Ukraine: The World’s Second-Highest Inflation

Venezuela has the dubious honor of registering the world’s highest inflation rate. According to my estimate, the annual implied inflation rate in Venezuela is 252%.

The only other country in which this rate is in triple digits is Ukraine, where the inflation rate is 111%. The only encouraging thing to say about Ukraine’s shocking figure is that it’s an improvement over my February 24th estimate of 272%—an estimate that attracted considerable attention because Matt O’Brien of the Washington Post understood my calculations and reported on them in the Post’s “Wonk blog.”

As a bailout has started to take shape in Ukraine, the dreadful inflation picture has “improved.” Since February 24th, the hryvnia has strengthened on the black market from 33.78 per U.S. dollar to 26.1 per U.S. dollar. That’s almost a 30% appreciation (see the accompanying chart). 

Hot Off the Press: April 2015 “Cato Trade” Newsletter

If you don’t yet subscribe to Cato Trade, the monthly newsletter of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, you can find the current edition here.  Highlighted in this month’s release is Simon Lester’s new paper, Expanding Trade in Medical Care through Telemedicine.  Additionally, you will find Cato trade scholars’ commentaries on the Export-Import Bank; the Trans-Pacific Partnership talks; Investor-State Dispute Settlement (ISDS); Trade Promotion Authority (TPA); and, other important matters of U.S. trade policy.

And here are the links to all previous monthly newsletters:

Money, Politics, and Policymaking

I will be taking part in a discussion of money, politics, and policymaking on April 8, 2015, at 7:30pm at Beth Sholom Congregation, 8231 Old York Road, Elkins Park, PA 19027.

Craig Holman of Public Citizen will also set out his views on this topic. The event will be moderated by Chris Satullo, Vice President, WHYY, and Co-founder/co-director, of the Penn Project for Civic Engagement.

The Bernard Wolfman Civil Discourse Project is sponsoring this event. You can register for the event and find out more about this worthy institution at www.CivilDiscourseProject.org. You might also register by calling 215.887.1342.

Craig and I will disagree about much on April 8, but we won’t be disagreeable, and I hope we say something you might not have heard about money and politics. I’m looking forward to participating, and I would love to see Cato folks there, whether you agree with me or not.

Housing and Wealth Inequality

American Nightmare is in some ways the most profound of the three books I have written for Cato. It covers a wide range of issues, including a detailed explanation of the 2008 financial crisis. But the overarching theme is that urban planning and zoning are best viewed as a form of economic warfare by the upper and middle classes against the working and lower classes. While that might not have been the original intent, to judge by the smug attitudes of the beneficiaries of such planning and zoning, they are perfectly happy with the results.

The book, therefore, was really about inequality, an issue that of course has been made popular and controversial by Thomas Piketty’s book Capital in the Twenty-First Century. Piketty’s thesis is that income inequality is necessarily rising because the returns to capital wealth are greater than overall economic growth, thus giving people one more reason to hate capitalists.

Last month, a paper by an MIT graduate student in economics named Matthew Rognlie, examined Piketty’s thesis in detail. Rognlie found that, contrary to Piketty, the returns on most kinds of wealth and capital have not been greater than overall economic growth, and therefore haven’t been contributing to income inequality. The one exception, Rognlie found, was housing.

President Obama Commutes 22 Sentences of Federal Prisoners

Yesterday, the Department of Justice announced that President Obama commuted the sentences of 22 federal prisoners, eight of whom were sentenced to spend the rest of their lives in prison. These commutations are in line with the administration’s criteria for reviewing certain clemency petitions.

Courtesy of the Clemency Project, the administration’s criteria to apply for the new clemency policy require the applicant to:

  • be serving a federal sentence;
  • be serving a sentence that, if imposed today, would be substantially shorter;
  • have a non-violent history with no significant ties to organized crime, gangs or cartels;
  • have served at least 10 years;
  • have no significant prior convictions; and
  • have demonstrated good conduct in prison.

Of course, these commutations are a welcomed development. But there are potentially thousands of inmates eligible under these criteria, as well as many others who have paid more than enough for their past misdeeds. Yesterday’s action doubled the number of granted petitions during Obama’s presidency, but these grants are not nearly enough.

Governors in the 50 states should institute their own clemency initiatives. Most of America’s incarcerated population is under state jurisdiction. The states house many more prisoners that should be brought back into society instead of  serving draconian prison sentences.

