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During the Western Han Dynasty (206 B.C. – A.D. 9), the question of monetary freedom was vigorously debated. There were as yet no banks or paper money in China — money consisted solely of coin.  Private mints competed with government mints, either in the shadow market or legally. In 81 B.C., the issue of whether the state or the market would be the best guardian of sound money came to a head in the famous “Discourses on Salt and Iron,” which were compiled by Huan Kuan in his book Yantie lun. The relevant chapter for our study is chapter 4, “Cuobi” (“Discordant Currencies”).

In this article, I provide some background for the debate between the Confucian scholars who favored private (competitive) coinage and the statesmen, particularly Sang Hongyang, who defended the government’s monopoly on coinage. I then consider the arguments of those engaged in the 81 B.C. debate over the role of government in coinage and the lessons learned.

Background

The first emperor of the Western Han Dynasty, Gaozu (202–195 B.C.), banned   government minting, legalized private mints — most likely because of the severe shortage of coins that impeded trade — and adopted the Qin Dynasty’s standardized bronze coin, the banliang (or “half ounce” = 12 zhu).[1] Its relatively heavy weight (about 8 grams) made it unsuitable for widespread use. The demand for lighter coins to facilitate trade led private mints to produce a large quantity of lighter “elm-seed” coins that weighed 0.2 to 1.5 grams. Those coins retained the conventional banliang inscription, making their face value much greater than their intrinsic value.[2]  Of course, merchants would not accept them at face value.

Banliang 4 Zhu Coin

In 186 B.C., Empress Lü reinstituted the Imperial Mint with the hope of gaining control over the monetary system. The first coin brought out by the government was a banliang coin weighing 8 zhu. Next, in 182 B.C., a new banliang coin called the wufen, which weighed only 2.4 zhu, was circulated. The demonetization of the 8 zhu coins, which allowed bronze to be restruck into a much larger nominal stock of money, led to inflation.  Consequently, in 175 B.C., Emperor Wen of Han increased the metallic content of the banliang to 4 zhu, and once again allowed private mints the freedom to coin money provided they complied with the standard weight of 4 zhu and produced only bronze coins. The see-saw between government and private mints continued when, in 144 B.C., Emperor Jing of Han ended competitive coinage and reinstituted the government’s monopoly. Private coining was made a crime and those convicted could face the death penalty.[3]

The substantial difference between the face value and intrinsic value of banliang coins during the early Han period provided fertile ground for counterfeiting.  However, money exchanges developed to discover the true value of banliang coins, adjusting their nominal value to reflect their weight (or intrinsic value), rather than passively accepting the fictitious value of 12 zhu. Eventually, in 120 B.C., a new bronze coin, the 3 zhu cash coin, replaced the old 4 zhu banliang coin — and its face value was made equal to its intrinsic value. Finally, in 119 B.C., Emperor Wu of Han introduced the wuzhu (or 5 zhu) bronze coin, which was extensively used until the 7th century.

At first, the wuzhu was minted by both the central government and the prefectures, but in 113 B.C. minting became the sole responsibility of the Imperial Mint.[4]

The 81 B.C. Debate Over Monetary Freedom

When Emperor Wen of Han legalized private mints in 175 B.C., Jia Yi, a former official, argued that competitive coinage would lead to debasement, a plethora of cash coins that would confuse the public, and result in the manipulation of money exchanges. He therefore recommended restoring the state monopoly on coinage and controlling the supply of copper.[5]  His advice was rejected but the debate over private coinage reemerged in 81 B.C.

The Main Arguments

Sang Hongyang, a statesman who had been a key advisor to Emperor Wu, took the lead role in arguing against private coinage and in support of government monopoly.  Meanwhile, more than 60 Confucian scholars (literati) from across China made the case for monetary freedom as the best way to provide sound coinage.

In his argument against monetary freedom, Sang Hongyang contended: “If the currency system is unified under the emperor’s control, the people will not serve two masters [the state and the market].  If coin issues from the ruler, the people will have no doubts about whether it is genuine or not.”[6]

The literati, who favored economic freedom, as opposed to the interventionist policies initiated by Emperor Wu, disputed that argument:

In high antiquity, numerous forms of currency existed, wealth circulated, and the people were happy.  Later, when the old types of currency were replaced with silver coins inscribed with tortoises and dragons, the people became deeply suspicious of the new coins. The more often the currency system changes, the more suspicious the people become.

Subsequently, all the old currencies circulating throughout the realm were demonetized and sole authority to mint coin was vested in the Three Officers of the Intendancy of Natural Resources. Officials and artisans alike steal from the profits of the mint. Moreover, they fail to ensure that coins are made to exact standards; some coins are too thin or too thick, too heavy or too light. Farmers are not expert at perceiving the qualitative differences between different coins. When comparing one coin to another, they trust the old coins but harbor suspicions about the new ones, without really knowing which is genuine and which is false. Merchants and shopkeepers pass off bad coins in exchange for good, taking in coins worth double their face value while fobbing off debased ones.  … If people must discriminate between different types of coin, then trade will be harmed, and consumers in particular will suffer.

Therefore, the sovereign provides for the people’s welfare by not restricting the use of natural resources … [and] he facilitates the use of currency by not prohibiting people from freely minting coins.[7]

It is clear from these passages that the literati based their case for monetary freedom on sound economics and the positive consequences competitive coinage was expected to have on human welfare.  As Richard von Glahn, an eminent historian of Chinese monetary history, notes,

The Confucian scholars arrayed in opposition to Emperor Wu’s policies of state intervention in the economy rejected the contention that a state monopoly on coinage is the best defense of sound money.  The market, they suggested, will compel private coiners to maintain proper standards of size, weight, and purity.  A state monopoly on coinage, in contrast, allowed the state to debase its own coin with impunity.[8]

They also thought that, from an ethical view point, a government monopoly is unjust, because it prevents free competition and allows officials to use their power to debase the currency for personal gain.

Although the literati had ethics, history, and logic on their side, they were unable to end the state monopoly on coinage.  Government officials’ inclination to abuse their power by manipulating the monetary system for fiscal purposes and their own profit was simply too strong. Consequently, “the court debate in 81 B.C. marked the last serious challenge to the principle of a [monopoly] sovereign currency.”[9]

A Catallactic View of Money

The proponents of competitive coinage held a catallactic (i.e., exchange) view of money. They held that money, as a medium of exchange, evolved from commodities that had an exchange value in barter economies. The literati argued: “The ancients had marketplaces but no coinage.  Everyone exchanged what they had for what they lacked … .  In later ages, tortoise and cowrie shells, gold, and bronze coins emerged as the media of exchange.”[10] They did so because those commodities had a nonmonetary value, were scarce enough and durable enough to serve as money, and engendered the people’s trust—not because the sovereign mandated their use as money. In Mengerian terms , they had wide “marketability” — not just personal use value.[11]

Knife-shaped money Spade-shaped money

The Confucian scholars who participated in the 81 B.C. debate over coinage no doubt were familiar with the writings of Sima Qian (c. 145–86 B.C.), the “Grand Historian,” who wrote: “When farmers, artisans, and merchants first began to exchange articles among themselves, manifold forms of currency — tortoise and cowrie shells, gold and bronze coin, and knife-shaped and spade-shaped money — came into being.”[12]

Sima Qian, the Grand Historian

According to von Glahn, Sima Qian and Confucian scholars “evoked an image of a spontaneous emergence of the market as a reproof of meddlesome rulers who manipulated the currency system for their own profit.”[13]  However, while Sima Qian criticized government intervention, he did not favor private coinage, which he thought could be disruptive.[14]

The catallactic (market-based) doctrine of the origin of money was not widely shared. Most authorities rejected it in favor of the long-held chartalist view that money originated from rulers who sought to improve the welfare of their people. As expressed in the Guanzi (a book by Guan Zhong, a 7th century B.C. statesman): “Tang [mythical founder of the Shang Dynasty] used the metal of Mount Zhuang, and Yu [founder of the Xia Dynasty] took the metal of Mount Li, to cast money, which they employed to redeem the children from bondage.”[15]

Lessons

A study of the monetary history of the Western Han Dynasty is instructive in showing the tension between state power and private initiative in meeting the demand for currency as the economy and population grow.  Government officials’ inclination to abuse their power when they have a monopoly on coinage is evident during the early Han Dynasty, as is the monetary chaos that can occur when there is a lack of a genuine rule of law.

The court debate in 81 B.C. shows that there was support for competitive coinage and that the literati from across China believed that, under just laws that were enforced, private mints could bring about monetary harmony. The debate also shed light on the importance of market forces in understanding the origin (or early history) of money. They thus give us another bit of evidence in the long-standing controversy over the state theory of money (chartalism) and the exchange (catallactic) theory of money, also known as “metallism”.[16]

_________________

[1] Nishijima Sadao, “The Economic and Social History of Former Han,” p. 586; in The Cambridge History of China: Volume 1, The Ch’in [Qin] and Han Empires, 221 B.C.–A.D. 220, edited by Denis Twichett and Michael Loewe, New York: Cambridge University Press, 1986.

The Han banliang was effectively a monetary unit, the actual metallic equivalent for which tended to change over time, while the zhu was a stable weight unit, equivalent to so many grams. Thus coins that bore a banliang value were given a nominal rating equal to12 zhu/banliang. The difference between the nominal and actual value was the difference between that rating and the coins actual weight in zhu.  For an excellent history of coinage during the Qin and Western Han Dynasties, see http://www.calgarycoin.com/reference/china/china2.htm.

[2] Nishijima, p. 586.

[3] Ibid.; see also Richard von Glahn, Fountain of Fortune: Money and Monetary Policy in China, 1000–1700, p. 35, Los Angeles: University of California Press, 1996.

[4] Nishijima, p. 587; Walter Scheidel, “The Monetary Systems of the Han and Roman Empires,” Princeton/Stanford Working Papers in Classics, Paper No. 110505 (February 2008), p. 8.

[5] Jia Yi’s commentary was preserved in the Hanshu (History of the Former Han) compiled by Ban Biao,  Ban Gu, and Ban Zhao. It appeared in 111 A.D.  See Scheidel, p. 8.

[6] Huan Kuan, Yantie lun, 4, “Cuobi,” p. 16; English translation in von Glahn, p. 36.

[7] Yantie lun, pp. 16–17; in von Glahn, pp. 36–37. “Currency” refers to so-called cash coins, not to paper currency.

[8] Von Glahn, Fountain of Fortune, p. 36.

[9] Ibid., p. 37.

[10] Yantie lun, p. 16.; in von Glahn, p. 27.

[11] See Carl Menger, Principles of Economics (1871), chap. 8, “The Theory of Money.” Translated by J. Dingwall and B. F. Hoselitz, with an introduction by Friedrich A. Hayek. New York: New York University Press, 1981.

[12] Sima Qian, Shiji (Records of the Grand Historian), 30.1442. Beijing ed.; von Glahn, p. 26.

[13] Von Glahn, p. 27.

[14] Ibid., p. 35.

[15] Guanzi, 75, “Shanquanshu,” III: 73 (Guoxue jiben congshu edition); in von Glahn, p. 26.  Accordingly, von Glahn (p. 28) notes: “By the late imperial times, the Guanzi version of the origin of money prevailed over catallactic theories.”

[16] On the case against chartalism (also known as cartelism), see Lawrence H. White, “Why the ‘State Theory of Money’ Doesn’t Explain the Coinage of Precious Metals,” Alt-M (August 24, 2017), and George Selgin, “‘Lord Keynes’ Contra White on the Beginnings of Coinage,” Alt-M (August 30, 2017).

[Cross-posted from Alt-M.org]

As Republicans flesh out details of their tax plan, one target for reform should be the “required minimum distribution” (RMD) rules for retirement accounts. The rules generally require that people begin withdrawing from their 401(k)s, 403(b)s, and traditional IRAs at age 70½ whether they need the cash or not.

The RMD rules are misguided, and policymakers should repeal them.

In writing this study on savings, I came across a Wall Street Journal piece arguing for liberalizing the RMD rules. Accountant Ed Slott says that the “government should raise the age for required minimum distributions to at least 80—if not eliminate it altogether.”

Here are Slott’s points:

  • People are living longer today than before, so the RMD rules should be updated “to more accurately reflect today’s increased longevity.”
  • Many people want to keep working, but “RMDs are particularly onerous for seniors who still have employment income and don’t need to tap savings for living expenses … No one should be forced to pull money out of an IRA while they are still working. When combined with a paycheck, these distributions can substantially increase taxable income … resulting in a higher overall tax bill that prematurely eats away at retirement balances.” The government should not discourage seniors from working, and the RMD rules can do that.
  • Policymakers who resist tax cuts would likely oppose RMD repeal. But Slott argues, “Uncle Sam won’t be denied his cut, even if the funds are never withdrawn during our lifetimes. The income-tax bill never goes away since there is no step-up in tax basis at death with IRAs or 401(k)s, as there is with nonqualified retirement funds and other assets. Whoever withdraws the taxable IRA or other retirement funds will pay the income tax whenever it is withdrawn.”
  • Slott notes that a round number such as 80 would make for simpler RMD rules than the current 70 ½. The half age thing is just one way that RMD rules are complex, as this WSJ article discusses. Full repeal of the RMD rules and penalties would be a great way to simplify the tax code.

Here is the most important issue: the RMD rules are anti-saving. By requiring withdrawals, they encourage consumption. Yet it is good for everyone when people save more. It increases financial security, reduces dependence on government, and generates larger pools of savings to support economic growth.

So repealing the RMD rules is a winner. Simpler tax code. Support for thrift, saving, and continued earning. Greater flexibility in retirement finances. More freedom with less government rules.

