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For well over a decade it’s been apparent that the distinctive arrangements by which asbestos plaintiff’s lawyers acquire control of the bankrupt remains of defendant corporations they’ve sued, and then exercise control over those firms’ claims, disbursements, and general management, is fraught with self-dealing and sometimes fraud, ranging from the charging of unnaturally high fees to the concealment of double- and triple-dipping by claimants. Business interests have pursued a campaign in the states and Congress to require more transparency and better judicial oversight of asbestos bankruptcy trusts. Now they may have a powerful ally indeed in the federal government, which has weighed in with an early statement of interest in one such bankruptcy to insist on better controls against fraud and abuse. Its standing for such an intervention arises in part from its role as Medicare and Medicaid payor (entitled by law to recoup some health-related outlays) rather than merely from any interest it might have in heading off fraud generally. Daniel Fisher at Forbes:

In the Trump administration, at least, the government will no longer look the other way as asbestos lawyers negotiate lenient terms that make it easy for their current clients to get money at the expense of future claimants and federal entitlement programs….

The government’s unusually blunt statement of interest in the Kaiser Gypsum bankruptcy, long before any plan of reorganization has been approved, warns lawyers against including terms that make it hard to ferret out fraud and abuse, including confidentiality requirements that make it impossible to determine how much claimants have been paid and the basis for their claims….

The Justice Department also warned it will be looking for excessive fees and may not allow claimants to deduct those fees from reimbursement due the government for Medicare and Medicaid expenses.

[cross-posted, slightly adapted, from Overlawyered]

Cost estimates for new government programs usually vary depending on the source. For government paid leave, cost estimates depend on assumptions about benefit duration, wage replacement rate, eligibility requirements, and more.

A variety of real and hypothetical government paid leave programs are listed below, along with associated costs. 

Source Program specs Cost to average worker  Total annual cost Notes AEI-Brookings Cost Calculator Similar to the FAMILY Act:
12 weeks paid, 70% wage replacement, $1000 max weekly benefit, FMLA take-up assumptions 0.89% payroll tax = $450/annually for average annual wage of $50,620 $76 billion This seems like a middle-of-the-road estimate.
This estimate uses a benefit profile that closely resembles the FAMILY Act. American Action Forum FAMILY Act 2.1 percent payroll tax to cover the lower bound estimate = $1,063 annually for mean annual wage of $50,620
A 13.02 percent (997 bill/159 bill = 6.27 and 2.1%*6.27= 13.02%) payroll tax to cover the upper bound estimate = $6,590 annually for average annual wage of $50,620 $159 - $997.4 billion annually The lower bound estimate assumes that everyone that takes paid leave takes 12 weeks in a year. FMLA take-up rates are used.The upper bound number assumes that all workers take paid leave in a given year and is considered the “total cost exposure” of the policy. Institute for Women’s Policy Research FAMILY Act About $5/week for average wage worker in 2016 = $255/annually for average wage worker $28.3 billion annually   California – author’s calculation California policy:
6 weeks of family leave and 52 weeks of disability. 1.0 percent in California in 2018 (on wages up to the first $114,967 of earnings) = $506 annually for average worker with mean annual wage of $50,620 n/a This includes family and medical leave benefits, as well. New Jersey – author’s calculation New Jersey policy:
6 weeks of family leave and 26 weeks of disability. 0.28% combined employee payroll tax + 0.5% employer payroll tax (on up to $33,700 for 2018) = $263 annually for average worker n/a This includes family leave insurance and state disability insurance (temporary medical insurance), as well.
This calculation assumes full pass through of employer payroll taxes associated with state disability insurance. Note that New Jersey payroll taxes are reset annually, so numbers are subject to change. Rhode Island –author’s calculation Rhode Island policy:
4 weeks of family leave and 30 weeks of disability. 1.1 percent in Rhode Island in 2018 (on up to $69,300) = $557 annually for average worker with average annual wage of $50,620 n/a This includes both family and medical leave programs.

Adjusting the benefit profile of the program (for example, changing the length of benefit offering, wage replacement rate, or eligibility criteria), or changing take-up rate assumptions impacts these estimates.

For more information on the consequences of federal paid family leave, see the new Cato report Parental Leave: Is There a Case for Government Action?

Wisconsin’s Badger Institute has a new book—Federal Grant Standing—that examines the $750 billion system of federal grants to state and local governments.

The federal grant or aid system is costly and bureaucratic. It undermines political accountability and sows distrust in government. The Badger book is chock full of unique data and survey information illustrating the problems. It examines the practical failings of aid programs within Wisconsin, but the lessons are applicable to every state.

The book discusses how federal aid prompts state and local governments to make bad decisions. And it describes how aid induces cost inflation, reduces innovation, and wastes everyone’s time on paperwork.

Sadly, the governments of Wisconsin and other states have become administrative arms of the federal government. Wisconsin’s Department of Workforce Development has 1,603 employees and 73 percent of them are paid with federal funds. Wisconsin residents may think that their state government works for them, but bureaucrats and politicians in faraway Washington are pulling the strings.

Democracy, local control, community, diversity, self-determination, and transparency. Those are words that liberals like. Yet the giant federal aid-to-state system that liberals built during the 20th century has helped to destroy those values in American government.

I hope that policy wonks in other states pursue similar investigations of aid, and I hope that federal policymakers reconsider the system and start cutting.

You can read more on federal aid here and here.

Late last night, Canada, Mexico, and the United States agreed to a revision of the North American Free Trade Agreement (NAFTA). They are calling it the United States-Mexico-Canada Agreement (USMCA), which is a pointless exercise in rebranding, but not worth agonizing about. We suspect that many people will just keep calling it NAFTA.

If you are curious, the full text is here but it is a slog. We are slowly making our way through it, and ultimately will provide an assessment of whether this new deal is net liberalizing. If you are interested in some more technical details, check out the blog posts at the International Economic Law and Policy blog.

If you want to get a general sense of what’s in it, here’s a basic overview. Overall, the new agreement is kind of a mixed bag. There are some improvements, mainly the liberalization of a few Canadian agricultural sectors. However, the agreement is made worse in some ways by making it harder for autos to qualify for zero tariffs. The new agreement has also been modernized by including some recent Trans Pacific Partnership (TPP) innovations, which is good. But there are systemic provisions that are not very good. All in all, it is not a terrible deal, although U.S. government resources probably would have been better spent on liberalizing trade with countries with whom we did not already have a trade agreement. 

A common argument employed by those opposed to lesser-skilled immigrants is that they are simply out of place in America’s high-tech economy. We often hear that the only workers we need now are those with advanced degrees. Yet according to the Bureau of Labor Statistics, 115 million Americans—74 percent of the total—were employed in jobs that do not require a Bachelor’s degree in 2016. Moreover, nearly a quarter of all jobs were those without any education requirement.

Share of Employment by Education Requirement

The opponents of lesser-skilled immigrants could respond by claiming that while this is true at the moment, these jobs will quickly disappear in the future. But the Bureau of Labor Statistics disagrees on this point as well. In 2026, the BLS projects that 73 percent of all jobs—123 million—will still not require a Bachelor’s degree—an increase of 7.1 million over 2016. The number of jobs for those without any formal education will still be 24 percent of all jobs—39.6 million—an increase of 2.4 million.

Figure 2: Employment by Education Requirement

BLS projects that 62 percent of all job growth will come from jobs not requiring a college degree. Nearly half of all new jobs will require no postsecondary education at all, and 21 percent of all new jobs will not require any education at all. 

Figure 3: Employment Growth by Education Requirement

It simply isn’t true that the United States needs no lesser-skilled workers right now nor will it be true in the near future. Recent legal immigrants are already far more educated than the U.S. population, and they are as educated as their counterparts in Australia and Canada. But even if this were not the case, the data simply doesn’t support keeping less-educated immigrants out of the country based on the belief that our developed economy doesn’t need them. In any case, the market—not government bureaucrats—should determine which workers are needed.

The essence of the separation of powers is that Congress may not give another branch the power to do what it alone may do. In Animal Legal Defense Fund v. Department of Homeland Security, several California-based environmental groups are challenging a law allowing the department secretary to waive any and all laws to speed building of the southern border-wall. Denied in the lower courts, the groups filed a petition with the Supreme Court. Cato has filed an amicus brief supporting that petition and arguing that such unlimited discretion violates the separation of powers.

