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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.

Background

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.

Conclusion

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.

 

 

 

In today’s New York Times, Brooklyn public defender Scott Hechinger makes a very strong case that criminal defendants in American courts face a two-tiered system of justice, and most defendants get the worse of it.

Mr. Trump assailed the practice of pretrial detention as “tough” when Paul Manafort had his bail revoked before his trial began. He then bemoaned the “very unfair” power that prosecutors wield to force people in the system “to break” in the wake of the Michael Cohen plea and the Manafort jury conviction and subsequent guilty plea. He lamented the devastating collateral consequences that arise from “a mere allegation” when Rob Porter was forced to resign after being accused of domestic violence; raged about the late-night, “no knock” raids of Mr. Cohen’s properties; and expressed outrage that the government, in its investigation of Carter Page, was able to overcome the protections of the Fourth Amendment to obtain a FISA warrant with “no hearings,” while also endorsing the idea, raised by the writer Andrew McCarthy, that they should be “looking at the judges who signed off on this stuff.”

[…]

I understand President Trump’s outrage. It is remarkable that people, presumed innocent, are locked up before being convicted of any crime. It is deeply unfair that mere accusations can lead to devastating, lifelong consequences. It is alarming that, in a system theoretically built around transparency and truth seeking, police and prosecutors have such outsize power to surveil, search, detain, bully, coerce and nearly destroy a person without producing evidence sufficient to secure a conviction. (emphasis in original.)

But it’s important to note how these defendants were actually treated as they work their way through the system, and how it differs from most everyone else.

Take Mr. Manafort’s experience with pretrial detention. Despite the seriousness of the allegations and his clear ability to flee, he was not in jail for a majority of his case pretrial. He and his attorneys were able to arrange an intricate bail package that was tailored to his financial circumstances, including $10 million bond and the surrender of his passport. This is how bail is supposed to work — not as punishment to lock someone up before a conviction, but as a way to guarantee that the accused will return to court while at liberty. Mr. Manafort was detained pretrial only after the presiding judge found evidence of witness tampering, following nearly two weeks of motion practice and then oral argument while Mr. Manafort continued to sleep in his own bed.

This kind of accommodation is unheard-of for the roughly quarter million people, my clients included, in jail for no reason other than their inability to pay bail. In the real world, despite the constitutional prohibition on excessive bail, decisions to detain people happen in a matter of seconds, with little to no consideration of an individual’s ability to pay. In just the past month alone, prosecutors requested and judges set bail totaling over $200,000 on clients of mine who, collectively, could not have afforded one one-thousandth of that.

Hechinger is also correct when he writes that the treatment of these high-profile defendants should not be resented: rather, it’s the double-standard for the privileged that should be eliminated. A meaningful presumption of innocence and the other rights afforded to Manafort et al. should be replicated and applied to the accused throughout the state and federal justice systems because they reflect constitutional protections intended to curb the coercive power of government.

The whole piece is worth reading in full here.

The federal government imposes a gasoline tax of 18.4 cents per gallon. Lobby groups are pressing for an increase and President Trump has suggested that he may support one. But a federal gas tax increase makes no sense.

State governments own America’s highways, and they are free to raise their own gas taxes whenever they want. Indeed, 19 states have raised their gas taxes just since 2015, showing that the states are entirely capable of raising funds for their own transportation needs. State gas taxes average 34 cents per gallon.

Also consider that gas taxes used to be a more pure user charge for highways, but these days gas tax money is diverted to inefficient nonhighway uses such as transit. Politicians say, “We need a gas tax increase to fix our crumbling highways,” and then they spend the money on other things. It is a bait-and-switch.

Federal fuel taxes and vehicle fees raise about $41 billion per year. About 20 percent of those funds (about $8 billion) are diverted to transit and other nonhighway uses.

With state fuel taxes the diversion is even larger, as shown in this Federal Highway Administration table. In 2016, state governments raised $44 billion from fuel taxes, and they diverted 24 percent—14 percent to transit and 10 percent to other activities. Texas, for example, diverts 25 percent of its fuel taxes to education spending.

The states also raised $38 billion from vehicle fees. They diverted 34 percent of those funds—13 percent to transit and 21 percent to other activities.

In total, states raised $82 billion from fuel taxes and vehicle fees. They spent $59 billion (72 percent) on highways and $23 billion (28 percent) on other activities. If the highways in your state have congestion and potholes, it may because your government is taking money raised from highway users and diverting it to other activities.  