For a further discussion of the RMD rules see here and here.

For more on spurring savings with tax reform, see this report on Universal Savings Accounts.

Should judges consider evidence that’s inadmissible at trial when deciding whether to certify a class for class-action litigation? Particularly given the serious consequences of certification—most defendants settle class actions to avoid greater liability, and non-certified cases are often not worth pursuing—due process should require that evidence presented at the class-certification stage meet the same standards as that presented at trial.

One case out of California illustrates how allowing inadmissible evidence in any part of a legal proceeding not only violates the due-process rights of defendants and absent class members, but contradicts recent Supreme Court rulings and the Federal Rules of Civil Procedure. Maria del Carmen Pena is the lead plaintiff of a group of agricultural employees alleging that they were denied breaks due them under the governing law. Pena tried to gain class certification by presenting a spreadsheet summarizing work hours, but this evidence was inadmissible for trial purposes because it was created by her attorney.

Nevertheless, the district court certified the class and the U.S. Court of Appeals for the Ninth Circuit affirmed. Cato has now filed a brief supporting the employer’s cert. petition, urging the Supreme Court to address just that evidentiary issue.

If, as the Supreme Court recently said in Walmart Stores, Inc. v. Dukes (2011), “mere allegations” are insufficient to support certification, then it is also wrong to allow otherwise inadmissible evidence to provide the foundation for certification. Because the Court insisted in Dukes that “certification is proper only if the trial court is satisfied, after rigorous analysis, that the prerequisites of Rule 23(a) [laying out the requirements for class certification] have been satisfied,” lower courts should consider examinations of both fact and legal merits when determining if certification is appropriate.

Adhering to the 1974 decision of Eisen v. Carlisle, in which the Court held that, “for purposes of determining certification, allegations made in the complaint are taken as true and the merits of the claim are not considered,” many lower courts avoid considering any issue at the certification stage that may overlap with a question on the merits—and thus have avoided requiring that evidence used to certify a class meet the normal standards for admissibility.

But Dukes established that due process demands a rigorous inquiry (which sometimes may go beyond the bare pleadings) before certification. When courts accept inadmissible evidence to support class certification, the basic requirements of due process are compromised. Once certified, expenses and risks often compel settlements divorced from merit considerations; certification is, as the Eleventh Circuit has explained, “the whole ball game.”

Absent class members also suffer because it is the act of certification that determines whether they are bound by a settlement or adverse judgment that wipes out their individual claims. Unfortunately, confusion over the decades-old holding in Eisen lingers; a refusal to view it in light of the Court’s more recent decisions has resulted in an inconsistent application of evidentiary standards.

The Court should take up Taylor Farms v. Pena, dispel confusion among lower courts, and protect due-process rights by clarifying that evidence submitted at the class-certification stage must meet the same time-tested standards as evidence submitted at trial.

The Republican tax reform framework envisions cutting the federal corporate tax rate from 35 to 20 percent. There may be pressure in coming weeks to scale-back some of the framework’s pro-growth provisions in order to hit revenue targets, but policymakers should stick with their corporate rate target.

Various groups have modeled the revenue effects of proposed corporate rate cuts, but they generally do not account for the full dynamic effects of reform. We can get an idea of the full effects by looking at actual reforms abroad.

Sharp corporate tax rate cuts in Canada and Britain do not seem to have lost those governments much, if any, revenue. That is likely because companies responded with a wide range of real and paper changes that increased their reported income. The same would happen in the United States, which is why dropping our rate to 20 percent would probably not lose revenue over the long term.   

Here is some evidence. For 19 OECD countries with good rate and revenue data back to the 1960s, I calculated the average corporate tax rates and average corporate tax revenues as a share of GDP. The chart illustrates the Laffer Curve effect of chopping high tax rates on a mobile tax base—rates go down, the tax base expands, and revenues remain strong.

From 1985 to 2005, corporate tax revenues as a share of GDP soared even though the average tax rate across the 19 countries fell from 45 to 29 percent. Then there is a sharp drop in revenues in 2010, presumably because of the recession or slow growth in many countries at the time. But note that even in the poor economic climate of 2010, corporate tax revenues were the same or higher than in years prior to the 2000 boom year.

By 2015, revenues were rising again even as the average tax rate continued to fall to a new low of 24 percent. The average revenue for these countries in 2015 at 2.9 percent of GDP is below 2000 and 2005, but above all prior years when rates were much higher.

 

Data Notes:

The 19 countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Spain, Sweden, United Kingdom, and the United States.

OECD revenue data is here and rate data is here. I used the central government rates because I have not found a source for subnational rates prior to the OECD data, which goes back to 1981. As a result, the revenues (which include subnational) and the rates (which do not) are not an exact match, but that is not a big problem for illustrating trends over time.

A decade after the start of the 2007-2008 financial crisis, and seven years after the passage of Dodd-Frank, it seems both the legislative and executive branches may be making small steps toward financial regulatory reform. Earlier this month, the Treasury Department released the second in a series of reports on the U.S. financial sector, this one focused on the capital markets. And last week, the House Financial Services Committee passed a suite of bills aimed at reforming many areas of financial regulation. 

While passing out of committee is only the first of many steps toward legislation, it is encouraging that several of the House bills passed with either unanimous or bi-partisan support. Although the House notably passed the CHOICE Act earlier this year, a bill that would serve effectively as a repeal-and-replace template for Dodd-Frank, that bill passed on a strict party-line vote, with only Republicans voting in favor. Therefore the fact that many of the most recent bills had some support from Democrats may bode well. Of course, any action will require the Senate as well. There has not yet been a Senate answer to the House CHOICE Act, although there is still time in the year.

As for the Treasury report and recent suite of House bills, they’re a mixed bag. On the whole, they take up several recommendations that many of us have been pushing for a while now. For example, the Treasury report recommends that all companies considering an initial public offering (IPO) be permitted to file confidentially and “test the waters,” that is, sound out potential investment interest before pulling the trigger on a costly IPO. Right now, only companies below a certain size are permitted to do this. There has been widespread concern about how few IPOs have taken place in recent years, and how few public companies now exist. Given the fact that investment in privately-held companies is tightly restricted, if companies eschew the public capital markets, average investors lose out. This change is one that may entice more companies to go public, with little risk to either investors or the markets.

Other changes would be half-measures, better than the status quo but still short of the mark. For example, both the Treasury report and one of the House bills address the restrictions on investment in private companies. Under current securities laws, investment in private offerings is effectively limited to institutions and wealthy individuals, defined as those who either earn at least $200,000 per year or have at least $1 million in assets excluding their primary residences. Both the Treasury report and the House bill would expand the definition, including individuals who can show financial sophistication through licensure or other means.

Expanding the definition is certainly a start. As it stands, existing regulation has absurd results. For example, an investment advisor who advises wealthy clients can recommend investments she herself cannot make since current law deems her insufficiently sophisticated if she is not also wealthy. Expanding the definition to remedy this would at least make the results less ridiculous. But this change doesn’t go far enough. Why should there be any restriction on how a person can spend money he has actually in hand? After all, anyone can spend money on all kinds of silly purchases thankfully without government interference. But if a person would prefer to make an investment with that money, current regulation is patently paternalistic: if the person is not wealthy, he, for the most part, cannot use that money to invest in private companies. 

Another half-measure concerns a bill that would repeal the controversial Department of Labor rule governing broker advice for the sale of retirement investments. This rule, which would require those providing advice while selling certain investments to adhere to the very stringent “fiduciary duty” standard, has been criticized on two grounds. First, that the Department exceeded its authority, shoe-horning the rule into its limited jurisdiction over employer-sponsored retirement accounts. Second, that the rule itself would result not in better advice for moderate income Americans, but no advice as brokers abandon low-value accounts due to the increase in compliance costs the rule would impose. Repealing the rule is a good place to start. However, the bill passed by the House committee would only remove the rule from the Department of Labor’s (DOL) jurisdiction. While it does not expressly impose a fiduciary standard, as the DOL’s rule does, it still uses language suggesting a heightened duty of care. Brokers are in reality salespeople who give recommendations incidental to that role. There may be some argument for requiring that such brokers disclose the fact that they may be paid based on a commission structure, to ensure that investors are not confused about their role. But any rule must ensure that the compliance costs of a higher duty of care does not outweigh the benefits, or place inappropriate requirements on those in a sales role. Otherwise the result is likely to be reduced access to information for the people who need it most. In fact, some initial reports show that this has already begun to happen in some firms under the current DOL rule.

The efforts by Treasury and the House Financial Services Committee are welcome. It is encouraging that some of the House bills passed with considerable support from both political parties. Given the breathtaking scope of Dodd-Frank’s changes, and the harmful effects it has had on the economy, any change is welcome. But there is still much, much more that can and should be done. 

 

As any child of five can tell you, taking a toy away in exchange for the promise of some future benefit does not change the fact that the toy was taken in the first place. This is also true of real property: A token gift of potential unknown value in no way changes the character of the initial taking. Under Supreme Court precedent, when all value of real property is regulated away, a taking has occurred and just compensation is due.

Gordon and Molly Beyer found themselves in just such a situation when they were informed that the nine-acre island in the Florida Keys they bought in 1970 for $70,000, intending to build a retirement home, had been reclassified as a bird rookery, requiring them to leave it in its natural state. Their island was zoned for general use at the time of purchase, but various regulatory actions restricted use over the years until the Beyers were informed that their property rights had quite literally gone to the birds. In exchange for the loss, they were awarded 16 nonmonetary, rate of growth ordinance (ROGO) points that might be sold to another property owner who wished to develop their land.

The Beyers pursued administrative review and inverse-condemnation proceedings, where a state court ultimately determined that no uses other than primitive camping and picnicking were allowed on the property, but that no taking had occurred. This was because the Beyers had no reasonable, investment-backed expectations for use of their property and because the award of ROGO points satisfied any expectations they had (if this is confusing to you, you’re not alone).

A series of fruitless appeals followed until finally in 2016, the Florida Supreme Court declined to hear the case. The Beyers―through their estate’s representative; the litigation dragged on so long that they’ve both passed away―are now requesting that the Supreme Court take their case. Cato has filed an amicus brief* supporting their petition and urging the Court to provide desperately needed clarity to regulatory-takings jurisprudence.

We argue that the Beyers were subject to a total taking and deserve just compensation for that loss. Giving them ROGO points does not change that analysis. Additionally, when engaging in an ad hoc, factual inquiry, courts must follow the Supreme Court’s instructions to consider three factors—economic impact, interference with investment-backed expectations, and the nature of the government action—rather than inappropriately focusing on just one of the three. Courts must consider how and when property owners form “reasonable” investment-backed expectations rather than assuming that property restrictions (or lack thereof) at the time of purchase play no role in shaping expectations.

Regulatory-takings jurisprudence is a quagmire that Florida courts further contort to ensure that state authorities can regulate without the constitutional responsibility to provide just compensation for burdened property. If the Court fails to take this case, it is not just property owners who will suffer. Allowing the state-court ruling to stand—blessing theft of property without compensation—may work directly against the purpose of the regulations; rather than providing effective conservation, lack of compensation may create a race to develop.

Consider the Beyers’ situation: if they had known in 1970 that they would not be able to build their retirement home one day, their best course of action would have been to develop the island to its highest allowable limit. Refusing compensation in cases that clearly fall under the Supreme Court’s total-deprivation-of-use rule will merely provide incentives to investors who want to avoid the risk of total loss to develop as much as possible, as quickly as possible.

The Court will decide whether to take the case of Ganson v. City of Marathon later this fall.

*This is the first brief that Cato research fellow Trevor Burrus has officially signed. He’s contributed to more than 100 over the years, but only recently became a member of the bar. Now he can get the public credit he richly deserves.

This study explored why there is so much failure and mismanagement in the federal government. Federal agencies lack incentives for efficiency and quality, and the environment in some workplaces seems to breed unethical behavior. The government has also become far too large to manage effectively and for Congress to oversee adequately.

A new investigation by USA TODAY reveals a pattern of rather disgraceful mismanagement in the Department of Veterans Affairs:

… the VA—the nation’s largest employer of health care workers—has for years concealed mistakes and misdeeds by staff members entrusted with the care of veterans.

In some cases, agency managers do not report troubled practitioners to the National Practitioner Data Bank, making it easier for them to keep working with patients elsewhere. The agency also failed to ensure VA hospitals reported disciplined providers to state licensing boards.

In other cases, veterans’ hospitals signed secret settlement deals with dozens of doctors, nurses and health care workers that included promises to conceal serious mistakes—from inappropriate relationships and breakdowns in supervision to dangerous medical errors–even after forcing them out of the VA.

USA TODAY reviewed hundreds of confidential VA records, including about 230 secret settlement deals never before seen by the public … In at least 126 cases, the VA initially found the workers’ mistakes or misdeeds were so serious that they should be fired. In nearly three-quarters of those settlements, the VA agreed to purge negative records from personnel files or give neutral or positive references to prospective employers.

This study on privatization discussed how the “public” sector is often less transparent than the “private” sector. The VA is certainly not transparent:

The secret settlements obtained by USA TODAY represent a fraction of the problem doctors and other employees the VA has discovered over the past 10 years.

Each year, the agency fires hundreds of medical workers and pays out hundreds of malpractice claims.

The providers’ names remain secret. USA TODAY asked to inspect the records for thousands of those cases, but the VA blacked out or would not release the identities of the providers or the details of what took place.

You may think that we have “government of the people, by the people, for the people” in America, but it does not seem that way when federal agencies behave like this.

For more on federal government failure, see here, here, and here.

For ideas on reforming the VA, see here.