The Constitution vests “all legislative power” in Congress, while the executive branch enforces those laws (rather than making or un-making them). Courts from the early days of the republic have maintained this division by preventing the delegation of the legislative power to the executive. To enforce this non-delegation doctrine the Court established the “intelligible principle” test. For a law to pass, Congress must (1) designate an agent or actor, (2) clearly direct the purpose or goal of the law, and (3) set boundaries to the agent’s powers. But the modern Court has stopped applying this doctrine; the last time it struck down a law on non-delegation grounds was in 1935. Since then it has deferred to larger and larger grants of legislative power to executive agencies.

The weakness of the intelligible-principle test lies in the third prong of imposing boundaries for the delegated powers. There is no definite line for how much discretion or power is “too much.” Even James Madison acknowledged the line between permitted and prohibited sharing of power can get blurry. The Court has long recognized that the branches can coordinate for efficiency, but has declined to find any practical limit to the powers Congress can delegate. The result is that executive agencies are making increasingly complex and restrictive laws, completely insulated from and un-accountable to the people.
In our brief, we argue that the Court must re-establish the non-delegation doctrine, either by refining or reforming the intelligible-principle test. It must make it more than an unenforceable truism. The ability to suspend laws at the secretary’s discretion is tantamount to the ability to enforce or repeal laws at will: an essentially legislative power. Unlimited discretion prevents the Court from having any standard by which it can measure abuses of power. The Court need not adopt a stringent test that would require abolishing years of precedent and many bureaucratic agencies, but if the non-delegation doctrine means anything at all, it must at least mean that unlimited discretion to suspend laws is too much.

The New York Times recently reported on a breakthrough at the United States Army’s Combat Feeding Directorate, the group that develops and tests combat field rations or Meals, Ready to Eat (M.R.E.’s). After twenty years of testing, the Army has finally created an M.R.E. pizza that fulfills the stringent requirements to survive extreme weather, pests, and combat conditions with a shelf life of three years. Considering the challenges of meeting these standards, this review from an artisanal pizza chef is quite glowing: “You know, they’re not far off…. It’s familiar. It reminds me of the frozen pizzas I had as a kid.”

As the Times notes, the M.R.E. pizza exemplifies some of the ways that the end of the draft in 1973 has forced the military to find ways to attract and retain the talent required to sustain an all-volunteer force:

But the deployment of M.R.E. pizza is not just a victory for food technologists. It is an indication of how much the military has been forced to change its culture since the draft effectively ended in 1973.

To recruit and retain the volunteers it needs, the military has built up an elaborate social support structure for troops and their families. It now offers child care and family counseling, continuing education benefits, improved base housing, and fitness centers that can rival those in luxury condo complexes. The core mission still includes service under spartan conditions in dangerous lands, but there has been a growing focus on delivering small comforts when possible.

Walter Oi, an economist who passed away in 2013, was a key contributor to the shift away from the draft and towards an all-volunteer military. One of his positions during his impressive career (achieved despite the loss of his sight in 1956) was as a staff economist on President Richard Nixon’s Commission on the All-Volunteer Force, or the Gates Commission. As David R. Henderson recounted in his eulogy for Oi in the spring 2014 issue of Regulation, Oi recognized that the budgetary costs of the draft neglected the hidden costs imposed on draftees.

Based on his research, the Gates Commission’s 1970 report recommending the end of the draft found that eliminating conscription would increase the federal budget by much less than the military estimated. This finding and Oi’s analysis of the impacts of ending conscription were, in the view of the executive director of the Gates Commission, “a watershed in the cause of voluntarism” and helped convince draft supporters that an all-volunteer force was practical.

Even after the draft ended in 1973, Oi continued to fight against any calls to reinstate the draft. In particular, he published two articles in Regulation, in 2003 and 2007, that directly refuted claims that the all-volunteer military unfairly burdens low-income Americans. Oi used data to show that the claims were unfounded and argued that, with the end of the draft, “Military pay was raised to be competitive with wages in the civilian labor market. It was the right thing to do, to eliminate the hidden tax that had been placed on draftees. Members of the [all-volunteer force] enlist to serve their country, to get training and post-service education benefits, and engage in something that is worth their while.”

Walter Oi’s work acknowledged the hidden costs imposed on draftees and the inequality of conscription. American’s who since 1973 have enjoyed the freedom to choose their occupation and the soldiers who enjoy the benefits an all-volunteer force has conferred, including M.R.E. pizzas, owe thanks to his contributions.

Written with research assistance from David Kemp.

Prager University (PragerU), founded by radio talk-show host Dennis Prager and Allen Estrin, is a non-profit that makes short videos on political, economic, cultural, and philosophical topics from a conservative perspective.  Last month, PragerU released a video called “A Nation of Immigration” narrated by Michelle Malkin, an individual most famously known for her defense of the internment of Japanese Americans during World War II.  The video is poorly framed, rife with errors and half-truths, leaves out a lot of relevant information, and comes to an anti-legal immigration conclusion that is unsupported by the evidence presented in the rest of the video.  Below are quotes and claims from the video followed by my responses. 

The United States still maintains the most generous [immigration] policies in the world.  Generous to a fault … 

There are two things wrong with the statement.  The first is framing around the word “generous” and the second is the claim that the U.S. has the freest immigration policy in the world.  

Using the word “generous” implies that allowing legal immigration is an act of charity by Americans and that we incur a net-cost from such openness.  On the contrary, the economic evidence is clear that Americans benefit considerably from immigration via higher wages, lower government deficits, more innovation, their greater entrepreneurship, housing prices, and higher returns to capital.  

Most immigrants come here for economic reasons.  In what sense is it generous or charitable on the part of Americans to allow an immigrant to come here voluntarily and to work for an American employer?  Not only do both the employer and the immigrant gain; the consumers, investors, and economy do as well.    

Second, the United States does not allow more legal immigrants to enter annually in comparison to other countries.  When controlling for the population size of the destination country (excluding Turkey), the annual flow of immigrants to the United States is the 25th most open among the OECD countries in 2016 (Figure 1).  Unlike other countries in the list, the OECD records the number of non-permanent migrants who entered the United States in 2016.  Adding together the permanent immigrants and non-permanent migrants for the United States only and then comparing that new number to the permanent immigrant inflows in other OECD countries, which I am only doing to give Malkin the benefit of the doubt, turns the United States into the 20th most “generous” OECD country.  

Malkin probably meant that the United States lets in a greater absolute number of immigrants per year than any other country in the world – which is true.  But that’s not a meaningful statistic unless we control for the resident population of every country. Analyzing cross-country comparisons in Gross Domestic Product (GDP) makes this point well.  According to the World Bank, the 2017 GDP for the United States in current dollars is $19.391 trillion and China’s is $12.238 trillion. By that measure, the United States is only 58 percent richer than China.  However, that is deceptive because the population of China is about 4.3 times as great as the United States. Thus, the more meaningful GDP comparison between the two countries controls for population – a measure called GDP per capita. A cross-country measure of GDP per capita shows that Americans are individually 674 percent richer than individual Chinese. (There are other important variables for cross-country comparisons in GDP per capita, such a Purchasing Power Parity, but they aren’t relevant to the point here). In the same way that we must adjust for the population when comparing GDP between China and the United States, we must also control for population size when comparing the relative openness of immigration policies across the world.

Another relevant comparison to evaluate our country’s openness to immigration is to America’s past when the United States had a much more open immigration system. The number of immigrants who received green cards in 2016 was 1,183,505, below the 1,218,480 who arrived in 1914 when the United States was a much smaller country (I picked 1914 because that was the last year before World War I seriously limited European emigration). According to research by my colleague David Bier, the number of immigrants receiving green cards today is low compared to most of American history. The number of immigrants who received green cards in 2016 was equal to about one-third of one percent of the U.S. population – below the average annual rate of 0.45 percent from 1820 to today. In 19 years, mostly in the mid-late 19th and early 20th centuries, the annual number of green cards issued was equal to at least 1 percent of the U.S. population.  Through comparison to America’s past and controlling for the number of residents over time by the time dimension itself, the current number of immigrants receiving green cards is relatively small.    

Figure 1
Annual Permanent Immigrant Inflows as a Percent of the Destination Country’s Population, 2016


Sources: OECD and World Bank. 


… the overwhelming numbers [of immigrants] have stymied our ability to assimilate the huddled masses.

 There’s never been a greater quantity of high-quality quantitative research that shows that immigrants are assimilating and becoming Americans at a rapid clip.  The first piece of such research is the National Academy of Science’s (NAS) September 2015 book titled The Integration of Immigrants into American Society. This 520-page book is a thorough summation of the relevant academic literature on immigrant assimilation. The bottom line of the book: Assimilation is never perfect and always takes time, but it’s going very well in the United States. 

