On Baltimore’s Economic Plunge

After Monday’s acquittal of Lt. Brian Rice in the ongoing Freddie Gray saga, lead prosecutor Marilyn Mosby is batting a perfect 0-4. The three previous defendants were similarly acquitted, with two (and perhaps three) more officers to take the stand in the future. 

It appears that Marilyn Mosby’s prosecutions have been politically motivated and without foundation. The big problem, however, is that Freddie Gray has taken the focus off of Baltimore’s long and painful economic plunge – a plunge that can be laid squarely at the feet of Charm City’s long embrace of anti-market economic policies.

My colleague, Prof. Stephen J.K. Walters, and I wrote about this in the Investor’s Business Daily on April 22, 2016: “One Year After: Freddie Gray and ‘Structural Statism’.”

Here is some of what we wrote about how the path of structural statism has contributed to Baltimore’s poverty and associated problems.

“When Freddie Gray was born in 1989, Baltimore hosted 787,000 residents and 445,000 jobs. By the time his fatal injuries in police custody provoked riots last April, the city’s population had fallen by one fifth, to 623,000, and its job base had shrunk by one quarter, to 334,000.

Little wonder that throughout his life, Mr. Gray had never been legally employed. Nevertheless, friends and family considered him “a good provider,” according to The Baltimore Sun.

This was because he worked in the drug trade, which filled his city’s economic vacuum. An average day on the corner can yield take-home pay ten times that available in the low-skill warehousing or service jobs sometimes available to high-school dropouts like Gray.

The catch, of course, is that such rewards carry two great risks. The lesser of these is regular involvement with the justice system. Gray was arrested 18 times and served three years behind bars in his tragically brief life.

Far more dangerous is how competition works in illegal markets. When selling contraband, one does not pursue market share by advertising high quality or low prices. Sales are increased by acquiring territory from rivals, often violently.

For Baltimore’s drug cartels, the post-riot disequilibrium provided an opportunity for market expansion. Inevitably, each strategic assassination produced reprisals and collateral damage.

As a result, 2015 saw the highest homicide rate in Baltimore’s history, at 55 per 100,000 residents — over 13 times New York’s rate. This horrific suffering was concentrated in the African-American community: 93% of victims were black, of which 95% were male and 65% aged 18 to 34.

In Freddie Gray’s demographic, then, the homicide rate was 450 per 100,000 — higher than the peak U.S. combat death rates recorded in the wars in Iraq and Afghanistan.

The prevailing narrative is that all this is a by-product of structural racism and exemplifies a society “built on plunder” (according to the celebrated black radical Ta-Nehisi Coates). This is a myth.

It is not that racism doesn’t exist but rather that it is relatively constant. When explaining variations in economic and social outcomes, constants have little power.

It’s the application of destructive public policies that explain why neighborhoods like Gray’s Sandtown-Winchester are deprived. If one had to put a label on this malignant force, it might be structural statism: an addiction to market-unfriendly governmental approaches to every problem.”

Stay tuned: with several trials still to come, we’re bound to hear more about the Freddie Gray Sideshow, even as Baltimore’s plunge into poverty – and its causes – goes unnoticed.

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How to Save Refugees with U.S. Ties

Refugees have few options to flee persecution both quickly and legally. Only a tiny fraction are granted access to formal refugee programs, and while other legal immigration avenues are available, they have quotas that can trap people attempting to escape violence in massive backlogs. But Congress could solve this problem by exempting immigrants from the quotas when they are otherwise eligible for a visa and meet the definition of a refugee.

Why are refugees with U.S. ties forced to wait?

With the exception of immediate family of American citizens, the U.S. government places strict limits on the number of immigrant visas issued each year. When more people apply than visas are made available, the process becomes backlogged. Some applicants from more populous countries must wait a decade or more for a visa number to become available. Nearly 4.6 million people were waiting for employer- or family-sponsored visas as of November 2015.

Under the Refugee Act of 1980, refugees admitted under the formal refugee program are exempted from the normal worldwide limits on immigration. They are also exempted from almost all of the non-criminal requirements for entry—health, income, etc. These exemptions make sense if the goal is to save victims of violence.

Yet as soon as refugees apply for other immigration programs, where they actually meet the qualitative requirements to enter the United States, the caps are enforced against them, and they are forced to wait just like anyone else. This makes no sense. People who otherwise meet all of the criteria for admission to the United States should not die due to an arbitrary and inflexible quota.

The government does not estimate how many people in the visa lines are refugees, but certain countries from which the United States has received a large number of refugees have thousands of people waiting for a visa. The United States, for example, has accepted 39,000 refugees from Iran since 2005, yet another 53,000 Iranians are currently waiting overseas for a visa under the non-refugee programs. In Syria, we have accepted roughly 8,200 refugees since 2005 with another roughly 6,400 waiting in line for an immigrant visa as of fiscal year 2014.