The chart below shows the shares of state fuel taxes and vehicle fees diverted to nonhighway uses. South Carolina, for example, diverts 31 percent.

Last year, South Carolina’s governor Henry McMaster vetoed a gas tax increase. He objected to his state’s diversion: “Over one-fourth of your gas-tax dollars are not used for road repairs … They’re siphoned off for government agency overhead and programs that have nothing to do with roads.”

As a rough user charge, gas taxes are a good way to fund highways, and our highways do need more investment. But motorists should be skeptical of gas tax increases until policymakers stop diverting funds to inefficient transit systems with declining riderships.

Many transportation experts say that the rise of electric vehicles will be the end of the road for gas taxes, and they are eager to impose new vehicle miles traveled (VMT) charges to fund highways. However, governments are diverting more than $30 billion in fuel tax revenues and vehicle charges a year to nonhighway uses. If that diversion was ended, these revenues could continue to be America’s highway funding source for years to come.

 

More on highways and the gas tax:

https://www.downsizinggovernment.org/transportation/federal-highway-policies

https://www.downsizinggovernment.org/infrastructure-investment

https://www.downsizinggovernment.org/chamber-commerce-misguided-gas-tax

https://www.cato.org/blog/federal-gas-tax-increase-misguided

https://www.cato.org/blog/federal-gas-tax-lahood-makes-no-sense

Transit ridership has been declining now for four years, and the latest census data, released last week, reveal that the biggest declines are among the groups that you might least expect: young people and low-income people. These results come from the American Community Survey, a survey of more than 3 million households a year conducted by the Census Bureau. Here are some of the key findings revealed by the data.

Young People Are Deserting Transit

Those who subscribe to the popular belief that Millennials and other young people prefer to  transit over owning and driving a car were shocked last week when the Washington Post published an article indicating that “a Millennial exodus” was “behind [Washington] Metro’s diving ridership.” This was based on a study that found that, from 2016 to 2018, young people had reduced their use of transit for commuting by 20 percent, while older people had reduced it by smaller amounts or not at all. The study used cell phone records from one of the nation’s largest wireless carriers, probably Verizon or AT&T.

Young people seem to be deserting transit more than older commuters.

Although the census data only go as far as 2017, they seem to confirm this finding. As shown in the above chart, the largest declines in transit commuting, both nationally and in the Washington DC urban area, are among younger people. Commuting forms only a part of transit ridership, but to the extent that declining ridership is due to ride-hailing services such as Uber and Lyft, those services disproportionately used by people the age of 35. For more information about transit declines by age class, including links to data files for 2017 going back to 2005, see my longer post on the subject. In addition to national data, the files show how people in various age classes commuted to work in each state and each major county, city, and urban area.

2. Low-Income People Are Deserting Transit

Although transit subsidies are often justified by the need to provide mobility to low-income people, the reality is that transit commuting by people in the lowest income classes is shrinking while transit commuting is growing fastest among people in the highest income classes.

Transit commuting in the lowest income classes is shrinking faster than the total size of those classes while in the highest classes it is growing faster than the total size of those classes.

Transit commuting is increasingly skewed to people who earn more than $75,000 a year. Even though only 19 percent of American workers were in this income class in 2017, they made up 26 percent of transit commuters, an increase from just 14 percent in 2005. Both the average and the median income of transit commuters are higher than those of all workers. For more information on transit commuting and income, including links to data files from 2006 through 2017, see my more detailed post on the subject.

3. Vehicle Ownership Continues to Rise

While ride hailing is probably responsible for much of the decline in transit ridership among young people, increasing auto ownership is responsible for much of the decline among low-income people. Between 2014 and 2017, the share of households that lacked access to a motor vehicle declined from 9.1 to 8.6 percent. Moreover, the share of workers who live in households with no vehicles declined from 4.6 to 4.2 percent.

In 1960, more than 20 percent of American households had no motor vehicles while only a small percentage owned three or more, figures that have practically reversed themselves today.

While a few tenths of a percent may not sound like much, remember that in all but a handful of urban areas more than 90 percent of commuters get to work by car while less than 2 percent take transit. Thus, a small increase in auto ownership can lead to a large percentage decrease in transit usage.

