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California governor Jerry Brown has been taking a victory lap of sorts after putting forth a budget for fiscal year 2019 that would include a $6 billion surplus, a remarkable turnaround for a state that hemorrhaged red ink in the wake of the great recession.

Of course, much of that surplus arrived via a hefty tax increase, as well as a surfeit of revenue resulting from the stock market boom via capital gains taxes, so attributing this turnaround to fiscal probity might be taking things a bit far.

However, Governor Brown does get credit for at least temporarily righting what seemed to be a sinking ship. What’s more, he seems to realize that this surplus can easily disappear, and he has warned his potential successors to resist spending that surplus. What Brown is fully aware of is that even the most spectacular stock market increase is not enough to erase the state’s most pressing financial problem—namely, its underfunded government pension.

Currently, it has enough money set aside to cover just 68% of its future obligations—certainly far from the most indebted state (that would be my own state of Illinois), but still low enough to dismiss any notion that future stock market growth can remedy the problem.

Despite this, the California Public Employees Retirement System, or CalPERS, has put politics ahead of achieving a high rate of return by insisting that the boards of the companies it invests in adhere to various social and environmental practices.

It’s nonsense, of course, and it amounts to little more than an extension of politics into a realm that doesn’t have room for it.

The problem is that these environmental and social constraints inevitably bring with them a lower rate of return—regardless of what CalPERS and other advocates say to the contrary. And these lower returns will only hasten the day when the state’s taxpayers—or, failing that, federal taxpayers—will be on the hook to cover California’s pension deficit.

A few of the state’s politicians seem to be aware of the conundrum this places on California citizens: A Democratic state senator recently offered a bill that would allow new state employees to opt out of the state pension plan and simply participate in a defined contribution plan. The state university system already allows newly hired professors to opt out—a recognition that a defined benefit plan does not work well for a peripatetic workforce like academics.

Ultimately, moving to a defined contribution plan might make sense from a long-term sustainability perspective, but transitioning to such a system for everyone would require someone (namely, current taxpayers and state workers) to cover promises already made to current and future state retirees while new employees build up their own retirement balances. In short, someone’s going to be left holding the bag in the ponzi scheme that is a pay-as-you-go public pension plan.

That’s a tricky path to navigate: Utah did such a thing for its new employees with a much smaller per-capita shortfall, accomplishing it by making those new employees fork over a portion of their income to cover promised benefits. It is not clear even that will be sufficient for the state.

California will need every dime it can get its hands on to fund its pension shortcomings, and with the country’s highest income tax rate it probably can’t raise personal income taxes too much higher. Governor Brown has commented that the state’s retirees should expect a benefit reduction the next time there’s a recession but most people think any reductions in promised benefits are precluded by the state’s constitution.

At some point a future governor of California will need to figure out how the state’s going to cope with having billions in promised benefits and insufficient money set aside to keep those promises. That calculus will be much easier if CalPRS doesn’t accept a lower rate of return in exchange for dubious political chits.

In response to threats of retaliation by the EU over his announcment of steel/aluminum tariffs, President Trump has been complaining about high EU trade barriers. Here’s a recent tweet of his:

If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!

And here’s something he said yesterday:

“The European Union has been particularly tough on the United States,” Mr Trump said at Tuesday’s joint press conference with the Swedish prime minister.

“They make it almost impossible for us to do business with them,” Mr Trump complained.

President Trump is right: EU trade barriers are too high. In addition, U.S. trade barriers are also too high. Here’s something I wrote a few years ago about tariffs:

In the context of the recently launced US-EU free trade talks (formally, the “Transatlantic Trade and Investment Partnership,” or TTIP), commentators have noted that tariffs between the US and EU are low, and thus the key part of the talks will deal with so-called regulatory barriers to trade. An article in Inside U.S. Trade observes: “Overall, the U.S. average tariff rate is 3.5 percent, although the average tariff rate on goods that the EU actually shipped to the U.S. last year was even lower, at 1.2 percent, … .”

But these average figures mask some significant “tariff peaks.” There are lots of individual tariff rates, so if many are low or zero, that makes the average figure fairly low; nonetheless, there are plenty of high tariffs still out there. The same article points out some US and EU tariff rates that may come up during the negotiations. Here is the US:

— U.S. light trucks tariff of 25 percent; a tariff on wool sweaters of 16 percent; a tariff on sardines of 20 percent; a tariff on tuna of 35 percent; and a tariff on leather at 20 percent

Here is the EU:

— applied tariffs on honey of 17.3 percent; carrots at 13.6 percent; potatoes at 14.4 percent; strawberries at 20.8 percent; lemons at 12.8 percent, beef at 12 percent; and lamb at 12 percent

And all of those tariffs add up:

— the U.S. collected about $4.5 billion in tariffs from EU products in 2012. … [Of this amount,] $900 million comes from imported German cars; about $260 million comes from Italian clothes and shoes; and about $72 million comes from cheese imports.” 

And regulatory trade barriers are even higher.   So perhaps there’s a way out of the back and forth threats of tariff retaliation going on right now: The two sides could restart the TTIP talks, and bring down barriers on both sides.

Alternative monetary policy targets continue to gain advocates. While Chair Powell was waiting to take over leadership at the Fed, internal support for rethinking the current inflation rate target was building. And while there are various possibilities to consider — such as raising the inflation rate target, turning the inflation target into an inflation rate range, or adopting price level targeting — there are reasons to believe that the Fed may end up choosing a nominal GDP target.

Powell testified before Congress for the first time last week and affirmed the Fed’s commitment to the current framework, including the symmetric 2% inflation target. However, he also went out of his way to state that the FOMC “routinely consults” monetary policy rules in their analysis and that he finds these rules “helpful.” According to David Beckworth of the Mercatus Center, this is the strongest endorsement of rules yet from a Fed Chair. If Powell is open to an expanded role for monetary policy rules, it is reasonable to think he may be open to a superior monetary policy target as well.

A New Target

Shortly after her successor testified on Capitol Hill, Janet Yellen made her first public appearance as former Fed Chair in a Brookings Institution interview — with her predecessor Ben Bernanke — about her time leading the Fed and career as an economist. When asked about potential alternatives to the Fed’s current framework, Yellen essentially dismissed raising the inflation rate target, something Bernanke has also done, on both political and economic grounds. On the other hand, Yellen volunteered nominal GDP targeting as an alternative, claiming it has “interesting advantages.”

Some of Yellen’s former colleagues within the Federal Reserve System are also open to changing the Fed’s target. In her brief remarks delivered at the University of Chicago’s Annual Monetary Policy Forum two weeks ago, Loretta Mester, President of the Cleveland Fed, supported reexamining the Fed’s inflation rate target — but added that any change would need to clear a very high bar.

However, Mester also suggested that nominal GDP level targeting and price level targeting were quite similar frameworks. She worried that under either regime a central bank might tighten policy after a negative supply shock raised prices, even if the economy was suffering from weak demand. Such tightening would be undesirable, of course. But in fact it is a risk only under price level targeting. With a nominal GDP target, the central bank would stabilize overall spending. That means the central bank would allow a decline in supply to raise prices without overtightening monetary policy.

Mester treating a price level target and a nominal GDP level target as almost one and the same was curious, because this was not the first time she had discussed alternative frameworks this year. Mester also gave a similar talk at the AEA annual meeting in January. In that discussion, Mester stressed that nominal GDP targeting was superior to other targets when the economy was hit with supply shocks. Mester expressed concern with measurement issues and the lack of central bank experience with nominal GDP level targeting, but spoke positively about it overall.

Mester’s was not the only prominent voice discussing nominal GDP targeting at the AEA annual meeting. The most notable discussion occurred during a panel titled Monetary Policy in 2018 and Beyond, when former Council of Economic Advisers Chair Christy Romer endorsed the idea, citing research done with her economist husband, David Romer.

During her presentation, Romer first asked: “Why should the Fed be thinking about a new target now?” She offered two answers to this question. First, she discussed the poor performance of monetary policy over the last ten years, including its failure to allow for a more robust recovery. Second, she rightly identified growing congressional pressure for more accountability at the Fed via a rules-based monetary policy — something that nominal GDP level targeting moves toward.

The Right Target

Why is nominal GDP, particularly the level, the right target? Romer began her answer with what may be called the “bygones” argument. Under inflation rate targeting, whenever the central bank misses its target that miss is a permanent mistake. That’s because the central bank will seek to restore the rate of inflation, rather than the price level. Policymakers would essentially let bygones be bygones, hence the name.

But policy misses distort the ability of economic actors to make their decisions, by either eroding the value of money with easy policy or acting as a contractionary force on economic activity with overly tight policy. And when a central bank is targeting a rate, policy misses are essentially written off rather than corrected — unlike under level targeting.