President Trump today signed an executive order that urges executive-branch agencies to take steps that could free millions of consumers from ObamaCare’s hidden taxes, bring transparency to that law, and give hundreds of millions of workers greater control over their earnings and health care decisions.

Background: ObamaCare’s Hidden Taxes

Since the Affordable Care Act took full effect in 2014, premiums in the individual market have more than doubled. The average cumulative increase is 105 percent, equivalent to average annual increases of 19 percent. Family premiums have increased 140 percent. In Alabama, Alaska, and Oklahoma, premiums have more than tripled. Analysts predict an average increase of 18 percent for 2018; premium increases will average 24 percent in Washington State and 45 percent in Florida. Maryland Insurance Commissioner Al Redmer predicts that if these trends persist, the Exchanges “will implode.”

ObamaCare’s skyrocketing premiums are not due to rising health care prices. They are due to the hidden taxes ObamaCare imposes. The law’s community-rating price controls increase premiums for the healthy in order to reduce premiums for the sick. The law also requires individuals and small employers to purchase a government-defined set of “essential health benefits,” including coverage (e.g., maternity care) that many consumers do not want.

The cost of ObamaCare’s hidden taxes is substantial. The Department of Health and Human Services commissioned (and then, oddly, suppressed) a study from the consulting firm McKinsey & Co. estimating their impact. McKinsey found ObamaCare’s essential health benefits mandate has increased premiums for 40-year-old males by up to 23 percent over four years. Even more startling, McKinsey found community rating has increased premiums for 40-year-old males by a further 98 percent to 274 percent since 2013. Community rating’s impact on premiums has been three to nine times greater than the overall trend in health care prices and spending. Community rating has also been the driving force behind ObamaCare’s narrow provider networks, which McKinsey found have largely or entirely erased the benefit from requiring consumers to purchase additional coverage.

Finally, insurers are fleeing the Exchanges, leaving consumers with little or no choice of carriers. At last count, 49 percent of counties and 2.7 million Exchange enrollees (29 percent) will have only one carrier in the Exchange. Exchange coverage is also eroding because ObamaCare literally penalizes insurers for providing high-quality coverage to the sick.

Short-Term Plans

Fortunately, Congress explicitly exempted one category of health-insurance products from ObamaCare’s crushing hidden taxes. While those provisions apply to individual health insurance coverage, the Public Health Service Act states, “The term ‘individual health insurance coverage’ means health insurance coverage offered to individuals in the individual market, but does not include short-term limited duration insurance.” Congress did not define “short-term limited duration insurance,” but HHS had traditionally defined them to be health plans with a term of less than 12 months and that were not guaranteed renewable.

After ObamaCare took full effect in 2014, the market for short-term health insurance policies grew by 50 percent as many consumers sought to avoid the law’s hidden taxes. In 2016, the Obama administration tried to cut off that escape hatch and force consumers to pay those hidden taxes by prohibiting short-term plans with terms that exceeded three months.

Today’s executive order directs executive-branch agencies to “consider allowing such insurance to cover longer periods and be renewed by the consumer.”

If the Trump administration allows insurers to offer guaranteed renewable short-term plans, it would be truly revolutionary. Consumers could avoid ObamaCare’s hidden taxes and low-quality coverage by purchasing relatively secure insurance that protects them against the long-term financial cost of illness, and that protects them against their premiums rising if they get sick. Premiums would be far lower than they are in the Exchanges. If the administration gets the regulations right, this change could even allow innovations that reduce the cost of health-insurance protection by a further 80 percent. In effect, the Trump administration could enact Sen. Ted Cruz’s (R-TX) compromise repeal-and-replace proposal via regulation.

Health Reimbursement Arrangements

The federal tax exclusion for employer-sponsored insurance effectively penalizes workers unless they surrender a sizeable chunk of their income to their employer and let their employer choose their health plan. Workers with family coverage lose control of an average $13,000. Overall, employers get to control $700 billion per year that rightfully belongs to their employees.

Health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement arrangements (HRAs) allow workers to control a portion of their health care dollars without penalty, but different rules apply to each. Only HSAs give workers true ownership of their health care dollars. But HRAs have the potential to allow workers who purchase health insurance on the individual market to avoid the effective tax penalty the federal government has traditionally levied on workers who purchase such coverage.

President Trump’s executive order directs executive-branch agencies “to increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup [i.e., individual-market] coverage.” Presumably, this means the administration is thinking of rolling back the Obama administration’s rule that employers could not use HRAs to make tax-free contributions to their employees’ individual-market premiums.

If the agencies get the rules right, they could reduce taxes by reducing the penalty the federal government imposes on workers who want to control their health care dollars, and free workers to purchase relatively secure coverage (e.g., on the short-term market) that does not disappear when they change jobs.

Association Health Plans

The federal government imposes different rules on coverage for individuals, small employers, and large employers. It also imposes different rules on employers who purchase coverage from an insurance company versus employers who “self-insure” by bearing that risk and basically running their own insurance company. As a rule, large employers and those that self-insure are subject to less regulation.

Association health plans, or AHPs, are a way for multiple individuals or employers to purchase insurance together. Trump’s executive order directs the Department of Labor to “consider proposing regulations or revising guidance, consistent with law, to expand access to health coverage by allowing more employers to form AHPs.” It appears the goal is to allow AHPs to let groups of small employers qualify as large employers (and therefore become exempt from federal regulations such as ObamaCare’s essential health benefits mandate) and to let them self-insure (and therefore become exempt from state health-insurance regulations).

The AHP changes the executive order envisions would not be as clear a win for consumers. They seek to build on existing government favoritism toward employer-sponsored health insurance, a type of coverage that has the curious feature that it disappears when you get sick and can’t work anymore. Employer-sponsored insurance therefore does not solve but instead exacerbates the problem of preexisting conditions. It also operates under community-rating price controls that are similar to those in ObamaCare, and that produce similar effects. (Oddly, while the Trump administration is trying to free consumers from community rating, it boasts that AHPs would have that feature.) If the AHP-related changes allow employers to avoid ObamaCare’s hidden taxes, that is a step in the right direction. But to the extent they would move even more authority for regulating health insurance from states to the federal government, that would be a step in the wrong direction.

And note: expanding AHPs is not what free-market advocates have in mind when we talk about allowing consumers and employers to purchase insurance across state lines. The idea is to allow employers and individuals to purchase insurance licensed and regulated by a state other than their own, not by the federal government.

Working within the Law, Not Undermining It

Despite all the hype on both sides, Trump’s executive order is not radical, nor would it undermine ObamaCare. Indeed, by itself the executive order does literally nothing. It merely indicates what some in the administration would like executive-branch agencies to do.

The changes this executive order envisions would not, as some suggest, be the most significant changes the Affordable Care Act has seen. All three branches of government have already altered the constraints imposed by the ACA to a greater extent than these changes would.

  • Congress and President Obama actually repealed parts of the ACA, including the “1099 tax” and the CLASS Act.  
  • Congress and President Obama curtailed the law’s tax cuts and subsidies by increasing premium-assistance-tax-credit clawbacks and limiting risk-corridor subsidies.
  • In NFIB v. Sebelius, the Supreme Court radically rewrote the ACA by making the Medicaid expansion optional.
  • President Obama unilaterally exempted people from the ACA’s health-insurance regulations when he created “grandmothered” plans.

The changes this executive order envisions would not go nearly so far. They would not alter the constraints imposed by the ACA or other federal statutes. They would work within those constraints.

It is therefore not accurate to claim these changes would somehow “undermine” ObamaCare. They would allow many consumers to avoid the Exchanges and ObamaCare’s hidden taxes—but then again, so did President Obama when he created “grandmothered” plans. They would make the costs of community rating, essential health benefits, and other hidden taxes more transparent—but so did “grandmothered” plans, as well as the steps President Obama took with Congress to increase premium-assistance-tax-credit clawbacks and to limit risk-corridor subsidies.

When healthy consumers flee the Exchanges, premiums could rise even faster than they already are, and the Exchanges could indeed collapse as Maryland’s insurance commissioner predicts. If so, we must understand that as a manifestation of ObamaCare’s unpopularity. If community rating and other provisions of the law were as popular as ObamaCare supporters claim, consumers would be lining up to pay the resulting hidden taxes. But they won’t–and even Democrats know it. So when Democrats object to reforms that would let consumers avoid ObamaCare’s hidden taxes, they are actually implicitly conceding that even the ObamaCare provisions that they claim are popular are actually unpopular. What Democrats appear to mean when they complain this executive order “undermines the law” is that it could undermine their illusions about ObamaCare’s popularity and sustainability. 

 

Yesterday, the President tweeted:

With all of the Fake News coming out of NBC and the Networks, at what point is it appropriate to challenge their License? Bad for country!

— Donald J. Trump (@realDonaldTrump) October 11, 2017

He then followed up with this:

Network news has become so partisan, distorted and fake that licenses must be challenged and, if appropriate, revoked. Not fair to public!

— Donald J. Trump (@realDonaldTrump) October 12, 2017

It is true that the U.S. Supreme Court has long upheld the awarding or withholding of broadcasting licenses by the Federal Communications Commission (FCC). In 1968, Richard Nixon thought the networks were hostile to his bid for the presidency. After his narrow victory, the Nixon administration contrived a plan to indirectly sanction the speech of the networks, as I noted in my Cato Policy Analysis on the Fairness Doctrine:

In December, after the [1968] election, Clay T. Whitehead, the head of the White House Office of Telecommunications Policy, delivered a speech in Indianapolis proposing changes in the Communications Act of 1934. When their licenses were up for renewal, local stations would be required to demonstrate that they were “substantially attuned to the needs and interests of the community” and had offered a reasonable opportunity for the “presentation of conflicting views on controversial issues.” Local station managers and network officials would be held responsible for “all programming, including the programs that come from the network.” Those who did not correct imbalances or bias in network political coverage would be “held fully accountable at license renewal time.” The policy would have bite. If a station could not demonstrate meaningful service to all elements of its community, the license should be taken away by the FCC. Along with that threat came two offers: the license period for stations would be extended, and challenges to license renewal would become harder to sustain.

The Nixon administration argued that the government should make the network news monopoly offer various viewpoints. They invoked that now defunct Fairness Doctrine, which required a balance of views on public issues from broadcast license-holders. The media struck back:

A Washington Post editorial captures the spirit of the harsh response that met Whitehead’s speech: “the administration is endangering not simply the independence of network news organizations, but the fundamental liberties of the citizens of this country as well.”…Robert G. Fichtenberg, chairman of the freedom of information committee of the American Society of Newspaper Editors, called the proposed licensing standards “one of the most ominous attacks yet on the people’s right to a free flow of information and views.”

The Nixon administration began to back off. In March 1973, they introduced legislation that would extend the term of a broadcasting license from three to five years. The other proposals mentioned at the start of Nixon’s first term “were not included in the proposed legislation nor were they mentioned again by the administration.”

More recently, in 2004, seventeen U.S. Senators bullied the Sinclair Broadcasting Group out of showing a documentary harshly critical of presidential candidate John Kerry. In this case, the media lost: Sinclair backed down for fear of its affiliates losing their licenses. The Kerry documentary went unseen.

President Trump’s tweets promise unconstitutional attacks on freedom of speech and of the press. Not for the first time, the tweets show illiberal passions dominating a man whose job demands rationality, discipline, and a respect for fundamental law. Absent those, President Trump might consider Richard Nixon’s failure to bring the press to heel. Perhaps prudence might serve as a substitute for absent virtues. 

In Sunday’s episode of “Reality-Show Presidency,” we found out what happens when the president and the chairman of the Senate Foreign Relations Committee “stop being polite… and start getting real.” After President Trump blasted him in a series of tweets early Sunday, Sen. Bob Corker (R-TN) shot back:

 

Senator Corker is hardly the only highly placed Republican to express grave doubts about Trump’s stability and competence. Daniel Drezner has assembled a list—now at 115 items and counting—of news stories in which the president’s own aides or political allies talk about him as if he’s a “toddler.”  But since Corker’s not running for reelection, he felt free to go on the record: Trump “concerns me,” Corker said in an interview later that day, “he would have to concern anyone who cares about our nation.” His recklessness and lack of emotional discipline could, Corker said, put us “on the path to World War III.”

In Corker’s account, it’s an open secret that our 45th president is a walking constitutional crisis. Is there a constitutional remedy?

The conventional wisdom says no: we have impeachment if the president turns out to be a crook, and the 25th Amendment if he falls into a coma—but for anything in between “felon” and “vegetable,” tough luck. When he introduced his article of impeachment against President Trump this summer, Rep. Brad Sherman (D-CA) explained that he’d focused on obstruction of justice because, sadly, “the Constitution does not provide for the removal of a President for impulsive, ignorant incompetence.”  

But when it comes to “the most powerful office in the world,” impulsive, ignorant incompetence can be as damaging as willful criminality. Did the Framers really leave us defenseless against it?

Actually, no: impeachment’s structure, purpose, and history suggest a remedy broad enough to protect the body politic from federal officers whose lack of stability and competence might cause serious harm. Contrary to the conventional wisdom, there’s no constitutional barrier to impeaching a president whose public conduct makes reasonable people worry about his access to nuclear weapons.

We tend to think of presidential impeachments in terms of the paradigmatic case: a corrupt, criminal president who abuses his power. Richard Nixon quit before he was actually impeached, but his case rightfully looms large in the public understanding of what the mechanism is for. As Cass Sunstein writes in his forthcoming book Impeachment: A Citizen’s Guide, “If a president uses the apparatus of government in an unlawful way, to compromise democratic processes and invade constitutional rights, we come to the heart of what the impeachment provision is all about.”

