Cato Op-Eds

Individual Liberty, Free Markets, and Peace
Subscribe to Cato Op-Eds feed

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Central Banks and Computer Glitches

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

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

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

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

A Flight to E-Cash?

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

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

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

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

Central Banks Make Poor Competitors

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

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

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

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

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

A Conflict of Interest

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

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

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

Hello, Central Bank E-Cash; Goodbye Payments Innovation

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

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

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

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


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

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

[Cross-posted from]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Immigrants and Type of Convictions

Source: Immigration and Customs Enforcement; *Through February 2017

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

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

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

Source: Immigration and Customs Enforcement; *Through February 2017

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Strossen begins by roughly defining hate speech:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Listen to the whole thing here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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