Under a nominal GDP level target, on the other hand, if the Fed was undershooting (or overshooting) the target, it would automatically make up for errant past performance by returning to the longer trend. If the Fed was generating too much inflation, which would be identified as excess spending, the Fed would know to tighten policy until nominal GDP was back on its trend path. Such a feature essentially eliminates the bygones problem of permanent errors and improves macroeconomic stability.

A nominal GDP level target is also superior to an inflation rate target because of desirable expectations effects, according to Romer. Keeping nominal GDP on a level path would firmly anchor expectations. Inflation expectations have been well anchored for some time, but due to the Fed’s persistent undershooting of the inflation rate target there is at least some chance those expectations could become unanchored.

Strengthening these expectations in turn leads to yet another benefit: increased accountability for Fed policy. With a nominal GDP level target there would be no ambiguity as to whether or not the Fed was successfully implementing policy. A successful policy would return nominal GDP to its trend line. Whereas now the Fed can continually claim it’s approaching its long-run inflation target, neither the public nor policymakers would tolerate that wait-and-see approach under a nominal GDP level targeting regime because it would be so clear when policy was failing. Romer provided a table showing that a nominal GDP level targeting would have improved the Fed’s performance over the last five policy cycles.

Romer concluded her remarks with optimism for a new target: now is the right time for the Fed to be rethinking its operating framework and a nominal GDP level target can work in practice. She pledged to continue this line of research.

A Robust Target

The day after the AEA meeting, the Brookings Institution hosted an event asking if now is the right time to rethink the 2% inflation target, which was adopted by the Fed in January 2012.

During the panel discussing different options for the Fed’s target, Jeff Frankel argued that targeting nominal GDP is superior to targeting the inflation rate. In addition to emphasizing some of the arguments that Romer made, Frankel added two key points.  (His slides can be found here.)

First, a nominal GDP target is the target most consistent with how the Fed ought to be making policy decisions.  It is, of course, important for a central bank not to overly focus on short term data. However, it’s equally important that the Fed not run an open ended policy that is always working towards, but never actually achieving, its goal. The Fed ought to be setting policy over the medium term, typically 1-2 years. Under inflation rate targeting, the Fed has been missing its target, in one direction, for years. A nominal GDP target would give the Fed a nominal variable that they could keep on a stable trend.

Second, and most importantly, a nominal GDP target is the most robust target available to policymakers with respect to shocks, particularly aggregate supply shocks. Under an inflation rate target a central bank needs to differentiate between supply and demand shocks.  It is supposed to “look through” the supply shocks and offset the demand shocks.  This means the Fed shouldn’t raise rates because an oil shortage raises the price of gas and they shouldn’t cut rates if a productivity boom make consumer goods available at lower prices.  With a nominal GDP target the central bank does not need to differentiate between supply and demand shocks in real time.  Rather, the Fed would monitor the overall level of spending in the economy and adjust the stance of monetary policy so that it was forecasting hitting its nominal GDP target over the medium term.

Frankel’s presentation would have been stronger had he specified that targeting the level of nominal GDP was the most desirable strategy for the Fed to adopt. His remarks could be read that he’s ambivalent between targeting the growth rate or the level of nominal GDP. But, of course, targeting the rate has the same “bygones” problem that Romer discussed when criticizing the inflation rate target.

Uncommon Consensus

While Frankel was scheduled to be the nominal GDP advocate at the event, an unexpected boost for nominal GDP level targeting came from Larry Summers. During the Q&A following his speech, which explained why the 2% inflation target is no longer appropriate, he was pressed on which alternative framework he would choose. He opted for a nominal GDP level target of 5-6%. While it’s easy to quibble with how Summers arrived at this decision — he sees it as the surest way to get higher nominal interest rates — to have an economist of his stature advocating for a nominal GDP level target is all to the good.

This is not the first year that prominent economists have announced support for targeting nominal GDP. For example, in late 2011 Paul Krugman expressed support when Christy Romer was urging Bernanke to channel his inner Paul Volcker and adopt nominal GDP level targeting. Therefore it was a bit odd when, as the keynote speaker at University of Chicago’s Annual Monetary Policy Forum, Krugman said that inflation rate targeting was insufficient, but that he did not have a replacement.  Stranger still, given that Krugman was an advocate of nominal GDP targeting in aftermath of the Financial Crisis.

Obviously, the year is young. But if these first two months are any indicator, 2018 may see a breakthrough for nominal GDP level targeting. As Scott Sumner likes to say, the Fed often follows the economics profession. The Fed is already discussing research on alternative frameworks, including level targeting. If more economists endorse a nominal GDP level target, then the Fed may move from researching it to adopting it. This would be welcome news.

[Cross-posted from Alt-M.org]

Despite the immense benefits that Americans have derived from free trade and globalization, as well as the far-reaching costs of protectionism, a “reciprocity” argument—that foreign protectionism against U.S. exports justifies current or even new U.S. protectionism against foreign imports—persists. Indeed, one of the primary justifications for President Trump’s proposed tariffs on steel and aluminum, as well as many other Trump administration trade policy proposals, rests on the notion that it is only “fair” that foreign trade barriers—low or high—be matched by America’s trade barriers. Leaving aside these arguments’ basic factual and historical errors (indeed, most countries’ average tariffs on U.S. iron and steel exports range between 0% and 5%—far less than Trump’s proposed 25%), the President’s reciprocity demands still suffer from many flaws: 

  • Reciprocity illogically demands the United States injure its own citizens because other countries injure theirs. There is overwhelming evidence that protectionism distorts markets and reduces economic welfare. For example, last year I documented “a vast repository of academic analyses and contemporaneous reporting that show that American trade protectionism—even in the periods most often cited as ‘successes’—not only has imposed immense economic costs on American consumers and the broader economy, but also has failed to achieve its primary policy aims and fostered political dysfunction along the way.” President Trump’s own Economic Report concludes that “trade and economic growth are strongly and positively correlated…. a 1-percentage-point increase in the ratio of trade to GDP raises per capita income by between 0.5 and 2 percent.” In terms of specific products, a 2006 International Trade Administration study of U.S. sugar trade barriers found that “[f]or each one sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost.” The study also found that sugar trade barriers had caused many sugar-using companies to close or move to foreign markets (e.g., Canada and Mexico) where sugar prices were lower. A 2013 Iowa State University report found that getting rid of the sugar program would save consumers up to $3.5 billion per year. The list goes on and on and on. It therefore defies basic common sense to argue that, just because a foreign country harms its citizens through protectionist policies, the United States should do the same.
  • Reciprocity cedes control of U.S. economic policy to other counties. The reciprocity argument maintains that the United States should not unilaterally dismantle protectionist programs while other countries maintain similar (bad) policies, but this approach cedes U.S. control over its own economic decisions to countries like China or the European Union. Yet the United States should remain free to improve its economy, without the need to wait for other countries to do likewise. It’s particularly odd to hear such an argument from “America First” proponents who decry “globalist” policies that supposedly cede control of U.S. “sovereignty” to foreign powers.
  • Reciprocity undermines reform—including through reciprocal trade agreements. The reciprocity approach also would likely prohibit trade reform in the United States—contrary to popular belief, the United States still maintains numerous tariff and non-tariff barriers to trade—or elsewhere. The WTO’s “Doha Round” of global trade negotiations, meant to update and expand the body’s trade-liberalizing agreements, spent over a decade trying, and failing, to produce an agreement among Members to reduce their trade barriers and subsidies. Among the reasons for this stasis was an unwillingness of any WTO Member (including the United States) to expend the political capital necessary to lead the way—a classic “prisoners’ dilemma.” Reciprocity promises the same inaction in the future—thus why many U.S. politicians and industries advocating import protection argue so loudly for reciprocity! Furthermore, new tariff “reciprocity” threats from the Trump administration are threatening to unravel U.S. trade agreements, like NAFTA, that actually have created reciprocal, free trade regimes—to the great benefit of all parties.
  • Reciprocity ignores the many tools that the United States has to address other countries’ protectionism without harming its own citizens. The reciprocity argument also ignores the fact that the United States could unilaterally eliminate many of its trade barriers and still have ample legal tools at its disposal to encourage others’ to follow suit. WTO negotiations, for either all Members or a select group of them (“plurilateral” talks), could introduce new, binding caps on tariff and non-tariff barriers, and the United States would, unlike the current situation, be in a superior moral and diplomatic position to demand them. The United States could also seek to renegotiate its own tariffs through the procedures set forth in GATT Article XXVIII, which would simply require it to lower U.S. tariffs on other products (or allow other Members to raise some of their own). Current and future U.S. free trade agreements could provide another venue for reforms. Finally, WTO and FTA dispute settlement disciplines permit (1) consultations with a foreign government over many of its trade-distorting measures; and (2) if such consultations fail, investigation of the alleged protectionism and eventual imposition of remedial U.S. tariffs on imports from the offending government. WTO dispute settlement has been particularly effective in this regard, as the President’s own 2018 Economic Report documents.

