Business Is Booming in Gaziantep, but There Are Other Worries

By
Christopher A. Preble

Gaziantep, Turkey – Late yesterday, we traveled from Ankara to Gaziantep, a manufacturing and industrial city in southeastern Turkey, about 30 miles north of the Syrian border. 

It was an eye-opening experience. The city itself is modern and booming. It has several major universities, and is a central hub for commerce and trade. New construction was visible everywhere. The airport was modest, but the flights to and from Gaziantep were full. 
 
The best parts of the trip were the meetings with individual Turks, including business people, students, and teachers. Several families welcomed us into their homes over traditional meals. 
 
The cut off of trade and economic ties since the outbreak of the Syrian civil war has affected some businesses, but most appear to have adapted by finding new markets and new suppliers. Indeed, I and other of my traveling companions were surprised that there were not more outward signs of the brutal war that has raged for over two years, in this city less than 60 miles from Aleppo.
 
The city of Gaziantep, and the surrounding province of the same name, have welcomed hundreds of thousands of refugees from Syria. Syrian refugees are allowed to work. This is a point of pride among the people with whom I met, even though they recognize the hardship that it causes for some already here. They would like more help for refugees from the international community.
 
They also would like leading powers, especially the United States, but also Russia and China, to play a role in resolving the crisis. But that end state could not include Bashar Assad. The sense was that he had to go. One gentleman told me that 40 years of rule by the Assad family was enough. And besides, “he has killed his own people,” he said, “How can he be allowed to remain?” When I explained to another gentleman that it might be hard to find someone who can fill the vacuum left behind, he replied that a Sunni Arab could do the job. Most Syrians are Sunnis, thus they would rally behind a Sunni. And other minorities will then come along. [I’m pretty sure that an Alawite would disagree, and I suspect many Christians would as well.]
 
These people were generally Erdogan supporters. Many worried about how the recent protests were undermining Turkey’s image abroad. They were concerned about the impact on tourism, and on the wider economy. Some, echoing the AKP’s standard line, saw evidence of nefarious foreign plots behind the protesters. Still others felt that the protests started out as a spontaneous expression of concern about Gezi Park, but had been hijacked by interest groups within Turkey, including far left parties, and vehement Erdogan opponents.
 
It is obvious that Erdogan taps into the sentiment among some of the people with whom I met–and arguably many Turks, given that he is the first Prime Minister to have been elected three times–that one shouldn’t be officially ostracized for practicing religion. And it certainly shouldn’t be a crime. In that respect, some Turks believe that the Kemalists went too far. They didn’t merely set up a secular state. They were anti-religious, sneering and dismissive of believers.
 
Others are enthused about the economic revival that has occurred under his watch. One of my hosts explained that many of the protesters were too young to remember the poor economic times, including a financial crisis in 2000-2001 that paved the way for the AKP’s rise to power. The implication was that if Erdogan and the AKP were to lose political control to the opposition, the economy would suffer. 
 
But there is an unsettling authoritarian streak in Erdogan’s behavior. Even strong AKP supporters worry that the party’s identity has become too wrapped up around Erdogan. The party lacks a firm institutional base, and too few voices from within the AKP who can or will challenge Erdogan, or at least help him moderate his ways. He has surrounded himself with sycophants and yes men, a closeted bubble increasingly isolated from reality. They say that in a democracy, the winners of elections have a mandate to govern. They are confident that the majorities that elected them, and returned them to power, are still with them. 
 
Are they? What is going on politically? Has Erdogan overreached? And will the opposition use the recent protests and a growing sense of frustration and unease among some Turks to cut into his power, beginning perhaps with next year’s municipal elections? I’ll write more about that tomorrow.
Topics: 
Foreign Policy and National Security

How Much Does Your State Government Depend on Federal Funds?

By
Tad DeHaven

This week the Indianapolis Star published an op-ed I wrote on Indiana state government’s reliance on federal funds. I said that “Most Hoosiers would be surprised to know that under [Gov. Mike] Pence’s first budget proposal, federal funds would have accounted for around 35 percent of total state spending.” I intended to look at the other 49 states because I imagine most citizens would be surprised at how much of the money their state government spends originates in Washington. However, the Tax Foundation beat me to the punch in this week’s “Monday Map”: 

As I explained in my op-ed, state politicians like “free” federal money. The problem is the money isn’t free: 

The appeal of federal funds to governors is obvious: They get to spend additional money without having to raise taxes on their voters to pay for it. A problem with this arrangement is that it creates a fiscal illusion — state taxpayers perceive the cost of government to be cheaper than it really is. In effect, the federal money and a large part of the annual budget appears to be “free.” 