But that’s not all impeachment is about. During the Philadelphia Convention’s most extensive period of debate on the remedy’s purpose, James Madison declared it “indispensable that some provision should be made for defending the community against the incapacity, negligence, or perfidy of the Chief Magistrate.” Those faults might be survivable when they afflict individual legislators, Madison argued, because “the soundness of the remaining members would maintain the integrity and fidelity” of the branch as a whole. But “the Executive magistracy… was to be administered by a single man,” and “loss of capacity” there “might be fatal to the Republic.”

In practice, impeachment has never been limited to cases of “perfidy” alone. In its comprehensive report on the “Constitutional Grounds for Presidential Impeachment,” the Nixon-era House Judiciary Committee staff identified three categories of misconduct held to be impeachable offenses in American constitutional history: abuse of power, using one’s post for “personal gain,” and, most important here, “behaving in a manner grossly incompatible with the proper function and purpose of the office.” The House has the power to impeach, and the Senate to remove, a federal officer whose conduct “seriously undermine[s] public confidence in his ability to perform his official functions.”

One of our earliest impeachments—the first to result in a federal officer’s removal—fell into that category. It involved federal judge John Pickering, a man “of loose morals and intemperate habits,” per the charges against him. Pickering had committed no crime, but was removed by the Senate in 1804 for the “high misdemeanor” of showing up to work drunk and ranting like a maniac in court. Such conduct was “disgraceful to his own character as a judge, and degrading to the honor and dignity of the United States.”

Nor was Pickering the only federal official to lose his post for erratic behavior demonstrating unfitness for high office. Others include judges Mark Delahay (1873), “intoxicated off the bench as well as on the bench,” and George W. English (1926), whose bizarre conduct included, among other things, summoning “several state and local officials to appear before him in an imaginary case,” and haranguing them “in a loud, angry voice, using improper, profane, and indecent language.” “By his decisions and orders he inspired fear and distrust” Article V summed up, “to the scandal and disrepute of said court.”  

Do precedents from judicial impeachments count when it comes to the presidency, an office with vastly greater powers and responsibilities? No doubt the attempted removal of an elected president is more serious and potentially disruptive than impeachment of one of hundreds of federal judges. But the argument that presidents are singularly important cuts both ways: it’s far more dangerous to leave an unfit president in office than an unfit judge. Judges don’t have the federal law enforcement apparatus or the massive destructive capacity of the US military at their disposal.

In any event, there’s presidential precedent available as well, from the 1868 impeachment of Andrew Johnson, whom Princeton political scientist Keith Whittington has called “the pre-modern Trump.” The 10th article of impeachment against Johnson charged the president with “a high misdemeanor in office” based on a series of “intemperate, inflammatory, and scandalous harangues” he’d delivered in an 1866 speaking tour. Those speeches, according to Article X, were “peculiarly indecent and becoming in the Chief Magistrate” and brought his office “into contempt, ridicule, and disgrace.”

Johnson, who’d been blotto for his maiden speech as vice president, was supposedly sober during the “Swing Around the Circle” tour, during which he accused Congress of, among other things, “undertak[ing] to poison the minds of the American people” and having “substantially planned” a race riot in New Orleans that July.

Much of the offending rhetoric cited in Article X wouldn’t be considered particularly shocking today, but at the time, it was a radical departure from prevailing norms of presidential conduct. Gen. Ulysses S. Grant, dragged along on the tour, wrote to his wife that “I have never been so tired of anything before as I have been with the political stump speeches of Mr. Johnson. I look upon them as a national disgrace.”

Article X never came to a vote in the Senate, having been abandoned after failure to convict on what were believed to be the strongest charges against Johnson. Nor was it uncontroversial at the time.

But according to Rep. Benjamin Butler (R-MA), a key impeachment manager in the Johnson case, the backlash against the president’s speeches made impeachment possible: “they disgusted everybody.” As Jeffrey Tulis explained in his seminal work The Rhetorical Presidency, “Johnson’s popular rhetoric violated virtually all of the nineteenth-century norms” surrounding presidential popular communication: “he stands as the stark exception to general practice in that century, so demagogic in his appeals to the people” that he resembled “a parody of popular leadership.”

Johnson’s behavior was, you might say, “not normal,” and what is “not normal” can sometimes be impeachable. On a number of occasions, the House has deployed that “indispensable” remedy against federal officers who, by their acts, revealed defects of intellect, character, and temperament “grossly incompatible with the proper function and purpose of the office.” Deliberate, criminal abuse of power may be “the heart of impeachment,” but our constitutional history suggests that the remedy is broad enough to reach “impulsive, ignorant incompetence” in an extreme case—should one happen to crop up.

Through all the chatter about Emoluments and Russian plots, “not normal” is at the heart of the fears evoked by the Trump presidency. That recurring lament, heard even from Republican Senators, often involves the president’s Twitter feed, his outlet for tantrums about bad restaurant reviews, Saturday Night Live skits “so-called judges” who should be blamed for future terrorist attacks, and the United States’ nuclear-armed rivals

In public appearances, Trump is equally incontinent. Whether he’s addressing CIA officers in front of the “Memorial Wall” at Langley or a gaggle of Webelos at the National Boy Scout Jamboree in West Virginia, the president rants about “fake news,” blasts his political enemies, and brags about the size of his Inaugural crowd. It’s a strange feeling when you find yourself almost relieved he didn’t take the opportunity to tell 30,000 Boy Scouts: “check out sex tape.”

Fans of the president’s speechifying praise him for “shaking things up” and “telling it like it is”—as if it’s only hypocritical Beltway pieties he’s skewering. Just as often, Trump tramples the sort of tacit norms that separate us from banana republic status, like: a president shouldn’t tell active-duty military to “call those senators” on behalf of his agenda, suggest that his political opponents should be put in jail, or make off-the-cuff threats of nuclear annihilation.

Still, in the current debate over impeachment, the conventional wisdom reigns. Even those who desperately want to repeal and replace the Trump presidency are convinced removal would be constitutionally illegitimate unless it can be shown that the president is a crook or a certifiable loon. 

As a result, they’re engaged in an awkward effort to shoehorn Trump’s ignominies into either a criminal or a clinical model. Impeachment advocates, like Rep. Sherman, emphasize obstruction of justice and tales of Kremlin conspiracies. Supporters of the “25th Amendment Solution,” like Ross Douthat and Rep. Jamie Raskin (D-MD) strain to categorize Trump’s verbal incontinence as some sort of mental disorder.

My guess is, if you put Sherman, Douthat, Raskin et al on the couch for a word-association test (“say the first thing that comes to your mind…”), “Trump” might elicit responses like “crooked” or “insane,” but you’d probably get a lot more along the lines of “reckless,” “juvenile,” “incompetent,” “clownish”—and perhaps a few unprintable epithets.  

Secretary of State Rex Tillerson used an epithet of his own, if you believe the recent reports. The original NBC News story had Tillerson referring to his boss as a “moron” at a Pentagon meeting this summer; one of the reporters, later said that according to her source, it was actually  “[expletive deleted] moron.”

Like they say, there really is “a tweet for everything.” After the Tillerson story broke, internet sleuths went hunting, and someone dug up this gem from Trump’s feed, when he was subtweeting then-president Obama in October 2014.

 

 

The Framers are gathered at the Philadelphia Convention and one says: “I keep thinking we should include something in the Constitution in case the people elect a [expletive deleted] moron.”

Zing! But—just maybe—they did.

With television cameras rolling and Attorney General Jeff Sessions on hand in San Diego, the Coast Guard announced late last month that it had set a new record for cocaine seizures at sea—more than 455,000 pounds through September 11, topping last year’s record.  

At last we’ve turned the corner in the war on drugs. Right? 

Don’t bet on it. When Americans read about ever-larger drug busts, or when we watch television shows about drug enforcement, we get the impres­sion that drug enforcement agents are clever and innovative, always staying one step ahead of the sinister pushers. But in reality the drug distributors are the innovative ones—because they have a financial incentive to be. 

That’s why we keep reading the same story. 

In 2015 the Coast Guard announced the largest submarine drug bust ever, $181 million worth of cocaine. 

In 2001 a Coast Guard crew seized more than 13 tons of cocaine in what authorities called “the largest cocaine seizure in U.S. maritime history.” 

Back in 1998 Attorney General Janet Reno and Treasury Secretary Robert E. Rubin announced more than 100 indictments and the seizure of some $150 million from Mexican banks, representing a successful conclusion to “the largest, most comprehensive drug money launde­ring case in history.”

Indeed, it seems that not a week goes by without a report of  “one of the biggest drug busts in Utah’s history,” “Brooklyn’s biggest drug bust in history,” “one of the biggest drug busts in New York City history,” “the largest drug bust ever in the United States outside of Florida,” or—drum roll, please—”the largest drug bust in history.” Visit CBSNews.com for pictures of “17 massive drug busts.”

Law enforcement agents and journalists love those stories—they publicize the “success” of the war on drugs, and they offer the journalists great visuals and great numbers. Helpful police flacks always provide some sexy dollar figures—cocaine or heroin or meth with a street value of $3.3 million, $20 million, $73 million, $2 billion, $4 billion.

This has been going on forever. In a 1991 San Francisco case, billed as the biggest heroin bust ever, television cameras panned over 59 boxes containing 1,080 pounds of heroin—enough to supply each of the country’s estimated 500,000 heroin addicts for a month. Drug war officials said the street value of the heroin was $2.7 billion to $4 billion. 

It’s true that the drug warriors are interdicting more drugs at our borders all the time. Seizures of cocaine have risen dramatically since President Ronald Reagan revved up the drug war in the 1980s. But does that indicate success? More likely, it means that more drugs are crossing our borders, and officials are interdicting about the same percentage as before. The street prices of cocaine and heroin have been falling for years, a pretty good indication that plenty of both are still crossing our borders.

As Mark A. R. Kleiman, a leading drug policy scholar, said back in 1991 about the California raid, “For any shipment like this that you catch, you can assume that many more get through.” 

Kleiman has a point. Drug distributors have to stay one step ahead of the cops in order to stay in business. 

The Drug Enforcement Agency and other law enforcement organizations are bureaucra­cies, and like all bureaucracies they tend to be inefficient. Police officers and drug agents are paid whether they slow drug traffic or not. In fact, they may receive more funding if the drug problem gets worse. Drug dealers, on the other hand, are entrepre­neurs. If they outwit the officers, they make big money. That economic incentive spurs creativity, innovation, and effi­ciency. 

When the Supreme Court in 1989 approved surveil­lance flights over private property to search for marijuana fields, marijuana growers began moving indoors and under­ground. Every week  brings reports of innovations in drug smuggling: people who swallow heroin and carry it into the United States in their stomachs; drugs placed in the luggage of unaccompanied children on international flights; cocaine implanted in a pas­senge­r’s thighs; liquid cocaine; cocaine chemically modified to be odorless and pliable; tunnels, drones, and catapults to get across the U.S.-Mexican border—and those are just the methods police have discov­ered.

Around the world, drug enforcers face what Ethan Nadelmann of the Drug Policy Alliance calls the “push-down/pop-up factor”: push down drug production in one country, and it will pop up in another. Since the stepped-up drug war in the 1980s, drugs have flowed into the American market at different times from Turkey, Mexico, Burma, Afghanistan, Colombia, Peru, and other places. As long as Americans want to use drugs, and are willing to defy the law and pay high prices to do so, drug busts are futile. Other profit-seeking smugglers and dealers will always be ready to step in and take the place of those arrested. 

“We’ve cut off the head of the dragon,” said Robert Bender, head of the DEA’s San Francisco office, in announcing that heroin bust back in 1991. 

But in the decades since, the DEA has discovered that it had cut off the head, not of a dragon, but of a Hydra—the nine-headed monster in Greek mythology that couldn’t be killed because whenever one of its heads was cut off, two more grew to replace it. Is there any reason to hope that this latest Coast Guard triumph will be any different? 

Ohio Sen. Matt Huffman (R) has introduced anti-SLAPP legislation, titled the Ohio Citizen Participation Act, which includes novel protections of anonymous internet speech. If approved by the legislature, it will stand as a new gold standard for anti-SLAPP laws.

SLAPP suits, or Strategic Lawsuits Against Public Participation, refer to a category of vexatious libel or defamation lawsuits intended to chill unwanted speech by subjecting speakers to arduous and costly legal battles. In most cases, plaintiffs have little chance of succeeding on the merits of their claims, and instead hope to force a settlement or deter future criticism by using the legal process as a punishment in and of itself. In response to the censorious threat posed by these suits, twenty eight states, the District of Columbia, and Guam, have passed anti-SLAPP legislation.

Anti-SLAPP laws provide defendants with an expedited dismissal process, allowing them to forestall the often expensive and lengthy discovery process, and introduce extrinsic evidence demonstrating that the speech in question falls under the aegis of the anti-SLAPP statute. While not all statements protected by the First Amendment are shielded by anti-SLAPP laws, most are, and the protections guaranteed by the Citizen Participation Act are particularly expansive. After the introduction of the defendant’s evidence, the burden shifts to the accuser, who must provide admissible evidence that the defendants speech is unprotected, and his suit is likely to prevail. If the plaintiff succeeds, the suit continues as usual, if not, it is dismissed, and attorney’s fees are awarded to the defendant. In the absence of this expedited process, the authors of constitutionally protected statements routinely face years-long legal battles and attendant financial ruin before receiving merely pyric vindication.  

