreamers who meet additional education and skill qualifications on top of DACA’s requirements (i.e. high school degree). No other piece of legislation so far has provided a pathway to citizenship that doesn’t discriminate against some legal immigrants. For some time, we have been nearly alone in advocating allowing legal immigrants in temporary status, such as children of H-1Bs, to apply for any pathway to permanent residency and citizenship. The fiscal and economic benefits of keeping these young immigrants—almost entirely highly skilled—in the United States are enormous. Unfortunately, as noted below, this pathway will help very few legal immigrant Dreamers.

Repeal of per-country limits: The draft would include provisions that would repeal the discriminatory per-country limits on employer-sponsored immigrants, while raising the limits for family-sponsored immigrants. The per-country limits prevent any single nationality from receiving more than 7 percent of the total number of green cards in any given year. The result is massive wait times for more populous countries, and no wait times for others. On the employer side, for example, Indian immigrants with advanced degrees who apply right now may never see their green cards in this lifetime. We have again led the way in championing this reform.

More employer-sponsored immigration: Employer-sponsored immigration will eventually get a boost of approximately 88,400 green cards. There would be an immediate increase of 65,000 with a subsequent increase of 23,400 in 2039. Increasing high skilled immigration is unequivocally positive for the U.S. economy and labor force. My colleague Alex Nowrasteh and I have advocated this reform for many years because it has massive fiscal benefits and will promote innovation and economic growth.

Many Bad Elements

Legal immigration cuts: The biggest problem with the GOP compromise is that it would slash legal immigration significantly. It would repeal provisions of immigration law that annually provide green cards to siblings (65,000) and married children of U.S. citizens (23,400). The cut would be partially offset by an annual increase of 65,000 on the employer-sponsored side, but the 23,400 green cards for married children would disappear. In addition, it would end the diversity visa lottery entirely, which makes 55,000 green cards available to nationals of countries that send few immigrants to the United States if they have at least high school degree.

The bill rebrands this banning of legal immigrants as a way to provide permanent status for Dreamers, reallocating the diversity visas (55,000) and the married children visas (23,400) to that purpose (as if God created only a finite number of green cards). But if the Dreamers don’t use the 1.6 million reallocated green cards over 20 years, the draft legislation would just delete the extras, which gives the lie to the claim that the reallocation is necessary to keep green cards at the same sacred level that we’ve had for almost three decades. While the 23,400 visas for married children would go to the employer-sponsored side in the 21st year and after, the 55,000 diversity visas would just be flushed forever.

The bill would make it much more difficult to receive asylum in the United States (below), likely halving the number of asylum seekers (from about 26,000 to about 13,000). All told, the GOP compromise would reduce legal immigration by about 1.8 million over two decades. Even if you count the Dreamers, it would still be a net reduction of likely about a million. This is about 9.1 percent cut to legal immigration. If you count the Dreamers, it would be about a 5 percent cut relative to what 2019 will be.

It makes no sense to cut legal immigration at a time when U.S. population growth is at the lowest level since the Great Depression, and the fertility rate has plunged to its lowest level ever recorded. GDP growth depends heavily on a growing population, and shrinking the labor force would shrink the economy proportionately. Family-sponsored and diversity immigrants are better educated than Americans, compounding the economic damage. Moreover, unlike employer-sponsored immigrants who are almost always in the United States working already when they receive permanent residency, family and diversity immigrants are new arrivals from abroad, meaning that there are much more severe implications for population growth as a result of keeping them out. Family-sponsored immigrants receiving permanent residency add to the existing population, while employer-sponsored immigrants receiving permanent residency are already part of it.

The United States is already one of the least generous countries in the world on legal immigration, and this bill would make America even less competitive than it already is.

Canceling legal immigrant applications: The reductions in legal immigration are even more perverse because they come at the expense of legal immigrants who have waited in line up to two decades for the ability to immigrate legally. The bill would terminate more than 3 million applications for family-sponsored visas. Implicit in the GOP compromise is that it would cancel these people’s applications in order to legalize legal and illegal immigrant Dreamers. The party that has routinely rejected “amnesty” on the grounds that it would be “unfair” to legal immigrants is planning to take away their ability to immigrate in order to give amnesty to illegal immigrants. This outcome is massively unjust, and it will inevitably result in more illegal immigration. Not only would those who now have no way to enter legally likely consider alternative avenues, but why would anyone else wait in the lines that remain if the U.S. government could simply throw up a “Closed” sign at any time years later?

Making asylum impossible for border crossers: Under a 1996 law, asylum seekers who come to the border must first prove that they have a “credible” fear of persecution in order to then apply for asylum. Asylum officers must assess where there is a “significant possibility” that an immigration judge will approve their claim. Rather than simply presenting a claim that is internally consistent, meets the requirements for asylum, and is otherwise credible, the compromise bill will now require them to prove their statements are “more probable than not” to be true.

The standard will effectively require asylum seekers to come with proof to the border, yet as I note in this longer article on the topic, we “simply cannot expect that asylum seekers who may have had to sneak out of their country of origin in the dead of night or swim across rivers to escape persecution will have sufficient evidence the moment they arrive in the United States to meet this burden.” As the Tahiri Justice Center, which serves women fleeing violence, has stated, the “heightened screening standard will, as intended, wrongfully prevent women and girls fleeing horrific violence from even presenting their cases in court.” Any provision that would have sent Jews—who often lacked documents—back to the Holocaust simply cannot be used as the standard for America today.

Very narrow pathway to citizenship: The pathway to permanent residency would apply to a very small share of immigrant Dreamers. In order to get the initial temporary status valid for six years, it would require applicants to be under the age of 37, and to have been physically present in the country 11 years ago (12 years by the time the plan is implemented). It would restrict the DACA population to those who have an income of at least 125 percent of the poverty line unless they were in school or taking care of a young child. It would exclude Dreamers who have ignored removal orders or skipped court hearings, even if they have lived in the United States for more than a decade. It would also require the payment of a fine of $1,000 for use in border security (which would not come close to covering the cost of the $23.4 billion in border security and wall funding provided in the bill).

In order to obtain permanent residency (a green card), Dreamers would have to meet a points threshold based on English language ability, education, work, and military service. In all likelihood, this bill would grant permanent residency to at most the same number of people who received DACA (700,000), excluding roughly 80 percent of all unauthorized immigrant Dreamers who entered the United States as children before 2017 (based on Migration Policy Institute’s estimate of that population).