The second piece of research is a July 2015 book entitled Indicators of Immigrant Integration 2015 that analyses immigrant and second-generation integration using 27 measurable indicators across the OECD and EU. This report finds problems with immigrant assimilation in Europe, especially for those from outside of the European Union, but the findings for the United States are positive.  In comparison to Europe and the rest of the OECD, immigrants in the United States are assimilating very well. 

The third work by University of Washington economist Jacob Vigdor offers a historical perspective.  He compares modern immigrant civic and cultural assimilation to the level of immigrant assimilation in the early 20th century (an earlier draft of his book chapter is here while the published version is available in this collection).  For those of us who think early 20th century immigrants from Italy, Russia, Poland, Eastern Europe, and elsewhere assimilated successfully, Vigdor’s conclusion is reassuring: 

“While there are reasons to think of contemporary migration from Spanish-speaking nations as distinct from earlier waves of immigration, evidence does not support the notion that this wave of migration poses a true threat to the institutions that withstood those earlier waves.  Basic indicators of assimilation, from naturalization to English ability, are if anything stronger now than they were a century ago [emphasis added].”

50 million residents of America are foreign-born.  In fact, today the United States has more immigrants as a percentage of its total population than at any time since 1890. 

According to the 2016 American Community Survey (ACS), there were 43.7 million foreign-born residents of the United States in 2016 (Advanced Search, Table S0501, 1-year sample).  Since the publication of PragerU’s video, the government released the 2017 ACS which estimates that there were 44,525,855 immigrants living in the United States last year.  The immigration restrictionist Center for Immigration Studies reported the same numbers.  This means that the foreign-born resident population was 13.5 percent of the U.S. population in 2016, below the 14.8 percent record set in 1890.  Malkin was correct in highlighting 1890 because that is when the foreign-born percentage of the population peaked. However, the foreign-born percent was higher, relative to today, in 1900 and 1910 too.  Perplexingly, the source that Malkin provides states that there were over 43.2 million immigrants in 2015, not the 50 million that she claims. PragerU should correct this factual error. 

Oddly enough, Malkin never actually mentions the percentage of the population that is foreign-born. A new working paper by economists Alberto Alesina, Armando Miano, and Stefanie Stantcheva shows the results of surveys across six countries to see how natives view immigrants. They found that Americans, as well as natives from other countries, systematically overestimate the percentage of the population who are legal immigrants (they specifically asked about legal immigrants and made it clear that they were not asking about illegal immigrants). The average native-born American’s perceived share of legal immigrants was 36.1 percent of the population, almost 4 times the actual 10 percent figure (the ACS figure above includes illegal immigrants).  Importantly, people who are more likely to be opposed to liberal immigration policies think the percentages are even higher.  

One of the purposes of PragerU videos is to inform viewers about facts that are ignored by liberals.  The research by Alesina, Miano, and Stantcheva illustrates how many Americans are ill-informed regarding the percent of the population that is foreign-born.  This video was a wonderful opportunity to state the actual percentage of the population that is foreign-born, something that would have been a great service.  It’s a shame Malkin neglected to do so.     

Chain migration allows immigrants to sponsor not only their immediate family – parents, spouses, and children under age 21, but much of their extended family once they gain citizenship … Princeton University researchers, using the most recently available data, found that immigrants sponsored an average of 3.45 additional relatives each.  So, the one million immigrants granted permanent residence each year potentially adds, over time, another three and a half million.

There are five important points that Malkin neglects to mention that are critical to put this statement in context. 

First, the annual cap on the number of immigrants who are not the spouses, minor children, or parents of U.S. citizens is 226,000 per year.  This is hardly a flood but it is true that many of these immigrants eventually sponsor other family members who are either immediate relatives, siblings, and/or adult children. 

Second, the wait time to sponsor an immigrant through the family-based green card system is long and varies by the immigrant’s country of origin. The government issues a “priority date” for people who want to apply for green cards.  When that date comes up, then the applicants can apply. According to the U.S. Department of State, the government is accepting green card applications for certain family-based green cards (F-1 through F-4) for those who have a priority date before the dates below (Table 1). The F-2A visa is for the spouses and minor children of those who already have green cards and is effectively capped at 87,934 per year. Those who had a priority date for the F-2A before December 1, 2017, can now apply for a green card. This is unlike other family-based green card categories. The wait time is over 20 years for Mexicans and Filipinos on the F3 and F4 green cards and for Mexicans on the F1. These long waits mean that about 4 million people were waiting to apply for a family-based green card at the end of 2017. 

Table 1
Dates for Filing Family-Sponsored Visa Applications Based on Priority Dates 

Sponsored  Other Countries China India Mexico Philippines F1 08MAR12 08MAR12 08MAR12 01SEP98 15FEB08 F2A 01DEC17 01DEC17 01DEC17 01DEC17 01DEC17 F2B 22MAR14 22MAR14 22MAR14 08JUN97 15DEC07 F3 22SEP06 22SEP06 22SEP06 08OCT98 01AUG95 F4 01MAY05 01MAY05 01JAN05 01JUN98 01DEC95

 Source: U.S. Department of State.

Third, the long wait times in Table 1 mean that Americans can only sponsor some of their family members. The long waits discourage many from applying and some actually die while waiting. Malkin mentioned a Princeton study that found that the average immigrant who arrived from 1996-2000 sponsored 3.46 family members. The author of that study went on to say that that was largely driven by high skilled employment-based immigrants sponsoring their families because these high-skilled immigrants are more likely to be naturalized. It was not driven not by family-based immigrants who sponsored additional family members.  

Fourth, the legal immigration system is extremely complex and restrictive.  Family members of American citizens or immigrants are not just waved in.  Rutgers law professor Elizabeth Hull wrote, “With only a small degree of hyperbole, the immigration laws have been termed ‘second only to the Internal Revenue Code in complexity.’ A lawyer is often the only person who could thread the labyrinth.”  A judge wrote that “This case vividly illustrates the labyrinthine character of modern immigration law-a maze of hyper-technical statutes and regulations that engender waste, delay, and confusion for the Government and petitioners alike.”  

Figure 2 is a simplified legal map of the green card system.  People watching the PragerU video could get the impression that it is easy to immigrate to the United States but that is a myth rooted in mainstream American perceptions of our history, not an accurate recounting of current law and policy. 

Figure 2
Legal Immigration System


Source: Immigration Road.

Fifth, the United States has the seventh most open family-based immigration system when compared to OECD countries. According to my own estimates, New Zealand, Sweden, Ireland, Australia, Norway, and Canada all allowed more family-based immigrants in 2013 than the United States did, statistically discussed as a percentage of their respective populations. Those countries allowed in fewer types of family relations but, because they allowed in more legal immigrants overall, the relative percentage of family-based immigrants was also higher.  

Sixth, the legal family-based immigration system (also known as chain migration) was created by Congress in 1921 when they placed the first numerical caps on European immigrants that favored Northern and Western Europeans based largely on long-discredited eugenics theories.  When the immigration system was slightly liberalized after the Immigration and Naturalization Act of 1965 went into effect, immigration restrictionists were the ones who argued for expanding family-based immigration. Tom Gjelten provides substantial evidence that immigration restrictionists in the 1960s favored expanding chain migration because most immigrants at the time were Europeans. Thus, the restrictionists thought that a new immigration system based on family reunification would mostly allow European immigrants to sponsor their family members and basically recreate the caps that favored Northern and Western Europeans at the detriment of other populations. These immigration restrictionists seriously miscalculated. 

In addition, an estimated 100,000 refugees and asylum-seekers–people who claim to be fleeing political or personal strife abroad–enter the country annually.

Malkin is double-counting. Those 100,000 refugees and asylum-seekers that she mentions eventually get green cards, which she stated above amount to about 1 million a year. Thus, these 100,000 refugees and asylum-seekers are not “in addition” to the one million who earn permanent residency a year as they are eventually counted as permanent residents. Over the last several years, about half of the green cards issued were to those who came directly from abroad and the other half went to immigrants already here on another visa – a process termed “adjustment of status.”  

Furthermore, refugees and asylum-seekers have to do more than merely claim that they are “fleeing political or personal strife abroad,” they must show a well-founded fear of persecution in the future or that they have suffered from past persecution “on account of race, religion, nationality, membership in a particular social group, or political opinion.”  Previous administrations have considered things like abuse or persistent gang violence that their home-country governments are incapable or unwilling to control as factors that could help an applicant obtain asylum.  The refugee process occurs overseas and is arduous.  Essentially, the U.S. government selects the refugees after having been initially screened by the United Nations. The other category, asylum-seekers, apply at U.S. ports of entry or inside of the country for humanitarian protection and must make their case in front of an immigration judge.  Some asylum-seekers and refugees fraudulently claim that they have been persecuted but the system relies on more than just the statements of asylum-seekers. 