The establishment of these protections alone would be a great boon to the residents of Ohio, however, the Citizens Participation Act goes further in its protection of their liberties. Unlike other anti-SLAPP bills, it protects the privacy of anonymous and pseudonymous speakers by requiring ISPs to notify their customers of any unmasking requests, and allowing speakers to contest attempts to piece their veil of anonymity. Furthermore, when anonymous internet speakers are sued for alleged defamation or libel, they may take advantage of the expedited dismissal process without revealing their identities.

These provisions allow those in vulnerable or sensitive positions to fully exercise their First Amendment rights without fear of censure or reprisal. While anonymous speech has long played an important role in the American public discourse, the internet has simultaneously strengthened and weakened the ability of citizens to speak anonymously. It has all but eliminated the financial barriers to anonymous speech, however, internet communication relies on a group of private intermediaries who have little incentive to weather lawsuits to protect the anonymity of their users. The Ohio Citizen Participation Act ably remedies this situation by providing statutory basis for the contestation of unmasking requests, shielding both the speech and the anonymity of 21st century Silence Dogoods.

The Trump administration and congressional Republicans are refining their tax reform plan and ramping up their marketing efforts. It is a good plan so far, but comments by some GOP leaders suggest that reforms may veer off-course as more details emerge.

To keep policymakers focused on true reform, the table below summarizes five tax reform goals and the policy changes needed to achieve each.

Tax reform is sometimes portrayed as a balancing act with various goals in conflict. But the table indicates the opposite. By adopting a lower, flatter rate structure and a more neutral tax base, policymakers would further multiple objectives at once: growth, simplification, fairness, and the strengthening of support for limited government.

Tax Reform Goals

Goal  Policy Change Comments 1) Economic Growth Low flat rate.    

Neutral Base.

Lower, flatter tax-rate structures cause much less damage because distortions rise with the square of marginal tax rates. Also, higher earners respond more strongly in their working, investing, and avoidance activities than do lower earners.  Eliminating deductions, credits, and other breaks would create a more neutral tax base that allowed resources to flow to the highest-valued uses. Reforms should also reduce the income-tax bias against saving and investment. 2) Simplification Low flat rate.       

Neutral Base. 

A simpler rate structure and more uniform base without narrow breaks would reduce costs of tax administration, compliance, and enforcement, and it would make economic decisionmaking easier. 3) Fairness Low Flat Rate.     

Neutral Base. 

People differ on their views about fairness, but one approach would be for everyone to pay tax at the same rate above a large exemption amount.  Fairness also means that the government does not micromanage society with deductions and credits that favor some people over others. 4) Limited Government Low Flat Rate.      

Neutral Base Visibility. 

Taxes that are simple, visible, and spread equally best convey the large cost of government to voters. H. L. Mencken said, “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” Pressure groups are always demanding higher government spending, but that needs to be countered by taxes that common people feel good and hard. 5) Starve the Beast Slash Revenues.  Slashing revenues is a dubious way to shrink the government because deficits have not induced policymakers to cut spending. That said, tax reforms should aim for a revenue loss in official scoring to grease the skids for passage and to compensate for scoring methods that undervalue the dynamic benefits of reform.

 

For more on …

Principles of tax reform, here.

Advantages of consumption-based taxes, here.

Reforms to boost saving, here.

Reforming the corporate tax, here.

International tax competition, here.

President Trump’s travel ban proclamation states that the Department of Homeland Security (DHS) developed a global baseline for visa vetting that all governments must meet before their nationals can travel to the United States. The proclamation states that the president then applied DHS’s baseline to all countries and then restricted travel to all those that failed them. This explanation is untrue.

DHS created nine baseline criteria grouped into three categories (see the Appendix for a detailed explanation of each one). Here they are:

  • Category 1: Identity management: 1) Use of electronic passports embedded with data; 2) Reports lost and stolen passports; 3) Makes available upon request identity-related information.
  • Category 2: National security information: 4) Makes available terrorist and criminal information upon request; 5) Provides identity document exemplars; 6) Allows U.S. government’s receipt of information about passengers and crew traveling to the U.S.
  • Category 3: Risk indicators: 7) Is a known or potential terrorist safe haven; 8) Is a participant in the Visa Waiver Program that meets all of its requirements; and 9) Regularly fails to receive its nationals subject to final orders of removal from the U.S.

The proclamation states that the president then applied the DHS baseline to every country and banned all those—and only those—that fail its criteria. This never happened.

Despite statements to the contrary, the proclamation admits that the president did not ban all countries that failed the requirements and did ban others that met them. It applies higher-than-the-baseline criteria to the countries on the list, but never applies those more stringent criteria to other countries that remained off the list. The president’s proclamation also applies mitigating factors to avoid banning every failing country but then didn’t apply those new mitigating factors to the other banned countries. Even when applying all of these additional criteria, no set of failed or met factors can explain the proclamation’s choices of which countries to ban. The travel ban simply lacks an objective grounding.

The presidential proclamation did not apply the DHS baseline to every country.

The proclamation states that Iraq failed the baseline, but it did not ban Iraqis. It is the only country that it claims to have failed yet not banned. By itself, this proves that the baseline is not automatically applied, but we know that many other countries also failed.

At least 86 countries did not issue electronic passports in 2017, and many others had nationals still using older non-electronic passports. At least 16 countries never report lost or stolen passports and, as of mid-2014, about 150, including large countries China, India, and Indonesia, rarely did. In May 2017, 12 countries regularly refused to accept U.S. deportees—only one of which was a travel ban country—and on September 13, 2017, just before the travel ban came out, the U.S. sanctioned four non-travel ban countries for this reason. None of those four were travel ban countries. In 2017, 153 countries did not participate in the Visa Waiver Program, and as of December 2015, a third of participating countries did not meet its requirements. In 2016, the State Department identified 13 terrorist safe havens—only three made the list.

The proclamation tells us that some countries decided to share information or passport samples, but it makes no mention of countries complying with the above criteria. It tells us that DHS initially identified 16 failing countries, but then settled on nine and exempted Iraq, implying that seven countries moved from failing to passing. Even if all of these seven countries initially failed each criterion above and then corrected the failure, 75 non-travel ban countries would still not be issuing e-passports; six would still not be reporting passports; and four would still not be accepting deportees. The number of terrorist safe havens appears to have remained the same.

Either the proclamation misrepresents how the baseline applies to each country (i.e. countries don’t need to meet all of its requirements) or the proclamation misrepresents how the president applied the baseline (i.e. he didn’t apply it to each country).

The proclamation did not apply the DHS baseline to travel ban countries.

Not only do many of these countries meet most of the baseline requirements, the proclamation did not actually apply the baseline to them. The administration applied something else entirely. Here are a few examples:

  • Somalia issues e-passports but fails this requirement because “the United States and many other countries do not recognize it.” This is a much higher standard than the baseline.
  • Libya and Venezuela do not “regularly refuse to receive their nationals” whom the United States deports—which is why Immigration and Customs Enforcement does not list either as an offender in this regard—but we are told that they are “not fully cooperative with respect to receiving their nationals,” and so they are banned. Here, the baseline allows some refusals, but when the proclamation then applies this criterion, it requires total or full cooperation.
  • Chad is not a “terrorist safe haven,” according to the State Department, and actively partners with the United States against terrorists, but apparently still fails this requirement because terrorists “are active within Chad or in the surrounding region.” Under the DHS criteria, a country must be a terrorist safe haven or potential safe haven. But according to the proclamation, the mere presence of “active” terrorists nearby can ban nationals from a nation even if the terrorists are outside of the country. This is moving the goalposts to an entirely different field.
  • Somalia “satisfies the information-sharing requirements of the baseline” but its “lack of territorial control… compromises Somalia’s ability… to share.” In other words, Somalia shares what it can, but due to its limitation, it cannot collect the information that the United States wants. Thus, this is about capacity, not cooperation, in terrorist surveillance. This higher-than-baseline standard also appears to apply to Libya which “faces challenges” to sharing. Again, the ability to collect is substantially different than the baseline requirement to share upon request.
  • Iran is not a safe haven for terrorists, but the proclamation justifies its inclusion by stating that it is a State Sponsor of Terrorism. This is a very different standard than a “terrorist safe haven,” which requires “ungoverned, under-governed, or ill‑governed physical areas where terrorists are able to organize, plan, raise funds, communicate, recruit, train, transit, and operate in relative security.” Iran does not fit this description, yet the proclamation still found it to have failed the baseline.

The point here is that the proclamation did not actually apply the DHS standards. It applied wholly different requirements that are not part of the baseline.

The proclamation did not apply its own criteria to every non-travel ban country.

Applying the proclamation’s additional criteria to every country adds no more clarity. Indeed, if these more stringent requirements become part of the baseline then more countries would fail and be banned. Thus, the selection of these eight countries becomes even more arbitrary than it already is. Another 125 non-travel ban countries don’t have e-passports or have e-passports that many countries don’t recognize. Like Syria, Sudan is also a State Sponsor of Terrorism. Active terrorists “in the surrounding region” would add at least the 31 non-travel ban countries where Foreign Terrorist Organizations are based and probably a half dozen more. The same must also be true for the higher-than-baseline deportee acceptance requirement. 

Yet even if we apply these higher-than-baseline criteria, still not all of the travel ban countries fail them. Iran issues an internationally recognized electronic passport. North Korea has no terrorist groups in its vicinity. 

The proclamation did not apply his own criteria to every travel ban country.

The proclamation explains that it did apply the baseline to Iraq because Iraq meets four mitigating factors and that it did not ban any Venezuelans, except for a few bureaucrats, because they meet a fifth mitigating factor. Yet meeting any or even all of these mitigating factors does not mean that the country is off the list. Here are the mitigating factors:

  • One mitigating factor is having a “cooperative relationship” with the United States. This would apply to Chad, Libya, Yemen, and Somalia. The first three the proclamation itself describes as “counterterrorism partners,” and Somalia is a member of the U.S. Global Coalition to Defeat ISIS.
  • Another mitigating factor is having a “commitment to combating” ISIS. This factor would apply to six of the travel ban countries, all of the counterterrorism partners listed above as well as Syria and Iran, both of whom are committing significant resources to defeating ISIS in Syria and Iraq.
  • Another mitigating factor is the presence of U.S. troops. This would apply at least to Chad, Syria, Yemen, Libya, and Somalia, and possibly even Venezuela.
  • Another mitigating factor is the presence of U.S. diplomats. This would also apply to Chad and Venezuela.
  • Finally, the existence of “alternative sources of information” about Venezuelan travelers mitigates against their governments’ failure to meet the baseline. But this mitigating factor would also apply to some travelers from every other country. The fact that sources of information exist about some travelers and immigrants from these countries is precisely why there was not already a ban in place. Travelers face the burden of proof in the process. If someone cannot prove their eligibility, the government simply denies their application.

Every travel ban country meets one of the mitigating factors. Chad meets all of them. Libya, Yemen, and Somalia meet four of the five, every factor except the presence of U.S. diplomats. Syria meets three of the conditions. Iran and Venezuela meet two of them. Thus, we have no idea how these mitigating factors matter, when they are applied, or what they can compensate for.

No combination of factors explains the proclamation’s travel ban selections.

Not all travel ban countries fail all of the baseline criteria, and not all of the other non-banned countries meet the baseline criteria. The next most logical explanation is that some combination of factors explains the list. The proclamation hints at this possibility, asserting that these eight countries “have ‘inadequate’ identity-management protocols, information-sharing practices, and risk factors.” At a minimum, this means that each country on the list has failed at least one criterion in each of the three baseline categories. Yet once again, the proclamation then admits that this is not true.

It states that DHS “determined that Somalia satisfies the information-sharing requirements of the baseline and states that Venezuela met “the baseline standards identified,” except for those relating to public-safety and terrorism-related information sharing and risk criteria. In addition, Iran appears to meet the identity management requirements. It uses an electronic passport that is recognized by other countries, and according to INTERPOL, Iran’s cooperation with lost or stolen passports is “quite strong,” and that it is “able to get information from Iran” on criminals. North Korea and Chad don’t appear to meet any of the risk criteria (except for complying with the rules of the Visa Waiver Program, which at least according to the State Department only applies to VWP countries).

In the table below, I mark failed criteria with Ns and those that the countries meet with Ys. Each country has two columns, the left (P) for what’s in the proclamation itself, and the right (R) for what I was able to identify independently or where I have no reason to doubt the proclamation (see the Appendix for a full explanation). Question marks signify that either the proclamation is unclear or, in the case of the (R) column, the answer is unknown or uncertain. The blanks indicate that the proclamation is silent on the issue. See the annex for an explanation of each factor. “Total fails” in the last column refer to all countries in the world failing that criterion.

Other than not complying with the requirements of the Visa Waiver Program—which appears to only apply to VWP countries—there is no single factor that all eight countries fail. That’s true even if you focus only the statements that the proclamation itself makes or add in the higher-than-baseline requirements. Even if we combine all the terrorism requirements into one criterion, not all the countries on the list would fit that requirement. Introducing the mitigating factors only muddies the picture even further, as there is also no consistent application of those.

Table: Factors for Each Country Mentioned in the Travel Ban Proclamation

Sources: International Civil Aviation Organization; White House; U.S. Department of State; Immigration and Customs Enforcement; Department of Defense; U.S. Department of State; Customs and Border Protection; See Appendix

Conclusion

For countries on the list, and for any country wishing to remain off the list, it is vitally important that they understand which factors led to their inclusion or exclusion. If the United States is acting in good faith—seeking to change behavior as opposed to looking for an excuse to ban people—its criteria should be clearly explained and understood. The Iran nuclear deal, for example, has very precise requirements for Iran to avoid sanctions, down to the exact percentage of purity for its enriched uranium. This is very far from the case here.