There is no doubt that some (but not all) nations impose higher barriers to imports of U.S. goods and services than the United States does in return. This is not, however, a weakness in the current system but rather a testament to sound American economic policy, which has generated undeniable benefits for the vast majority of Americans. In short, the United States should not start impoverishing its citizens because other nations lack the economic insight or political strength to stop impoverishing theirs. To do so would not only ignore common sense and basic economics, but also lead to higher trade barriers, fewer reforms and therefore a lower standard of living for us all.

The views expressed herein are those of Scott Lincicome alone and do not necessarily reflect the views of his employers.

Apparently, if you want to learn about school choice success in the United States, your first move should be to look to countries that are thousands of miles away. Sarah Butrymowicz from The Hechinger Report did just that. She traveled to Sweden, New Zealand, and France, talked to people about their education systems, decided that they were not perfect, and concluded that “real-life examples from around the world provide little evidence that allowing families more freedom of choice improves achievement.”

The worst part is that the conclusion – that school choice does not improve achievement – is not at all scientific.

For example, Butrymowicz pointed out that Sweden enacted a universal voucher program in 1992 and that their international test scores haven fallen since then. First, Sweden’s test scores most recently rose in math, reading, and science between 2012 and 2015. But more importantly, the simple pre-post observation does not in any way establish a causal relationship. Such a claim doesn’t even attempt to consider any control variables. For instance, immigration in Sweden also increased substantially from 1992 to 2012, which may have had a lot to do with their declining test scores. In fact, a study by Dr. Gabriel Heller-Sahlgren found that about 30 percent of the decline in Sweden’s overall PISA scores is explained by immigration patterns alone. Based on strong existing empirical evidence from Sweden, it is more likely that their PISA scores would have fallen even more without the academic benefits accrued from school choice.

We have a 2015 peer-reviewed study on what actually happened as a result of Sweden’s implementation of universal school choice. Böhlmark and Lindahl used strong econometric methods and found that school choice in Sweden improved “average short- and long-run outcomes.” Another rigorous study in a top academic journal, the Journal of Public Economics, found that Sweden’s voucher program improved academic outcomes due to competition.

Butrymowicz deserves credit for pointing out three studies that show positive effects of the Sweden program. But she points out that one of these studies finds “no positive long-term effects for students.” While that may be true, she failed to acknowledge that the same study found positive effects on student achievement.

I simply do not understand how one can cite several studies finding positive effects of school vouchers in Sweden, and then come up with an article titled “Betsy Devos’ school choice ideas are a reality in Sweden, where student performance has suffered.” But that’s not all. The article goes on to pull quotes from Samuel Abrams regarding how something “went wrong in Sweden.” According to the evidence presented in the article – and elsewhere – the title and presentation are highly misleading at best.

In her article on New Zealand, Butrymowicz presents the country as a “school choice utopia.” I know she didn’t pull that quote from me, because basic economic theory compels me to prefer private school choice to the system of government school choice in New Zealand. 

Nonetheless, the article goes to say that “one unintended consequence of more school choice is more segregation” in the United States and in New Zealand. Butrymowicz cited zero studies from New Zealand to support this claim. She should have considered the fact that 7 out of the 8 rigorous studies existing on the subject in the U.S. find that private school voucher programs improve racial integration. None of the U.S. studies find that private school choice leads to segregation.

Similarly, the article on France is titled “this country spends billions on private schools – and has a terrible learning gap between poor and wealthy,” as if somehow the two are connected. The article then goes on to point out that “France hasn’t erased all of the barriers that prevent lower-income families from accessing the best schools,” implying that perfection is the standard for success. Of course, it is arguably more plausible that achievement gaps would be even larger if the government did not allow poor people to attend the expensive private schools that rich people can already afford.

The France article also claims that even though children in private schools outperform those in public schools, “public schools would actually outperform private schools” if they served the same students. What that claim comes from—an OECD report—is not causal. Absent rigorous econometric methodology, the OECD simply cannot determine whether private schooling in France – or any other country – has any effects on PISA scores. On the other hand, my 2018 study found that increases in the private share of schooling within countries actually leads to moderate increases in PISA math and reading scores, even after controlling for changes in factors such as GDP, government spending, population, and school enrollment.

The author also claims that the school choice research “shows mixed outcomes for the roughly 448,000 American students who attend private schools through taxpayer-funded programs.” This claim is simply false. And it needs to be put to bed.

Seventeen experimental studies of the effects of private school choice programs on student achievement exist in the U.S. today. The majority of the 17 studies find statistically significant positive effects on student test scores, and effects tend to be most beneficial for disadvantaged students. And it is important to note that the only two studies finding negative impacts are first-year evaluations.

But the academic benefits aren’t only limited to the students that exercise choice. Twenty-five of the 26 existing studies find that private school choice also improves achievement for the students remaining in traditional public schools due to competitive pressures.

Of course, these studies merely examine effects on standardized test scores, which may not be all that important for at least two reasons: (1) parents often care more about things like safety and culture than standardized test scores, and (2) a growing body of literature suggests that test scores may not be good proxies for long term outcomes like graduation, crime, and income.

So why don’t we look at the non-test score outcomes?

Six of the seven rigorous studies linking private school choice to student educational attainment reveal positive effects overall or for subgroups. For example, the experimental evaluation of the DC voucher program found that private school choice increased the likelihood of high school graduation by 21-percentage points. None of the seven studies found negative effects. The majority of the eleven rigorous studies linking private school choice to civic outcomes also find positive effects. Again, none of the studies find negative effects.

Anyone see a pattern here? The most rigorous U.S. evidence is not mixed.

If we want to figure out if school choice works in the U.S., we ought to rely on the preponderance of the best evidence existing in the U.S. But if we really want to learn from school choice in other countries, we ought to look at the scientific evidence rather than anecdotes. We ought to examine the data rigorously rather than from a 10,000-foot view. The strongest evidence available tells us we need more private school choice in the United States, not less.

The 7th round of negotiations on the North American Free Trade Agreement (NAFTA) wrapped up early this week, and ended on a relatively positive note.  There was a noticeable change in tone in the joint press conference with USTR Lighthizer, Minister Freeland and Secretary Guajardo, which NAFTA watchers certainly must have noticed.

The first striking detail was actually something that was omitted. Though Lighthizer did say that the two major goals of the administration were to update and rebalance the deal, he didn’t once utter the phrase trade deficit. Instead, he highlighted discouraging outsourcing, likely referring to the U.S. proposals to eliminate the controversial Chapter 11 on investor-state dispute settlement (ISDS); strengthening rules of origin by increasing the content of North American inputs in automobile manufacturing; and adjusting the rules on government procurement, through a “more balanced” dollar-for-dollar procurement market. It should come as no surprise that he is still pushing in these areas, as there is much left to negotiate, and concessions on these issues will not likely be settled until the final rounds of the agreement take shape.

So far, the three countries have closed a total of 6 out of 30 chapters, most recently finishing the chapters on Good Regulatory Practices, Administration and Publication, and Sanitary and Phytosanitary Measures. Though the three ministers all stressed the importance of timing, considering the upcoming Presidential elections in Mexico, as well as mid-term elections in the U.S., Freeland made clear that Canada would not be satisfied with just any deal. Lighthizer seemed to suggest this as well, but said that while the U.S. preferred a tripartite agreement, he would conclude bilaterals, if necessary. This light jibe is in line with previous reports that Lighthizer thinks the talks are moving a lot more smoothly with Mexico than with Canada.

The overall positive tone was only briefly interrupted when Freeland addressed President Trump’s announcement last week that he would impose a 25% tariff on steel and 10% tariff on aluminum imports. She reiterated the message from her official statement that any tariffs on Canada would be “entirely inappropriate.” A comment on this was to be expected, not least because Canada would be the country most affected by the administration’s actions. In fact, a December 2017 report by the International Trade Administration noted that Canada leads in steel imports to the U.S., making up 16% of total imports. The Canadian and U.S. steel sectors are also highly integrated, with 50% of all American steel exports destined for Canada.

What remained unacknowledged, however, were recent comments by President Trump that the tariffs would be tied to satisfactory progress on the NAFTA negotiations. The three ministers seemed to signal that they prefer to keep the discussion on steel tariffs separate from NAFTA. This would be wise. First, linking the Section 232 actions to NAFTA undermines the overall national security argument put forward by the administration, as it is now being used by the president as a bargaining chip. Second, it would run counter to the spirit of NAFTA, which is of three neighbors working together to increase North American competitiveness. The Department of Defense even expressed its concern “about the negative impact on our key allies” that the steel and aluminum tariffs would bring about. Third, linking this issue to the ongoing negotiations could seriously threaten to derail the talks, which the administration simply cannot afford due to its tight negotiating timeline.

While the NAFTA negotiations have had their ups and downs in seven successive rounds, it is important to keep in mind that things can change very quickly. In Monday’s press conference Freeland, addressing Lighthizer, said “I think we’re becoming friends.” Let’s not upset the progress we’ve made so far on NAFTA, as well as the friends we’ve made along the way, and keep steel out of the discussions.

