Universal Savings Accounts (USAs) Introduced

I have proposed that America adopt a Canadian-British innovation to encourage greater household savings. Canada’s Tax Free Savings Accounts (TFSAs) and Britain’s Individual Savings Accounts (ISAs) are revolutionizing savings for moderate- and middle-income families in those countries.

Now Americans may get a chance to save in a similar tax-friendly vehicle. Senator Jeff Flake (R-AZ) and Representative David Brat (R-VA) are introducing companion Senate-House bills to create Universal Savings Accounts (USAs). The accounts are like supercharged Roth IRAs.

Here are some of the features of the Flake-Brat USAs:

  • Americans could save without the restrictions, confusion, and penalties associated with other savings accounts.
  • Anyone 18 years of age or older could open a USA, contribute up to $5,500 after-tax a year, and use the tax-free withdrawals for any purpose at any time.
  • Funds would be invested in bonds and equities, and grow tax-free.
  • USA accounts would allow individuals to decide what to use their savings for and when, without Congress micromanaging their choices, as they do with other accounts.

Flake and Brat cite data showing that only 53 percent of adults could currently cover an emergency expense of $400 without selling an asset or borrowing, and most Americans do not have the recommended three to six months of income in their current savings accounts.

As Ernest Christian and I have noted, USAs would help solve these sorts of problems for many Americans by giving them a savings account that maximized liquidity and flexibility, while zeroing out taxes that eat away at returns. Flake and Brat are right that their USA accounts would encourage more savings by Americans at all income levels.

House Speaker Paul Ryan is known to admire these sorts of accounts, and numerous Republican presidential candidates have pro-savings features in their tax plans. So if the next president is a Republican, we should have a good chance at making these pro-family, pro-growth savings accounts a reality.

Air Hostesses Then and Now

In the mid-1960s, being an air hostess was considered to be a glamorous job. Back then, however, air stewardesses were paid less than half of what they make today. They also had to endure much longer flights, since 1960s airplanes carried relatively little fuel and had to stop for refueling. That also meant that flight attendants had to serve more meals and, consequently, worked harder during the flight. Most importantly, the likelihood of dying on the job declined substantially. In 1965, there were 1,142 airplane fatalities per 250 million passengers carried worldwide. Only 761 people died out of over 3 billion people who flew in 2014.


Democracy Triumphs in Burma—If Military Will Yield Real Power

In 2010, Burma’s military junta–misnamed the State Peace and Development Council–began a controlled move toward limited democracy. The process was highly imperfect and there has been backsliding of late.

Nevertheless, national elections were held last week.

Nobel Laureate Aung San Suu Kyi’s National League for Democracy annihilated the regime’s Union Solidarity Development Party, winning 78 percent of the seats. Voters rejected many top military and USDP leaders.

The losers were surprised that the people gave them so little credit for the end of dictatorial rule. “All of our calculations were wrong,” said one. Yet this happened before.

After ruthlessly suppressing pro-democracy demonstrations, the military regime sought to improve its image with an election in 1990. The NLD similarly won about 80 percent of the legislative seats. The embarrassed junta promptly voided the results, suppressed protests, and kept Suu Kyi under house arrest for most of the last quarter century.

No one expects a similar response this time, however. The military made a far more calculated move toward democracy, writing the constitution to guarantee its influence. Moreover, after inviting in the West, the military could not easily return to isolation, the almost certain result of any electoral repudiation.

However, is the military prepared to allow reform to move forward?

Suu Kyi and the NLD face extraordinary challenges, made more difficult by people’s high expectations. People across Burma voted for The Lady, but she has never held office or participated in the give and take of politics.

She faces what remains an authoritarian state. Human Rights Watch recently warned that “the reform process has stalled.”

Much must be done. Civil and political freedoms must be further expanded. All members of parliament should be elected. Judges must be made independent and fair criminal procedures need to be established.

Moreover, power must be fully vested in civilians. Today, the Ministries of Defense, Border Affairs, and Home Affairs are formally under military control, while the army has seeded its personnel throughout the nominally civilian bureaucracy and judiciary.

Fundamental economic reform also is necessary. The Economic Freedom of the World index places Burma at a dismal 146 of 157 nations. Little progress has been made toward a market economy. The new government must make Burma attractive to domestic entrepreneurs and foreign investors alike.

Conflict continues among a number of ethnic groups. Peace requires allowing substantial self-government, creating trust after decades of military atrocities, and reintegrating ethnic and religious minorities in Burmese institutions.

Riots and massacres have continued in Rakhine State targeting the Muslim Rohingya, encouraged by radical Buddhist nationalists. The national government must protect vulnerable groups from organized violence.

Standing in the way of real change is the military-drafted constitution, which bars Suu Kyi from the presidency and requires a 75 percent vote in parliament to amend the constitution, while guaranteeing 25 percent of the seats to the military. Forging a relationship with the army while edging it aside will require extraordinary sensitivity.

Suu Kyi also must overcome her own limitations. Although a heroic figure who has suffered much for the cause of democracy, she has failed to delegate and develop a broad leadership within the NLD.