The Wasteful Border Wall: The bill would spend $23.4 billion on border security, including $16.6 billion on a pointless border wall. For comparison, Border Patrol has spent just $65 billion in the last five decades combined. As I have written before, the border wall is not effective at reducing illegal immigration, and even if it was, it’s construction would result in the seizure of miles of private land without reasonable due process protections.

Bottom Line

There are so many other problems with this bill that they are impossible to list in one post. There is the unnecessary and costly biometric exit system, the fast-track deportations of unaccompanied children at the border back to violence in Central America, and much else. The pathway to citizenship is simply too narrow to make up for the dramatic restrictions that this bill would impose on legal immigrants and asylum seekers. The cancellation of applications by legal immigrants who have been waiting is massively unfair and undermines the integrity of the entire legal immigration system.

The Trump administration announced it will argue in federal court that ObamaCare’s preexisting-conditions provisions are unconstitutional. Supporters of the law, including many reporters, are beside themselves with glee. Republican fools! Everyone knows ObamaCare’s preexisting-conditions provisions are the most popular part of the law! (Democrats, crush them!!)

ObamaCare’s supporters have this one exactly backward. The law’s preexisting-conditions provisions are not popular. They are wildly unpopular. Supporters of the law believe they are popular – and have fooled even Republicans into believing the same – because they have been drinking a strong brew of economic ignorance, shoddy polling, and bad journalism.

In response to the Trump administration’s announcement, Kaiser Family Foundation president Drew Altman wrote:

Protections for people with pre-existing conditions are hugely popular, and the administration may have handed Democrats their strongest health care weapon yet — because now they can make the case that the administration has gone to court to take away protections for people with pre-existing medical conditions.

The case is also likely to drag on, so it could be the political gift that keeps on giving through 2020, even if it is eventually thrown out.

The Washington Post’s Paige Winfield Cunningham wrote:

The Trump administration has given Democrats a generous political gift
Preexisting conditions health coverage is very popular.

President Trump has given Democrats the political gift that Capitol Hill Republicans were too smart to grant them last year. And Republicans know all too well it could be disastrous…

Dismayed, top Republicans have been moving quickly to put space between themselves and the administration on the matter, anxious to distance themselves from such popular consumer protections…

Politicians and policymakers are well aware that preexisting protections [sic] poll extremely well with Americans. Seventy percent of respondents to a Kaiser Family Foundation poll last year — including 59 percent of Republicans — said the federal government should continue prohibiting insurers from charging these folks more for coverage.

Less smart than Capitol Hill Republicans? Them’s fightin’ words.

The reason Altman, Cunningham, and almost everyone else in Washington believe ObamaCare’s preexisting-conditions provisions are popular is because they conduct (in the case of Altman) and rely on (in the case of Cunningham) poll questions that ask only about the presumed benefits of those provisions–as if those provisions have only benefits, and no costs. Here is the Kaiser Family Foundation poll question both of them cite.

Bad Polling

The question basically asks whether respondents want the federal government to guarantee that sick people will pay no more for health insurance than healthy people pay. It asks only about the intended benefits of ObamaCare’s preexisting-conditions provisions: lower premiums for the sick.

Kaiser Family Foundation scholars from Altman all the way down to the lowliest research assistant, as well as seasoned health-policy journalists like Cunningham, know full well that requiring insurers to charge healthy and sick enrollees the same entails significant costs as well as benefits. And they know what those costs are. But while I have seen Kaiser Family Foundation polls ask respondents to offer opinions informed by both the benefits and the costs of a certain policy, I have never seen them do so with regard to ObamaCare’s preexisting-conditions provisions.

Fortunately, we at the Cato Institute have done so. The results may shock you! 

In 2012 and again in 2017, Cato scholars fielded surveys that sought to get a more accurate picture of public attitudes toward these provisions. On both occasions, we learned that when pollsters as voters about both the benefits and the costs of ObamaCare’s preexisting-conditions provisions, voters really don’t like them.  

Take our most recent series of poll questions, conducted last year. When we asked voters essentially the same benefits-only question the Kaiser Family Foundation asked, we got essentially the same response: 2-1 support for ObamaCare’s preexisting-conditions provisions. But when we asked whether voters would still support those provisions if they increased premiums or taxes, support flipped to opposition.

But those are not the only costs of those provisions. In this blog post at Health Affairs, I discuss research showing that ObamaCare’s preexisting-conditions provisions are reducing the quality of coverage for patients with many expensive conditions. Believe it or not, and even ObamaCare’s architects know this to be true, ObamaCare’s preexisting-conditions provisions provisions literally punish insurers who offer high-quality coverage for the sick.

When we asked voters if they would still support ObamaCare’s preexisting-conditions provisions if those provisions reduced quality, voters opposed those provisions by a 2-1 margin. That’s right: the impact ObamaCare’s preexisting-conditions provisions have on quality caused initial 2-1 support for those provisions to flip all the way to 2-1 opposition.

Good Polling

This huge swing occurs because the impact that ObamaCare’s preexisting-conditions provisions have on quality causes even Democrats to turn against them.

Have a look at the below chart. Unlike Republicans and independents, Democrats are willing to endure the higher taxes and health-insurance premiums associated with those provisions – but not reductions in quality, which cause 41 percent of Democrats to flip from supporting those provisions to opposing them.

More Good Polling

The polling that Altman conducts and Cunningham cites on ObamaCare’s preexisting-conditions provisions has almost no connection to the reality of how those provisions operate, and therefore paints a misleading picture of public attitudes toward those provisions.

More responsible polling suggests not only that these provisions are unpopular, but that Republicans could turn opposition to those provisions to their political advantage–if they learn how to talk about how those provisions affect quality.

In fact, I’m so confident that ObamaCare’s preexisting-conditions provisions are unpopular, I will bet Drew Altman $100 that if the Kaiser Family Foundation polls both the benefits and costs of those provisions, their poll will show those provisions are unpopular too. What do you say, Drew?

Every once in a while, something truly bizarre gets published in the climate business. The latest iteration would  be “Higher CO2 Concentrations Increase Extreme Event Risk in a 1.5°C World”, published online on June 12th in the prestigious Nature Climate Change by Baker et al.