The assimilation of immigrants and their descendants is important to their long-run success and to maximize the benefits from immigration.  Current research indicates that today’s immigrants are assimilating well.  A massive 520-page literature survey by the National Academy of Sciences found that assimilation is proceeding apace in the United States although some of those gains are masked by a phenomenon called “ethnic attrition” whereby the most successful and integrated descendants of immigrants cease to self-identify as members of their ancestor’s ethnic groups.  Numerous OECD reports find greater economic integration of immigrants and their descendants in the United States relative to other developed countries, even when it comes to job matchingResearch by University of Washington economist Jacob Vigdor shows that modern immigrant civic and cultural assimilation is similar to that of immigrants from the early 20th century, to the extent that “[b]asic indicators of assimilation, from naturalization to English ability, are if anything stronger now than they were a century ago.”

However, John Fonte of the Hudson Institute argues that today’s immigrants are not assimilating well because our “patriotic assimilation system is broken.”  In a shorter piece explaining his reasoning, Fonte argues that the “assimilation of the Ellis Island generation succeeded only because American elites (progressive at the time) insisted upon ‘Americanization.’”  Elites at the time showed their support for Americanization through many government programs and non-profit assimilation efforts supported by states. 

Fonte and I disagreed about this (and other topics) on a panel in 2014 at Hudson.  I argued that there is no evidence from over 100 years ago that the Americanization Movement, a government program combined with support from non-profits to assimilate immigrants, actually encouraged or sped up the assimilation of the immigrants who were affected by it.  Fonte countered by saying [2:44:15]: “It’s true we don’t have data on how well assimilation worked, but I think we have plenty of anecdotal evidence that Americanization did help.”  Later, I wrote about several contrary anecdotes where new immigrants offended and discouraged by the government’s efforts to forcibly assimilate them to a particular nationalistic definition of what it meant to be an American.

A revealing anecdote printed in a Polish-language newspaper that appealed to American traditions when it wrote that the Americanization Movement “smacks decidedly of Prussianism, and it is not at all in accordance with American ideals of freedom” (256).  A Russian-language newspaper made the more devastating claim that the Americanization Movement did not actually do much except insult immigrants:

Many Americanization Committees only exist on paper.  They make much noise, get themselves in newspapers, but do not do much good.  They mostly laugh at the poor foreigners.  If Americans want to help the immigrants, they must meet them with love.  The immigrant is by no means stupid.  He feels the patronizing attitude the American [Americanizers] adopts towards him, and therefore never opens his soul (258). 

At this point, Fonte and I had dueling anecdotes and it is not at all obvious whether these programs had an effect on assimilation regardless of the direction.  Since the 2014 Hudson event, a new empirical working paper called “Backlash: The Unintended Effects of Language Prohibition in US Schools after World War I” by Vasiliki Fouka found that anti-German language laws in the United States actually slowed down the assimilation of German Americans on several margins, lending support to my anecdotal evidence. 

The anti-German language laws have a nasty history.  Around World War I, many state governments passed anti-German laws that outlawed school instruction in the German language – even in private schools.  Beyond that, the government undertook an intense campaign to assimilate German Americans out of fear that they were a potential fifth column that would undermine the war effort.  Fouka’s paper employed expert research design methods to look at how these anti-German language laws in Ohio and Indiana affected the assimilation of German American children who were subject to them. 

The good news is that German Americans who were already well assimilated were not affected by the anti-German laws so at least they did not unassimilate them.  The bad news is that German Americans who were the least assimilated actually integrated at a much slower rate after these anti-German language laws went into effect.  As they aged, they dropped out of school at younger ages, picked German names for their children, tended to marry other Germans rather than Americans of different European ethnic backgrounds, and were less likely to volunteer for military service during World War II.

Fouka’s assimilation model has two main components: peer effects and family effects.  Peer effects are assimilation pressures from the broader society that includes schooling.  The supporters of the anti-German laws proceeded under the theory that cutting German out of schools would reduce their exposure to that language, culture, and help assimilation by boosted exposure to the English language.  Those advocates forgot that there were also family effects whereby German-American families substituted more emphasis on preserving German culture inside of the home to make up for the lack of German language and cultural instruction outside of the home.  The net result was that German-American families vastly increased their production of German culture and language relative to the decline of German language and culture in school.  This backlash overwhelmed any potential pro-assimilation effects of the anti-German policies and actually worsened the rate of assimilation.   

Most of the policies of the Progressive Era have had devastating effects on the United States but we are just now beginning to understand how their insistence of assimilation through government schools and other programs slowed integration.  The failure of government assimilation programs through public education is not confined to the United States.  Even the totalitarian Chinese Communist education system could not make ethnic minorities in China feel more “Chinese.”  What hope is there for a comparable American assimilation program to succeed today where the Chinese Communists could not?      

People do not assimilate or learn to love the United States because an American schoolteacher told them to.  Students barely even remember any lessons from school unless they use them frequently on the job, especially civics.  Immigrants and their descendants assimilate and become American because it is in their best interests to do so and they cannot help it.  Learning English, adopting most of our social norms, and understanding our culture spontaneously happens over time through exposure and because doing so increases their income.  Immigrants become patriotic (they really do) and love the United States because it is a lovable country – two things a government program cannot and should not teach.      

Donald Trump has talked up protectionism for decades, so his apparent decision to impose tariffs on steel/aluminum for (unconvincing) “national security” reasons may be something he truly believes in. If that’s the case, it’s very important for everyone to step forward and figure out a way to talk him out of it. And they are. Here’s a sampling:

Sen. John Thune, a South Dakota Republican who’s a member of GOP leadership, told reporters Monday night that Republicans are still looking at what legislative recourse they have to stop Trump’s action on trade, but first they are trying to convince him not to go through with it.   “First and foremost there is going to be an attempt to try to convince the President that he’s headed down the wrong track, and hopefully get him to a point where he’ll reconsider that decision,” Thune said.

Congress has ultimate Constitutional power over trade, although they have delegated a good deal of it by statute over the years. This is their opportunity to exercise their power in support of free trade.

West Wing aides led by Cohn, who directs the National Economic Council, are planning a White House meeting for later this week with executives from industries likely to be hurt by big tariffs on imported steel and aluminum, two officials familiar with the matter said. The meeting is tentative and the participants have not yet been set in stone, but industries that could be hit hard by the tariffs include automakers and beverage companies.

Trump announced the tariffs in front of the steel/aluminum companies who would benefit. It’s important he hear from those who would be hurt.

European Commission chief Jean-Claude Juncker has vowed to fight back against US President Donald Trump’s threat of a 25% tariff on steel and 10% on aluminum imports.

“So now we will also impose import tariffs. This is basically a stupid process, the fact that we have to do this. But we have to do it. We will now impose tariffs on motorcycles, Harley Davidson, on blue jeans, Levis, on Bourbon. We can also do stupid. We also have to be this stupid,” he said in Hamburg on Friday evening.

If Juncker’s threats lead to actual tariff retaliation, we are worse off than with Trump’s tariffs alone. But the idea behind Juncker’s response is to appear as “stupid” as Trump, in order to get him to back down, by giving other U.S. industries a reason to lobby against the steel/aluminum tariffs. (A Canadian journalist had a clever idea for retaliation without so much self-inflicted harm that I haven’t seen tried before: “Rather than raise tariffs on American exports, why not lower them on exports of the same goods from other countries, giving them a leg up over the Americans in our market?”)

Trade policy looks pretty bleak in the face of these tariffs, which would create a loophole in the system that others are sure to utilize as well. If the U.S. can impose these tariffs on steel and aluminum on the basis of “national security,” someone else is sure to try for tariffs on food, or clothing, or various other products on the same basis. But the tariffs haven’t been imposed yet. Until they are, everyone should push back in every way they can think of.

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

In Pauly v. White, 874 F.3d 1197 (10th Cir. 2017), the Tenth Circuit used qualified immunity to shield three police officers who brutally killed an innocent man in his home. The officers had no probable cause to think Samuel Pauly had committed any crime, but they stormed his home with guns drawn and shouted that they had him surrounded—yet failed to identify themselves as police. Mr. Pauly and his brother reasonably believed they were in danger and retrieved two guns to defend themselves. After his brother Daniel fired two warning shots to scare away the unidentified attackers, Samuel was shot dead by one of the officers—Ray White—through the front window of his home.

The Tenth Circuit held that Officer White’s use of deadly force was objectively unreasonable and that it “violated Samuel Pauly’s constitutional right to be free from excessive force.” But the court still granted Officer White qualified immunity; there was no prior case with sufficiently similar facts, so the unreasonableness of his conduct was not “clearly established,” in the court’s view. What’s more, the court held that because Officer White had qualified immunity, the other two officers automatically received immunity as well, even though their own reckless conduct caused Officer White to commit the unlawful shooting.

