Archives: April, 2014

Gas Prices Are Pinching Again, and You Can Thank U.S. Trade Policy For Some of the Pain

The summer driving season is still weeks away, but rising U.S. gas prices are already back in the news.  Last week, the average price for regular gasoline at U.S. gas stations hit $3.6918 a gallon – the highest since March 22, 2013 and up 43 cents this year.  Much of this price depends on global supply and demand, but certainly not all of it.  In fact, two archaic, little-known U.S. policies – vigorously defended by the well-connected interest groups who benefit from them – restrict free trade in petroleum products and, as a result, force American consumers to pay considerably more at the pump.

First, the Jones Act - a 94-year-old law that requires all domestic seaborne trade to be shipped on U.S.-crewed, -owned, flagged and manufactured vessels – prevents cost-effective intrastate shipping of crude oil or refined products.  According to Bloomberg, there are only 13 ships that can legally move oil between U.S. ports, and these ships are “booked solid.”  As a result, abundant oil supplies in the Gulf Coast region cannot be shipped to other U.S. states with spare refinery capacity.  And, even when such vessels are available, the Jones Act makes intrastate crude shipping artificially expensive.  According to a 2012 report by the Financial Times, shipping U.S. crude from Texas to Philadelphia cost more than three times as much as shipping the same product on a foreign-flagged vessel to a Canadian refinery, even though the latter route is longer.

It doesn’t take an energy economist to see how the Jones Act’s byzantine protectionism leads to higher prices at the pump for American drivers.  According to one recent estimate, revoking the Jones Act would reduce U.S. gasoline prices by as much as 15 cents per gallon “by increasing the supply of ships able to shuttle the fuel between U.S. ports.”

Chinese Company 3-D Prints a House for $4,800

To paraphrase Lord Peter Bauer, the first recipient of the Milton Friedman prize, each child comes to this world not only with an empty belly, but also with a brain. Put differently, people are not parasites living off finite resources (though exception needs to be made in the case of most politicians and bureaucrats). They are discoverers and innovators, who look for ways to achieve more with less. They are the creators of wealth and drivers of human progress.

As a reminder of human ingenuity, consider that a Chinese company was able use a massive 3-D printer to print 10 houses in 24 hours at the cost of $4,800 per house.

Let’s put that in perspective. There are 30 million people in Afghanistan, or 7.5 million families of four. At a cost of $4,800 per house (expect the cost to drop significantly over the next few years), it would cost $36 billion to build all Afghani families a new house. The current foreign aid to Afghanistan is $6.7 billion, which means that – using foreign aid money alone – it would take 5.4 years to have each Afghani family housed in a brand new Chinese-made home.

Will it happen? Probably not, since most of the foreign aid money to Afghanistan is devoured by parasitic government officials.  

Washington Should Focus on Protecting Americans, Not Reassuring Allies

The United States is busy in the world, but no function seems more important than acting as the world’s universal comforter, constantly “reassuring” friends and allies no matter the location.

For instance, after Russia’s annexation of Crimea, the administration undertook what Secretary of State John Kerry termed “concrete steps to reassure our NATO allies.”  The Military Times reported that Washington dispatched aircraft “to reassure NATO partners that border Russia.”

The process continues.  The Wall Street Journal entitled an article “U.S. Tries to Help Ukraine, Reassure Allies Without Riling Russia.”  Gen. Philip Breedlove said the transatlantic alliance would maintain new security measures throughout the year “to assure our allies of our complete commitment.” 

Beijing’s assertiveness has resulted in another gaggle of friendly states clamoring for reassurance.  Defense Secretary Chuck Hagel visited Asia in early April; the Washington Post reported that he sought “to reassure allies in Asia amid questions about U.S. commitment.”  The president headed to Asia in mid-April, explained Voice of America, “in a bid to reassure allies in the region.” 

As I point out in my new Forbes online column:  “Washington’s obligation always is to give.  The U.S. not only is supposed to guarantee the security of assorted friends and allies.  It also must constantly reassure them.  Americans must not only be prepared to die for anyone and everyone who wants protection, but Americans must always and in every way demonstrate that willingness.”

It’s a bizarre policy.  First, the overriding responsibility of Washington officials is to safeguard America—its people, territory, constitutional liberties, and prosperity.  The Department of Defense is not a charity created to protect the world, subsidize the improvident, calm the nervous, or save the indifferent.