Kudos to the Clemency Project’s member organizations and 1,500 attorneys working pro bono to bring these and the many other inmates home. And congratulations to those 22 individuals who can be reunited with their friends and families as they look to rebuild their lives and rejoin society.

In a new Why Liberty? video released today, Families Against Mandatory Minimums’ founder (and Cato alumna) Julie Stewart talks about why she started her organization and the work that still needs to be done in sentencing reform.

Maine’s Recommitment to Work Requirements

Last week, the Associated Press reported that more than 9,000 food stamp recipients in Maine have been removed from the program because they failed to comply with the program’s work requirements. These requirements themselves are largely nothing new, but in the years since the recession, almost every state received a waiver exempting them from these provisions. By allowing the waiver to lapse, Maine will again enforce the requirement that able-bodied adults without dependents participate in some form of work activity. These rules only apply to a small fraction of beneficiaries, just 10 percent of Maine’s beneficiaries in 2013. A spokesman for the Maine Department of Health and Human Services revealed that the number of SNAP beneficiaries subject to the reinstated requirements has fallen from roughly 12,000 to 2,680. This is a steep reduction, but relatively small compared to the 250,000 people in the Supplemental Nutrition Assistance Program (SNAP) when the rule change went into effect.

Even before the recession, the percentage of Maine households in the program surged from 9.6 percent in 2002 to 12.3 percent in 2007. The recession caused the beneficiary rolls to swell even further, and they have continued to grow in the years since, in part due to the waiver. In 2013, 18 percent of Maine households participated in SNAP, third highest in the country. As the figure shows, since October 2010, Maine’s unemployment rate has fallen significantly, but the number of SNAP recipients remains elevated. Since the enforcement of the new rules began, these two measures have been more highly correlated.

Maine Unemployment Rate vs. SNAP Beneficiaries

 

Sources: Federal Reserve Bank of St. Louis, “Federal Reserve Economic Data,” MEUR_NBD20100901, BRME23M647NCEN; Office of Family Independence, “Geographic Distribution of Programs and Benefits,” Maine Department of Health and Human Services, June 2013-February 2015.

Innovating Within an Overregulated Alcohol Landscape: A #CatoDigital Discussion

April is Alcohol Awareness Month. What better time to take a close look at one of our nation’s most heavily regulated industries and the inventive ways entrepreneurs are innovating within this realm?

The ratification of the 21st Amendment may have officially ended this nation’s failed experiment with alcohol Prohibition, but the policy hangover has had lingering effects. From dry counties to bans on Sunday sales, the sale of alcohol is severely restricted in a confusing patchwork of local, state, and federal regulations. Homebrewing was not legal in all 50 states until 2013 (and homebrewers still cannot legally sell their product). Eighteen states maintain a state monopoly over the wholesaling or retailing of some or all categories of alcoholic beverages. But, even in this stifling economy, intrepid businesses are finding new ways to serve thirsty consumers.  

One real-world example of this is Klink, formerly known as DrinkDrivers, a rapidly growing start-up with a strong foothold in the nation’s capital. The app-based alcohol delivery company relies upon the mechanisms of the sharing economy—which has faced its own share of difficulties from overzealous regulators—to navigate the treacherous legal landscape of the American alcohol industry.

The concept behind Klink is a simple one: modern consumers want the ease of on-demand goods and services, deliverable at the touch of a button, wherever they are. Yet, Klink is not an alcohol provider in the traditional sense.

Unlike many other businesses in the sharing economy, Klink is stringent in its adherence to the laws and regulations governing alcohol sales. When you place an order, the company does not itself process your payments or deliver your alcohol. Instead, Klink plays the role of middleman, partnering with licensed liquor retailers, providing an easy-to-use online platform to connect alcohol providers with customers and occasionally running localized marketing campaigns.

Tomorrow at noon, I’ll be moderating a live-streamed lunchtime discussion featuring my colleague Matthew Feeney, who is Cato’s leading expert on the sharing economy; David Ozgo, the Distilled Spirits Council of the United States (DISCUS)’s Senior Vice President of Economic & Strategic Analysis; and Klink’s Founder and CEO, Jeffrey Nadel.

We’ll be discussing the ways in which Klink is navigating the treacherous regulatory waters of both the sharing economy and the alcohol industry, the regulatory hurdles standing in their way, and what this means for the future of tech innovation and alcohol sales. The panel will be live-streamed, and at-home viewers are encouraged to participate in the Twitter discussion—and tweet their question—using #CatoDigital.