In that same time frame [2008-2017], nearly half a million more people came to America through the diversity visa lottery – a program designed to admit people from ‘underrepresented’ countries.  Diversity visa applicants don’t need a high school education, job skills – or pretty much anything.

An immigrant who applies for a Diversity visa must have a high school education, its equivalent, or two years of qualifying work experience as defined under provisions of U.S. law.  It is simply inaccurate to state that they “don’t need a high school education, job skills, – or pretty much anything.”  This is another factual error that PragerU should correct. 

The number of illegal aliens in the country is usually given as 11 million, but have you noticed that number never seems to change?  Common sense suggests it’s higher – much higher. 

A recent paper published in the journal PLoS ONE claims that the actual number of illegal immigrants in the United States is likely between 16.2 and 29.5 million.  Their finding is dubious for several reasons as explained by immigration researchers on both sides of this issue.  Millions of additional illegal immigrants would have lots of births that are not currently recorded, fill the public schools with additional children who are not currently there, and would show up in surveys of employment and the workforce.  Either these extra illegal immigrants have zero children and do not work, or they are simply not here.  

But, let’s assume for the moment that Malkin’s “common sense” theory turns out to be true and there really are millions more illegal immigrants than demographers estimate. That would mean that illegal immigrants are far less likely to commit crimes than natives, have an even smaller effect on the wages of Americans, and are assimilating at a rapid pace. I don’t believe that Malkin intends to make this point but, if she’s correct, then she’s helped prove that illegal immigrants are among the safest people in America and are assimilating rapidly.    

And though illegal aliens themselves don’t qualify for welfare, they receive free health care in our clinics and hospitals, and through their American-born children they can expect to receive all manner of benefits – cash aid, food stamps, and housing vouchers.  Their children are entitled to a free education in public schools.

Malkin is correct that some illegal immigrants and their children do receive some welfare benefits but much less so than natives. Still, welfare is a problem and I’ve co-authored several pieces on how to build a wall around the welfare state instead of around the country. If welfare is a real concern, it is a lot easier to reform welfare than it is to tinker with the U.S. population through immigration controls in an age of low-cost transportation. I like to quip that immigration restrictionists use the welfare system to argue against immigration while real free-marketeers use immigration to argue against welfare.    

Building a high-tech border barrier would certainly help stem this flow. Ending chain migration is another obvious remedy. 

Malkin’s statement here conflates illegal and legal immigration. A border wall could only potentially hinder the flow of illegal immigrants into the United States but “ending chain migration” would cut legal immigration. Although Malkin isn’t specific in her video, her suggestion could cut the number of green cards issued annually by 20 percent to 68 percent (and potentially more depending on how it is counted).  

Many conservatives rightly complain about pro-immigration advocates unfairly lumping in legal and illegal immigrants – so why is Malkin unfairly lumping policies to stop illegal immigration in with those to cut legal immigration without making an obvious distinction between the two?  Just to be clear, family-based immigrants who arrive through the chain migration system are legal immigrants.  

E-Verify, the national database that allows employers to check workers’ immigration status, is also essential.

E-Verify is not a database. It is an electronic eligibility for employment verification system run by the federal government that is supposed to check the identity information of new hires against government databases to deny employment to those legally ineligible to work. The intent of E-Verify is to exclude illegal immigrant workers from the workforce to dis-incentivize them from coming in the first place.  

Many immigration restrictionists sing E-Verify’s praises but they rarely address its deep and persistent problems. Even worse, they never acknowledge that E-Verify is ineffective. Barely more than half of the new hires in states where E-Verify is mandated are actually run through it, E-Verify erroneously approves about 54 percent of illegal workers for legal employment, E-Verify doesn’t affect the wages of illegal immigrants much, and there are a host of other problems. Additionally, Arizona’s mandate of E-Verify in 2008 may have increased crime there, and a nationwide mandate of E-Verify will likely increase identity theft. Even worse, E-Verify’s supporters have stoked high expectations for the program that will never be met. The best thing about E-Verify is that it does not work very well and can never work well as currently designed. The worst thing about E-Verify is how Congress will react if, after it mandates the program for all new hires, they find out that it does not work and then they create a more intrusive government identity system.  

But all solutions will ultimately fail unless we get control of the numbers and enforce our laws consistently. 

Malkin is arguing for enforcing immigration laws more consistently and changing those laws to cut legal immigration.  Her rhetorical conflation of these two points is misleading and does a disservice to her audience who would probably like to distinguish legal immigration from illegal immigration.  

Also, cutting the number of legal immigrants will make it harder to enforce immigration laws.  Immigrants overwhelmingly come to the United States for economic opportunity. If they can’t come legally, then some percentage of them will come illegally. Creating a legal way for them to come or, at a minimum, not cutting those few legal avenues that do exist is essential to consistently enforcing our laws.  

In the 1950s, the U.S. government decreased the number of illegal Mexican immigrants by about 90 percent by combining a massive expansion in guest worker visas through the Bracero program with more enforcement. At the time, a Border Patrol official warned that if the Bracero program was ever “repealed or a restriction placed on the number of braceros allowed to enter the United States, we can look forward to a large increase in the number of illegal alien entrants into the United States.” That is exactly what happened when Congress canceled the Bracero program in 1964.

It’s Sovereignty 101: This is our home and we have not only the right, but the responsibility, to determine who comes in, how many come in, and what qualities and qualifications they bring. 

There are few scholars who doubt that the U.S. government has the legitimate constitutional power to regulate immigration, but the specific immigration policy that Congress chooses has little to do with national sovereignty as foreign governments do not have a hand in it. 

The standard Weberian definition of a government is an institution that has a monopoly (or near monopoly) on the legitimate use of violence within a certain geographical area. The way it achieves this monopoly is by keeping out other competing sovereigns (a.k.a. governments, countries, nations, etc.) that seek to become that monopoly of legitimate coercion. The two main ways our government does that is by keeping the militaries of other sovereigns out of the United States and by stopping insurgents or potential insurgents from seizing power through violence and supplanting the U.S. government. 

U.S. immigration laws are not primarily designed or intended to keep out foreign armies, spies, or insurgents. The main effect of our immigration laws is to prevent willing foreign workers from selling their labor to willing American purchasers. Such economic controls do not aid in the maintenance of national sovereignty and relaxing or removing them would not infringe upon the government’s national sovereignty any more than a policy of unilateral free trade would. There are individual exceptions to this like an immigrant who is a terrorist or an agent of a foreign government, but those are rare exceptions even for illegal immigrants. 

Less-than-perfect enforcement of our immigration laws does not diminish national sovereignty because those coming are not agents of foreign governments or other groups trying to conquer the United States and diminish our government’s monopoly on the use of violence. It would be an odd standard to argue that any less-than-perfect enforcement of American laws diminishes sovereignty, even if those laws are largely intended to regulate Americans’ interaction with foreigners who are not a national security threat. Less-than-perfect enforcement is evidence that Congress is either uninterested and/or incapable of doing so better, not that national sovereignty is somehow infringed.  

It’s not hateful to protect our borders.  It’s not hateful to protect our citizens. 

This depends on how the government conducts border security relative to the seriousness of the threat. It’s easy to argue that the U.S. government’s policy of separating the young children of asylum seekers from their parents is an action far crueler than what action is required to deal with the manageable threats of crime and terrorism. Previous administrations have cruelly blocked immigrants on dubious grounds that one should call hateful. Proponents of those laws certainly thought they protected American citizens. Almost all of us would support very cruel policies to defend the United States from great and serious threats but having a cruel policy for no good reason isn’t reasonable. 

It’s not hateful to protect our values.

One of our core American values is an openness to immigration, as Malkin acknowledged at the beginning of this video.  Although our government has not always followed that principle well, it is part of our exceptional national character. Progressive and nationalist politicians violated those values when they slowly closed the border in the late 19th and early 20th centuries. Today, many self-described conservatives are the biggest proponents for rejecting Western Civilization’s ancient pro-immigration history, a history that is especially relevant in the United States.    

Lady Liberty may be shedding tears – not because we’ve stopped welcoming immigrants, but because our ill-conceived immigration policies are threatening the American Dream. 

This conclusion does not follow from the arguments in Malkin’s video. Americans are getting richer, achieving more, and leading the world in numerous endeavors while immigration is increasing. Although Malkin does not define what the “American Dream” is, it’s certainly not diminishing. A great measure of the vitality of the American Dream is the tens of millions of foreigners who want to immigrate here and become Americans. We should all be proud that immigrants from around the world want to come here and join our country. Our government should allow them to do so more easily and cheaply because it is in our best interests to and consistent with our values. 