But Hoosiers should be mindful that every dollar Washington sends to Indianapolis is a dollar taken from taxpayers in Indiana and the other states. (The return is actually less than a dollar since the federal bureaucracy takes its cut). The situation is no different when the federal dollars go instead to, say, Sacramento. In addition, economists have found that federal subsidies to the states lead to higher state taxes and spending in the long-run because the federal “seed money” creates a demand for more government. 

See this Downsizing Government essay for more on federal subsidies to the states. 

Topics: 
Tax and Budget Policy

ObamaCare, Democracy, and Jonathan Cohn

By
Michael F. Cannon

At The New Republic’s blog, Jonathan Cohn grumbles about the insolence of ObamaCare opponents:

Across the country, Republican state officials vilify the law…In Washington, Republican members of Congress are trying to undermine the law by denying funding for outreach and implementation. According to a report by Elise Viebeck  in The Hill, a few Republicans have suggested they won’t help constituents having trouble enrolling in the new insurance options. And, as Anne Kim and Ed Kilgore from the Washington Monthly recently reported, they’re even refusing to work with churches on crafting a bipartisan fix to what looks like a predictable, if inevitable, glitch in the law’s drafting.

Nobody expects Republicans to praise Obamacare or to give up efforts at repeal, assuming they feel strongly about it. But, as long as Obamacare remains on the books, don’t even its critics have some obligation to enforce the law in good faith? Shouldn’t they be helping constituents without insurance to take advantage of the law’s new options?

Let’s first examine the absurdity of Cohn complaining that “Republican members of Congress are trying to undermine the law by denying funding for outreach and implementation.” Wait, you mean ObamaCare didn’t include enough funding for its own implementation? How does the fault for that lie with congressional Republicans (who opposed this law), rather than congressional Democrats (who enacted it with inadequate funding)? Doesn’t the need for additional funding mean ObamaCare will cost more than supporters claimed when they enacted it? And wasn’t that an accusation they denied? Shouldn’t Cohn be criticizing Democrats for that, too? Does Cohn really mean to say that legislators have a duty to vote to fund a law they want to repeal? Does he also believe legislators have a duty to fund “outreach and implementation” for anti-sodomy laws? What about voter-ID laws? Marijuana prohibition is horribly under-funded; think of all the users who don’t go to jail. Do legislators have a duty to ensure those laws are fully funded and implemented? Do they have a duty to fix any glitches in those laws?

As for Cohn’s question, “as long as Obamacare remains on the books, don’t even its critics have some obligation to enforce the law in good faith?” Any middle-school civics student could tell him the answer is “no.” In our system of government, the executive branch enforces the law, not the legislature, and not the citizenry. So with respect to the federal government, that means there are exactly zero ObamaCare opponents who have a duty to enforce this law. The Supreme Court has clarified that nobody at the state level has a duty to enforce it, either. Given that many opponents (including me) believe ObamaCare to be an unjust law, we could go farther and say critics have a moral duty to resist or disobey it. Finally, it’s hard to take Cohn seriously when Jonathan Adler and I are trying to get the Obama administration to enforce the law in good faith, yet Cohn is trying to stop us.

Topics: 
Government and Politics, Health Care

Committee Issues Excuse to Keep Doing Wrong Thing

By
Neal McCluskey

Today, the Democratic staff of Congress’s Joint Economic Committee released a report which seems mainly to be an excuse to keep doing the wrong things.

The basic tenets of the report certainly feel sensible: People with more education tend to have greater skills and earn more, but the ever-inflating price of college saddles people pursuing education with bigger and bigger debts. The solutions? Keep subsidized federal loan rates frozen at 3.4 percent, greatly expand loan forgiveness, and convert private loans into federal loans. Basically, more cheap aid—exactly the wrong thing.

The fundamental problem with the report is the fundamental problem with federal aid in microcosm: It ignores the crippling, self-defeating, unintended consequences of aid. You know: The downsides of federal “help.”

First and foremost, federal aid furnishes jet fuel for tuition inflation, both by allowing people to demand more than they otherwise would, and by enabling schools to raise prices knowing students will be able to pay them. It also encourages millions of people to enroll in college who, for many reasons, have little prospect of finishing. That’s why roughly one out of every two people who enter a postsecondary program don’t finish. Finally, it powers over-credentialing, with about a third of people with bachelor’s degrees in jobs not requiring them, and many jobs that require the degree likely doing so for basic signaling reasons—e.g., the person has some basic stick-to-it-iveness—rather than indicating that they possess useful skills or abilities they obtained in college.