And her plan for governing sounds anything but inclusive: “The president will be told exactly what he can do. I make all the decisions, because I am the leader of the winning party.”

It has been more than a half century since the people of Burma have been able to rule themselves. They face tough questions of media freedom, political reform, economic liberalization, ethnic conflict, military accountability, and more.

As I argued on Forbes online: “For too long the Burmese people could only look to the future and hope for change. Today they have a chance to enjoy the opportunities that the rest of us take for granted. Hopefully now, after decades of conflict, the future finally has arrived for Burma.”

Do the Paris Attacks Authorize President Obama to Wage War under NATO’s Article 5?

At the Washington Post online, Ilya Somin claimed that the Paris attacks gave “the Obama administration an opportunity to legalize its previously unconstitutional war against ISIS.” He continues, though invoking Article 5 may not appeal to the Obama administration it “is nonetheless the only sound legal justification for continuing the war against ISIS, unless and until the president gets a new authorization from Congress.”

International legal scholar Julian Ku disagreed, noting “Article 9 of the North Atlantic Treaty states that ‘[t]his Treaty shall be ratified and its provisions carried out by the Parties in accordance with their respective constitutional processes.’ (emphasis added).”

In response to Ku, Somin wrote: “in the event of an enemy attack on the US itself, the president has the legal authority to use force of his own volition, without additional congressional authorization.” And Article 5 “gives him the same authority to use force as he would have in the event of an attack on the United States itself.” Indeed, Somin enthused that “Empowering the president to assist an ally under attack without having to seek congressional authorization…makes the US commitment to defend its European allies more credible and certain.”

I am struck by Somin’s enthusiasm for allowing Barack Obama to circumvent the Congress’s war-making authority, and take the United States to war in Syria on account of attacks in France.

This is the same Barack Obama, mind you, who a number of scholars have criticized for exceeding his Constitutional authority. It seems particularly odd, given the importance that the Founders invested in the principle of legislative supremacy over the executive with respect to the war powers – Madison famously said that it was the most important passage of the entire document – that anyone, but especially advocates of limited, constitutional government, would be quick to make an exception in this case.

Will these advocates of greater executive power be now similarly inclined to allow the president to usurp a number of the other legislative powers enumerated in the Constitution? Should Obama be allowed to levy taxes and fees? Or initiate massive new domestic spending programs, independent of the Congress? Say, to implement a health care plan?

That is doubtful. What we are seeing, instead, is a manifestation of the fear-driven politics of the post-9/11 era, which has created a worrisome double-standard: presidents supposedly have nearly unlimited authority to send Americans abroad to be killed or maimed, but they are severely constrained when acting here at home. This attitude is perhaps best exemplified by Bush-era lawyer John Yoo’s claim that, in light of the supposedly uniquely dangerous threats confronting us today, “we should not…adopt a warmaking process that contains a built-in presumption against the use of force abroad.”

Actually, we should. The supposed dangers are precisely that: we do not live in a uniquely dangerous world. Americans today, in particular, enjoy a measure of safety that our ancestors would envy, and that our contemporaries do envy. Given this state of affairs, we should be extremely reluctant to intervene in others’ disputes when our vital interests are not directly threatened. And we should never forget that efforts to create a strong executive abroad will inevitably lead to a strong one at home.

The United States should maintain military power capable of deterring attacks against the United States, and fighting and winning wars when deterrence fails. That military will also be large enough to assist other nations in need, but the authority to deploy forces in that way should never be pre-delegated to circumvent the Congress – and, by extension, the people – of the United States.

China and Taiwan Meet: A Brief Opportunity for U.S. to Promote Peace?

Chinese President Xi Jinping and Taiwanese President Ma Ying-jeou recently met in Singapore. Never before has Beijing treated the island’s government as an equal. It was a small step for peace, but the circle remains to be squared.

China insists that Taiwan is a wayward province, while the vast majority of Taiwanese feel no allegiance to the People’s Republic of China. If, as expected, Taiwan’s opposition presidential candidate Tsai Ing-wen wins in January, relations between the two states are likely to shift into reverse.

The island of Formosa, or Taiwan, separated from the mainland when the Kuomintang government relocated to Taipei following the triumph of the Chinese Communist Party. Taipei continues to promote a separate identity.

The PRC insists that the island should return to Beijing. China’s growing power has encouraged its leaders to press Taiwan to accept some form of “one country, two systems.”

The PRC has hoped that closer economic and cultural ties would move the two countries closer to union. Yet Taiwan is steadily moving away from the PRC. More than 80 percent of Taiwanese back independence—if it would not trigger Chinese military action.

Now the KMT is likely to lose the presidency and possibly the legislature. The opposition is unlikely to enter into serious negotiations leading to reunification.

Can Open Market Operations Save Puerto Rico?

With Puerto Rico’s continuing fiscal strains, some commentators have suggested that one avenue to give Puerto Rico breathing room would be the purchase of Puerto Rican municipal debt as part of Open Market Operations by the Federal Reserve.  The most prominent proponent of this plan is Rensselaer Tech Economics Professor Arturo Estrella.  His proposal can be found here.  The governance of Open Market Operations, which is the buying and selling of securities by the Federal Reserve System, is found in Section 14 of the Federal Reserve Act.