Milton Friedman published Studies in the Quantity Theory of Money in 1956, a seminal anthology of papers from five economists, leading with “The Monetary Dynamics of Hyperinflation” –the recent PhD dissertation of Phillip Cagan (1927-2012), which became an instant classic.  So, Cagan was thought to be a “Monetarist” a dozen years before that phrase was even coined by my UCLA teacher, Karl Brunner.

Soon after August 15, 1971 when President Nixon opted to renege on the Bretton Woods pledge to convert foreign official dollar reserves into gold on demand (rather than simply devalue the dollar/gold ratio), we entered a long and painful period of extremely high worldwide inflation.

Even as measured by the gentler “core” CPI (less food and energy), U.S. inflation averaged 9% from 1974 through 1981, reaching 12.2% in 1980.   When President Reagan took office in January 1981, the Fed had pushed the fed funds rate above 19% – up from 9% six months earlier.

We can’t always fix such big problems by thinking small, so the prolonged stagflation of 1968 to 1982 led several economists to propose fundamental, even radical monetary reform, preferably on a global scale.  Such ambitious reform plans commonly involved making dollars convertible in tangible assets, such as gold or a group of commodities.

I was invited to testify before the 1982 Gold Commission, perhaps because of a decade of published and personal connections to Milton Friedman and Karl Brunner.  I had echoed conventional objections to a gold standard before, and was probably expected to do so again.  But that would have been too facile. I instead took the occasion to review periods of long and impressive prosperity when currencies were linked (or re-linked) to gold, invariably followed by instability and crises when they weren’t.

Other economists attempted to replicate some key advantages of being able to convert dollars to gold and vice-versa at a predictable guaranteed rate, yet do so without using gold. In 1983, Greenfield and Yeager proposed the “Black-Fama-Hall” system (melding similar analyses of Fischer Black, Gene Fama and Robert Hall) in which the unit of account would be defined by convertibility into a basket of commodities, rather than just gold and/or silver.

Chicago School monetarists were generally quite critical of any of these ideas, except, as we later learned, Phil Cagan.  

After Brunner moved to the University of Rochester and his star pupil Alan Meltzer to Carnegie-Melon, they held legendary Carnegie-Rochester conferences which I attended.   

After the conference on April 15-16, 1984 I kept the paper by Phillip Cagan of Columbia University, “The Report of the Gold Commission (1982)” later  reprinted in Carnegie-Rochester Conference Series on Public Policy 20 (1984) 247-268.  In it, Cagan flirted with hopeful thoughts about hypothetical hybrid standards, such as Black-Fama-Hall, but not before he said this about gold:

The appeal of the gold standard… is that it solves to problems.  First, if control over the quantity of transactions balances becomes more difficult and discretionary policy is unable to achieve reasonable stability of the price level, convertibility can provide the needed control of the relevant monetary quantities for stabilizing the price level.  Second, even if monetary policy continues to be capable of achieving stability of the price level, discretionary control may still fail to do so, as in the past, because of inadequate determination or inability to pursue polices that are successful (for political or other reasons). Convertibility provides a mechanism for making a commitment to price stability.

I see no escape from the conclusion, inherent in the position of the advocates of gold, that only a convertible monetary system is sufficiently free of discretion to guarantee that it will achieve price stability… If one is looking for some kind of long-last commitment of a constitutional nature, a convertible monetary system seems to be the only practical possibility.

According to the Economic Freedom of the World: 2018 Annual Report—co-published today in the United States by the Fraser Institute (Canada) and the Cato Institute—the United States has returned to the list of the top ten freest economies in the world after an absence of many years and a decline that began around the year 2000. The United States ranks 6th on the index.

“During the 2009–2016 term of President Obama, the US score initially continued to decline as it had under President Bush. From 2013 to 2016, however, the US rating increased from 7.74 to 8.03. This is still well below the high-water mark of 8.62 in 2000 at the end of the Clinton presidency,” note authors James Gwartney, Robert Lawson, Joshua Hall, and Ryan Murphy. In the aftermath of the financial crisis, the five broad areas of freedom that the report measures—size of government, legal system and property rights, monetary policy, trade openness, and regulation—saw falls in their U.S. scores that in recent years have begun to recover.

This year’s report ranks 162 countries and covers data through 2016, the most current year for which internationally comparable data is available. The index continues to find a strong relationship between economic freedom and a host of indicators of human well-being, including prosperity. The top ten countries in order are: Hong Kong, Singapore, New Zealand, Switzerland, Ireland, United States, Georgia, Mauritius, United Kingdom, and, tied at 10th place, Australia and Canada.

As a group, high income industrial countries experienced declines in their level of economic freedom that began last decade. The graph below from the report shows that those levels have improved somewhat in recent years. It also shows that the gap in economic freedom between rich and poor countries has been closing notably since 1980, with most of that gain coming from increases in developing countries’ economic freedom even as developed countries increased their freedom during the same time.

Difference between the Average EFW Summary Ratings

Find out where other countries rank and the relationship between economic freedom and longevity, gender equality, happiness, income and more here.

A recent paper published in the journal PLoS ONE claims that the number of illegal immigrants currently residing in the United States is at least 50 percent greater than previously thought and likely to be twice as high.  Researchers Mohammad M. Fazel-Zarandi, Jonathan S. Feinstein, and Edward H. Kaplan write that:

Our conservative estimate is 16.7 million for 2016, nearly fifty percent higher than the most prominent current estimate of 11.3 million, which is based on survey data and thus different sources and methods. The mean estimate based on our simulation analysis is 22.1 million, essentially double the current widely accepted estimate.

That PLos ONE paper levels a serious charge as virtually all demographers and researchers in think-tanks on both sides of the immigration issue and the government think that the real number of illegal immigrants lies somewhere between 11 and 12 million. 

Understandably, much of the media has run with this headline finding but have neglected to cite the substantive and convincing criticism published in PLoS One in the same issue.  There are three major criticisms of the paper by Fazel-Zarandi, Feinstein, and Kaplan.  The first is that their model is highly sensitive to assumptions about return migration in the 1990s.  Merely replacing the authors’ assumptions with those based on Mexican return-migrant survey data brings their estimates down to the commonly accepted level.  The second is that it is very difficult for millions of additional people to hide in the United States without leaving a demographic or statistical trail.  Their children should show up in birth and school records, their deaths should show up in death records, and more of them should be counted in the American Community Survey or U.S. Census.  The third is that they should show up in economic surveys of employment, but they do not.

Researchers, pundits, policy-makers, and members of the media should not support the PLoS ONE findings based on the quality of the criticisms.  Although my doubts line up well with those of the critics cited above, there are some interesting implications if (a very big nearly-impossible if) the results of the PLoS ONE paper turn out to accurately estimate a greater number of illegal immigrants.  

The first is that the illegal immigrant crime rate would be much lower than we currently estimate.  We calculate crime rates by dividing the number of convictions or incarcerations by the entire subpopulation.  We then multiply the result by 100,000 to estimate the crime rate per 100,000 people.  This means that a greater population of illegal immigrants would have a lower crime rate, all else being equal.  The authors of the PLoS ONE study admit this.  Since we know how many crimes were committed, a higher illegal immigrant population only increases the denominator which lowers their crime rate.  Within a 95 percent confidence interval, the study’s most conservative finding is that there are 16.2 million illegal immigrants, the mean finding is that there are 22.1 million, and the most extreme is that there are 29.5 million illegal immigrants. 

Distributing those additional illegal immigrants across the U.S. states in proportion to where they currently live substantially lowers the illegal immigrant conviction rate for homicide in Texas.  In 2016, the illegal immigrant homicide conviction rate in Texas was 1.8 per 100,000 relative to 3.2 per 100,000 for natives and 0.9 per 100,000 for legal immigrants.  If there were instead 16.2 million illegal immigrants nationwide distributed in proportion to their current population, the illegal immigrant homicide conviction rate would drop to 1.2 per 100,000.  For the mean estimate of 22.1 million illegal immigrants nationwide, their homicide conviction rate would be 0.9 per 100,000, equal to that of legal immigrants.  In the most extreme case of 29.5 million illegal immigrants, the illegal immigrant homicide conviction rate would be 0.7 per 100,000 – the lowest of all groups that we studied.

The second is that the illegal immigrant impact on the labor market would be much smaller than researchers currently estimate.  This would mean that the negative elasticities reported by Borjas and others would be less negative, and the positive ones reported by Peri and others would be less positive.  There would be even less reason to debate the impact of immigrants on the wages of native-born Americans as it would be even smaller.