This decision was erroneous even under existing precedent, but it also throws into sharp relief the shaky legal rationales for qualified immunity in general. The text of Section 1983 makes no mention of any sort of immunity, and the common-law background against which it was adopted did not include a freestanding defense for public officials who acted unlawfully; on the contrary, the historical rule was that public officials were strictly liable for constitutional violations. In short, qualified immunity has become nothing more than a “freewheeling policy choice” by the Court, at odds with Congress’s judgment in enacting Section 1983.

The Cato Institute has therefore filed an amicus brief urging the Court to hear Mr. Pauly’s case and to reconsider its misguided qualified immunity jurisprudence. This brief will be the first of many in an ongoing campaign to demonstrate to the courts that this doctrine lacks any legal basis, vitiates the power of individuals to vindicate their constitutional rights, and contributes to a culture of near-zero accountability for law enforcement and other public officials.

In his State of the Union address, President Trump expressed support for a Right to Try law that would allow terminally-ill patients to test medicines not yet fully vetted by the FDA. This perspective recognizes the tradeoff between benefits and risks.

The administration is singing a different tune, however, regarding kratom, a medicinal herb grown in East Asia that might help Americans who suffer from chronic pain and do not wish to, or cannot, rely on opioids.

The FDA recently announced that it is considering a ban on kratom and is working to prevent shipments to the United States. This announcement comes on the heels of the DEA’s attempted ban in 2016, which caused a public and Congressional backlash, forcing the DEA to back down.

Kratom, which appears to target opioid receptors in the brain, is used by many chronic pain sufferers. The FDA correctly notes that existing evidence is not conclusive on kratom’s efficacy, but numerous studies and a wealth of anecdotal evidence suggest kratom relieves pain with modest risks.

Kratom is also used to reduce opioid addiction. The FDA also doubts about its effectiveness in this area, but again several studies support its value in easing withdrawal.

Doubts about effectiveness aside, the prima facie reasoning behind the FDA’s crackdown can be found in a press release from November 14, 2017, in which Commissioner Scott Gottlieb attributes 36 deaths to kratom. A recent study, however, found no evidence that kratom alone causes death.

And even if kratom can be dangerous, banning it violates the administration’s defense of Right to Try laws: potentially dangerous medicines are nevertheless valuable if their expected benefits exceed their risks.

Outlawing kratom, moreover, will mainly spawn a black market. This harms kratom consumers (by raising prices and diminishing quality control) and society generally (by generating violence and corruption, as occurs now for other banned substances).

The FDA may believe that kratom’s risks are so great that no rational person would ever accept them. But in a free society, individuals—not a government bureaucracy—decide what risks to take with their health.

The Trump White House is on the right track by supporting Right to Try. The administration should stick to this philosophy in its treatment of kratom.

Last month, Congress authorized a massive increase in defense spending as part of a two-year budget deal. In 2018 alone, the Pentagon will receive an additional $80 billion, increasing the topline number to $629 billion. War spending will push the total over $700 billion. Though such a windfall might prompt Defense Department to ignore cost-saving measures, the White House pledged that “DOD will also pursue an aggressive reform agenda to achieve savings that it will reinvest in higher priority needs.” Noticeably absent, however, was another Base Realignment and Closure (BRAC), even though Secretary of Defense James Mattis, and at least four of his predecessors, have called for such authority in order to reduce the military’s excess overhead, most recently estimated at 19 percent.

Congress’ unwillingness to authorize a round of base closures should surprise no one. But congressional inaction doesn’t merely undermine military efficiency. In the most recent Strategic Studies Quarterly, ranking member of the House Armed Services Committee, Rep. Adam Smith (D-WA) and I explain how the status quo is actually hurting military communities.

To be sure, closing a military base can be disruptive to surrounding economies, and for some communities it may be economically devastating. But such cases are the exception, not the rule. Evidence shows that most communities recover, and some do so quite rapidly. A 2005 study by the Pentagon Office of Economic Adjustment researched over 70 communities affected by a base closure and determined that nearly all civilian defense jobs lost were eventually replaced.8 The new jobs are in a variety of industries and fields, allowing communities to diversify their economies away from excessive reliance on the federal government.

Rep. Smith and I are not alone in our assessment of the impact that congressional inaction on BRAC has on local communities and our military. In June of last year, over 45 experts from various think tanks of differing ideological and political bents signed onto an open letter urging Congress to authorize a BRAC round.

In a 2016 letter to congressional leaders, then-Deputy Secretary of Defense Robert Work explained that “local communities will experience economic impacts regardless of a congressional decision regarding BRAC authorization. This has the harmful and unintended consequence of forcing the Military Departments to consider cuts at all installations, without regard to military value… . Without BRAC, local communities’ ability to plan and adapt to these changes is less robust and offers fewer protections than under BRAC law.”

Further, an overwhelming majority of the communities represented by the Association of Defense Communities would prefer a BRAC to the current alternative. This should not come as a shock because, as Smith and I note, “Local communities have been deprived of the support BRAC would provide and have been denied access to property that could be put to productive use.”

Just to recap, nearly everyone—from think tank experts to DOD officials and from presidents to local community leaders—want a BRAC. Alas, a few key members of Congress stand in opposition.

BRAC has proven to be a fair and efficient process for making the difficult but necessary decisions related to reconfiguring our military infrastructure and defense communities. Rather than continuing to block base closures for parochial reasons, Congress should permit our military the authority to eliminate waste while providing vital defense resources where they are most needed, and give communities the clarity and financial support they need to convert former military bases to new purposes.

If you would like to hear more, Rep. Smith and I will be discussing the issue at the Cato Institute on March 14 at 9 am. Click here for more information and to register.

Yesterday morning, my colleague Dan Ikenson warned of a possible announcment by President Trump related to tariffs on steel and aluminum, to be imposed on (extremely flimsy) “national security” grounds. That announcement did come (as Trump was speaking to steel and aluminum company executives), and everyone is still trying to sort out what it means. This is from the Washington Post:

Speaking at the White House, the president said he has decided on tariffs of 25 percent for foreign-made steel and 10 percent for aluminum.

“We’ll be imposing tariffs on steel imports and tariffs on aluminum imports,” the president said. “…You will have protection for the first time in a long while, and you’re going to regrow your industries.” 

It certainly feels like Trump is finally going to make good on his frequent threats to impose tariffs (putting aside the usual “trade remedy” kind, which all presidents impose). But if you are looking for signs of hope, note that nothing has actually been signed yet. All Trump did was say that he would impose tariffs. And recall this sequence of events from last year:

In late January, Trump signed a Presidential memorandum on “Construction of American Pipelines,” and said: “We are – and I am – very insistent that if we’re going to build pipelines in the United States, the pipes should be made in the United States. … From now on, we’re gonna start making pipeline in the United States. We build it in the United States; we build the pipelines; we wanna build the pipe. Gonna put a lot of workers, a lot of steel workers, back to work. Okay. We will build our own pipeline. We will build our own pipes.”

Then in February, he said this: “We have also taken steps to begin construction of the Keystone Pipeline and Dakota Access Pipelines. Thousands and thousands of jobs, and put new buy American measures in place to require American steel for American pipelines. In other words, they build a pipeline in this country, and we use the powers of government to make that pipeline happen, we want them to use American steel. And they are willing to do that, but nobody ever asked before I came along. Even this order was drawn and they didn’t say that.”

By early March, however, the White House quietly announced that the Keystone XL pipeline would not be subject to a requirement to use American steel.

Is it possible that a similar pullback will happen with the steel/aluminum tariffs? U.S. trading partners, some members of Congress, and U.S. companies that use steel/aluminum will work hard to convince the White House not to go forward. (Reports like this one may help: “Electrolux puts $250 million U.S. investment on hold over Trump tariff hike.”)

For more on the issue, see these op-eds from my colleagues Dan Ikenson and Colin Grabow, and also from me.

Vladimir Putin’s public speech Thursday night hit many of its objectives: a memorable branding moment for a politician heading into an election this month, boasted a new image of Russia after years of economic stagnation and military decline, and debuted a shiny new missile to emphasize that point. 

The new nuclear-powered cruise missile could have serious implications for U.S.-Russia relations by complicating the bilateral New START treaty that intended to downsize the world’s two largest nuclear arsenals. The state of American nonproliferation efforts seems to be at a low in recent history. President Trump frequently threatens to rip up the Iran Nuclear Deal and antagonizes North Korea, another rogue nuclear power. Hopefully policymakers can resist using this new Russian missile as an excuse to undercut New START and cease advocating for nonproliferation on the global stage.

For a full run-down, read my analysis published yesterday at Reuters.

The Minnesota Department of Health reported today that 42 percent of the more than 2,000 first-time medicinal marijuana users with intractable pain enrolled in its research study obtained significant pain relief. In announcing the results, the Minnesota Health Commissioner said, “We need additional and more rigorous study, but these results are clinically significant and promising for both pain treatment and reducing opioid dependence.”