The extreme events under consideration include

1) days hotter (less cold) in the summer (winter) than the 90th percentile of current temperatures at a given location,

2) a measure of atmospheric stickiness called the “wet bulb globe temperature”, expressed as  its 95th percentile for the amount of moisture in near-surface air at a given location, and

3) the 95th percentile rainfall on days when it rains.

The paper claims that carbon dioxide itself will “have a significant direct impact on Northern Hemisphere summer temperatures, heat stress, and tropical precipitation extremes”. That’s what it claims, but it is really not what it shows.

The problem is, as readers of these posts know, that the climate models are making horrific errors with regard to warming rates in the tropical upper troposphere. The difference between near-surface and upper temperatures determines whether and/or how much it rains.  When the difference is large, the surface air is more buoyant, and thunderstorms explode.  When it’s small, the atmosphere is more stable and dry.

So how could the authors find a “significant” impact on heavy tropical precipitation?  Simple, just sweep the error under the rug.  They took a model with the CO2 of the current era and subtracted its calculated precipitation  from other models with ranges of carbon dioxide changes consistent with a total warming of 1.5°C.

Yes. The modeled precipitation for the present, with all of its upper tropospheric errors (shown yet again below), was subtracted from the modeled precipitation for the more-CO2 models, with all of their upper tropospheric errors.

Hint:  subtracting two wrongs does not make a scientific right.

Figure 1. Predicted warming rates with height, expressed on the y-axis as atmospheric pressure. The colored spaghetti is the average of each model family listed on the right, the solid black line is the average of all the models and the actual (observed) values are within the ovals on the left. Models used in the recent paper include MIROC5 and a version of HadGEM2, both of which are far too warm at elevation in the tropics.

Let’s zero in on that “significant direct impact on…tropical precipitation regimes”.  Figure 2 e-f gives the change in the number of wet days above the 95th percentile.  A close squint reveals that the range of change is from about two more wet days per season to about two less.

As for the significance, the figure caption in Nature Climate Change, says there’s stippling on the maps when the change is significant at the 10% level (a very lax criterion by science standards).  There’s no stippling on the precipitation maps, meaning none of the forecast changes are significantly different than the present, despite what the paper says.

Figure 2. Top: change in number of hot days per season; Middle:  change in the “stickiness” temperature; Bottom:  change in number of wet days per season.  None of the precipitation changes (“e” and “f”) are significant, despite what the text says, and there is only limited significance in the other four maps, depicted by the stippling. Notice that the precipitation changes in the negative (orange)  direction (fewer heavy rain days) are about the same as those in the opposite (blue) direction. From Baker et al., 2018.

There are some stipples—but not many—on the maps for relatively warm days, and on the maps for sticky days. They concentrate in June-August over the Sahara Desert (which will have the profound effect of turning it into a desert) and Siberia, where warmth might be somewhat welcome there, both by the residents and the black flies.

You can scratch your head as to how the peer-reviewers of this manuscript would allow the abstract of the paper to boldly claim “significant” changes in wet days in the tropics when there were none.

The ubiquitous nature of these types of shenanigans—and it’s not just in climate science—is what prompted me, along with Cato Scholar Terence Kealey, to write and edit Scientocracy:The Tangled Web between Science and Public Policy, currently under editorial review.

In a 7-2 decision today, the Supreme Court struck down Minnesota’s blanket ban on wearing anything with a political insignia at a polling place. Chief Justice Roberts’s opinion agreed with many parts of Cato’s brief, particularly regarding the inherent unworkability of such a broad ban on political speech. The decision is a small but important victory for free speech.

In highlighting the unpredictability of the what counts as “political,” Chief Justice Roberts’s opinion cites one moment from oral argument that Supreme Court observers found particularly telling. When asked by Justice Alito whether the law would ban a shirt with the text of the Second Amendment, Daniel Rogan, counsel for Minnesota, said “I think that that could be viewed as political.” Alito then immediately asked whether the same would be true of a shirt with the text of the First Amendment. Observers in the courtroom laughed, and Rogan said “no your honor, I don’t think the First Amendment,” only to be interrupted by the Chief Justice, “No what, that it would be covered or wouldn’t be allowed?,” Roberts asked. “It would be allowed,” replied Rogan, but the Chief Justice seemed surprised, “it would be?,” he asked.

There’s a saying in Supreme Court practice that a case can’t be won at oral argument, but it can be lost. While Minnesota had a tough law to defend, but that exchange underscored the arbitrariness of the law. At a Cato forum in February, before the case was argued, I had a similar exchange with Ginger Anders of Munger, Tolles, and Olson, LLC when I asked her whether a Gerald Ford or a Ronald Reagan shirt would be banned. No to Ford, she said, but yes to Reagan.

So did Minnesota lose the case at oral argument? Roberts’s opinion goes almost out of its way to explain that bans on political expression in polling places are often valid, if not desirable:

Casting a vote is a weighty civic act, akin to a jury’s return of a verdict, or a representative’s vote on a piece of legislation. It is a time for choosing, not campaigning. The State may reasonably decide that the interior of the polling place should reflect that distinction.

From this language, it would seem that Roberts is writing to uphold the law. But “the State must draw a reasonable line,” he goes on to write, and “the unmoored use of the term ‘political’ in the Minnesota law, combined with haphazard interpretations the State has provided in official guidance and representations to this Court” mean the law should be struck down.

Every state and the District of Columbia have laws that prohibit certain types of speech around polling places on election day. If a state’s law provides specific enough standards for prohibited speech, then today’s decision won’t affect it. Those that let election judges make arbitrary distinctions, however, will likely be struck down.

This morning, the Supreme Court ruled 7-2 that a Minnesota law banning “political” apparel at polling places violates the First Amendment. This was ultimately an easy case, as it should have been all along, and this decision was predictable after oral argument.

Obviously voters shouldn’t be allowed to harass, intimidate, misdirect, or otherwise interfere with other voters – and politicking or electioneering can be disruptive, so there’s nothing wrong with restricting that. But merely wearing a “political” hat or T-shirt doesn’t do any of those things, which are covered by other laws anyway. As Cato argued in our amicus brief, a complete ban on political expression should be met with the most searching judicial inquiry, regardless of the setting.