Second, America’s broader foreign policies should be directed at advancing the interests of Americans.  The national government is the agent of those who fund, staff, and support it, the American people.  Their welfare is primary.  Washington should look after their interests, not those of some imaginary “international community” that exists only in the minds of social engineers who desire to escape even minimal national restraints.

Moreover, the tendency of political organizations to live out Lord Acton’s famous warning that “power tends to corrupt and absolute power corrupts absolutely” requires the U.S. government to build limits into its own institutions and especially those beyond its borders.

The notion that America has an obligation to constantly “reassure” others is particularly pernicious when applied to the military.  Washington’s principal obligation is to protect the American people, not those who desire to be defended by the world’s greatest military power.

There are occasions when it is in America’s interest to aid other states, but only rarely.  Today Washington collects allies like most people accumulate Facebook friends.

Unfortunately, almost all U.S. allies expect to be defended by America rather than to help defend America.  Some contribute small troop contingents to Washington’s unnecessary wars elsewhere, such as in Iraq, but that is not worth promising to face down nuclear-armed Russia on their behalf.

One of the worst consequences of America’s defense guarantees is discouraging prosperous and populous states from defending themselves.  Europe has eight times Russia’s GDP—why is it relying on America at all? 

Similarly, why is Japan, a wealthy state which until recently had the world’s second largest economy, expecting Washington’s help to assert control over contested islands?  Why does South Korea, with 40 times the GDP of North Korea, presume the U.S. will forever maintain military forces in the peninsula?

Now Washington is sending Cabinet secretaries and military forces hither and yon to “reassure” these same nations that it will continue to subsidize their defense.  Why should governments in Asia and Europe inconvenience their peoples when Washington is willing to burden Americans to pay for everyone’s defense?

It is time for Washington to start reassuring Americans.

More Drinking Hours, Fewer Accidents

Does restricting access to alcohol reduce traffic accidents? Not necessarily, according to a recent study by economists from the University of Lancaster: 

Recent legislation liberalised closing times with the object of reducing social problems thought associated with drinking to “beat the clock.” Indeed, we show that one consequence of this liberalization was a decrease in traffic accidents. This decrease is concentrated heavily among younger drivers. Moreover, we provide evidence that the effect was most pronounced in the hours of the week directly affected by the liberalization; late nights and early mornings on weekends.

The authors also suggest that the restrictive closing times caused more traffic congestion (everyone left the pubs at the same time), increasing the scope for accidents.

So more freedom seems to generate better outcomes, presumably because most people use increased freedom sensibly.

BLM vs. the Nevada Rancher

The battle between Nevada rancher Cliven Bundy and the Bureau of Land Management (BLM) might be viewed as an overly aggressive federal bureaucracy enforcing misguided environmental regulations vs. an oppressed individual and his overly enthusiastic supporters with guns.

However, like the ongoing battles in California between farmers and environmentalists over water, the Nevada story is more complex than that. The issues are not divided neatly along left-right political lines. In both cases, the property rights issues are complicated, and the federal government has long subsidized the use of land and water resources in the West. The first step toward a permanent solution in both cases is to revive federalism. That is, to transfer federal assets to state governments and the private sector.

To understand the Nevada situation, it is useful to consider the history of federal land ownership in the West. From an essay by Randal O’Toole and myself:

“From the founding of the nation, the federal government began accumulating large tracts of land … As the federal government was accumulating land, it was also trying to unload it. The government’s general policy for more than a century was to sell or transfer its western lands to settlers, railroad companies, and state governments … With the rise of the Progressive movement at the turn of the 20th century, federal policy began to change toward land retention and land additions. Progressives believed that federal agencies would manage western lands better than states, businesses, or individuals.”

It turned out that the Progressives were dead wrong. In his book Public Lands and Private Rights, Robert H. Nelson describes how the Progressive ideas of scientific management and federal land planning have failed repeatedly. The last century of federal land management has been “filled with laws that had lofty purposes and achieved dismal results,” he concludes. He also notes that “federal ownership of vast areas of western land is an anomaly in the American system of private enterprise and decentralized government authority.” Federal policymakers should start fixing that anomaly.