No consistent combination of factors or mitigating factors triggers the ban. Not every country needs to meet the baseline requirements, and while certain mitigating factors can protect a country from the ban, meeting some or all of them doesn’t always result in exclusion. The travel ban simply lacks an objective standard of application. 

APPENDIX: TRAVEL BAN CRITERIA

Nine Primary Baseline Requirements

Category 1: “Identity management information”/“Integrity of documents”

1) “Use of electronic passports embedded with data”: The International Civil Aviation Organization is a United Nations agency responsible for tracking travel documents. According to the ICAO, 86 countries fail to issue an electronic passport embedded with data. Of the travel ban countries, Venezuela, Iran, Libya, and Somalia do issue electronic passports. This criterion lacks even a vague quantification aspect, so we cannot know what share of passports must possess these capabilities. For example, certain nationals of the United Kingdom still rely on non-electronic passports, despite the country now issuing such passports.

2) “Reports lost and stolen passports to the appropriate entities”: This criterion lacks a quantification aspect—what share of lost or stolen passports must be reported and how regularly must the country report? According to INTERPOL on whose database the U.S. government relies on for this information, 174 countries share this information, meaning that 16 INTERPOL member states and at least one other do not. (The U.S. admits travelers from 191 countries.) Of the 174 sharing countries, as of mid-2014, only a small minority were regularly contributing to the database, and the most populous countries in the world—China, India, and Indonesia, contribute few. In 2014, at least India did not participate at all.

In December 2015, DHS reported that all 38 Visa Waiver Program countries shared lost or stolen passport information. INTERPOL itself doesn’t report on individual member participation in a systematic way, but it did release data in 2011 to researchers, showing that 101 countries, including Syria, were using INTERPOL’s passport screening system in some fashion. In 2014, INTERPOL described Iran’s reporting compliance as “very strong.” Somalia is said to have met all information sharing requirements, and Venezuela is described as lacking only one of the information sharing requirements. Syria also appears to report lost or stolen passports. Libya also uses INTERPOL’s Stolen and Lost Travel Document database.

3) “Makes available upon request identity-related information not included in its passports”: There doesn’t appear to be any systematic reporting on this requirement, and again, there’s not even vague quantification aspect to this criterion. However, the order indicates that Somalia met all information sharing requirements and that Venezuela only failed one information sharing requirement. I assumed that the counterterrorism partner countries—Yemen, Libya, Chad—also share this information as Somalia does. Chad and Yemen utilize the U.S. Personal Identification Secure Comparison and Evaluation System (PISCES), which is a border control screening system that the U.S. created to aid information sharing between itself and countries with porous borders. At least 32 countries use PISCES.

Category 2: “National security and public-safety information”

4) “Makes available, directly or indirectly, known or suspected terrorist and criminal-history information upon request”: This requirement focuses on the willingness of a government to share information with the United States unlike secondary baseline criterion #2 below, which requires an ability to collect. We know this because Somalia is said to have met this requirement despite being said to be unable to share as much information as the U.S. would like. As far as criminal history information goes, all 192 INTERPOL member countries, including all travel ban countries except North Korea, share information regarding felons via “red notices” to INTERPOL that all members, including the United States, receive. This has been the case for all countries except Somalia since 2007. All 38 Visa Waiver Program countries have entered into agreements to share information directly with the U.S. Terrorist Screening Center, though more than a third of them were not doing so as of December 2015, according to DHS. DHS officials told the GAO, however, that some countries report this information through other means.

Other countries also share this information, but there does not appear to be systematic reporting on it. According to section 1(f) the proclamation, 11 countries agreed to share this information in response to U.S. requests. Libya does contribute to INTERPOL’s databases for criminals, terrorists, and war criminals. Somalia does as well. The proclamation asserts that six travel ban countries—Chad, Iran, Syria, Yemen, North Korea, and Venezuela—fail this requirement.

We know, however, that Yemen and Chad are misclassified because, as counterterrorism partners, they do share when they can, and both countries utilize the U.S. Personal Identification Secure Comparison and Evaluation System (PISCES), which the U.S. has funded and introduced specifically for watch-listing purposes. At least 32 countries use PISCES. According to INTERPOL, only 52 countries last year reported individuals to its foreign terrorist fighter database. The State Department’s embassy cable about the proclamation asks specifically about participation in this.

It’s also unclear whether Iran, Syria, and Venezuela never share this information. The U.S.-backed Iraqi government is coordinating with both Iran and Syria against ISIS, and Iran is helpful in sharing information about its passport abusers. But again, there’s not even vague quantification aspect to this criterion: how much information or how often.

5) “Provides passport and national-identity document exemplars”: The Department of Homeland Security’s Immigration and Customs Enforcement Forensic Laboratory accepts and analyzes foreign passport samples to identify fraudulent documents and alert immigration inspectors to them. Other than Visa Waiver Program countries, all of which do so, there does not appear to be systematic reporting on this criterion. According to section 1(f) the proclamation, 29 countries provided samples in response to the U.S. request. The proclamation itself does not describe any travel ban country as failing this requirement, except for perhaps North Korea.

6) “Impedes the United States Government’s receipt of information about passengers and crew traveling to the United States”: DHS vets the biographic information (19 data fields) of travelers to the United States using its Advance Passenger Information and Passenger Name Records system. Airlines, not governments, must provide this information to fly to the United States. Foreign governments may “impede” the delivery of this information through privacy laws or other measures that bar its transfer. The European Union entered into protracting negotiations with the United States on this point. However, according to DHS, by mid-2013, compliance was “near 100 percent.”

Category 3: “National security and public-safety risk assessment”/”National security risk indicators”

7) “Is a known or potential terrorist safe haven”: The idea of a “potential” terrorist safe haven is not a phrase that appears in any of the State Department’s Country Reports on Terrorism from which the idea of a “safe haven” originates. I considered any country a “potential safe haven” if the State Department at any time in the last decade has considered it a safe haven. In 2016, there were 13 “safe havens”: 1) Somalia, 2) Egypt, 3) Iraq, 4) Indonesia, 5) Malaysia, 6) the Philippines, 7) Lebanon, 8) Libya, 9) Yemen, 10) Afghanistan, 11) Pakistan, 12) Colombia, and 13) Venezuela. Additionally, Mali was a safe haven in 2015. No other country was removed from the list in the last five years. The State Sponsors of Terrorism are automatically not included on this list, and it appears that the reasons for Iraq’s inclusion—the existence of the Islamic State—would apply to Syria. The other two state sponsors, Sudan and Iran, do not meet the definition of a terrorist safe haven.

8) “Is a participant in the Visa Waiver Program that meets all of its requirements”: The United States must invite a country to participate in the Visa Waiver Program, which allows for visa-free travel to the United States. Only 38 countries out of 191 fulfill this requirement. As of December 2015, 13 or 14 countries didn’t fulfill the requirements of the program. The State Department cable implies that this requirement actually only applies to Visa Waiver Program countries, which would make more sense, but the proclamation itself doesn’t say that and, given how much else has changed, we can’t know for sure that it means that.

9) “Regularly fails to receive its nationals subject to final orders of removal from the United States”: According to Immigration and Customs Enforcement (ICE), 12 countries failed this requirement as of May 2017: Cuba, Burma, Cambodia, Eritrea, Guinea, Iran, Laos, Morocco, South Sudan, Vietnam, China, and Hong Kong. In September 2017, four countries—Eritrea, Cambodia, Guinea, and Sierra Leone—were sanctioned for it. In May, Sierra Leone was not on the list but was sanctioned in September. Iran is on the May 2017 list. It is the only travel ban country listed as uncooperative by ICE.

Six Higher-Than-Baseline Requirements

Category 1: Identity systems

1) “Issues an electronic passport the United States, and many other countries, recognize”: The proclamation states that Somalia fails this higher-than-baseline requirement. It is unclear how many countries would also fail this requirement. However, according to the ICAO, only 58 countries participated the ICAO’s Public Key Directory as of 2017, which “ensures that border authorities around the world can validate ePassports.” The State Department’s cable asks about the country’s use of this directory. Of the travel ban countries, only Iran is a participant.

Category 2: Security sharing

2) “Compromised ability… to share information about its nationals who pose criminal or terrorist risks”: The proclamation tells us that Somalia and Libya fail this higher-than-baseline requirement. As distinct from criterion #4 above, it focuses on the inability to collect and then share information, not the willingness to share it. It is too vague to assess in any particularly rigorous way. Of the travel ban countries, Libya, Chad, and Yemen are counterterrorism partners. This implies that although the proclamation describes Chad and Yemen as failing criterion #4 above, they actually fail this higher-than-baseline requirement.

Category 3: Other risks

3) “Designated as a state sponsor of terrorism”: Iran and Syria are said to have failed this unlisted requirement. Sudan is also a State Sponsor of Terrorism, but after being on prior versions, this new version of the travel ban removed it.

4) “Terrorist groups are active within [the country] or in the surrounding region”: Chad is said to have failed this higher-than-baseline requirement. This requirement is much broader than baseline criterion #7, regarding terrorist safe havens. This criterion appears to have been added by the president or White House officials because it does not appear in the State Department cable instructing U.S. embassies to request certain information from foreign governments related to the proclamation. It brings in activities of terrorists outside of the borders of the country. The terrorist groups listed as threats from Chad are neither based in Chad nor composed of Chadians.

According to the U.S. Department of State, terrorist groups in 2016 based their operations in 37 countries. Here they are in order of most groups to least groups: Pakistan, Afghanistan, Palestine, Lebanon, Syria, Libya, India, Iraq, Israel, Mali, Niger, Algeria, Burkina Faso, Colombia, Egypt, Indonesia, Iran, Nigeria, Philippines, Tunisia, Turkey, Bangladesh, Cameroon, Cote D’Ivoire, France, Greece, Ireland, Japan, Nepal, Peru, Russia, Somalia, Spain, Sri Lanka, United Kingdom, Venezuela, and Yemen. The first 22 countries have at least two terrorist organizations operating in their country. In addition, it mentions groups that sometimes threaten, cross into, operate on the borders of, or have in the past made attacks, or host individual leaders in Malaysia, Ivory Coast, Mauritania, Brazil, Ecuador, Qatar, and “European countries.” Of the travel ban countries, only North Korea is not on this list.

5) “Not fully cooperative with respect to receiving its nationals subject to final orders of removal from the United States”: Libya and Venezuela are said to have failed this higher-than-baseline requirement, which is more stringent than baseline criterion number #9 that stipulates that must “regularly” fail to respect removal orders, while this criterion requires “full” or complete compliance. The government does not report how many countries are not fully cooperative with deportees, but back in May 2016, DHS listed 23 countries as uncooperative—perhaps some of the 11 that dropped from the list by May 2017 are now not “fully” cooperative. It’s noteworthy that Sierra Leon was on the list in May 2016, off in May 2017, and then separately sanctioned in September 2017. The same was true for Libya, but Venezuela has not appeared on any of the lists. In any case, this more stringent category would sweep in several more non-travel ban countries.

6) “Lack of territorial control”: This unlisted criterion justifies the inclusion of Somalia. It is duplicative, however, because Somalia is a terrorist safe haven and part of the definition of a safe haven is ungoverned or under-governed areas. For this reason, this would also apply to all 12 of the known or potential terrorist safe havens listed in criterion #4. There are, however, several other areas in various countries around the world that are not under the control of the central government. However, for our purposes here, I will assume that any country that is not a potential or known safe haven has territorial control.

BONUS #7) “Fails to satisfy at least one key risk criterion”: The proclamation repeats the phrase that six countries fail “at least one key risk criterion” without specifying which one. “Risk criterion” relates only to the category #3 national security risk factors. It does not use this phrase for Somalia and North Korea, but it appears that they would each fail two of these criteria. It becomes even more difficult to figure out which criteria the other governments failed given the vague phrase “at least one”—meaning that it could be more than one—and the fact that we know that the order is not applying the risk factors as actually detailed in section 1(c).

The proclamation throws in additional uncertainty by saying that the security risks “include” the three listed, implying that there could be more. But the fact that the proclamation lists these three risks implies that it considers them to be the “key” risks. It would be very strange—but not out of character for this strange proclamation—to list non-key risks and not key ones. In any case, the State Department cable to embassies requesting information about each country for this proclamation lists slightly different versions of these three as the “three security risk indicators,” so this does appear to be comprehensive list (in the cable, the Visa Waiver Program requirement applies only to the Visa Waiver Program countries).

If it is true that this criterion doesn’t apply to non-Visa Waiver Program countries, then there are only two risk criteria that each country could fail. In this case, Chad, Libya, and Venezuela don’t fail any risk criteria, even though the proclamation claims that they do.

Five Mitigating Factors

1) “Commitment to combating the Islamic State of Iraq and Syria”: Section 1(g) of the proclamation explains that this factor mitigates the fact that Iraq failed the baseline, keeping it out of the ban. This phrase would also apply to Somalia and Chad, each of which are members of the U.S.-led Global Coalition to Defeat ISIS, as well as Syria and Iran. Syrian government forces are the primary opposition forces to ISIS in Syria, and according to the Pentagon, Iran is backing almost 100,000 troops in Iraq.

2) “Close cooperative relationship”: This factor also is also said to have mitigated the fact that Iraq failed the baseline. A total of 69 countries have defense agreements with the United States, though some of these include countries like Cuba and Venezuela. There are also 72 coalition partners in the U.S.-led Global Coalition to defeat ISIS. The State Department describes a large number of countries as counterterrorism partners. The United States certainly has “cooperative relationships” with travel ban governments in Chad, Libya, Yemen, and Somalia. The first three the order itself describe as “counterterrorism partners,” and Somalia is a member of the U.S. Global Coalition to Defeat ISIS as is Chad. Mitigating factor #3 further highlights the cooperation between these four governments and the United States. The United States does not have cooperative relationships with the other travel ban governments: North Korea, Iran, Syria, or Venezuela.