The study found that 63 percent of the patients who were taking opioids for their chronic pain when they started taking cannabis were able to reduce or eliminate their opioid use after six months.  Some patients were also able to reduce their use of other pain medicines, as well as benzodiazepines.

This is not the first study to point to the potential of cannabis in reducing opioid use. A study reported in JAMA in 2014 by researchers looked at all 50 states from 1999-2010 and found opioid overdose rates approximately 25 percent lower in states with legalized medicinal marijuana during that time period. A RAND study published in the March 2018 Journal of Health Economics reveals similar findings. And researchers at the University of Michigan reported in 2016 64 percent of chronic pain patients were able to reduce their use of opioids. Researchers at the University of California at Berkeley reported last June that 97 percent of the chronic pain patients they studied were able to reduce their opioid use.

Opponents of cannabis, including Attorney General Sessions, believe it is a “gateway” drug to more potent and dangerous drugs. But this is not born out by the evidence. Since cannabis was legalized for recreational use in Colorado and Oregon, opioid overdose rates have actually come down, making a case that  cannabis is an “off-ramp,” not a “gateway.”

If anything, cannabis may have potential benefits as a substitute for opioids in the management of pain. And if the federal prohibition of cannabis is lifted then research can be more easily done, and we can find out if cannabis has a role to play in medication-assisted treatment for opioid addiction. If politicians in Washington want to do something constructive to address the opioid overdose problem, then lifting the federal ban and allowing states to go their own way would be a positive move.

Reports are circulating that President Trump is convening a gathering at the White House this morning to announce, in the interest of national security, his plan to impose restrictions on imported steel and aluminum.  Though the details of his plan remain unclear as of this moment, Commerce Department reports published last month concluded that steel and aluminum imports “threaten to impair the national security” of the United States and recommended a range of remedies to the president.

For steel, the Commerce report recommends moderate to highly restrictive quotas, and tariffs ranging from 24 to 53 percent; for aluminum, the recommendations are also for moderate to highly restrictive quotas, and tariffs ranging from 7.7 to 23.6 percent.  But the president can more or less do whatever he wants here.

In Forbes this morning, I go into some detail about what could happen and what’s at stake:

Media report that President Trump intends to announce import restrictions on steel and aluminum at a press conference or signing ceremony today. Where exactly that leads is anyone’s guess, but it is certain to be a place less stable, less predictable, and less cooperative than the place we are right now.

In reports published last month, the U.S. Department of Commerce concluded that steel and aluminum imports “threaten to impair the national security” of the United States and recommended a range of remedies to the president. Those reports were the culmination of two investigations conducted under Section 232 of the Trade Expansion Act of 1962, a seldom used statute that authorizes the president to respond to perceived national security threats with trade restrictions.

For steel, the Commerce report recommends moderate to highly restrictive quotas, and tariffs ranging from 24 to 53 percent; for aluminum, the recommendations are also for moderate to highly restrictive quotas, and tariffs ranging from 7.7 to 23.6 percent.  But the supposed “cure” of these restrictions would prove far worse than the disease.

According to the Commerce Department reports, trade restrictions would induce U.S. producers to build and use more domestic capacity, which would reduce U.S. dependence on foreign—potentially hostile—sources of supply of materials deemed critical to national defense.  Oddly, the reports say nothing about the adverse effects of steel and aluminum restrictions on the U.S. producers who purchase those basic inputs to manufacture the very materials deemed critical to national defense.  Those U.S. producers would be weakened by trade restrictions, exposing them to competition from foreign rivals with lower production costs capable of offering lower prices in the U.S. market.

Of course, the problems wouldn’t end there. Any U.S. decision to restrict imports based on the argument that an abundance of low-priced raw materials from a diversity of sources somehow threatens national security would lower the bar so significantly as to invite every other member of the World Trade Organization to invoke national security to protect favored industries.

Under WTO rules dating back to the establishment of the General Agreement on Tariffs and Trade in 1947, member governments are permitted to raise trade barriers for purposes of protecting national security without obligating them to demonstrate that their rationale conforms to some agreed definition of national security or national security threat.  While the GATT’s original contracting parties were well aware of the importance of trade openness to the goals of economic growth and goodwill among nations, they were also in agreement that attending to the security and protection of their citizens was government’s primary obligation. So, Article XXI of the GATT—the “National Security Exception”—was weaved into the agreement with the expectation that it would not be invoked without the most compelling of reasons.  So far those expectations have been met.

Should President Trump deviate from the norm and impose restrictions on imported steel or aluminum under Section 232, the presumption is that—if challenged by another member as a WTO violation—the United States would invoke its privileges under Article XXI.  However, most international trade law scholars believe the likelihood of the WTO Dispute Settlement Body issuing a rebuke of the U.S. government’s rationale for concluding that its national security is threatened or impaired is pretty close to zero.  The DSB is already deferential when facts aren’t clearly established or when obligations aren’t clearly delineated.  But on matters of national security, which necessarily require subjective risk assessments and nuanced analyses of murky gray areas, maximal deference would likely prevail.

Trade partners ill-affected by the measures could invoke GATT Article XXIII, claiming that the benefits due to them under the agreement have been “nullified or impaired,” but the lengthy duration and uncertain outcome of that approach might encourage members to invoke their own national security rationales to block certain imports.  Beijing certainly sees its dependence on foreign semiconductors and other technologies to represent a threat to China’s national security.  Trump’s restrictions on steel or aluminum could give license to the Chinese government to harass, compel technology transfer, and discriminate against foreign companies on a grand scale under the rubric of protecting national security.  That, in turn, could subvert any solutions that may be incubating as a result of the U.S. Section 301 investigation into Chinese technology and intellectual property policies.

Likewise, the 232 remedies could give India’s protectionist government justification for quotas on imported wheat and rice in the name of food security.  Brussels might respond by adopting rigid restrictions on data flows in the name of information security, kneecapping U.S. companies like Google and Amazon.

Recently, Beijing initiated investigations into imports of U.S. sorghum under China’s antidumping and countervailing duty laws. Although use of those laws is permissible under WTO rules, provided that they are written and implemented in accordance with those WTO rules, it is widely assumed that the cases against sorghum amount to de facto retaliation for the recent U.S. decision to impose tariffs on solar panel components under the U.S. Safeguard law.  American soy exports could be targeted next.  As a major importer of agricultural products and among the largest export markets for many American commodities, U.S. farmers and agribusinesses could suffer the brunt of any Chinese retaliation.

Alternatively, some governments might choose to bypass the formalities and go straight to retaliation against U.S. exporters. The Europeans might target citrus from Florida, tobacco from Kentucky, textiles from North Carolina, or dairy from Wisconsin in order to arouse strategic U.S. opposition to the steel and aluminum restrictions.

How government’s react—and what happens to the trading system as a result—will largely be determined by the nature, duration, and magnitude of the U.S. remedies.  The more modest the restrictions, the less the collateral damage.  But the bottom line is that once Trump opens Pandora’s Box by rationalizing protectionism as a national security imperative, the durability of the rules based trading system will be tested like never before, with global economic security hanging in the balance.

The amount of future warming is predicated on the amount of emitted greenhouse gases and the sensitivity of earth’s surface temperature to changes in their concentrations. Here we take a look at the emissions component.

The U.N. currently entertains four emissions scenarios, all expressed as the change in downwelling radiation (in watts/meter-sq, nominal year 2100) towards the surface that results from an increase in the atmospheric concentration of certain greenhouse gases. They are called “representative concentration pathways,” or RCPs.

As can be seen in Figure 1, there are four, given as 2.6, 4.5, 6(.0) and 8.5. The ranges of associated warming for over 1000 total scenarios are given on the right axis.

Figure 1. Approximately 1000 scenario runs for four RCPs. From Fuss et al., 2014.

It’s not surprising that those making the case for climate action most frequently reference the highest (RCP8.5), embedding it in most climate scenarios, assessments, and international agreements (the Paris Agreement being a prime example). Here is a summary of Google Scholar citations for the different RCPs, published on February 9 by Eric Roston in Bloomberg:

Figure 2. Although increasingly untenable, RCP8.5 draws the most attention.  

RCP8.5 is obsolete. It was obsolete when it was first published in the journal Climate Change by Riahi et al. in 2011. By then the shale gas revolution was underway, as can be seen from the plot below of shale gas production. By 2011, abundant shale gas had begun a wholesale displacement of coal for electrical generation, increasing natural gas’s portion of our energy portfolio and decreasing that of coal.

Figure 3. U.S. shale gas production, 2007–2016, according to the U.S. Energy Information Administration.

The Riahi et al. RCP 8.5 continues to be the favorite for analysts. It completely dominates the draft of the upcoming fourth “National Assessment” of climate change, created by our U.S. Global Change Research Program. Here is the fanciful “wedge chart” for various energy sources in RCP8.5:

Figure 4. Energy contributions (in Joules X 1018, or EJoules) in RCP 8.5.