In this time when the freedom of speech is becoming an increasingly controversial idea, the Supreme Court did well to remind us that the First Amendment protects expression even and especially when Americans go to vote.

To the surprise of no one, yesterday the Federal Reserve voted to raise interest rates.  Chair Powell, conducting his second FOMC press conference, was true to his reputation in giving direct, plainspoken answers to most questions. He described the economy as doing “very well”; and, when asked about the Fed’s natural rate of unemployment (known as the NAIRU in economics jargon), he replied the Fed “can’t be too attached to these unobservable variables,” rather than offer a long, technical explanation. Many of Powell’s answers affirmed his commitment to seeing to it that having the FOMC’s policy rate settings are data-driven.

One notable development was Powell’s announcement that, starting in January, all eight FOMC meetings will be followed by a press conference. Currently, the Fed Chair takes questions from the press only once per quarter, or after every other meeting.  Powell was quick to add that this change offered “no signal [for] policy rates,” and that it was being made only to improve communications.  However, those comments do not ring true. Since first lifting rates off their zero lower bound in December 2015, the FOMC has only raised rates during meetings that were followed by a press conference, also known as “live” meetings; and it’s now generally assumed that the FOMC will only adjust policy rates at a live meeting.  Internal pressure for adjusting this expectation was building. For example, new Atlanta Fed President and current FOMC voter Rafael Bostic considered the live meeting public expectation to be “a sign that what [the Fed is] doing right now isn’t working.” There were two options available that could convince the public and markets that policy rates could change at any meeting: one, the Fed could adjust rates at a meeting without a press conference or two, every FOMC meeting could be followed by a press conference. Chair Powell chose the second option.

A possible change that got only brief attention is that of having the Fed change its nominal policy target, which is currently a 2% inflation target. Although the FOMC discussed alternative targets late last year, Powell said that an actual change is neither on the calendar nor something he is looking at seriously right now.  Powell did nevertheless refer in his statement to “price level targeting and that sort of thing” as potential alternatives to the Fed’s current inflation target. (It’s not clear whether Powell sounded flippant because he didn’t think much of such alternatives or simply because he wanted to move onto the next question.) In my view a nominal GDP level target would be better than either the current inflation target or a price level target.

On Wednesday June 13 the Saudi-led military coalition launched an assault to seize Hodeidah, the site of Yemen’s main port. The port, currently held by Houthi fighters, is the primary channel through which humanitarian aid reaches millions of at-risk Yemenis, who have suffered from four long years of civil war.

The war has already taken a huge toll on Yemen. If the vital humanitarian aid delivered through Hodeidah is disrupted by a coalition assault, many more civilians could die.

The coalition had sought direct military assistance from the United States, which has provided weapons, intelligence, and logistical support throughout the war. The Trump administration declined, however, and encouraged the coalition to give the United Nations time for diplomacy. This remains the right approach. As tragic as the situation in Yemen is today, continued American support for military intervention is the wrong answer. Not only does the United States lack a compelling national security interest in Yemen, but by supporting the Saudi-led coalition the United States has contributed materially to the one of the worst humanitarian disasters of the 21st century. Further military support won’t improve American security, but it risks making things worse for Yemen.

American support of the Saudi-led war in Yemen has been spurred by two ultimately misguided arguments. First, Yemen is home to an Al Qaeda affiliate—Al Qaeda in the Arabian Peninsula—most famous for sponsoring the attacks on the office of the French magazine Charlie Hebdo and two failed attempts on U.S. soil by lone attackers in 2009 and 2010. But although the group certainly maintains an anti-Western ideology, like most terrorist groups its overwhelming focus is fighting for control of its own neighborhood. In addition, like most terrorist groups it is relatively small and has little ability to project power across long distances. It does not represent a big enough threat to justify a full-scale invasion of Yemen.

The second argument for supporting the war in Yemen is that both the Saudis and the United States view the Houthi rebels as Iranian proxies. Helping Saudi Arabia “manage” Yemen is thus seen as part of the broader campaign to limit Iranian influence. Yet it is Saudi Arabia, not Iran, that dominates the Middle East when it comes to defense spending. According to Jane’s Defense Budgets Report Saudi Arabia will spend roughly $50 billion in 2018 on defense compared to Iran’s $16 billion. Simply put, as a major player in the Middle East Iran may enjoy the ability to frustrate Saudi and American interests in Yemen and elsewhere, but it is no threat to become a regional hegemon anytime soon.

The reality is that neither the threat of terrorism nor the threat from Iran are significant enough to warrant the Saudi coalition’s intervention in the first place, much less the United States continuing to support the coalition.

Nor is there any assurance that a coalition military “victory” would put an end to conflict in Yemen. Conventional military campaigns are good for killing people, destroying infrastructure, and taking territory, but the United States has learned through painful experience in Iraq and Afghanistan that even America’s awesome firepower cannot create peace. Even worse, the destruction and chaos caused by military conflicts are often the crucible of new terrorist groups, as the emergence of the Islamic State after the invasion of Iraq showed. In short, neither the underlying causes of the civil war nor the sources of terrorism would be eradicated if the Saudis were to take control of Yemen tomorrow.

Last, but most fundamentally, American support for the Saudi-led intervention in Yemen puts the United States on the wrong side of international law and moral duty. Saudi airstrikes, carried out with American targeting and refueling support, have killed as many as 5,000 civiliansdisplaced millions, put millions more at risk of starvation, and led to history’s worst cholera outbreak, which itself has already caused thousands of deaths. The coalition air campaign’s lack of targeting discrimination led the United Nations to send war crimes investigators to Yemen. As long as the United States continues to support Saudi Arabia and the UAE, the United States must bear some responsibility for any war crimes being committed by the coalition and it must share in the blame for the tragic consequences. 

It is past time for the United States to stop supporting the war in Yemen. The Trump administration should tell the Saudi-led coalition not to launch an assault on Hodaideh. Further, the United States should make it clear to the Saudis that the coalition needs a plan to wind down the war. The U.S. and coalition emphasis moving forward should be on supporting the United Nations-led negotiations to convince the Houthis to cede control of the port to the United Nations and from there to brokering an end to the conflict. Given the tragic consequences of the war to date, diplomacy is the best next step.