3) “Presence of United States forces”: This factor also mitigates the fact that Iraq failed the baseline. According to the Defense Department, the United States has military personnel in 178 countries, including six travel ban countries: Chad, Libya, Somalia, Venezuela, Syria, and Yemen. Only North Korea and Iran have no U.S. troops. The Pentagon has underreported the true numbers of U.S. troops in countries, and there are some 51,490 troops reported as occupying an “unknown” location, so identifying the exact number of troops in any particular country is difficult. But it lists 112 countries with double-digit personnel figures. For the purposes of the table below, I considered only these 112 as having a U.S. “military presence.” It also has military “bases” in 74 countries. These include bases in Libya, Iraq, Chad, Yemen, and Somalia.

  • In Chad, the U.S. has held annual military “exercises” in Chad since 2005, has conducted special operations in Chad for several years, and has a drone base there. About 2,000 U.S. special forces and Chadian soldiers conducted counterterrorism raids together in April 2017.
  • In Yemen, U.S. troops are on the ground fighting with the Yemeni government against militants there, and in August, they engaged in a joint operation against al Qaeda. U.S. soldiers were seriously wounded there in May, and in January, one died. From 2009 to 2017, the U.S. has carried out 214 drone attacks in Yemen.
  • The U.S. has involved itself militarily in Somalia for decades. In Somalia, U.S. forces have carried out 24 counterterrorism raids and 32 drone strikes. In April 2017, the Trump administration sent “dozens” of new soldiers there.
  • In Libya, U.S. forces were instrumental in the overthrow of Libyan dictator Muammar Qaddafi in 2011. U.S. forces are still carrying air strikes in the country and also carry out special operations on the ground. President Trump is considering increasing the ground presence.

4) “United States diplomatic presence”: This factor also mitigates the fact that Iraq failed the baseline. The United States also has a diplomatic presence in Chad and in Venezuela. The United States maintains limited or no diplomatic presence in Antigua and Barbuda; Dominica; Grenada; St. Kitts and Nevis; St. Lucia; St. Vincent and the Grenadines; Guinea-Bissau; Bhutan; North Korea; Iran; Yemen; Syria; Libya; Netherlands Antilles, Curaçao; and Belarus.

5) “Alternative sources for obtaining information to verify the citizenship and identity”: Once again, there is absolutely no doubt that this factor applies to all eight travel ban countries. As mentioned at the top, no one can receive a visa to travel to the United States without proving their identity and eligibility, so if no one from these countries could do so, there would already be a travel ban. This is why the basic premise of the travel ban is wrong.

The White House released a list of immigration priorities for Congress yesterday. These ideas would render a broken immigration system even more dysfunctional, and the president’s team justifies these expensive and unnecessary proposals with distortions and falsehoods. President Trump may never have reviewed them, so we should not necessarily view these ideas as set in stone, but they do demonstrate how far certain members of the administration are willing to go to undermine the growing bipartisan consensus on allowing young undocumented immigrants to stay.

Here are some problems with the priorities:

1) Not a single pro-immigrant plank: When the White House first announced that it would put together this list, it explicitly tied it to a deal with the Democrats on DACA. Yet these new principles fail to mention anything about DACA or the Dreamers, despite President Trump’s public endorsement of legalization for them and his personal efforts to obtain a deal on the issue. Legislative DACA—which is the only humane outcome for people who are Americans in every sense that matters—would increase tax revenue, grow the economy, and lower enforcement costs. Beyond DACA, the proposals also will not fix any of the infuriating and irrational aspects of America’s legal immigration system. Indeed, it will make them all worse.

2) An expensive ugly border wall: President Trump’s top priority is the “construction of a wall along the southern border of the United States.” This gigantic expenditure of taxpayer dollars will do little, if anything, to secure the already secure border. More importantly, while the proposal will not make Mexico pay for it, it would make legal immigrants pay for it through taxes on immigration applications. Beyond being exceptionally unfair, these new taxes—which the proposal erroneously calls “processing fees”—will make legal immigration and tourism more expensive, reducing foreign investments, expenditures, and work in the United States, all of which would harm the U.S. economy.

3) Criminalizing nonviolent civil offenses: The priorities would create a new misdemeanor offense for overstaying a visa. Immigration fraud is already a crime. This would criminalize the technical violation, regardless of the reason. It would also create new criminal penalties for filing “baseless” asylum applications and increase penalties for those who recross the border after a deportation.

Bills containing these ideas are already moving through Congress. They would gut much of the progress America has made on criminal justice reform over the last decade, finally decreasing the federal and state prison populations for the first time in decades. Immigration offenses already make up half of all federal criminal arrests. At any particular time, the federal government has 23,000 immigrants incarcerated for immigration offenses. The priorities would also allow state and local governments to pass their own enforcement laws, which—if they included criminal penalties under state law—would vastly expand America’s capacity to pointlessly lock up immigrants for these offenses. This idea could be what the drug war once was to America’s over-incarceration problem.

4) Penalties for visa overstays that will backfire: The priorities would bar all visa overstays from any immigration benefits for a certain period. Immigration law already does this for those who overstay their visas and then leave the country. In such cases, immigrants cannot apply for a visa to return for three years if they overstayed for 180 days or ten years if they overstayed for a year, and so are known as the three and ten-year bars. Those who cross the border illegally cannot apply for any benefits in the United States and are subject to the same restrictions if they leave. Rather than encourage lawful behavior, these laws backfired after Congress imposed them in 1996. When people broke the law, they didn’t seek to correct their mistakes because the law prohibited them from doing so. Instead, they stayed illegally. The likelihood of a new unauthorized immigrant leaving within one year after an initial trip to the United States dropped from about 50 percent in 1996 to about zero in 2008.

5) “Merit-based” immigration that doesn’t reward merit and punishes immigrant families and refugees: Congress should allow more high-skilled immigration, but the White House describes the following reforms as rewarding merit: reducing the number of refugees; eliminating the ability of U.S. citizens to sponsor parents, adult children, or siblings; and eliminating the diversity visa lottery. None of these proposals actually help skilled immigrants, whom America treats terribly.

Moreover, they do not propose increasing the availability of visas for high-skilled immigration. Instead, they propose—like the White House-endorsed RAISE Act—to replace the existing employer-sponsored visas with a “points system.” In other words, it would not increase skilled immigration. The “replacement” aspect of the RAISE Act would throw hundreds of thousands of skilled immigrants who have waited for many years out of line and require them to reapply under its nonsensical point system. Because many of the family-sponsored immigrants are skilled, the administration priorities would have enormously negative fiscal and economic impacts.

6) Unnecessarily cruel asylum policies: The administration proposes increasing the threshold even to simply apply for asylum. I have written before about Republican efforts to impose a high evidentiary standard for asylum seekers at the border or ports of entry. The administration blames America’s generous asylum system for a surge in asylum cases (rather than violence abroad and a worldwide refugee crisis). Yet in 1996, Congress adopted a much less harsh policy in response to a similar surge of asylum seekers, requiring them to state a plausible claim of asylum and then giving them time to gather evidence and prove their claims. This system weeded out people who obviously were not asylum seekers without risking turning back people to violence and persecution. Now the administration wants people to have to prove their claims before they even apply, and as soon as they arrive. This is simply impossible for people fleeing for their lives.

7) E-Verify’s electronic national ID system: E-Verify is the federal government’s attempt at a card-less national identification system. Some employers currently use it either voluntarily or under threat of sanction under state law to screen employees against federal databases for immigration status. But it contains no restrictions on its use and could be used to screen Americans participating in almost any activity. Gun sales seem like a likely target given that the law already prohibits unauthorized immigrants from possessing a firearm, but once it is mandated for gun sales, the argument against its use for housing, bank accounts, DMVs, etc. diminishes greatly and a comprehensive system of surveillance and government pre-approval is likely.

Other problems with E-Verify abound. System errors already have delayed or cost a half a million jobs for legal workers since 2006, and over the next decade, would delay or cost another 1.7 million jobs. Mandatory E-Verify would be one of the largest labor market regulations in the history of the United States, applying to every employer and worker in the United States. It would increase the costs to hiring and so lower overall employment at the margins. It has not been shown to decrease unemployment or reduce the incentive to immigrate illegally.

So many other aspects of the priorities deserve mention. Combining various proposals, the administration wants to 1) create a deportation force to round up large numbers of immigrants, 2) place these immigrants in expensive detention centers and deport them 3) without any due process to 4) countries where they are not even nationals. It wants the ability to deport legal immigrants whose convictions were vacated or who were never even convicted of a crime. It wants to deport unaccompanied child border crossers without a court hearing to countries where their parents may not even live.

All of these ideas are expensive and unnecessary. Illegal immigration has fallen to a trickle and increases in legal immigration would eliminate the remaining flow. These ideas would make nearly every portion of America’s immigration system less rational, less humane, and more costly. Congress should not even debate them and move immediately to consider real proposals to fix the system.

The Trump administration’s newest argument in favor of the travel ban is that foreigners from the eight banned countries are disproportionately crime prone. Indeed, the administration’s new travel ban proclamation references “criminal” risks or “public safety threats” from foreigners from those eight banned countries a total 34 times. However, the incarceration rate for people from the travel ban countries is below that of native-born Americans and foreign-born folks from countries that were not on the travel ban list.

The average incarceration rate for those born in the travel ban countries is 0.32 percent, almost half of the 0.59 percent incarceration rate for those born abroad in non-travel ban countries (Figure 1). There are some exceptions by nationality-at-birth as Somalis have a high incarceration rate just below that of native-born Americans and the Yemeni rate is right above that of the non-travel ban countries. The numbers of people from Chad and North Korea who are incarcerated or in the population as a whole are not reported.

The government has many categories of countries that are marked as terrorist threats. These categories of countries are divided by their level of sharing of immigration and travel security with the U.S. government, the operation of foreign terrorist organizations on their soil, whether they are sponsors of terrorism, whether they border terrorist safe havens, if they refuse to accept deportees, and other criteria. The incarceration rate for folks born in the countries in these categories varies dramatically (Figure 1). 

The foreign-born incarceration rate for nations without E-Passports is 0.82 percent—the worst showing of these categories. The foreign-born incarceration rate for those from countries that refuse deportees is 0.38 percent, barely above those of the travel ban countries. The foreign-born incarceration rate for state sponsors of terrorism, terrorist safe havens, nations that border countries with foreign terrorist organizations, and countries with foreign terrorist organizations operating on their soil are all below the average incarceration rate for the travel ban countries. Of the eight countries, only Yemen and Somalia have incarcerations above those categories of countries. 

Figure 1

Incarceration Rates by Country of Origin, Ages 18-54

 

Source: Authors’ analysis of the 2015 1-year American Community Survey data.

We calculated the figures from the 2015 1 year American Community Survey (ACS) sample from IPUMS. It focuses on people between the ages of 18 to 54 who are incarcerated in the United States, their incarceration rates, and their demographics. The ACS inmate data is reliable because it is ordinarily collected by or under the supervision of correctional institution administrators. These estimates include all foreign-born people who are incarcerated regardless of legal status.

One weakness of the ACS data is that we cannot help but over count the incarceration rate. That is because we can only look at those who are in group housing, a category that includes adult correctional facilities, mental health hospitals, homes for the handicapped, and elderly care institutions. We partly adjusted for this by narrowing the age range to 18-54 so as to exclude many inmates in mental health and retirement facilities. Still, this method over counts by about 800,000 prisoners. 

Even with the overcount of prisoners in adult correctional facilities, the incarceration rate for foreign-born people from the travel ban countries is below the average of non-travel ban countries, all foreign countries, countries that do not issue E-Passport, and those born in the United States. The incarceration rate of people born in the travel ban countries is not a compelling justification for the travel ban.

Special thanks to Michelangelo Landgrave for crunching most of the numbers that went into this blog post.

My colleague Pat Eddington has already taken a first pass at the newly unveiled legislation aimed at reforming Section 702, the controversial foreign intelligence surveillance authority that empowers warrantless surveillance of foreigners outside the United States.  While Pat focused primarily on the defects of the bill, I’d like to start by briefly surveying what I think it gets right, and then note a few other elements I was disappointed not to see included.  

Probably the two most salient features of the “USA Liberty Act” for civil libertarians are that it partially closes the so-called “backdoor search loophole” in 702, and that it codifies the recent end of Upstream “about” collection.  For those not steeped in electronic surveillance law, both of those will require a bit of explanation. 

The “backdoor search loophole” is explained well and in some detail here by the Brennan Center’s Liza Goitein, but here’s the essence of it:  Section 702 permits the warrantless targeting of foreign persons located outside the United States, subject to broad procedures for selecting targets and “minimizing” the information obtained.  With more than 100,000 persons targeted for surveillance annually, the scope of communications collection under this authority is, as one might expect, enormous, and includes messages the targeted individuals exchange with American citizens.  This provides a roundabout mechanism for obtaining the communications of Americans, which would normally require a particularized Fourth Amendment search warrant based upon establishing probable cause before a judge: That vast database of warrantlessly collected communications can now be queried using search terms associated with Americans, and their communications with foreign targets obtained. We know that the CIA and NSA query the 702 database for terms (such as e-mail addresses) linked to Americans thousands of times each year—and that the FBI does so even more frequently, though unlike their bretheren agencies, they have not provided any estimate of how often. This sets up a sort of constitutional shell game, where an authority sold as a counterterrorism and intelligence tool targeting foreigners with no Fourth Amendment rights can ultimately be used by ordinary criminal investigators to sift through the emails of citizens.  