Graph: Immigrant Visas Issued, Refugee Admissions, and Immigrant Visas Pending for Syria and Iran

Of course, the majority of these applicants are unlikely to be refugees, but those who are will get caught up in the backlog just the same—with possibly fatal consequences. (You can read here about the Syrian mother of Rep. Steve Russell’s friend who was killed waiting for a visa.) While Congress should increase the green card limits generally, a specific exemption could save thousands of refugees around the world from persecution, violence, and death.

Why can’t these refugees access the U.S. refugee program?

Under the Refugee Act, the president does have the authority to admit as many refugees of “special humanitarian concern to the United States” as he decides, so the president could simply increase the number of slots and allow refugees who are waiting for visas to apply directly to the program. Indeed, President Obama took both of these actions on behalf of Syrian refugees this fiscal year.

But this fails to solve the problem for several reasons. First, the refugee program is so slow, often taking more than two years to process a single person, that these refugees are just being pushed from one wait list to another. The regular immigration process is faster based on the reasonable rationale that people with proven U.S. ties present a lower potential security threat than others.

Here’s the much bigger problem: because refugees are entitled to so many federal benefits, the program has a de facto cap. The president can only admit as many refugees as Congress appropriates money to fund. Unless Congress increases funding, something it is unlikely to do, green card applicants only take away slots from refugees without any other option to immigrate to the United States.

The president could allow—as I have suggested elsewhere—some refugees to be admitted under the refugee program without benefits or with sponsors who reimburse the government. But admitting refugees who are already eligible under other family- or employer-based programs, which bar their access to benefits, would obtain essentially the same result, allowing the United States to invite in more refugees per dollar spent than under the formal U.S. refugee program.

Even if Congress did fund an increase in refugee expenditures, it would still not make sense to push people with other legal immigration options into the refugee system. The United States can help more people if it simply numerically exempts refugees with pending green cards—who have U.S. sponsors to support them if necessary—instead of sending them to the slower and more expensive refugee program.

How can Congress reform the law?

Congress could fix this issue with a simple change to the Immigration and Nationality Act (INA)—subsections (c) and (d) of section 201—to state that immigrants who are designated as refugees by the United Nations High Commissioner for Refugees or present proof that they meet the definition of a refugee (under section 101) shall not be included in the quota calculation for employer- or family-sponsored green card limits.

Typical complaints about refugees—that “we don’t know who they are”—shouldn’t apply here. By virtue of their connection to the United States, we do know who they are: they are a close relative of a U.S. resident or an employee of a U.S. company, and it makes little sense to force these people to suffer for an extra few years. After all, they are coming either way—let’s just make sure that it’s not in a body bag.

Arizona Gov. Ducey Cuts Off Many Public Sector Lobbyists

In search of some upbeat news this morning? Here you go:

“Arizona Gov. Doug Ducey issued an executive order [last month] that effectively ended all government contracts with lobbyists in Arizona. The order terminated contracts with professional lobbyists at all state agencies, boards and commissions.” In future, state agencies other than the judiciary and independently elected officials will need permission from the governor to hire lobbyists, and Ducey’s office said requests would be “heavily scrutinized” and require documentation that the hiring would be important for the “public health, safety and welfare of the state and the taxpayers.” A gubernatorial spokesman says outside lobbyists hired by professional licensing and other boards have often “pushed for burdensome regulations, and that these agencies lack sufficient reporting practices.” The move “comes nearly a decade after the Goldwater Institute — a conservative think-tank — recommended it.”

Reports the Arizona Republic: “Use of contract lobbyists varies state by state. According to the National Conference of State Legislatures, Utah bans agencies from using public money to pay contract lobbyists. Louisiana prohibits a state government entity or an employee from using state funds to lobby ‘any matter being considered by the legislature.’…In Virginia, officers, boards, institutions or agencies are prohibited from ‘employing lobbying for compensation,’ the NCSL website said.” And no less should be expected. Why should taxpayers be forced to pay so that those on the inside can persuade legislators to increase their powers and prerogatives yet further? [cross-posted and expanded from Overlawyered]

A Victory for Free Speech in the Criminal Justice System

Earlier this month, the California-based U.S. Court of Appeals for the Ninth Circuit upheld the First Amendment rights of Darren Chaker, siding with a position Cato took in the case. A lower-court judge revoked Chaker’s supervised release for violating a condition that he not “disparage or defame others on the internet.” Judge Alex Kozinski wrote for the court in a terse two-page opinion that reversed that nonsense.

Chaker’s wrote a blogpost that neither “qualif[ied] as harassment” nor as defamation. In that writing that caused all of the hullabaloo, he merely stated that former police investigator Leesa Fazal “was forced out of the Las Vegas Metro Police Department.” Chaker lacked the actual malice required to defame a public official, and a further restriction on his speech would be unconstitutional.

Cato—joined by the ACLU, the Marion B. Brechner First Amendment Project, the Electronic Frontier Foundation, and First Amendment Coalition—filed an amicus brief in the case. Whether or not what Chaker said was true, the First Amendment requires that restrictions on political speech, particularly that disparaging public officials, be subjected to the “highest levels of scrutiny.” An attack on a public official is, on its face, political speech. That it comes from a person being supervised by the Justice system should make no difference to the First Amendment—and for good reasons too.