The third is that the positive assimilation trends observed amongst today’s immigrants, even in relation to those in the past, are occurring when the foreign-born population has been far higher than previously estimated – which would silence a lot of worriers or at least force them to move the goalposts.   

There are undoubtedly other policy debates that would be affected by the revelation that the number of illegal immigrants is far greater than it is.  The PLoS ONE paper is an interesting but fatally flawed piece of research so we do not have to consider every policy area that would be affected by such a titanic shift in our assumptions.  Rather than supporting restrictionist calls for additional immigration enforcement measures, a larger than expected illegal immigration population would support many of the claims made by the proponents of immigration liberalization.

The Trump administration has finally published its long awaited proposed regulation that expands a current rule denying applications to immigrants it deems “public charges”—that is, people who are likely to rely on the government for their support in the United States. As the Department of Homeland Security (DHS) explains in its proposed new rule.

The primary benefit of the proposed rule would be to help ensure that aliens who apply for admission to the United States, seek extension of stay or change of status, or apply for adjustment of status are self-sufficient, i.e. do not depend on public resources to meet their needs, but rather rely on their own capabilities and the resources of their family, sponsor, and private organizations.

My colleagues at the Cato Institute have repeatedly urged proposals that would lead to this same result. Indeed, we believe that this goal should apply to all people regardless of immigration status. For decades, we have proposed to build a wall around the welfare state, not around the country. However, while this version of the rule significantly improves upon a draft version leaked to the public earlier this year – which I commented on here – it unfortunately still retains many of the same problems as the first version. These defects will seriously undermine any fiscal benefits that the rule could provide.


As I’ve explained before, since 1891, federal immigration law has denied visas or status to foreigners deemed “likely to become a public charge” in the United States. The likely public charge law does not directly prevent immigrants from legally receiving welfare. Rather, it prevents them from receiving legal status in the United States if a government bureaucrat predicts that they could end up at some point in the future depending on welfare that the law allows them to receive. This draft rule would alter the procedures governing how DHS bureaucrats make these likely public charge predictions. It would apply to anyone in the United States applying to adjust or extend their status in the country or those seeking to enter the country for the first time.

DHS’s current guidance from 1999 defines public charge to mean “primarily dependent” on welfare, as demonstrated by the receipt of certain cash welfare programs. This new rule would redefine the term to mean receipt of any government assistance in any amount greater than 15 percent of the poverty line over the course of any year of their lives (or the use of certain programs for more than 1 year). To predict the likelihood of future use, the rule requires adjudicators to consider a list of seven factors and at least 19 pieces of evidence.

Problems with the Rule

First, the most important fact, which is often obfuscated in DHS’s explanation of the rule, is that the rule does not render any immigrant or group of immigrants ineligible for any public benefits. Instead, the rule will predict whether an immigrant could—in the future—use public benefits that they are legally entitled to. Not a single person will lose their eligibility for benefits under the rule. Instead, immigrants will lose their eligibility for status in the United States. In other words, rather than building a wall around welfare, the rule adopts the opposite approach: it uses the welfare state as an excuse to further wall off the country.

Second, DHS largely ignores the degree to which immigrants can support themselves. The historic understanding of public charge has always had two aspects: use of benefits and inability to support oneself apart from those benefits. The rule defines “public charge” to mean anyone who uses more than 15 percent of the poverty line in public benefits—$2.50 per person daily for a family of four. This absolute standard overlooks the extent to which the person is supporting themselves. For example, a family of four making 175 percent of the poverty line, or $43,925 annually in private income, but which received $2.50 per day per person in government aid would be receiving just 8.6 percent of their income from the government, meaning that they are 91.4 percent self-sufficient. Yet the rule would still consider a member of this family a “public charge” and ban them from the United States.

While the rule states that having an income 250 percent of the poverty line or greater will be a “heavily weighted” positive factor, even people above this line could be deemed public charges if they received $2.50 per day per person in a family of four. Thus, even immigrants who are 95 percent self-sufficient could still be considered public charges.

The current DHS standard for public charge of “primarily dependent” on government—i.e. 51 percent of a person’s income or greater—appropriately considers both aspects of public charge and protects taxpayers from losing billions in tax revenue from immigrants who are largely self-reliant.

Third, the rule fails to define what it means by “likely.” Given that the entire function of the rule is to predict the probability of future benefits use, DHS bureaucrats will have to define the threshold likelihood on a case-by-case basis, creating uncertainty for applicants and leading to denials for immigrants who should be approved. This imprecision is strange in light of the great precision with which DHS attempts to measure household income and benefits amounts. In normal parlance, “likely” implies a level of certainty greater than a coin flip. For CIA analysts, the accepted meaning of “likely” is greater than a 70 percent probability. Yet DHS’s commentary on public benefits use by noncitizens implies that predicted use rates as low as 20 percent might trigger a public charge determination.

Fourth, the rule’s complex weighting system for determining the likelihood of future use is entirely arbitrary. DHS could use data on benefits use from either Census Bureau surveys or administrative data to create a precise model for predicting an applicant’s probability of future benefits use. Instead, the rule will explicitly states that the weights will not be consistent across all applicants. Rather they would “depend on the particular facts and circumstances of each case.” This is a “points-based system” where the bureaucrats get to make up the point values as they go. This will inevitably result in wildly divergent outcomes and numerous denials for people who are not likely to become public charges. It is impossible to overstate the importance of this problem. Under this rule, no immigrant will know before they apply whether they qualify. It will sow chaos into the legal immigration system.

Fifth, DHS has still failed to estimate the most important costs of the rule—the number of immigrants who will be denied status in the United States and how much tax revenue the U.S. government will lose by reducing the number of taxpayers. This is despite the fact that the rule does estimate the number of immigrants who will supposedly cease using welfare benefits, even though the eligibility requirements for using benefits don’t change. DHS assumes that the rule will intimidate otherwise eligible aliens into not using benefits. But it makes no similar assumption about immigrants choosing not to immigrate to the United States or attempting to obtain legal status. DHS simply “acknowledges” that many aliens will be denied based on public charge determinations (p. 353), but states that it cannot estimate how many. This makes sense because its arbitrary criteria make it impossible to use the Census or administrative data to determine how many immigrants will be denied. Yet its failure to estimate these costs and its inability to do so reinforce different major problems with the rule.

In addition, DHS’s refusal to consider the net fiscal effects of the rule leads it to adopt fundamentally unsound conclusions. For example, it concludes that child migrants are more likely to use benefits while they are children, so the rule should discriminate against child immigrants. For DHS, being under the age of 18 is a “negative factor,” but according to the National Academy of Sciences, child immigrants are the most fiscally positive of all immigrants to the United States. Indeed, they are fiscally positive on average at all education levels because they have their entire working careers in front of them.

Sixth, DHS’s estimates of the fiscal benefits of the rule are not reasonable. The biggest fiscal benefit comes from its conclusion that the rule will cause 324,438 people annually to forego public benefits for which they are eligible. It arrives at this conclusion based on research showing that, following the welfare reform legislation in 1996, many eligible immigrants refused to sign up for programs. Yet that law did restrict eligibility for benefits for some immigrants, leading to the confusion. This rule doesn’t restrict eligibility at all for anyone. They are not comparable cases.

Moreover, the 324,438 people DHS predicts will not use benefits under its rule are about as numerous as the entire population of immigrants who would be subject to a public charge determination under the rule. Certainly, some of the immigrants subject to the rule might be using certain benefits now and stop, but only a small fraction of the total. The vast majority of people adjusting status in the United States are people in nonimmigrant (i.e. temporary) statuses that preclude them from eligibility for almost all federal means-tested benefits programs, so the benefits of them stopping will be very small. Yet DHS assumes that the rule will saves billions of dollars from less welfare use.


DHS needs to revisit its rule. Hopefully, the comments that it receives prior to its publication will cause it to reconsider this misguided approach to reforming the legal immigration system. Ultimately, the rule will wreak havoc on the system, deny many more contributors than welfare abusers, and harm the fiscal security of the United States. America needs immigrants, and the National Academy of Sciences recently produced a number of estimates of the fiscal effects of immigration. The average of those estimates indicate that a recent immigrant to the United States will contribute to all levels of government, in net present value terms, $150,000 more in taxes than they receive in benefits over their lifetime. DHS needs to narrow its rule significantly before it will pass a basic cost-benefit analysis.

As North Carolina grapples with the aftermath of Hurricane Florence, transportation officials in the state are attempting to secure the use of a U.S. government-owned vessel, the Cape Ray, to transport supplies to the port of Wilmington. With the city temporarily transformed into an island by recent flooding, the roll-on, roll-off ship—or “ro-ro” in maritime parlance—will enable trucks filled with needed goods to drive aboard.