 

 

I’ve blogged several times now about Cato’s ongoing campaign to challenge the doctrine of qualified immunity. This judge-made doctrine – invented out of whole cloth, at odds with the text of Section 1983, and unsupported by the common-law history against which that statute was passed – shields public officials from liability for unlawful misconduct, unless the plaintiff can show that the misconduct violated “clearly established law.” This 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. Not only does this doctrine deny relief to victims whose rights have been violated, but at a structural level, it also erodes accountability for government agents (especially law enforcement).

I’m thrilled to report, however, that in the last 36 hours, we’ve had three promising developments in this front:

First, in a Section 1983 case in the Eastern District of New York, Judge Jack Weinstein denied qualified immunity to police officers alleged to have beaten up a man after he refused to allow them to enter his home without a warrant. His comprehensive opinion not only denied immunity in this case, but also discussed recent criticisms of the doctrine, both on legal and policy grounds, and suggested that the law “must return to a state where some effective remedy is available for serious infringement of constitutional rights.” Judge Weinstein thus joins other lower court judges, like Lynn Adelman of the Eastern District of Wisconsin and Jon O. Newman of the Second Circuit, who have criticized the Supreme Court’s qualified immunity jurisprudence. Lower court judges are, of course, obliged to follow Supreme Court precedent with direct application, but this is exactly the kind of criticism and commentary that can help explain to the Court why that precedent should be reconsidered.

Second, Joanna Schwartz, a law professor at UCLA, has just put up on SSRN a forthcoming article in the Notre Dame Law Review, titled The Case Against Qualified Immunity. Professor Schwartz previously published an influential article in the Yale Law Journal called How Qualified Immunity Fails, which empirically demonstrates how the doctrine of qualified immunity is failing to achieve its professed purposes. But her latest piece weaves together the legal, historical, and prudential arguments against the doctrine, and argues that the Supreme Court can and should reconsider it. We know that the Supreme Court pays attention to scholarship in this area, as both Justice Thomas and Justice Sotomayor have recently cited Will Baude’s article Is Qualified Immunity Unlawful?, so I have every expectation that Professor Schwartz’s comprehensive broadside will likewise be taken seriously by the courts. (Professor Schwartz is also blogging about her new article at the Volokh Conspiracy this week.)

Third, this morning the Supreme Court ordered a response to the cert petition in Allah v. Milling, which explicitly asks the Court to reconsider the doctrine of qualified immunity. This is the case I recently blogged about, and in which Cato filed an amicus brief, where a pretrial detainee was kept in extreme solitary confinement for nearly seven months, for no legitimate reason. Although every single judge in his case agreed that Mr. Allah’s constitutional rights were violated, a split panel of the Second Circuit granted qualified immunity to the prison officials, simply because there was no prior case holding that the “particular practice” used by this prison was unlawful. The case is an ideal vehicle for the Court to reconsider the doctrine of qualified immunity, because there are no disputed facts, and Mr. Allah has already won a judgment at trial, so the outcome turns solely on the legal question of whether the defendants should get immunity for their unlawful misconduct.

“Calling for a response” doesn’t necessarily mean that the Court is going to hear the case, but it’s a sign that they’re looking at it closely. The defendants in this case tried to waive their right to respond to the cert petition (a common practice, because respondents want to avoid signaling that the case is important), but the Court basically said “no, this is important enough that we want to hear your argument about why we shouldn’t take the case.” The defendants will therefore be required to put forward actual legal justifications for qualified immunity – so we’ll see what they come up with. The response is due July 11th, and Mr. Allah will then get the chance to file a reply, so I’ll be sure to cover those briefs when they come in.

Overall then, the fight continues, but we’ve got some promising signs of real progress.

The Departments of Justice and Homeland Security (DOJ/DHS) will be publishing a quarterly report on immigrant incarceration in federal prisons because of an Executive Order issued by President Trump last year.  The most recent report found that 20 percent of all inmates in federal prison are foreign-born and about 93 percent of them are likely illegal immigrants.  Since immigrants are only about 13.5 percent of the population and illegal immigrants are only about a quarter of all immigrants, many are misreading it and coming away with the impression that foreign-born people are more crime-prone than natives. 

That is simply not true.

This new DOJ/DHS report only includes those incarcerated in federal prisons, which is not a representative sample of all incarcerated persons in the United States.  Federal prisons include a higher percentage of foreign-born prisoners than state and local correctional facilities because violations of immigration and smuggling laws are federal offenses and violators of those laws are incarcerated in federal prisons.        

The report itself almost admits as much with this important disclaimer: 

This report does not include data on the alien populations in state prisons and local jails because state and local facilities do not routinely provide DHS or DOJ with comprehensive information about their inmates and detainees—which account for approximately 90 percent of the total U.S. incarcerated population.

There is much better information on immigrant incarcerations in other formats.  My co-author Michelangelo Landgrave and I recently released a Cato brief that estimates incarceration rates by immigration status in federal, state, and local correctional facilities.  We used a standard statistical technique known as the residual method to identify illegal immigrants in the incarcerated population in the American Community Survey in 2016.  We found that if illegal immigrants are 47 percent less likely to be incarcerated than native-born Americans and legal immigrants are 78 percent less likely to be incarcerated than natives.  The results reported in our recent brief are similar to our other research into immigrant incarceration and conviction rates as well as the peer-reviewed academic research.

The evidence that legal and illegal immigrants are less likely to be incarcerated, convicted, or even arrested for crimes is so overwhelming that even immigration restrictionists like Mark Krikorian at the Center for Immigration Studies admit that, “A lot of data does suggest immigrants are less likely to be involved in crime.”

Crime data in the United States is poor, especially how it relates to details about the immigration status of the offenders.  There is no good reason for a dearth of data on this topic.  Thus, improving the quality of crime and immigration data is important so that we can better understand the relationship between immigration and criminality.  Unfortunately, the new DOJ/DHS report does not help because the information it presents is of a non-representative subsample of the entire incarcerated population, the title of the report strongly suggests that it reports all incarcerations rather than just those in federal correctional facilities, and this information is already available.    