A threshold question is: does the debt of Puerto Rico qualify as allowable investments?  There are essentially three categories of allowable purchases under Section 14:  state/local government debt in the continental United States, foreign government (or agency) debt;  and U.S. Treasury or agency debt.  Professor Estrella spends considerable effort arguing that Puerto Rico is within the definition of “continental” United States and hence qualifies.  Unfortunately, his efforts are in vain as the Federal Reserve Act in Section 1 defines the “continental United States” to mean “the States of the United States and the District of Columbia” which obviously excludes territories like Puerto Rico.

How does Professor Estrella attempt to overcome the very clear language of the Federal Reserve Act?  He argues that “the preponderance of regulatory language in Federal Reserve regulations shows that Puerto Rico is treated in the same way as a state…”  The good professor offers plenty of examples, such as the Truth in Lending Act, carried out by the Fed’s Regulation Z.  What he fails to mention is that the cited regulations are not carried out pursuant to the Federal Reserve Act.  For instance, the Truth in Lending Act actually defines Puerto Rico as a state, which explains why Regulation Z as implemented does so.  Congress regularly chooses different definitions of the same words for different statutes, and it does so intentionally.  That, however, does not allow an agency to pick and choose.  The definitions contained in a statute govern the regulations promulgated under that statute only.

Syrian Refugees Don’t Pose a Serious Security Threat

Of the 859,629 refugees admitted from 2001 onwards, only three have been convicted of planning terrorist attacks on targets outside of the United States, and none was successfully carried out.  That is one terrorism-planning conviction for every 286,543 refugees that have been admitted.  To put that in perspective, about 1 in every 22,541 Americans committed murder in 2014.  The terrorist threat from Syrian refugees in the United States is hyperbolically over-exaggerated and we have very little to fear from them because the refugee vetting system is so thorough.  

The brutal terrorist attack in France last Friday reignited a debate over accepting refugees from Syria and the Middle East.  A Syrian who applied for asylum could have been one of the attackers, although his passport was a forgery.  (As of this writing, all identified attackers have been French or Belgian nationals.) Governors and presidential candidates have voiced opposition to accepting any Syrian refugees, while several bills in Congress could effectively end the program.

There are many differences between Europe’s vetting of asylum seekers from Syria and how the United States screens refugees.  The geographic distance between the United States and Syria allows our government to better vet those seeking to come here, while large numbers of Syrians who try to go to Europe are less carefully vetted.  A lax security situation there does not imply a lax security situation here.  

The Differences between Refugees and Asylum Seekers

Much of the confusion over the security threat posed by refugees is over the term “refugee” itself.  It’s not yet clear how many foreign attackers in Paris entered Europe, but one or more may have entered disguised as asylum seekers. 

In the United States, asylum seekers show up at U.S. borders and ask to stay must show they have a well-founded fear of persecution due to their race, religion, nationality, membership in a particular social group, or their political opinion if they return to their country of origin. There is an application and investigation process, and the government often detains the asylum seeker during that process. But the investigation and vetting of the asylum seeker often take place while he is allowed inside of the United States. Many of the Syrians and others who have entered Europe are asylum seekers who are vetted through similar, less stringent security screens.

Refugees are processed from a great distance away and are more thoroughly vetted than asylum seekers as a result.  In the United States, a refugee is somebody who is identified by the United Nations High Commissioner for Refugees (UNHCR) in a refugee camp.  UNHCR does the first round of security checks on the refugee according to international treaties to which the United States is a party and refers some of those who pass the initial checks to the U.S. Refugee Admissions Program (USRAP).  The referrals are then interviewed by a U.S. Citizenship and Immigration Services (USCIS) officer abroad.  The refugee must be outside the United States, be of special humanitarian concern to the government, demonstrate persecution or fear of persecution due to race, religion, nationality, political opinion, or membership in a particular social group, and must not be firmly resettled in another country.

Because the refugee is abroad while the U.S. government checks their background, potential terrorist links, and their claims to refugee status, the vetting is a lot more thorough and can take up to two years for non-Syrians.  For Syrians, the vetting can take about three years because of the heightened concerns over security. 

Asylum seekers, on the other hand, face rigorous checks, but they are conducted while the asylum seeker is inside of the United States and not always while he is in a detention center.  Syrians fleeing violence who come to the United States will be refugees, whereas many getting into Europe are asylum seekers.  This crucial distinction shows that the United States is in a far better security situation vis-à-vis Europe on any potential terrorist threat from Syrians.

The distinction between asylum seekers and refugees is usually lost when discussing the security threat from refugees.  The father of Boston Marathon bombers Tamerlan and Dzokhar Tsarnaev was granted asylum status, which conferred derivative asylum status on the children.  None of the Tsarnaevs were ever refugees. 

Both Tamerlan and Dzokhar were children when they were admitted through their parents’ asylum claims.  They did not adopt a radical interpretation of Islam or start plotting a terrorist attack until years after coming here.  Their case does not reveal flaws in the refugee vetting process. There were some other terrorist attacks in the early 1990s from applicants for asylum status, but none of them were actual refugees.