As we noted in our previous write-up of the case, if the lower court’s decision were allowed to stand, it would have led to diabolical speech restrictions:

If the anti-disparagement provision of Chaker’s supervised release becomes widespread, it could easily stifle valuable speech by activists and others. For instance, in his Letter from the Birmingham Jail, Dr. Martin Luther King Jr. remarked that “[w]e are sadly mistaken if we feel that the election of Albert Boutwell as mayor will bring the millennium to Birmingham. While Mr. Boutwell is a much more gentle person than Mr. Connor, they are both segregationists, dedicated to maintenance of the status quo.” Had King been subject to the same conditions as Chaker, he might have been resentenced for some of his most powerful writings. Worse still, he might never have published at all. Imposing vague and broad restraints on speech leaves people like Darren Chaker guessing as to the limit of their rights and as to which leaders are “touchable” by the spoken and written word.

Chaker notes on his personal blog that he is “only one of 4,708,100 people are on probation or parole.” Millions of individuals’ political speech could have been swept up under the precedent set by the lower court’s outrageous decision.

The decision in Chaker v. United States is thus a victory for First Amendment advocates and political activists everywhere. It protects the rights of even the most downtrodden and implicitly applies the correct defamation standard to political speech aimed at public officials.

Tax Army Larger than U.S. Army

The Office of Management and Budget has released new data on the amount of time Americans spend complying with the federal tax code. Tax Foundation summarizes the data here.

Individuals and businesses spend 8.9 billion hours a year on federal tax paperwork, which is equivalent to 4.3 million people working full-time and year-round on this unproductive activity. That “tax army” is three times larger than our uniformed military of 1.4 million active duty service members.

The burden of tax paperwork can be expressed in dollars. Based on the average earnings of U.S. workers, Tax Foundation finds that federal tax paperwork imposes a $409 billion annual cost on the economy.

UK Trade Policy after Brexit

The Brexit vote last month came as a surprise to many people (including me), and there is still a lot of uncertainty – both legal and political – as to how the United Kingdom (UK) will proceed.  In order for Brexit to go forward, the UK will have to invoke Article 50 of the Lisbon Treaty, and then enter into a complex negotiation with the European Union to establish a new UK-EU economic relationship.

As things move ahead, I will have more to say on the UK-EU negotiations, but for now I wanted to weigh in on the UK’s trading relationship with the rest of the world.  There are questions about when the UK can actually begin any such trade negotiations, but putting that aside, I wanted to address two points:  (1) With whom should the UK negotiate? And (2) what should the UK negotiate about in these trade agreements?

My long answer is here, in a new Free Trade Bulletin (a shorter, op-ed version is here), but here’s a quick summary.

In terms of negotiating partners, I would ask these questions: (1) Which countries have the most to offer in terms of a substantial economic relationship; (2) with which countries would the negotiations be the smoothest; and (3) which countries would involve the least external controversy in a trade negotiation.  Weighing and balancing all of these factors, it seems to me that the best candidates for the initial set of trade negotiations would be Australia, Canada, New Zealand, and the United States; and perhaps developed countries such as South Korea and Japan.  

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Setting the Record Straight on the Coulson Education Productivity Study

A recent op-ed in the Times Herald took aim at a study by our dearly departed colleague, Andrew J. Coulson. In short, the author claimed that the study’s “flaw” was supposedly failing to take into account something that Andrew actually did take into account, as he explained in his study. Since Andrew is no longer available to address specious attacks on his research, it falls to his colleagues to do so. What follows is the letter that Rachel Reese, a research associate at the Cato Institute’s Center for Educational Freedom, and I submitted to the Times Herald:

In an op-ed urging support for a bond proposal for the Port Huron school district, Professor James Clatworthy took issue with a Cato Institute study by the late Andrew J. Coulson that found no correlation between spending and achievement. We take no position on the bond, but stand by our colleague’s research.

Despite a near tripling of the inflation-adjusted cost per pupil in public schools nationwide between 1972 and 2012, the performance of high school students on the SAT and National Assessment of Educational Progress has been flat. Coulson’s study compared state-level SAT scores, controlling for changing participation rates and student demographics, to the total, inflation-adjusted cost of a K-12 education, finding no discernable link between spending and performance.

Clatworthy erroneously claimed that Coulson’s findings did not account for SAT scores being periodically “mean centered,” meaning that the average scores were reset. In fact, contrary to Clatworth’s assertion that the test was recentered “multiple times” over the period of the study, the Educational Testing Service (ETS) only recentered the SAT once between 1972 and 2012 and Coulson used ETS’s own formula to compare the pre- and post-recentering data.

Ironically, Clatworthy also criticized Coulson for supporting policies empowering parents to choose schools, claiming that choice would “return us to the status of the 1700s.” But choice is clearly the right model for the 21st century, in which a quickly changing world will need a nimbly adapting education system. That requires choice and decentralized control, not a bureaucratic system that demands evermore money without measurably improving results.