Curiously, most American workers who live in households without cars don’t take transit to work. In fact, in most states and urban areas, more workers who live in households without cars nevertheless drive alone to work than take transit to work. How do they drive alone if they don’t have a car? Probably in employer-supplied vehicles. In any case, this is just one more indicator of transit’s declining relevance. For more information on increasing auto ownership, including data files, see my detailed post on the subject.

4. Transit Is Increasingly Irrelevant

Transit agencies and their supporters act as though transit is somehow vital to the national and local economies. That may still be true in New York City, but it is only marginally true in Boston, Chicago, Philadelphia, San Francisco, and Washington, and not at all true elsewhere. The decline in transit ridership among young people who were supposed to love transit the most, and among low-income people who were supposed to need transit the most just reinforces this declining relevance and argues against any further subsidies to this obsolete industry.

At his Washington Post blog, Cato alumnus Radley Balko has cultivated a running list of data-driven reports that show persistent, measurable, widespread, and common racial disparities in criminal justice enforcement. In police stops, sentencing, pretrial detention, the death penalty, and a host of other areas, enforcement disproportionately affects African Americans and Latinos. For those who study or work in criminal justice for a living, the racial disparities are glaring and the quantitative research supports our policy prescriptions. But most people aren’t criminal justice wonks, and what Radley has created is a great public education resource about what our system is doing all around the nation. 

The abundance of evidence Radley collected shows that our criminal justice system harasses and punishes racial minorities more harshly than whites. These findings are important because so many critics of justice reform and of activist groups like Black Lives Matter deny that many of these disparities exist. The denial of these problems—which have been well-known or, at least, strongly suspected in many American minority communities for all of living memory—precludes the identification of any potential remedies. This clearinghouse of peer-reviewed academic papers, government reports, and books that measure racial disparities marks a new starting point for individuals who want to understand our criminal justice system.

Read the whole thing here.

Thank you, Radley.

Child custody is among the most fraught topics the law confronts. It is the area in which personal relationships and raw emotions must be reconciled with legal rules and court judgements. Such is the case of “Ann,” an eight-year-old girl at the center of a case now before the Wisconsin Supreme Court. Ann has periodically spent time with her paternal grandmother, but due to family squabbles, Ann’s mother stopped bringing Ann to visit. The grandmother filed a lawsuit saying she was entitled to visitation rights, which a Wisconsin statute allows grandparents to ask for in circumstances where they have a preexisting relationship with the child such that the severing of that relationship would not be in the child’s best interest.

Complicating matters, the U.S. Supreme Court has held that these familial relationships have a constitutional dimension. In the 2000 case of Troxel v. Granville, the Court struct down a Washington State law that granted grandparents visitation rights when to do so would be in “the best interests of the child.” This standard was constitutionally infirm, the Court held, because parents have important rights that cannot by overcome by a bare showing that the child would be better off being raised by someone else.

As the late Justice Antonin Scalia pointed out, a great number of children should be taken from their homes if the question is whether someone else might do a better job raising them. Wisconsin’s statute is somewhat different than the Washington law, in that it requires a greater showing before invading the parent’s decision-making. The question for the Wisconsin Supreme Court is whether that’s different enough to shift the constitutional calculus.

Cato has filed an amicus brief, without taking a position as to which member of the family should prevail in this very personal dispute. Instead, we concern ourselves with the standards the court should apply. There’s a longstanding dispute about the source and extent of constitutional rights not explicitly set out in the constitution’s text (or even if they exist at all). The parental rights the U.S. Supreme Court previously recognized are of this type: there’s no specific clause that specifies that parents are entitled to direct the upbringing of their children, but the Court has (correctly) recognized such a right as an inherent feature of liberty.

Cato’s brief argues that this understanding should be expanded, to recognize that it is not only the parent’s liberty that matters here, but also that of the child. We draw on the original understanding of the Fourteenth Amendment, in particular the Privileges and Immunities Clause, which while having fallen into disuse was intended to be the guarantor of such rights. We urge the Wisconsin Supreme Court to address the full scope of citizen’s constitutional liberties in considering Ann’s fate.

The Wisconsin Supreme Court will be hearing Michels v. Lyons this fall.