It’s a good thing the ship is government-owned—under private ownership the Cape Ray’s provision of relief supplies would be illegal. This absurd situation is due to a nearly 100-year-old law called the Jones Act. Passed in 1920, the law mandates that ships transporting goods between two points in the United States be U.S.-owned, crewed, flagged and built. The Cape Ray, however, was built in Japan.

Even if officials sought the private sector’s help and a Jones Act-compliant ro-ro ship to transport the trucks, none are available. According to data from the U.S. Maritime Administration (MARAD) there are only seven ro-ro ships in the entire Jones Act fleet. The closest one to North Carolina, the Delta Mariner, isn’t even an ocean-going vessel but rather operates on the Tennessee River. The other six vessels ply routes between the West Coast and Alaska or Hawaii.

The picture is little improved if Jones Act containerships and general cargo ships are also included, with a total of six such vessels currently on the East or Gulf Coasts (MARAD shows five but does not include the recently commissioned El Coquí). The closest one to the North Carolina flood victims is a 47-year-old general cargo ship, the Coastal Venture, which is currently moored near Charleston.

One reason behind the dearth of ships is the fact that U.S.-built vessels cost up to eight times as much as those built overseas. Such exorbitant prices mean that fewer are purchased, with fewer available for both general commerce and emergency situations. 

In contrast, there is little difficulty locating foreign-flagged ro-ro vessels in the mid-Atlantic region. The Marshall Islands-flagged Morning Pride, for example, is making its way up the East Coast toward Philadelphia, while the Norwegian-flagged Höegh Asia is bound for Baltimore. A combination cargo/ro-ro vessel, the Saudi-flagged Bahri Tabuk, is currently off the coast of North Carolina.

But because of the Jones Act, none of these ships are eligible to take on relief supplies at a U.S. port and speed them to Wilmington.

The Jones Act’s stated purpose is to ensure that the United States “shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency.” But when faced with a genuine emergency, such as Hurricane Maria in 2017 or Hurricane Florence today, the Jones Act fleet is often found wanting.

By its own terms, the law is a failure that actually impedes the realization of its goals. It’s time for the Jones Act to go. 

The Washington Post slammed Ben Carson’s Department of Housing and Urban Development today. The paper found that “loyalty eclipses expertise” in the upper ranks of the agency given that 24 of HUD’s 70 political appointees have little housing experience. Most of the 24 helped on either Trump’s or Carson’s presidential campaigns.

A few thoughts.

Washington is a revolving door of analysts and operatives moving back and forth between trade associations and businesses (when their team is out) and executive branch agencies (when their team is in). Arguably, Carson’s policy of bringing non-housing outsiders into HUD is consistent with Trump’s “drain the swamp” promise. After all, when industry insiders are appointed to federal jobs, their incentive is to steer subsidies and bend regulations toward their industry friends on the outside.

The Post argues that Obama’s HUD appointees were more expert than Trump’s. Maybe so, but as small government supporters in Washington know, a great policy asymmetry is that most of the experts on government welfare programs are the liberals and lobbyists who favor the expansive status quo. That is one reason why Washington is a self-sustaining and self-protecting ecosystem so difficult to cut.

All that said, in 2015 I also critiqued federal political appointees as amateurs who have a problematic incentive structure:

The federal executive branch is headed by an elected president who appoints about 3,000 people to top positions across the bureaucracy. Political leadership of federal agencies has some benefits, but it also causes failures. New administrations come into office eager to launch new initiatives, but they are less interested in managing what is already there. Political appointees think that they know all the answers, so they do not bother learning the lessons from past efforts, and they repeat mistakes. As each administration yanks agencies in new directions, past investments are thrown down the drain. The average tenure of federal political appointees is short—just two and half years—and so appointees tend to push superficially appealing initiatives that look good on their resumes, but they shy away from tackling longer-term, structural reforms. 

Another problem with appointees is that many of them are political partisans who lack management or technical experience. One of the reasons for the failed response to Hurricane Katrina in 2005 was that many executives in the Department of Homeland Security were inexperienced party loyalists. This lesson from Katrina has not been learned. Today, for example, many U.S. ambassadors are political donors with no experience in the countries they are posted. Another example is the current acting head of the 900-employee Federal Railroad Administration, who seems to have no background in railroads or transportation, or apparently any technical qualifications. The ticket to the top for this official appears to have been a decade of media relations jobs for members of Congress and the White House.

That is the executive branch. As for the legislative branch, inexperience is an even larger problem. Most members of Congress and their staffs have little knowledge of the complexities of the industries that they subsidize, penalize, and tax. The modern Congress is a bunch of lawyers squabbling over how to manipulate a $20 trillion economy that they do not understand.

The basic problem with the federal government is that it is too big. The problem with HUD is that officials in a faraway capital are trying to micromanage local communities, not that some HUD officials were former event managers and HVAC salesmen.

For more on executive branch failings, see this study.

For more on legislative branch failings, see this study.

For an overall analysis of federal failure, see this study.

Washington’s relations with Russia have been deteriorating for years, but new U.S. actions could make matters considerably worse.  One major source of irritation for the Kremlin has been NATO’s military exercises in countries on Russia’s border.  Those war games have proliferated since the onset of the Ukraine crisis in 2014, when the United States and European Union countries helped demonstrators oust Ukraine’s elected, pro-Russian president, Viktor Yanukovych, and Russia responded by annexing Crimea.

Russian anger also has been directed at “rotational” U.S. military deployments in NATO’s easternmost members.  Those supposedly temporary assignments of American units have become nearly continuous.  Now there are indications that the Trump administration may dispense entirely with the diplomatic fiction that sequential rotational deployments do not constitute a permanent U.S. military presence.

During a state visit to Washington in mid-September, Poland’s president, Andrzej Duda, promised to provide $2 billion toward construction costs if the United States built a military base in his country.  In a transparent appeal to the U.S. president’s notorious vanity, Duda even offered to name the base “Fort Trump.”  Poland “is willing to make a very major contribution to the United States to come in and have a presence in Poland,” Trump said in the Oval Office. “If they’re willing to do that, it’s something we will certainly talk about.”  He added that the United States would take Duda’s proposal “very seriously.”

American Conservative columnist Daniel Larison warned that putting a U.S. base in Poland “would further antagonize Russia, and it would create one more overseas military installation that the U.S. doesn’t need to have.  Trump is often accused of wanting to ‘retreat’ from the world, but his willingness to entertain this proposal shows that he doesn’t care about stationing U.S. forces abroad so long as someone else is footing most of the bill.”  The cost issue would be the least of the problems created by establishing a permanent U.S. military presence in a country bordering on Russia’s Kaliningrad enclave.  The rotational deployments are bad enough, but ostentatiously building a major base would escalate that provocation.

As I discuss in a recent article in the American Conservative, Washington’s growing military ties with Ukraine, a country that is an even more central security concern for Moscow, constitute an especially provocative move.  Secretary of Defense James Mattis has acknowledged that U.S. instructors are training Ukrainian military units at a base in western Ukraine.  Washington also approved two important arms sales to Kiev’s ground forces in just the past 9 months.  The more recent deal included the extremely lethal Javelin antitank missiles—the kind of weapons that Barack Obama’s administration had prudently declined to send to Kiev.

Potentially even more worrisome, former U.S. Ambassador to NATO Kurt Volker disclosed during a September first interview with the Guardian that Washington’s future military sales to Kiev would likely involve weapons for Ukraine’s air force and navy as well as the army. “The Javelins are mainly symbolic and it’s not clear if they would ever be used,” Aric Toler, a research scholar at the staunchly pro-NATO and anti-Russia Atlantic Council, asserted.  One could well dispute his sanguine conclusion, but even Toler conceded:  “Support for the Ukrainian navy and air defence would be a big deal.  That would be far more significant.”

Relations with Russia already are bad enough without pouring gasoline on the fire.  Unfortunately, the Trump administration is doing exactly that.  Perhaps the president is embracing these provocative initiatives to rebut hysterical critics who charge that he is “soft” on Russia—or even worse, is a Russian agent.  Whatever the motive, Washington’s recent actions are reckless and need to be abandoned.



Yesterday morning, in an op-ed we published in a Chinese news outlet, we made the case that assuaging the Trump administration will be difficult, and that instead of responding to Trump, China should just focus on being a good citizen of the world trading system. In this context, we said this:

China should unilaterally open up its markets to the greatest extent possible, as a sign of its good faith … includ[ing] tariff reductions.