Moderate House Republicans may force a vote on immigration this month. The resolution that could do so would require House leadership to bring to the floor the Securing America’s Future (SAF) Act with the opportunity to provide four amendments “in the nature of a substitute,” meaning that the amendments would effectively be replacement bills. The resolution specifies that the four amendments will be offered by:

  1. SAF Act (H.R.4760) sponsor Rep. Bob Goodlatte (R-VA);
  2. Dream Act sponsor (H.R. 3440) Rep. Lucille Roybal-Allard (D-CA);
  3. House Speaker Paul Ryan (R-WI) who has not sponsored or cosponsored any legislation on the issue but could use the Recognizing America’s Children (RAC) Act (H.R. 1468) that has proven most popular among moderate Republicans; and
  4. USA Act (H.R. 4797) cosponsor Rep. Jeff Denham (R-CA).

The table below compares these proposals.

Table: Pathways to Status & Citizenship Under House Bills and DACA

Summary of Pathways

Securing America’s Future Act (H.R. 4760)

The SAF Act is the dominant choice among House Republicans on the right with 97 Republican cosponsors and no Democrats. It is also the stingiest of the pathways, legalizing the fewest people and providing the worst status at the highest cost. It maintains the same basic criteria as DACA, which was created six years ago by an act of prosecutorial discretion and never intended as a blueprint for permanent legislative reform. In addition, it requires that the immigrants already be enrolled in DACA, meaning that anyone who was too young to apply, couldn’t afford to apply, or was otherwise unable to apply or renew would be excluded. Like DACA, the bill caps the age of applicants at 37 and requires more than 11 years of residency, and the status in the bill is temporary (3 years) and must be renewed. It will not lead to permanent residency and citizenship, and it prohibits them from applying for permanent residency if they crossed the border illegally.

In addition, it adds many new obstacles to legal status, including a minimum income requirement and other bars to status. If they violate any conditions of status such as school enrollment or work, the bill provides that they can be criminally prosecuted. By requiring an in-person interview, the repayment of certain lawfully obtained tax credits, and the payment of a $1,000 fine to go to border security, the cost of obtaining and maintaining status in the bill would be much higher than DACA. Cost has already prevented many Dreamers from applying for DACA, and this bill would give them just one year to apply (the other bills don’t limit the time to apply). This pathway is likely to exclude many DACA recipients. Because the status is temporary, these costs would escalate over time.

It is important to note that the rest of the bill reduces the number of green cards—permanent legal immigration—by almost 40 percent, making it more difficult for Dreamers to receive legal permanent residency from the normal immigration channels, and it would spend more on border security in 5 years than in Border Patrol’s history.

The Dream Act (H.R. 3440)

The Dream Act is the dominant choice among Democrats with 197 Democrats and just six Republicans as cosponsors. This bill is the most expansive pathway, legalizing the most people and providing the best status at the lowest cost. It expands the criteria for DACA to anyone who arrived at age 18 or under (compared to 16) who arrived more than 4 years ago (rather than 11 years). It would remove DACA’s maximum age limit, allowing those older than 37 to apply. The Dream Act also allows immigrants in Temporary Protective Status to apply. It would waive state or local criminal offenses related to one’s immigration status (such as driving without a license). 

In addition, the Dream Act provides for a pathway to permanent residency and citizenship for Dreamers. In order to receive permanent residency, Dreamers would have to have worked for 3 years, attended college for 2 years, or worked for the military for 2 years. They would also have to pass the naturalization exam, showing that they have a knowledge of U.S. history and are literate in English. Dreamers would have eight years to complete these requirements. It contains no changes to legal immigration or border security.

Recognizing America’s Children Act (H.R. 1468)

The RAC Act is the dominant choice among moderate Republicans with 34 Republicans and one Democrat as cosponsors. RAC is more restrictive than the Dream Act, but much more open than the SAF Act. It would reduce DACA’s minimum presence requirement to 6 years and 6 months of residency (before January 1, 2012) from 11 years under DACA, and it opens enrollment up to Dreamers older than 37. It would also allow those too young to be in high school to apply, which is better than the Dream Act, and it would let some legal immigrant Dreamers in E-2 nonimmigrant status to apply—also an improvement on the Dream Act.

RAC would also provide a pathway to permanent residency and citizenship, but to a smaller segment of the Dreamer population than the Dream Act. It would require that Dreamers graduate college, work for 48 months, or work for the military for 3 years in a five-year period to extend their conditional status for another 5 years. They would then have 5 more years to complete the requirements for naturalization in order to receive permanent residency: demonstrate proficiency in English and knowledge of U.S. history.

The USA Act (H.R. 4797)

The USA Act is the only bipartisan legislation with 30 Republicans and 30 Democrats as cosponsors. The USA Act maintains similar criteria to the Dream Act, but would require 4 years and at least 6 months of residency (before December 31, 2013) compared to 4 years for the Dream Act. Like the Dream Act, it would allow anyone who arrived before age 18 to legalize (compared to 16 for the other bills). It would also allow some TPS recipients to benefit from its provisions.

Also like the Dream Act, the USA Act has a generous pathway to legal permanent residency and citizenship on the same terms: 2 years in college, 3 years working, or 2 years in the military. Like the SAF Act, it does attach some border security measures, but unlike that bill, the measures are modest and relatively inexpensive. It also makes no changes to the legal immigration system.

Potential Beneficiaries

The Migration Policy Institute (MPI) has produced  estimates of the potentially eligible populations for the permanent residency under the Dream Act (1.7 million), the RAC Act (1.4 million), and the American Hope Act (3.6 million). The American Hope Act would provide a pathway to citizenship for all noncriminal immigrants who entered as minors before 2017, regardless of education level, so this estimate effectively provides the total Dreamer population in the United States. MPI has not analyzed the SAF Act or the USA Act, but the USA Act is almost exactly the same as the Dream Act (just requiring a few more months of residency). The SAF Act would cover only those with current DACA permits, about 700,000. But it adds a minimum income requirement and a large number of other restrictions that would reduce this number considerably.

Thus, no plan currently under consideration for debate under the discharge petition would, even in theory, provide a pathway to citizenship for a majority of Dreamers. In practice, as I’ve noted before, some portion of the potentially eligible populations will not apply due to financial limitations or other reasons. 

The Federal Reserve plans to review its inflation growth rate target and potentially select a new monetary policy target. Many Fed officials are in favor of the idea, including Chair Powell. And the latest FOMC minutes show that the Fed’s policy setting committee has discussed new targets.