The estimated number of above-average “excess deaths” in Puerto Rico attributed to Hurricane Maria (Sept 20, 2017) is a difficult figure to estimate objectively.  Puerto Rico’s official figure of 64 deaths by December 9, 2017 (which the President remembered) counted only those deaths directly attributed to the storm and confirmed by medical examiners.  Most of the direct deaths from Katrina were from drowning – which is much easier to attribute to the storm than many other causes of death. Studies of Puerto Rican deaths from Maria aspire to account for a wide range of indirect effects that are presumed (not proven) to be consequences of the storm such as suicides and heart attacks, infectious diseases, and damage to electricity and therefore to dialysis and respirator equipment.

Among at least eight major studies of direct and indirect effects on mortality attributed to Maria, two outliers stand out as being 3-5 times larger than the others, which all cluster around 1000. The first big number was from Harvard. On September 13, Time said, “Harvard’s report, which was based on systematic household surveys throughout Puerto Rico, reached an estimate of 4,645 storm-related deaths between September and December 2017, many as a result of ‘delayed or interrupted health care.’”  Nonsense. The Harvard study extrapolated from only 15 deaths reported in a survey of 3299 households to estimate that “between 793 and 8498 people died … up to the end of 2017.” By adding 793 and 8498 and dividing the result by 2, Time and others came up with a totally meaningless “average” which were widely reported with predictable sensationalism: “The hurricane that struck Puerto Rico in September was responsible for more deaths than the Sept. 11 attacks and Hurricane Katrina combined,” exclaimed The Daily Beast.” In reality, these “estimates of death from people who were interviewed” are little better than an opinion poll, and finding 15 deaths out of a sample of 3299 can’t plausibly be multiplied into 4645 for the whole island.

The latest sensational estimate of 2,975 excess deaths over six months is from an August 28 report from the Milken Institute School of Public Health at George Washington University  (GWU) commissioned by the Government of Puerto Rico. The study mentions two “scenarios” (census and displacement) yet only publicized the one with the biggest number: “Total excess mortality post-hurricane using the migration displacement scenario is estimated to be 2,975 (2,658-3,290) for the total study period of September 2017 through February 2018.” 

The 2,975 estimate only applies to the “displacement scenario.”  That is, the study “estimates cumulative excess net migration from Puerto Rico in the months from September 2017 through February 2018 and subtracts this from the census population estimates in these months.”  The population fell by about 8%, mainly due to migration rather than death, so the fact that there were more deaths than average after the hurricane means the death rate (deaths per thousand) rose more than the unadjusted statistics would suggest because the population is smaller.  But this issue is the number of deaths, not the death rate, and displacement (migration) did not make that number any higher than half a dozen other studies found (about 1000) much less three times higher.  

Trying to explain the high “displacement scenario” estimate, Eliza Barclay at VOX writes, “The ideal way to calculate the death toll from a hurricane, disaster researchers say, generally, is to count all the deaths in the time since the event, and then compare that number to the average number of deaths in the same time period from previous years. Subtract the average number from the current number and that’s the death toll.”  Unfortunately, the GWU “displacement scenario” estimate does not do that.  What it does instead is to compare what actually happened with hypothetical simulations of what might have happened without the storm.  Those projections come from “a series of generalized linear models (GLMs)… accounting for trends in population … in terms of age, sex, seasonality and residence by municipal level of socioeconomic development.”  And the estimates “also considered Puerto Rico’s consistently high emigration during the prior decade and dramatic population displacement after the hurricane.” Such complexity adds uncertainty.

The August 28 GWU report claimed to be “the first to use actual death certificates and other mortality data in order to estimate a more precise mortality count due to Hurricane Maria.” On the contrary, an earlier Aug 2 study in the Journal of the American Medical Association, by professors from Penn State and the University of Texas, had already used death certificate data to (as Ms. Barclay recommended) “count all the deaths in the time since the event and then compare that number to the average number of deaths in the same period from previous years.” Yet that ideal method found the number of excess deaths was 1,139 from September through December of last year.  As the Table from that paper shows, “excess deaths” means the number above the 2010-2016 average.  Since 90% of these atypical deaths happened in September and October, it appears quite plausible to attribute most of them to Hurricane Maria.  That is consistent with five previous credible estimates of  Puerto Rican deaths due to Maria, which, as a Washington Post fact checker noted in June were “all … roughly around 1,000 deaths.” 

The rationale for the study’s novel choice of a six-month time frame was to find out if things are getting better.  But the more months pass after the disaster, the more arbitrary it appears to attribute deaths to the disaster, since an estimated 77% of those who died were seniors.