The BLM faces a complex task in juggling all the competing uses of its timberlands, rangelands, minerals, watersheds, wildlife, water, and other resources located across a huge area. Livestock grazing, timber cutting, and mineral extraction all potentially conflict with wildlife habitat, watershed protection, and outdoor recreation.

The situation is made worse by BLM officials operating in a nonmarket environment. Essentially, they run a giant socialist enterprise in trying to centrally plan vast lands and resources. The decisions the agency makes are often infuriating to Westerners because they are made by unaccountable officials on the other side of the country.

The solution is to transfer most federal lands in Nevada to the State of Nevada. Charges for the use of the land—such as grazing fees—should be set in the marketplace. Where feasible, environmentally significant land should be owned and managed by private non-profit land trusts, as discussed here. But these sorts of decisions should be made by the Nevada legislature. Politicians in Washington lack the knowledge to make the crucial land-use decisions that affect the lives of people such as Cliven Bundy, and they are far too distracted with all the other issues on the federal agenda.

Freedom of Association in the Docket

I’ve got a piece just up at the Daily Caller, drawing on two brief stories earlier today that capture nicely the growing intolerance of the Left for people and groups holding views with which they disagree. One arises from a decision by Yale’s Social Justice Network (SJN) of Dwight Hall to deny membership to the school’s Choose Life at Yale (CLAY) group. The second concerns a proposed ban on judges affiliated with the Boy Scouts in California. Both illustrate how a bedrock American principle, freedom of association, is increasingly being gutted by the Left’s anti-discrimination agenda.

The Yale case is straightforward. As blogger Katherine Timpf writes, although CLAY was provisionally admitted to the network over the past year, during which its members did voluntary work with a local non-profit organization helping pregnant women, CLAY was voted out last week because, said the chair of the Yale chapter of the ACLU (itself a member), admitting CLAY would “divert funds away from groups that do important work pursuing actual social justice.”

That’s par for the course on today’s campuses. It’s training for the real world, as seen in the California case. Here, blogger Patrick Howley writes:

The California Supreme Court Advisory Committee on The Code of Judicial Ethics has proposed to classify the Boy Scouts as practicing “invidious discrimination” against gays, which would end the group’s exemption to anti-discriminatory ethics rules and would prohibit judges from being affiliated with the group.

Such a change in status could not be limited to the Boy Scouts, of course, but it’s a good start. That point was made in a letter to the committee from Catherine Short, legal director of the pro-life group Life Legal Defense Foundation. The Girl Scouts, numerous pro-life and religious groups, even the military practice “discrimination” of one kind or another, she wrote.

Years ago, when I was a scout leader as my son was growing up, I read a lengthy insert in the handbook meant for leaders. It concerned sexual exploitation and the need for scout leaders to take it seriously, prompted doubtless by experience. Given the nature of scouting activities, often isolated in the wild, and the need to assure both boys and their parents concerning the potential for abuse, even if the BSA had never taken an express position on sexual orientation, its decision to disallow gay scout leaders would not be gratuitous.

Go to the Daily Caller piece for a fuller discussion of the principles at stake here and a glimpse at how the distinction between private and public and the further distinction between reasonable and unreasonable discrimination are being undermined by a political agenda that has the freedom of private association as its ultimate target.

Federal Judge Says Thousands of Innocent Americans Behind Bars

Judge Jed Rakoff delivers a lecture.Federal Judge Jed Rakoff:

“The criminal justice system is nothing like you see on TV — it has become a system of plea bargaining,” Rakoff said.

Today, only 2 percent of cases in the federal system go to trial, and 4 percent of cases in the state system go before a jury. As a result, accepting a deal from prosecutors — despite one’s guilt or innocence — has become a common choice for individuals accused of a crime.

“Plea bargains have led many innocent people to take a deal,” Rakoff said. “People accused of crimes are often offered five years by prosecutors or face 20 to 30 years if they go to trial. … The prosecutor has the information, he has all the chips … and the defense lawyer has very, very little to work with. So it’s a system of prosecutor power and prosecutor discretion. I saw it in real life [as a criminal defense attorney], and I also know it in my work as a judge today” …

Until extraordinary action is taken, Rakoff said little will change.

“We have hundreds, or thousands, or even tens of thousands of innocent people who are in prison, right now, for crimes they never committed because they were coerced into pleading guilty. There’s got to be a way to limit this.”

For related Cato work, go here.