Later in the day, we saw this Bloomberg story:

China is planning to cut average tariff rates on imports from the majority of its trading partners as soon as next month, two people familiar with the matter said, in a move that would lower costs for consumers as a trade war with the U.S. deepens.

The two people asked not to be named because the matter isn’t public yet. Premier Li Keqiang said Wednesday that China would reduce tariffs, though he didn’t elaborate. 

It’s not yet clear how the planned reduction would affect imports from the U.S., if at all, including Chinese retaliatory tariffs on American products amid the trade war. Those details may only emerge once the government outlines which products will enjoy lower tariffs. …

Now, we’re not claiming cause and effect here, but we’re thinking of making some more requests!

But seriously, we think it is pretty unlikely that our piece led to the Chinese government’s decision here. Nevertheless, this is a positive development. It is helpful that China is recognizing that liberalization is beneficial, and that as a major world economy, it needs to lead by example when it calls itself a defender of “the principles of free trade and the multilateral trading system.”  China has a long way to go to become a true market economy, but this is a good step.

“[T]here came another folly of government intervention in 1930 transcending all the rest in significance. In a world staggering under a load of international debt which could be carried only if countries under pressure could produce goods and export them to their creditors, we, the great creditor nation of the world, with tariffs already far too high, raised our tariffs again. The Hawley-Smoot Tariff Act of June 1930 was the crowning folly of the who period from 1920 to 1933….

Protectionism ran wild all over the world.  Markets were cut off.  Trade lines were narrowed.  Unemployment in the export industries all over the world grew with great rapidity, and the prices of export commodities, notably farm commodities in the United States, dropped with ominous rapidity….

The dangers of this measure were so well understood in financial circles that, up to the very last, the New York financial district retained hope the President Hoover would veto the tariff bill.  But late on Sunday, June 15, it was announced that he would sign the bill. This was headline news Monday morning. The stock market broke twelve points in the New York Time averages that day and the industrials broke nearly twenty points. The market, not the President, was right.”

– Dr. Benjamin M. Anderson [chief economist at Chase National Bank 1920-39], Economics and the Public Welfare: A Financial and Economic History of the United States, 1914-1946 (Indianapolis, Liberty Press, 1979, pp. 229-230)

A new Government Accountability Office report on the Low Income Housing Tax Credit echoes some of the concerns expressed in this 2017 Cato report. Vanessa Brown Calder and I suggested that the $9 billion program was vulnerable to abuse and that the costs of projects may be inflated.

Under the program, the IRS hands out tax credits to state agencies, which in turn give them to favored developers. We argued that the program had little oversight and that developers and contractors may inflate their claimed costs.

The GAO found that “no federal agency monitors or assesses LIHTC development costs, which are key to evaluating the efficiency and effectiveness of the tax credit program.” At the state and local levels, “few agencies have requirements to help guard against misrepresentation of contractor costs (a known fraud risk).” Because the IRS and many state agencies do not require detailed cost certifications, “the vulnerability of the LIHTC program to this fraud risk is heightened.”

The GAO compared the costs of 1,849 projects in 12 jurisdictions. They found a wide variation, as shown in the chart below.

Whether it is taxes, gasoline, or housing, everything seems to cost much more in California than Texas. The cost of low-income housing units are two and half times higher in the Golden State than in the Lone Star State. GAO found that both the hard costs of construction and the soft costs (such as architect fees) were much higher in the former than the latter.

The median per-unit cost of the new construction LIHTC projects was $218,000, of which the land cost was just $9,400. I’m not an expert, but that seems high given that you can buy a really nice tiny house for $80,000 or so.

Vanessa and I call for repeal of the LIHTC program.

To tackle housing affordability, she has suggested a deregulatory approach, which was recently embraced by HUD secretary Ben Carson.

A new GAO study examines the Low-Income Housing Tax Credit, which is a complex government program aimed at increasing the supply of affordable housing.

How complex is it? Vanessa Brown Calder and I noted that one LIHTC guidebook is 1,400 pages long.  

The LIHTC is a classic government solution to a problem. It is complicated, raises costs, and is not very effective. Nonetheless, some people favor such approaches. Adam Smith called them “men of system.” 

An easier way to solve problems is to let markets work. This approach leans toward simplicity and low cost. Some efforts may not be effective at first, but through innovation and feedback entrepreneurs eventually nail it. Adam Smith called it the “obvious and simple system of natural liberty.”

Below, a diagram from the GAO study shows part of the LIHTC process. Little tax credit boxes float around and dollar signs flow to LIHTC investors, which are usually major banks. This is the hard way to increase affordable housing supply.

Below that, I’ve diagrammed the easy way, which is to deregulate, remove the subsidies, and let banks and developers compete in the marketplace.

Affordable Housing: The Hard Way


Affordable Housing: The Easy Way

            Beijing continues to intensify its diplomatic campaign to isolate Taiwan internationally, and as I describe in a recent article in China-U.S. Focus, that bullying strategy threatens to trigger dangerous tensions between China and the United States.  Chinese leaders were shocked and angered when Taiwanese voters endorsed Tsai Ing-wen and her pro-independence Democratic Progressive Party (DPP) in the 2016 elections.  The communist regime soon moved to adopt an aggressive strategy of diplomatic strangulation.  During her presidency, Beijing has induced five of the 22 countries (mostly small, poor nations in Africa and Latin America) that had still recognized Taipei when she took office to switch ties to Beijing.  The latest defector is El Salvador. 

            Although the Chinese strategy appears to be paying off in the narrow sense of achieving its primary objective, it may ultimately come at an unacceptably high price.  The campaign is producing the opposite reaction in Taiwan of what Beijing seeks.  Tsai and her government have adopted a stance of outright defiance, making it clear that Taipei will not be bullied into taking steps toward reunification with the People’s Republic of China (PRC). 

More ominously, American supporters of Taiwan are pushing back firmly, and they are moving to increase Washington’s support of the island’s de facto independence.  The State Department immediately issued a statement that Washington was “deeply disappointed” by El Salvador’s decision—even though the United States itself does not maintain formal diplomatic ties with Taiwan.  

 Taipei’s friends in Congress ratcheted-up their support for the beleaguered democratic island.  Senator Cory Gardner (R-CO), chairman of the Senate Foreign Relations Committee’s Asia subcommittee, indicated his intention to propose a measure pressuring countries to stick with Taipei.  Among other things, his legislation planned to authorize the State Department to downgrade relations or alter foreign assistance programs to discourage countries from making any decisions deemed adverse to Taiwan.  “The Taipei Act of 2018 would give greater tools and directions to the State Department in making sure we are as strong a voice as possible for Taiwan,” Gardner told Reuters.  A little more than a week later, he and a group of bipartisan co-sponsors, including Marco Rubio (R-FL) and Ed Markey (D-MA) carried through on that pledge and introduced the legislation.

Their initiative is just the latest indication that American backers of Taiwan are becoming more vocal and proactive in pushing U.S. measures to counter the PRC’s hardline policies.  A major step occurred in March 2018 when President Trump signed into law the Taiwan Travel Act, which encouraged “officials at all levels of the United States Government” to visit and meet with their Taiwan counterparts and to “allow high-level officials of Taiwan” to enter the United States and to meet with their U.S. counterparts.  That legislation, which passed both houses of Congress overwhelmingly, ended Washington’s practice adopted when the United States recognized the PRC in 1979 of authorizing meetings only with relatively low-level Taiwanese officials.  It was especially noticeable that the new law specifically promoted interaction by “cabinet-level national security officials.” 

In early July, the Pentagon sent two U.S. warships through the Taiwan Strait, the first such passage in more than a year, in a display of support for Taipei.  That move occurred on the heels of a State Department request that the Defense Department send a small contingent of Marines to guard the American Institute in Taiwan (Washington’s de facto embassy in Taipei).  The United States also invited two senior Taiwanese military officials to participate in a May ceremony at the U.S. Pacific Command. 

Any one of these episodes might not be all that significant, but taken together they confirm that Washington’s backing for Taiwan is escalating.  Beijing can blame itself for much of that development.  The PRC’s strategy of diplomatic strangulation is backfiring, and the surge of Chinese military exercises in the Taiwan Strait is making matters even worse.

Beijing would be wise to dial back its confrontational policies toward Taiwan.  However, Taiwan’s supporters in Congress, the media, and the Trump administration need to appreciate just how sensitive the Taiwan issue is to PRC leaders and the Chinese people.  Excessive, ostentatious U.S. diplomatic support for Taiwan could bring the PRC and the United States closer to a dangerous confrontation.  Both sides need to exercise much greater caution and restraint than they are showing now.