In marked contrast to the JAMA paper (where 90% of the deaths happened near the time of the hurricane) only 42.7% of the GWU study’s simulated 2,975 deaths occurred in September and October of 2017.  Another 27.8% occurred in November and December, and 29.5% occurred in January and February of 2018.  That timing seems counterintuitive and implausible, suggesting the September storm has lately been becoming more fatal rather than less.  

To attribute deaths over a six-month period to the hurricane per se is inherently difficult and subjective. What the Milken report calls “a failing health system “ and “multiple cascading failures in critical infrastructure” (telecom and power) may largely reflect negligence by Commonwealth or city governments, notably the island’s mismanaged government-owned electric utility, Prepa

To attribute the estimated 6-month deaths to FEMA, as some have, is even less believable. By August 8, FEMA reported it had awarded “more than $3 billion in Public Assistance funds … to the government of Puerto Rico and municipalities” for Hurricane María-related costs. “This is a massive job and it has taken a massive effort by everybody: the Government of Puerto and the municipalities, federal agencies, voluntary and faith-based organizations and the private sector,” said Federal Coordinating Officer Michael Byrne. 

The questionable 2,975 GWU estimate of hurricane-related deaths, like the unbelievable 4,645 Harvard estimate before it, is being widely misused as a criticism of emergency relief efforts by FEMA and numerous private charities, rather than to either the sheer magnitude of destruction to an isolated island, or to any shortcomings of local Puerto Rican efforts. 

In short, an actual 4-month count closer to 1,100 for above-average Puerto Rican deaths in the wake of Maria appears much more transparent and statistically relevant than the 6-month statistical simulation of 2,975 now being used.

In Washington earlier this month, one person’s words in the New York Times were were deemed a threat to national security by those at whom they were aimed.

An anonymous Trump administration official was labeled “a seditious traitor who must be identified and prosecuted for illegal conduct” for exercising his or her 1st Amendment rights by publishing an op-ed in the September 5 edition of the New York Times. Vice President Pence stated that the op-ed writer’s actions inside the Administration—trying to limit what the writer believes is the damage President Trump is doing daily to the United States—is “an assault on our democracy”—a notion unhinged from any semblance of reality. 

Like everyone else working in the Trump administration, the author of the op-ed took the same oath I did when I served in the federal government, the text of which is federal law: 5. U.S.C. § 3331. Here’s the text:

I, AB, do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.

The oath makes no reference to pledging fealty to whoever happens to be President. It is a pledge of loyalty to our form of government, not an individual. The notion that the Justice Department even has a basis to prosecute the writer does not pass the laugh test, much less constitutional muster.

The anonymous Trump administration official—and if he or she is to be believed, many more working for Trump—views him as a domestic threat to the American people and the Constitution itself. Democrats and others on the political left have viewed Trump that way since he won the Electoral College vote in November 2016. Clearly others in the Administration now view Trump the same way.

The anonymous op-ed writer is hardly the first person working for a federal chief executive to believe that an increasingly mentally unhinged boss needed to be contained, or even removed. Nixon White House counsel-turned-Watergate whistleblower John Dean is perhaps the most prominent, but he was not the only Nixon administration official prepared to ignore or even countermand a presidential order deemed a threat to the Republic.

As Daily Beast reporter Gil Troy reminded us less than a month into the Trump presidency, then-Secretary of Defense James Schlesinger made certain in the summer of 1974 that any Nixon order to the military would not be carried out unless Schlesinger approved it. Would Nixon really have tried to order the Old Guard to do something crazy, like march on Capitol Hill and round up those who voted for the articles of impeachment against him? Probably not, but Schlesinger made sure there was no way it could happen.

I think it’s fair to argue that the author of the op-ed in question should’ve resigned, then published. By remaining anonymous and in the Administration, the author has forced his or her colleagues to engage in the very public and humiliating spectacle of going out of their way to say, “It wasn’t me.” The chaos of Trump’s governing “style” has been deepened by the op-ed writer’s action, something that carries its own risks, however ill-defined they may be. 

But the reality is that the day-to-day business of keeping America’s government running is handled by hundreds of thousands of effectively anonymous civil servants, all of whom have taken the oath outlined above, the overwhelming majority of whom execute that oath faithfully every day. It is they who will help ensure that America and its government survive the Trump era, even if enduring it sometimes feels like the political equivalent of passing a kidney stone.