This is good news, because inflation rate targeting suffers from serious shortcomings. With a growth rate target, a central bank writes off past errors. Instead of deliberately correcting those errors, it “lets bygones be bygones,” allowing its mistakes to permanently alter the value of its policy target. For example, the Fed has persistently undershot its 2% inflation target since adopting it in January 2012. Because it does not plan to atone for this prolonged period of undershooting the price level will forever remain below its original target path, at least so far as deliberate Fed actions are concerned.

Successful price level targeting requires, on the other hand, that the central bank make up for past mistakes. Monetary policy is successful if the price level returns to the trend line it was growing along before the undershooting occurred. This makes the future course of the price level easier to predict. Inflation growth rate targeting cannot match this degree of predictability because its policy errors permanently change the long run price level, making the future path of the price level more like a random walk.

Improved price level predictability is one of the reasons that several Fed officials have discussed the benefits of adopting a price level target. For example, John Williams, who will take over as President of the New York Fed and become Vice Chair of the FOMC next Monday, argues that a price level target would offer an increased level of predictability over inflation rate targeting by better indicating where prices will be 5, 10, even 30 years into the future. Williams also believes, rightly, that this predictability would make future Fed policy more transparent to the public.

Richard Clarida, Vice Chair-elect at the Federal Reserve Board, has also suggested implementing a price level target. He made the suggestion back in 2014 because he was concerned that the Fed lacked the ability to credibly communicate the future path of policy absent a level target. At the time, the Fed was following the Evans Rule, a promise to leave interest rates at the zero lower bound until either inflation was above 2.5% or the unemployment rate was below 6.5%. Clarida saw that these thresholds were not enough to anchor the public’s expectations going forward. He feared that so long as the public’s expectations remained insufficiently anchored, the Fed would continue to struggle to meet its policy target.

In his most recent speech, the Atlanta Fed’s new President, Rafael Bostic, also endorsed a price level target as an alternative to the Fed’s current inflation rate target. Like Williams and Clarida, Bostic believes that price level targeting would have performed just as well as inflation rate targeting throughout the Great Moderation, and that it would have been superior to it since the Fed adopted an explicit inflation target in 2012.

While Fed officials are right to believe that price level targeting can improve upon inflation rate targeting, they fail to consider the shortcomings of either alternative in the presence of supply shocks. A price level target (to refer only to the better of these two options) may be optimal in the absence of such shocks, but in their presence it makes monetary policy procyclical.

Consider the case of a negative supply shock. A sudden fall in the global production of oil would likely push up domestic gas prices, which would in turn raise the price level. Such a rise would be a signal to the Fed to tighten monetary policy. Yet, tighter monetary policy would provide no relief to the economy in such a circumstance. Tighter policy would put further downward pressure on an economy whose consumers already feel constrained by higher prices because of the oil shock. Only if the rise in gas prices was the result of excess aggregate demand, something likely caused by over-easing by the Fed, would tighter monetary policy be appropriate.

Positive supply shocks can likewise have procyclical consequences. Were the United States to see a (welcome) improvement in productivity the inflation rate would tend to fall. After a short period with the lower inflation rate the price level would still be rising but be below its target path. Under a price level target, the Fed would respond with easier monetary policy in an effort to raise the inflation rate and bring the price level back up to its path. But prices falling because products are made more efficiently is a gain for consumers, who ought to enjoy lower prices on those products. Trying to raise the overall price level in an effort to “combat” these productivity gains should hardly be part of a central bank’s policy and could risk overheating the economy.

In short, the tendency of a price level targeting central bank to respond to positive supply shocks in the same way as it responds to negative demand shocks, and to respond to adverse supply shocks in the same way as it responds to positive demand shocks, is a recipe for trouble. To their credit, both Bostic and Williams discuss implementing a “flexible” price level target, one that could be adjusted to changing economic circumstances. Such flexibility would allow the Fed, at least in theory, to avoid procyclical monetary policy during supply shocks by allowing the price level to change.

But flexible price level targeting is really just a more ad-hoc, and therefore less robust, version of a nominal GDP level target. Nominal GDP is the overall size of the economy uncorrected for inflation, so nominal GDP growth is essentially the sum of the real growth rate and the inflation rate. Under a nominal GDP level target the central bank would be stabilizing overall spending, thereby automatically and systematically doing what flexible price level targeting is supposed to accomplish with less risk of implementing procyclical monetary policy.

Reconsider the previous example when the inflation rate tends to fall during periods of improved productivity, except now the central bank has a nominal GDP level target. With the inflation rate falling the price level would fall below its previous trend, but that decline would not elicit any procyclical response from the central bank.  Under a nominal GDP level target the central bank only responds velocity shocks.  The central bank would adjust the money supply to offset velocity shocks, in an effort to stabilize overall spending and keep nominal GDP growing on its trend.

Because it focuses the central bank’s response function on one variable, changes in velocity, a nominal GDP level target is the best target for monetary policy.  On the other hand, a price level target, and its advocates fail to fully account for this, obligates the central bank to react to changes in velocity and changes in aggregate supply.  A nominal GDP level target offers the same degree of predictability as a price level target, but has the additional advantage of being robust to supply shocks, precisely because it allows the price level to change. Under a nominal GDP level target, the chances of the Fed being procyclical during a downturn and amplifying the contraction would be greatly reduced.

Price level targeting proponents are right to believe that it is superior to inflation rate targeting because it corrects the bygones problem, improving the Fed’s performance by making the price level more predictable. However, a price level target is the ideal only in a world without supply shocks. With supply shocks, a central bank with a price level target would too often act in a procyclical manner. A “flexible” price level target is certainly a better option than a strict price level target. But it would only be the best available option if it were so “flexible” that it amounted to nothing other than a nominal GDP level target.

Fed officials are making the right decision to rethink the current inflation rate target. For that review to be successful, they should thoroughly consider, but ultimately reject a price level target. Instead, they should listen to a growing number of economists discussing the best option: a nominal GDP level target.

[Cross-posted from Alt-M.org]

In his prime tweeting time, bright and early last Monday, President Trump proclaimed:

Numerous legal scholars?” I harrumphed to myself: “come on.” Given that no president has ever been crazy enough to try it, the self-pardon is a novel question of constitutional law. When I first looked into the issue last year, I could find only two law review articles devoted to the subject, one pro, one con

But sure enough, in the week that followed, “numerous legal scholars” chimed in with impressive confidence. Jack Goldsmith has a useful roundup over at Lawfare, noting that while the “constitutional text does not speak overtly to the issue and there is no judicial precedent on point… that doesn’t stop people from voicing strong opinions” on each side of the issue.