The Liberty Act addresses that concern in part by requiring a warrant to access the contents of a U.S. person’s communication that was found by querying a search term linked to an American—again, an e-mail address being the simplest case.  This would, then, limit the ability of criminal investigators at the FBI to turn to 702 as a way of evading the need to establish probable cause for surveillance of their domestic targets.  I say it addresses the issue only “in part” for two reasons.  

First, the warrant requirement applies only to queries conducted for the purpose of obtaining evidence of a crime; warrantless queries on U.S. person–linked terms remain unencumbered if the purpose is to obtain foreign intelligence information.  Since these purposes often blur together in practice, this still leaves the government a fair amount of leeway in deciding which “purpose” to consider primary, at least for crimes with some plausible nexus to foreign intelligence.  Moreover, queries are often performed in the course of criminal investigations for a wide variety of reasons beyond seeking specific “evidence of a crime,” and the current language leaves ambiguous whether such searches are covered–though I am assuming that the intent was to do so.

But even when obtaining intelligence is clearly and genuinely the goal, the Foreign Intelligence Surveillance Act still requires a probable cause warrant to directly target an American, so 702 still provides a way around that requirement.  Many of the intelligence abuses of the 20th century involved nominal intelligence purposes. When the FBI spied illegally on domestic political adversaries in the 1960s and 70s, it rarely advertised its abuses by trying to make its surveillance the basis of a criminal prosecution, but rather used it for harassment, public embarrassment, or strategic advantage. Thus, closing that part of the loophole seems at least as important as restricting the repurposing of intelligence for criminal prosecutions.

Second, the warrant restriction applies when investigators access the contents of communications—not the communications metadata detailing when, how, with whom, and sometimes from what location a U.S. person is sending and recieving messages. While this is concerning, as metadata can often be extremely revealing, this exception is a closer call.  The case for permitting this is that it spares investigators the burden of expending valuable time and resources preparing a warrant application for communications that may have no bearing on their inquiry—which, in turn, may avoid further unnecessary intrusions on the targets.  It’s also true that, at least under current Supreme Court jurisprudence, metadata is generally not seen as subject to the Fourth Amendment’s warrant requirement.  Like many civil libertarians, I regard this as a profound error of both legal and technical reasoning, but as a practical matter, it may not make sense to impose a statutory warrant requirement on information that can, in fact, be obtained far more easily using other authorities: The likely effect would be to prompt the issuance of subpoenas or National Security Letters for the same metadata—and any other help by the same provider. Here a heightened standard short of “probable cause” may be an acceptable compromise pending a more comprehensive reevaluation of the protection due metadata, whether by Congress or the courts.

So much for backdoor searches.  The issue of “about” searches concerns the recently halted practice of scanning Internet traffic—including message content as well as headers—for the “selectors” tasked for surveillance.  The result was that messages could be swept up that were neither to nor from the target, but only mentioned—were “about”—the target of surveillance.  An unsurprising side effect of such collection was that it carried a much higher risk of intercepting wholly domestic communications, which are meant to be beyond the scope of 702.  Under pressure from the FISA court, the NSA finally halted such collection earlier this year.  The bill would codify that cessation, making clear that 702 is meant to authorize interception only of communications to which the target is a party.  This provision, however, has its own independent “sunset” clause, meaning that the limitation could be allowed to expire while the 702 authority generally remains in place. It would be better to make it a permanent restriction on the authority.

There’s an assortment of other procedural and transparency reforms I’ll try to survey in a follow up post next week, but those are the marquee changes. So what’s missing? New America’s Open Technology Institute has already put out a strong list of absent reforms worth looking at, which I’m largely in sympathy with, so I’ll save an in-the-weeds consideration for yet another follow-up post and focus on a few broad points.  

First, there’s little here that would tend to assuage foreigners’ discomfort with 702 surveillance—which means there’s still a risk that European courts will end up invalidating the Privacy Shield framework for international data transfers, with severe consequences for the ability of American firms to compete in European markets.  Foreign citizens may lack Fourth Amendment rights, but that doesn’t mean foreign govenrments are sanguine about the prospect of their citizens’ communications being indiscriminately scanned or collected.  One healthy way to narrow the scope of collection would be to limit the scope of “foreign intelligence purposes” for which communications can be intercepted.  The legal definition of “foreign intelligence” encompasses not just obvious matters like information relevant to counterespionage or counterterrorism, but also information relevant to the government’s conduct of foreign affairs—a catchall that can be stretched to cover a huge swath of ordinary foreign political and business activity.  If the public case for 702 authority was that it was necessary to monitor spies and terrorists, the statute should confine it to those bounds, especially if that is already its core use in practice.

Second, it’s not clear whether this addresses an issue alluded to obliquely by Sen. Ron Wyden, who hinted that 702 may be sweeping in wholly domestic communications.  I’ve speculated that one way this could occur is if a person who has spent time in the U.S., such as on a student visa, is targeted after leaving the country, making the archived messages they sent and received while here fair game.  More broadly, there’s no effort here to focus 702 on the problem it was initially pitched to the public as solving: Enabling the collection of strictly foreign-to-foreign communications that merely happen to transit through the United States (because, for instance, the foreign correspondents are using a U.S. email provider).  While there are post-collection or “backend” rules governing the use and dissemination of communications to which a U.S. person is a party, it would be preferable to have stronger up-front filtering requirements, leveraging data about user location the companies already possess to exclude such messages up front.

Third and finally, there are some good transparency measures here I’ll try to detail in a subsequent post, but still no requirement to estimate, even approximately, the number of Americans whose communications have been incidentally swept into NSA’s database.  The intelligence community repeatedly assured civil liberties groups that it was working on providing such an estimate, but then earlier this year, new Director of National Intelligence Dan Coats abruptly changed gears and declared the task infeasible.  Having discussed this with intelligence officials at some length, I’m persuaded that there are indeed legitimate challenges with generating a meaningful figure—and even, perhaps ironically, legitimate privacy concerns around how to do so.  But the public cannot meaningfully evaluate the privacy/security tradeoff implicit in this authority without at least a rough sense of the scale of its impact on citizens’ communications.

On the whole, it’s hard not to be disappointed in this draft, even though it would undoubtedly constitute a significant improvement over the current state of the law.  The list of what it fails to address is too long, and the areas it does cover, it covers spottily.  At a time when Republicans are loudly complaining about the perils of the “deep state,” one would have hoped it would be politically possible to go further than this.  

This afternoon, the U.S. Department of Commerce announced the preliminary results of its antidumping investigation in large civil aircraft from Canada, launched at the request of the Boeing Company in May. Commerce “calculated” dumping margins of 79.82 percent for Bombardier—the only Canadian aircraft producer in this market—which becomes the rate of duty that any U.S. purchaser would have to post with U.S. customs upon importation. This penalty comes on top of last week’s assessment of 219.63 percent subsidy margins in the companion countervailing duty case.

It goes without saying that neither Delta Airlines (the intended customer) nor any other U.S. carrier is going to pay a 300 percent tax to purchase these aircraft. Unless the U.S. International Trade Commission rules in February 2018 that Boeing is not threatened with material injury by these proposed Bombardier sales, the orders will go into effect (requiring approximately 300 percent duties, although those figures will change—but probably only slightly—between the Commerce preliminary and final), putting the U.S. market out of reach to Bombardier, and Bombardier aircraft out of reach to the U.S. carriers, who need these smaller planes (which Boeing doesn’t even produce) to serve less-travelled routes efficiently.

In a previous post, I described some of the methodological shenanigans that Commerce was likely to perform in this case. Confirmation of those and other capricious decisions will be possible after the official analysis memo is released.  But, if the ITC finds “threat of material injury” to Boeing by reason of these “unfair” prospective Bombardier sales, and AD and/or CVD orders are imposed, in all likelihood, there will be some major issues that Bombardier or Delta will want the U.S. Court of International Trade (or a NAFTA Chapter 19 panel) to review and determine whether Commerce acted beyond its authority.

Even if the ITC goes negative in February—finds no threat of injury—the market for the next 5 months will be in a state of suspended animation.  Uncertainty will rule.  Bombardier will not know how to proceed.  Should it build the aircraft in anticipation of exoneration?  Should it seek other markets? Will it be able to service its debt and keep its workforce? Delta and the other airlines will have to put off plans to modernize their fleets, while remaining unable to perform reliable cost-benefit analyses. The specter of a long adjudicative process offers only distant relief, with plenty of distortions and inefficiencies to endure in the interim.

The U.S. trade laws are a form of economic terrorism. They are deployed unexpectedly and with stealth; they cripple their intended targets, while generating enormous amounts of collateral damage to other companies, industries and jobs; and they cast a long shadow of uncertainty over the costs and conditions of operating in the market prospectively. 

Maybe the political and economic fallout from this case will bring scrutiny of these laws to the level they have long deserved.

Previous Posts on this Topic:

Viewers of Anthony Bourdain’s CNN series Parts Unknown last weekend were treated to the raconteur’s visit to the city-state of Singapore. Along with Bourdain’s usual noshing, imbibing, and bantering about the food culture with knowledgeable locals, he also made time for drinks with Donald Low to discuss the country’s economic and political culture. Among Singapore’s hallmarks according to Low, an Associate Dean at the Lee Kuan Yew School of Public Policy, was the desire to attract foreign capital and an “understanding that free trade is good for everyone.” 

Low’s remarks will not come as a surprise to readers of the Economic Freedom of the World annual report co-published by the Cato Institute, Canada’s Fraser Institute, and a number of other international think tanks. In the report’s 2017 edition Singapore earns a second-place ranking among the 159 jurisdictions examined for overall economic freedom, and a #1 ranking in the category of “Freedom to Trade Internationally” owing to its score of 9.25 (out of 10). Amazingly, this actually represents one of Singapore’s lower ratings since 1980, with the island country receiving a stunning 9.9 score in the category in 1990.

The results of Singapore’s free trade embrace have been spectacular, strongly contributing to its status as home to the world’s second-largest container port, stunning visual transformation, and dramatic rise in GDP per capita since earning its independence in 1965. 

Singapore’s success is, of course, multicausal, with free trade being just one of several key ingredients that have made the country the wealthy economic hub it is today. Such caveats aside, the country nonetheless stands as a rebuke to those who cling to protectionist policies and insist that such measures are necessary to ward off the alleged threat of foreign competition.

Late on Thursday afternoon, the Washington Post reported that President Trump plans to undermine American involvement in the Joint Comprehensive Plan of Action (JCPOA) by “decertifying” Iranian compliance with the deal and kicking the issue to congress.

This move is hardly unexpected: when he last certified Iranian compliance with the deal 90 days ago, President Trump reportedly told staff “he wants to be in a place to decertify 90 days from now and it’s their job to put him there.” Yet as that quote suggests, the President’s decision is not based in any reality-based assessment of the deal. Iran is in fact complying with the deal, a fact verified repeatedly by the International Atomic Energy Agency.

Many of Trump’s own advisors disagree with his decision. On Tuesday, Secretary of Defense James Mattis told Congress that he believed it was in the U.S. national interest to remain in the deal. They are undoubtedly aware that the President’s choice will most likely undermine or end U.S. participation in the nuclear deal, split us from our European allies, reduce the constraints on Iran’s nuclear program, and reduce America’s global credibility and negotiating power.

In a newly published Cato Policy Analysis, my colleague John Glaser and I examine the grounds for retaining the nuclear deal, and explore the alternatives that the Trump administration could decide to pursue. Our analysis suggests that the prospects for a better approach are bleak.

We examine four key alternatives to the JCPOA:

  1. Increased or Renewed Sanctions: Though the United States possesses an impressive and far-reaching sanctions infrastructure – including so-called ‘secondary sanctions’ – it is highly unlikely that new sanctions will force further concessions from Tehran. European allies will push back strongly against any new sanctions, and neither Russia nor China is likely to cooperate in creating a new sanctions regime when the United States is responsible for destroying the current deal.
  2. Challenging Iranian Influence in the Region: The United States could instead choose to push back against Iranian proxies across the Middle East, such as Hezbollah. But there are few groups or states which are practical partners for such a strategy, meaning the burden would fall most heavily on U.S. troops. The risk of blowback – endangering the lives of U.S. forces in Iraq, Syria and elsewhere – is a serious concern. This option also does nothing to prevent Iranian proliferation.
  3. Regime Change “from Within”: A popular idea among some anti-Iran hawks, this strategy would see the United States use sanctions and funding for pro-democracy groups inside Iran to destabilize the regime. The lack of any good group for support is one key problem with this strategy. Yet the bigger problem is simply that research has shown that regime change rarely works, and even when it does, it tends to produce worse outcomes.
  4. Direct Military Action: Targeted strikes on Iranian nuclear or military facilities is perhaps the most extreme option we examine. Put simply, there are no good options for a military strike on Iran; this was key to the Bush and Obama administration’s decisions to pursue diplomacy. Any military strike would likely escalate to a costly, large-scale war, further destabilizing the region and ironically most likely encouraging other states to seek a nuclear deterrent.

Contrary to the Trump administration’s statements, the nuclear deal with Iran is working. Though it has not solved – and was never intended to solve –every problem in the U.S.-Iranian relationship, the deal has halted Iranian proliferation and opened lines of communication and negotiation which can be exploited to defuse future tensions and improve relations over the long-term.

By decertifying Iran, President Trump is starting down a dangerous road towards a strategy which is far more uncertain, risky, and costly.

You can check out the whole report on alternatives to the JCPOA here.

 

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