There are at least two notable errors in RCP8.5, which both serve to exaggerate its radiative forcing. The first is an incorrectly modest growth in natural gas use, and the second is the massive growth in coal combustion. According to the International Energy Agency (2017):

The global natural gas market is undergoing a major transformation driven by new supplies coming from the United States to meet growing demand in developing countries and industry surpasses the power sector as the largest source of gas demand growth…[emphasis added]

The evolution of the role of natural gas in the global energy mix has far-reaching consequences on energy trade, air quality and carbon emissions…

Global gas demand is expected to grow by 1.6% a year…China will account for 40% of this growth.

British Petroleum (BP) recently estimated the global fuel mix through 2040 in its 2018 Energy Outlook. Under their “Evolving Transition” assumption, natural gas usage passes coal worldwide around 2030, and oil use levels off at the same time. A comparison to RCP 8.5 (above) shows how wrong it is, even in the near future.

Figure 5. British Petroleum’s fuel outlook from its most recent (2018) Energy Outlook. Note the color scheme is somewhat different than in Figure 4, with natural gas now red, instead of blue.

The substitution of shale gas for coal continues to drive down the “carbon (dioxide) intensity” of developing and developed economies. This is the amount of carbon (dioxide) emitted per unit of GDP, usually normalized to 2010 dollars adjusted for their purchasing power in a given economy. In the United States, in the quarter-century beginning in 1990, the drop was a remarkable: from 0.9kg of carbon dioxide/dollar to 0.35, or over 60%.

The imminent dethroning of King Coal is obvious in the BP data, which leads to another problem: Justin Ritchie and Hadi Dowlatabadi from University of British Columbia recently found there simply isn’t enough coal to support RCP8.5. Nor were they conservatively looking at so-called “recoverable” reserves; instead, they toted up all geologically identified coal around the planet.

They then adjusted RCP8.5 for the twin errors of increasing carbon (dioxide) intensity by a huge growth in coal use over natural gas (recall that IEA indicates large scale industrial as well as electrical switchover), and the fact that there isn’t enough coal, and modified RCP8.5 to look like this: 

By comparing the contribution of oil, coal, and natural gas (the greenhouse gas sources) between RCP8.5 and what is likely to happen, we can estimate the total downwelling radiation change: it drops from 8.5 watts to roughly 5.1. (Recognizing there is a lot of fine print—this is certainly a ball-park number.)

It is the nature of climate models to scale global warming with percentage changes in emissions; i.e. a quadrupling of emissions has almost exactly the effect of doubling prospective warming. Reducing emissions by 40%, which is the difference between Rihai’s RCP8.5 and Ritchie’s modification, similarly reduces total warming.

There’s the further problem of model overprediction of warming that we recently documented in our public comments on the upcoming Fourth National Assessment of Climate Change. Generally speaking, we find the data-based sensitivity of temperature to be about 56% of the average of the 105 climate models in the UN’s most (2013) science summary.

Multiplying everything through, we take the mean 20th and 21st century RCP8.5 warming of 4.3⁰C, adjust by 60% to get the difference with the modified RCP, and then adjust for the 56% sensitivity and we find a 21st century warming a teense under 1.5⁰C—very, very close to the sensitivity just calculated by University of Alabama-Huntsville’s Roy Spencer.

REFERENCES

British Petroleum 2018 Energy Outlook at https://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/energy-outlook/bp-energy-outlook-2018.pdf

Fuss, S., et al, 2014.  Betting on Negative Emissions.  Nature Climate Change 4, 850-853

IEA, 2017. IEA Sees Global Gas Demand Rising to 2022 as US Drives Market Transformation. https://www.iea.org/newsroom/news/2017/july/iea-sees-global-gas-demand-rising-to-2022-as-us-drives-markettransformation.html

Riahi, K., Rao, S., Krey, V. et al. Climatic Change (2011) 109: 33. https://doi.org/10.1007/s10584-011-0149-y

Ritchie J and Dowlatabadi H 2017.  The 1000 GtC coal question: are cases of vastly expanded future coal combustion still plausible? Energy Econ. 65 16–31.

Roston, E., 2017, at: https://www.bloomberg.com/news/articles/2017-05-24/misleading-coal-estimates-may-have-skewed-climate-projections

Ryan Maue of Cato’s Center for the Study of Science provided important background material for this post.

It seems no amount of evidence can make political leaders disabuse themselves of the misguided notion that the nation’s opioid overdose crisis is caused by doctors getting patients hooked on prescription opioids. A group of eight senators unveiled the CARA(Comprehensive Addiction and Recovery Act) 2.0 Act on February 27, targeting the opioid crisis. It would impose a 3-day limit on all opioid prescribing for patients in acute and outpatient postoperative pain.

But the movement to restrict prescriptions is not evidence-based, as prominent experts have pointed out. The politicians base their proposal on the 2016 opioid guidelines put out by the Centers for Disease Control and Prevention. The guidelines stated:

When opioids are used for acute pain, clinicians should prescribe the lowest effective dose of immediate-release opioids and should prescribe no greater quantity than needed for the expected duration of pain severe enough to require opioids. Three days or less will often be sufficient; more than seven days will rarely be needed.

The guidelines pointed out that the above recommendations were based on “Type 4” evidence:

Type 4 evidence indicates that 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.

It further described Type 4 evidence as being based upon “clinical experience and observations, observational studies with important limitations, or randomized clinical trials with several major limitations.”

In their introductory comments, the guidelines stated:

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. The recommendations in the guideline are voluntary, rather than prescriptive standards. They are based on emerging evidence, including observational studies or randomized clinical trials with notable limitations. Clinicians should consider the circumstances and unique needs of each patient when providing care.

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.”

It doesn’t seem to matter that studies have shown the addiction potential of opioids prescribed for acute pain to be extremely low, including a January 2018 study published in BMJ of more than 568,000 postoperative patients receiving opioids between 2008 and 2016 who were found to have a “misuse” rate (using all “misuse” diagnostic codes) of 0.6%. It doesn’t matter that Cochrane systematic studies in 2010 and 2012 demonstrated a roughly 1% addiction rate in chronic non-cancer pain patients.

The National Survey on Drug Use and Health reports that less than 25% of nonmedical opioid users received a doctor’s prescription, and a November 2017 study found that heroin was the gateway drug in 33.3% of opioid addicts entering rehab in 2015 (as opposed to 8.7% in 2005).

There has been a 41% drop in high-dose opioid prescriptions since 2010, yet overdose rates continue a steady climb, with more than 60% due to heroin and fentanyl. In fact, the CDC notes the fentanyl overdose rate has been increasing at a clip of 88% per year since 2013; the heroin overdose rate has gone up 33% per from 2010–2014, and 19% per year since 2014. Meanwhile the prescription overdose rate has been increasing at a stable rate of 3% per year since 2009. With the advent of abuse-deterrent prescription opioids (ADFs) in 2010, opioids diverted to the black market have become increasingly useless to nonmedical users.

All the evidence points to the overdose crisis being primarily the result of nonmedical users accessing drugs in the black market. The restrictive, supply-side approach of present-day opioid policy has driven these users to more dangerous, but cheaper and readily available, fentanyl and heroin. And the majority of opioid overdoses involve multiple drugs. New York City recently reported that 75% of the overdoses in 2016 were due to heroin and fentanyl, and 97% of overdoses involved multiple drugs—46% of the time it involved cocaine. This is not an opioid crisis—it’s a fentanyl and heroin crisis. And the deaths are due to drug prohibition: the result of nonmedical users accessing drugs in a black market.

If CARA 2.0 passes as written, look for more patients to suffer in agony. As a surgeon who prescribes postoperative opioids to my patients for pain control, I will no longer be able to individualize my prescriptions to my patients. This will probably mean I will have to see many of my patients for their postoperative visit 3 days after surgery, rather than the 10–14 days that is usually the case, so that I can prescribe a refill of their pain prescription. And because I am being surveilled by my state’s Prescription Drug Monitoring Program, the pressure will be on me to limit those refills.

Meanwhile, not one intravenous heroin user will be moved to pull the needle out of their arm as a result of this policy.

To its credit, CARA 2.0 has provisions to liberalize the prescription of buprenorphine which, like methadone, is a form of medication-assisted treatment, a proven type of harm reduction. And it provides increased funding in order to make the overdose antidote naloxone more available. But it doesn’t go far enough: naloxone should be available over-the-counter.

The damage and death resulting from drug abuse will continue unabated as long as drug prohibition continues unabated. Meanwhile, policymakers should drop their focus on doctors treating patients in pain and place their efforts squarely on reducing harm. Medication-assisted treatment, syringe services programs, and naloxone distribution are good places to start. The current restrictive approach will only further drive up the death rate.