Since Goldsmith’s post, two more right-leaning legal heavyweights have made the case for the self-pardoning power. In the Wall Street Journal, Richard Epstein insists that Article II, Section 2, allows the president to issue himself a get-out-of-jail-free card, but—not to worry—we’ll always have “the powerful check public opinion places on the president.” And in a Washington Post oped that ran Friday, former 10th Circuit judge Michael W. McConnell argues that “presidents do have the constitutional authority to pardon themselves.”

The main piece of evidence McConnell offers to support that proposition is a September 15, 1787 exchange between Edmund Randolph and James Wilson at the Constitutional Convention. As captured in Madison’s notes, it went like this:

Mr. RANDOLPH moved to “except cases of treason” [from the reach of the pardon power]. The prerogative of pardon in these cases was too great a trust. The President may himself be guilty. The Traytors may be his own instruments.

Col. MASON supported the motion.

Mr. Govr. MORRIS had rather there should be no pardon for treason, than let the power devolve on the Legislature.

Mr. WILSON. Pardon is necessary for cases of treason, and is best placed in the hands of the Executive. If he be himself a party to the guilt he can be impeached and prosecuted.

Q.E.D., apparently. “The framers of the Constitution thus specifically contemplated and debated the prospect that a president might be guilty of an offense and use the pardon power to clear himself,” McConnell writes. 

That is… not at all clear. The Randolph-Wilson exchange could just as easily be read to refer to the president’s power to pardon co-conspirators (the “Traytors” he’s in league with), as in a similar exchange, also featuring George Mason, at the Virginia Ratifying Convention the next summer. Renewing Randolph’s objection, Mason warned that the president “may frequently pardon crimes which were advised by himself…. If he has the power of granting pardons before indictment, or conviction, may he not stop inquiry and prevent detection?” (If he’d understood the September 15 conversation the way McConnell does, Mason might have strengthened the point by adding “he can even pardon himself!”) 

Professor McConnell insists that when Wilson said the president “can be impeached and prosecuted,” he meant “prosecuted before the Senate,” i.e., in an impeachment trial. Maybe! But what makes him so sure? It seems just as likely that Wilson is referring to criminal prosecution, per (what became) Article I, sec. 3, cl. 7, under which a civil officer convicted in an impeachment trial “shall nevertheless be liable and subject to Indictment, Trial, Judgement and Punishment, according to Law.” 

In the leading (possibly lone) law review article supporting the constitutionality of self-pardons, the authors have a different take on the Randolph-Wilson colloquy. In their reading of the passage: “while not addressing self-pardons directly, there is a clear indication that pardons were available to protect one’s cohorts in a treason attempt. Wilson further argued that if the President committed treason, he could be impeached and even prosecuted after impeachment” [emphasis added]. Brian Kalt, author of the best full-length case against the presidential self-pardon, points out that “When Randolph suggested the possibility of presidential treason, his solution was to eliminate the treason pardon, not to prohibit self-pardons, which would have been a more direct solution.” He further notes that “the self-pardon was nowhere mentioned in the debates.”

But let’s say McConnell is spot-on about what the Randolph-Wilson exchange signified. If so, we have, at most, one example of the Framers implicitly recognizing a presidential power to self-pardon, in a forum governed by secrecy, whose deliberations weren’t directly available to the ratifiers, who, in turn showed no evidence of sharing that understanding. On the other side, we have textual ambiguity, historical silence, and the fact that the underlying rationale for the pardon power—“humanity and good policy”—would seem to be weakest when the president’s letting himself off the hook. Is that one piece of evidence enough? Is that how originalism works? Libertarian legal scholar Randy Barnett has argued the Constitution should be interpreted in light of a “Presumption of Liberty.” But what interpretive principle is at work here? In disputed cases, a tie goes to the president? A Presumption of Executive Power? 

Neither Epstein nor McConnell address the best argument against the constitutionality of the self-pardon, one based on the text of Article II, Section 2 itself: The President shall have Power to grant Reprieves and Pardons for Offenses against the United States.” “Grant” implies a grantor and a grantee, “pardon,” a donor and a recipient. The power is “inherently bilateral,” the argument goes.

McConnell’s right, however, that some of the arguments on the other side aren’t very good. The Nixon-era Justice Department memorandum denying a self pardon power, he notes, rests on a single line of analysis, rejecting the power because it violates “the fundamental rule that no one may be a judge in his own case.”

But here’s an interesting wrinkle: that same memo suggests—far more credibly—that the president can accomplish the same end, via the 25th Amendment, provided the vice president is willing to go along.

This is a very different “25th Amendment Solution” than the one that Never Trumpers and #Resistance leaders favor. In their version, Mike Pence and a majority of the Cabinet or “such other body as Congress may by law provide” invoke Section 4 of the amendment to declare the president “unable to discharge the powers and duties of his office.”  

The DOJ memo focuses instead on Section 3, which allows the president to make the call himself, stepping aside temporarily while the vice president steps in. So far, Section 3 has served as the Constitution’s “Colonoscopy Clause,” invoked mainly when presidents are getting their polyps snipped. According to the memo, however,  

A different approach to the pardoning problem could be taken under Section 3 of the Twenty-Fifth Amendment. If the President declared that he was temporarily unable to perform the duties of his office, the Vice President would become Acting President and as such he could pardon the President. Thereafter the President could either resign or resume the duties of his office.

As “Acting President,” the veep accedes to all the powers of the office, including the power to pardon. If Trump could strike a deal with Mike Pence, then a de facto self-pardon, minus the legal uncertainty, could be accomplished in an afternoon. Nor would he run any great risk if Pence refused to hold up his end of the corrupt bargain. Either way, Trump could reassume his post as quickly as he could fire off a letter to Congress.

As with the #Resistance version, this twist on the 25th Amendment Solution is the stuff of political thrillers: it’s quite unlikely to happen in real life. Both versions require Pence’s cooperation to get off the ground. In the Section 4 scenario, he has to be willing to shiv his boss; the Section 3 scheme requires Pence to torch his own political career. Still, if you had to pick which “Solution” was more likely… take a look at one of those Cabinet meeting videos, then place your bet.

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.

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