The existence of government infrastructure deters or “crowds out” private investment. Many airports, bridges, and urban transit systems in the United States used to be private, but during the mid-20th century entrepreneurs were squeezed out by governments.

The provision of federal aid or subsidies to government-owned airports, bridges, and transit facilities was a key factor in pushing out private enterprise. That is one reason why I favor repealing federal aid for transportation.

AIRPORTS

In the early years of commercial aviation, private airports served many American cities. For example, the main airports in Los Angeles, Miami, Philadelphia, and Washington D.C. were for-profit business ventures in the 1930s.

The airports were generally successful and innovative, but they lost ground over time due to unfair government competition:

  • City governments were often eager to set up their own airports, even if private airports already served an area.
  • Cities issued tax-exempt bonds to finance their airports, giving them a financial edge over private airports.
  • Private airports pay taxes. Government airports do not, giving them another financial edge.
  • The U.S. military and the Post Office promoted government airports over private ones.
  • Federal New Deal programs provided aid to government airports, not private ones.
  • Congress provided aid to government airports for national defense purposes during World War II.
  • The federal Surplus Property Act after the war transferred excess military bases to the states for government airport use.
  • The federal Airport Act of 1946 began regular federal aid to government airports, not private ones.
  • The new Federal Aviation Administration in 1958 “prohibited private airports from offering commercial service.”

So governments banished entrepreneurs from a major part of America’s aviation industry. In the early 1930s, about half of the nation’s more than 1,100 airports were private, but by the 1960s, private commercial airports had mainly disappeared. Very sad, as I discuss here.

However, there is good news about airports. A privatized commercial airport industry is booming abroad, particularly in Europe. U.S. policymakers should let entrepreneurs take another crack at our airport industry.

BRIDGES

Bob Poole discusses government crowd out of private bridges in his new book Rethinking America’s Highways. In the 1920s, four main bridges built in the San Francisco area were private toll facilities. In the 1930s, the Golden Gate Bridge and Oakland Bay Bridge were built as government toll facilities.

Poole picks up the story:

All six of these bridges suffered declines in traffic and revenue due to the Depression, but the Bay Bridge and the Golden Gate opened closer to its end and were therefore less affected. Their financing costs were also lower, with the Bay Bridge getting low-cost financing from the New Deal’s Reconstruction Finance Corporation, and the Golden Gate being able to issue tax-exempt toll revenue bonds, rather than the taxable bonds issued by the toll bridge companies.

In addition, the California legislature voted in 1933 to relieve the Bay Bridge of having to cover operating and maintenance costs out of toll revenues, allocating state highway fund (gas tax) monies to cover those costs. The four private toll bridges all went into receivership by 1940. Unlike the Ambassador Bridge (in Michigan), they were unable to work out refinancing plans and were eventually acquired by the state, with the Dumbarton and San Mateo transfers not taking place until the early 1950s; their shares traded on the Pacific Coast Exchange until then.

A similar fate befell many of the other 200-odd private toll bridges during the Depression. The Reconstruction Finance Corporation provided low-cost loans to public-sector toll bridges, but not to investor-owned ones. Relatively new government toll agencies offered buyouts to struggling bridge owners during those years. The New York State Bridge Commission bought four private toll bridges over the Hudson River; the Delaware River Joint Toll Bridge Commission acquired at least six private toll bridges; and the city of Dallas bought the toll bridge on the Trinity River in order to eliminate tolls.

By 1940, the Public Roads Administration (the former Bureau of Public Roads, now part of the Federal Works Agency) reported that the number of US toll bridges had declined to 241, of which 142 were still investor-owned. But nearly all the bridges had been bought out by toll agencies or state and local governments by the mid-1950s.

URBAN TRANSIT

The early history of urban transit in America is one of private-sector funding and innovation, as Randal O’Toole discusses in this study. Hundreds of cities had private streetcar and bus companies moving people in downtowns and the growing suburbs in the early 20th century.

As the century progressed, however, the rise of automobiles undermined the demand for transit. At the same time, transit firms had difficulty cutting costs because their workforces were dominated by labor unions and governments resisted allowing them to cut services on unprofitable routes.

The nail in the coffin for private transit was the Urban Mass Transportation Act of 1964, which provided federal aid to government-owned bus and rail systems. The act encouraged state and local governments to take over private systems, and a century of private transit investment came to a close.