Yesterday, Public Affairs published a compelling new book by Cato alum Radley Balko and his co-author Tucker Carrington entitled The Cadaver King and the Country Dentist. The book chronicles the horrific and sordid tale of how the State of Mississippi railroaded innocent men for heinous crimes with the help of Dr. Steven Hayne, a medical examiner, and Dr. Michael West, a dentist.

Those who have followed Radley’s career over the years may be familiar with his investigations into Hayne and West, particularly their repeated use of deeply flawed forensics and preposterous testimony. We are proud to welcome Radley and Tucker to Cato to talk about the remarkable story that is garnering praise across literary and criminal justice circles. Already named by Amazon.com as a “best nonfiction book” selection, it should be a smashing success and we couldn’t be happier to have both authors share their work with us.

The event will be held Thursday, March 15, at 4pm here at Cato. For those unable to attend in person, the event will be livestreamed on cato.org/events and facebook live. You can register here.

The headline is a quote from this BookPage review by Deborah Mason.

Illegal immigrants who can’t work are more likely to commit crimes in order to support themselves, according to a superb new paper by Matthew Freedman, Emily Owens, and Sarah Bohn that is forthcoming in the American Economic Journal: Economic Policy.  They examined administrative data from Bexar County, Texas and found an increase in felony charges filed against residents who were most likely to be illegal immigrants after the Immigration Reform and Control Act made it unlawful for illegal immigrants to work in the United States.   

Their finding is especially relevant for the current debate over E-Verify, an electronic eligibility for employment verification system that is supposed to exclude illegal immigrants from the workforce.  The goal of E-Verify is to turn off the wage magnet that attracts illegal immigrants to the United States and open up jobs for American workers.  Although E-Verify fails to lower unemployment and only has a very small effect on dimming the wage magnet, the paper by Freedman et al. points to another possible unintended consequence of mandating E-Verify: higher crime.

Arizona provides a wonderful opportunity to test whether an E-Verify mandate affected crime.  In March 2007, the Arizona House passed the Legal Arizona Workers Act (LAWA).  The state Senate passed it in May and governor Napolitano signed it in July.  Among other things, LAWA mandated E-Verify for all new employees beginning on January 1, 2008. 

We used Arizona Department of Corrections (ADC) data on the number of entries into the prison system by month by citizenship.  The ADC data does not allow us to separate prisons by nativity or legal immigration status so we used the proxy of non-citizens, many of whom are likely illegal immigrants and would be affected by mandatory E-Verify.  Although this is a grave imperfection in the data that makes us hesitant to continue, the effect we find is large enough to report in the hopes that future researchers will be able to actually identify illegal immigrants who are incarcerated.  We interpolated Arizona population data to the monthly level using a cubic spline to better capture any non-linearity in population trends. 

First, we consider the flow of non-citizens into Arizona prisons as a fraction of the Arizona population multiplied by 100.  The vertical bars correspond to March 2007 and January 2008 when E-Verify first passed the Arizona House and was effective, respectively.  To smooth trends in this series, we overlay a locally weighted polynomial regression line computed for three periods: before E-Verify passed the House, after E-Verify passed the House and before its implementation, and after the E-Verify mandate took effect.[1]  There is a significant discontinuity and uptick in the flow of non-citizens into Arizona prisons relative to the total population after E-Verify passed in March 2007 up until it became mandatory in January 2008 (Figure 1).

Figure 1

Monthly Flow of Non-Citizens into Arizona Prisons

 

Source: Authors’ interpretation of Arizona Department of Corrections data.

Figure 2 shows a sharp increase in the share of non-citizen entries into Arizona prisons relative to all new entries after E-Verify laws were passed.  To determine whether these relations are simply due to chance, we also consider a simple regression model with controls for other state-level economic factors. 

Figure 2

Monthly Share of Non-Citizen Admissions into Arizona Prisons as a Percentage of All Admissions

 

Source: Authors’ interpretation of Arizona Department of Corrections data.

In order to add a regression to our suggestive graphs, we created indicator variables denoting the level of E-Verify law activation with one variable for the period after the law was passed and before its activation and one after E-Verify was activated.  This allowed us to examine both the reaction to the LAWA’s passage and what happened when it took effect.  Results for this specification indicate a statistically significant change in the average flow of non-citizens to Arizona prisons by approximately 3.2 percent after passage and 1.9 percent after implementation (Table 1, Column 1).  Since the series are likely to be serially autocorrelated, we compute Newey-West (1987) standard errors corrected for six lags of autocorrelation for each specification.

To control for variation in prisoner flows based on economic factors, we collect employment and unemployment data from the Bureau of Labor Statistics, median income and poverty rates from the Census Bureau’s Small Area Income and Poverty Estimates program, and personal income from the Bureau of Economic Analysis.[2]  Since many of these variables are likely to be highly correlated, we employ a Lasso regression framework to identify and remove redundant regressors.[3]  Results for this model with Lasso-selected covariates are in Column 2 of Table 1 and show a similar pattern of significant increases in the share of non-citizen flows into Arizona prisons of nearly 2.8 percent after E-Verify passed and 5.1 percent after it went into effect.

Table 1

Effect of E-Verify on the Share of Non-Citizen Prisoner Admission in Arizona State Prisons                                                       

 

These relatively simple graphs and regressions do not provide evidence that E-Verify boosted the inflow of non-citizen prisoners into Arizona prisons.  However, they do show a clear, significant, and positive association between an E-Verify mandate and the fraction of non-citizens sent to prions in Arizona.  Other social scientists should take the research by Freedman et al. seriously and view state-wide E-Verify mandates as an opportunity to study how increased immigration enforcement affects crime.  The supporters of E-Verify should also consider that one possible result of mandating that system is higher incarceration and crime rates.

Andrew Forrester contributed mightily to the econometric portions of this post.

[1] We choose a bandwidth of 0.8 based on visual appearance of fit to the data series.

[2] Data for personal income, poverty rates, and median income were only available at the quarterly and yearly level and were interpolated to the monthly level using a cubic spline.

[3] For details on this procedure, see Belloni et al. (2014).

What should’ve been a slam-dunk win for those challenging Minnesota’s ban on “political” apparel at the polls was complicated by the plaintiffs’ counsel’s inability to draw clear lines between what the government can and can’t restrict. The voters’ lawyer began his argument by arguing, quite correctly, that Minnesota’s law was overbroad – sweeping in shirts and buttons supporting the Chamber of Commerce, NAACP, and AFL-CIO – and so several justices pushed him on the constitutionality of a more narrow rule, one restricting paraphernalia explictly referencing candidates and parties. Counsel hemmed and hawed but ultimately stated that he would make that “close call” by disallowing such a statute, though it would depend how the legislature worded it.

That unsuccessful attempt to play coy opened the door to discussions of how to draw the distinction between electioneering – which the Court 25 years ago correctly held could be banned within a certain distance of the polling booth – and what the law at issue proscribes. Chief Justice John Roberts and Justice Anthony Kennedy further expressed concern about the state’s interest in maintaining “decorum” and “solemnity” (which Justice Elena Kagan later made light of by suggesting that it likened a poll to a church). As Justice Kagan put it, “it’s hard to evaluate an overbreadth argument if we don’t know where to draw the line.”

This shouldn’t be so hard. Federal and state laws everywhere already prohibit intimidation, deception, disruption, and other attempts to interfere with the right to vote, so the rare t-shirt that does one of those things – for example, “Republicans vote tomorrow” or “Mexicans shouldn’t vote” – is already covered. As for the electioneering bit, a voter’s wearing a button is very different from an activist’s waving signs or distributing literature – or even that same voter’s going up to others in line and trying to convince them to vote for a particular candidate.

Moreover, Minnesota’s law is so broad and gives so much discretion to poll workers that its enforcement is arbitrary. When the lawyer representing the election officials tried to explain that a political message or insignia could only be restricted if it related to an issue that was part of the campaign – which seemed to be a change from his earlier litigating position – Justice Samuel Alito shut him down with a devastating line of inquiry. Alito asked whether shirts with the following text could be banned: Parkland Strong, NRA, “I Miss Bill [Clinton],” Reagan-Bush ‘84. Counsel struggled to answer, at which pointed Alito asked whether, in the current political climate, the text of the Second Amendment could be banned. The response was yes!

That’s about as much of a mic-drop moment as happens at the Supreme Court – and it was followed by Justice Ruth Bader Ginsburg’s concern that #MeToo apparel could be banned given that sexual harassment is very much an issue in contemporary discourse. “The [poll workers’] conversation about the shirt seems more disruptive” than the shirt itself, commented Justice Kennedy.

The challengers will still win their case – only Justices Stephen Breyer and Sonia Sotomayor appeared firmly on the state’s side, so I’m still confident the margin will be more than 5-4 – but it’ll be closer, and the opinion likely narrower, than it needed to be.

For more on Minnesota Voters Alliance v. Mansky, see this blogpost, Cato’s brief and my op-ed in today’s Wall Street Journal.

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