This Transportation Research Board study discusses the decline of private transit:

As the declining fortunes of America’s cities gained national recognition during the 1960s, Congress passed legislation that for the first time gave the federal government a prominent role in the provision of urban transit. The Urban Mass Transportation Act of 1964 (later redesignated the Federal Transit Act) provided loans and grants for transit capital acquisition, construction, and planning activities.

… Notably, only public entities could apply for the federal grants. Given the availability of federal aid, many cities, states, and counties purchased or otherwise took over their local rail and bus systems. Thus by the 1970s, a largely new model of transit provision—public ownership—had become increasingly prevalent in the United States. Many jurisdictions consolidated the operations of smaller private and public systems under the auspices of regional transit authorities. A few states, such as Connecticut, Rhode Island, and New Jersey, formed statewide transit agencies.

… In 1940, only 20 transit systems in the country were publicly owned, and they accounted for just 2 percent of ridership. By 1960, although the vast majority of all systems were still in private ownership, properties in public ownership accounted for nearly half of all transit ridership, mainly because the country’s very largest systems were publicly owned. By 1980, more than 500 systems were publicly owned, accounting for 95 percent of ridership nationally.

In sum, the bad news is that when the government advances, the private sector retreats. But the good news we have seen around the world in recent decades is that when the government gets out of the way, the private sector steps in to provide better services at lower costs.

Further reading:

https://www.downsizinggovernment.org/transportation

https://www.downsizinggovernment.org/infrastructure-investment

https://www.downsizinggovernment.org/privatization

In principle, the federal housing-voucher program known as Section 8 ought to win points as a market-oriented alternative to the old command-and-control approach of planning and constructing public housing projects. While allowing recipients wider choice about where to live, it has also enabled private landlords to decide whether to participate and, if so, what mix of voucher-holding and conventionally paying tenants makes the most sense for a location. 

But there is another possibility, which is that Section 8 will in time bring with it onerous new restrictions on the private landlord-tenant relationship. For landlords, participation in the program has long carried with it some significant burdens of inspection, certification, and reporting paperwork. So long as participation was voluntary, these conditions were presumably worth it in exchange for the chance to reach voucher-holders as a class of potential tenants. When accepting Section 8 tenants stops being a voluntary choice, however, the balance is likely to shift. And one of the big policy pushes of the past decade – zealously promoted by the Obama administration – was the local enactment of laws and ordinances prohibiting so-called source-of-income discrimination, which in practice can mean making it a legal offense for a landlord to maintain a policy of declining Section 8 vouchers. Once that sort of control is in place, and landlords cannot opt out of the program, there will no longer be any natural check on Washington’s imposition of ever more burdensome conditions via Section 8 program rules on private landlords, including conditions that affect their relations with conventional non-voucher tenants. 

Now, in an en banc ruling, the Third Circuit has made clear another source of legal exposure for landlords participating in the program. A specialized portion of the program provides so-called enhanced housing vouchers to enable tenants to go on living in properties that once received “project-based” Section 8 support (akin to traditional low-income housing) but have been converted by their owners to conventional market-rate housing. Philip Harvey owned one such property a unit of which had long been rented to Florence Hayes. When Ms. Hayes died in 2015, Harvey sought to renovate the apartment for use by his daughter, while Ms. Hayes’s son wanted to take over as primary tenant. Litigation ensued and a three-judge panel of the Third Circuit ruled, over a dissent, that once her lease expired the law placed Harvey under no obligation to sign a new lease with her successor. 

On Aug. 31, however, the full Third Circuit by a lopsided margin overturned the panel opinion and ruled Ms. Hayes’s son had the right to take over as tenant and obtain lease renewals from Harvey under good behavior, and so did anyone else who had been on the lease (even as a child) at the time of such a property’s conversion. It construed language about how a tenant “may elect to remain” in a converted project as binding not just HUD in its obligation to provide assistance, but also as binding the landlord. Only Judges D. Michael Fisher and Thomas Hardiman, who had prevailed on the original panel, dissented. Various tenants’-rights amicus filers, as well as the City of Philadelphia, took the son’s side. 

Judge Fisher, in dissent, says the majority “overlooks the basic design of the enhanced voucher program as an incentive-based program, not a compulsory one.” But “overlooks” may not be the right verb. Maybe a better one is “takes another step to subvert.”

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