A reasonable reading of the data forces one to conclude that Washington should markedly reduce its presence in college—indeed, get out altogether—rather than perpetuate bad policy. Which is likely why policymakers seem to assiduously avoid reasonable readings—or any readings at all—of important data.

Cross-posted at seethruedu.com

Topics: 
Education and Child Policy, Finance, Banking & Monetary Policy, General

The Stopped Clock at the IMF Tells Us that It Is Time to Reduce Bureaucratic Excess

By
Daniel J. Mitchell

I’ve repeatedly explained that Keynesian economics doesn’t work because any money the government spends must first be diverted from the productive sector of the economy, which means either higher taxes or more red ink. So unless one actually thinks that politicians spend money with high levels of effectiveness and efficiency, this certainly suggests that growth will be stronger when the burden of government spending is modest (and if spending is concentrated on “public goods,” which can have a positive “rate of return” for the economy).

I’ve also complained (to the point of being a nuisance!) that there are too many government bureaucrats and they cost too much.

But I never would have thought that there were people at the IMF who would be publicly willing to express the same beliefs. Yet that’s exactly what two economists found in a new study. Here are some key passages from the abstract:

We quantify the extent to which public-sector employment crowds out private-sector employment using specially assembled datasets for a large cross-section of developing and advanced countries… Regressions of either private-sector employment rates or unemployment rates on two measures of public-sector employment point to full crowding out. This means that high rates of public employment, which incur substantial fiscal costs, have a large negative impact on private employment rates and do not reduce overall unemployment rates.

So even an international bureaucracy now acknowledges that bureaucrats “incur substantial fiscal costs” and “have a large negative impact on private employment.”

Well knock me over with a feather!

Next thing you know, one of these bureaucracies will tell us that government spending, in general, undermines prosperity. Hold on, the European Central Bank and World Bank already have produced such research. And the Organization for Economic Cooperation and Development has even explained how welfare spending hurts growth by reducing work incentives.

To be sure, these are the results of research by staff economists, whom the political appointees at these bureaucracies routinely ignore. Nonetheless, it’s good to know that there’s powerful evidence for smaller government, just in case we ever find some politicians who actually want to do the right thing.

Topics: 
Government and Politics, International Economics and Development, Tax and Budget Policy

CBO Dynamically Scores Immigration Bill

By
Alex Nowrasteh

The Congressional Budget Office has fiscally scored the Senate’s immigration bill, S. 744, and found that it will decrease fiscal deficits over the next 20 years—giving a huge boost to reform proponents.  In line with criticisms made by me and others, the CBO departed from orthodoxy and assumed that S. 744 would affect economic growth (i.e., they dynamically scored the bill)—arguing that the economic and fiscal gains from immigration reform are clear.  These findings are broadly consistent with Cato’s findings here.  

The CBO produced two scores of S. 744.  The first was less dynamic, assuming that GDP and the workforce would grow as a result of immigration. Increased numbers of workers will add to GDP, producing growth by definition, and not displacing many other workers.  The second score is more dynamic, taking into account many of the economic effects of immigration reform using an enhanced Solow model.

The less-dynamic CBO score found that immigration reform will reduce the federal deficit by about $197 billion by increased GDP and tax revenues through adding six million people to the workforce by 2023.  Over a period of 20 years, the CBO estimated that this legislation would reduce deficits by about $700 billion—a sizeable decrease.  In what seems to be a specific dig at the 50-year span of the recent Heritage study, the CBO wrote that, “we cannot determine whether enactment of S. 744 would lead to an increase in on-budget deficits … in any of the three 10-year periods starting in 2033.” 

The more dynamic CBO score found that S. 744 would not affect the budget by 2023.  However, because the dynamic economic effects of S. 744 would affect the economy slowly, the CBO predicts a $300 billion decrease in deficits from 2023-2033 greater that the $700 billion reported in the less-dynamic score.

The more-dynamic CBO model predicts $1.197 trillion in reduced deficits over the next 20 years if immigration reform is passed. 

Delving into the details of the CBO’s more-dynamic score, they estimated that S. 744 would increase GDP by 3.3 percent in 2023 and 5.4 percent in 2033, relative to the baseline.  Per capita GNP would lower by .7 percent by 2023 but be higher by .2 percent in 2033.  Wages would be .5 percent higher in 2033 under S. 744. 

The more-dynamic score takes into account these effects from S. 744: 

  1. Increased size and employment in the economy.
  2. Increased average wages after 2025.
  3. Slightly increased unemployment rate through 2020.
  4. Increased quantity of capital investment.
  5. Increased productivity of labor (due to complementary task specialization).
  6. Increased productivity of capital (due to increase in supply of labor and TFP).
  7. Higher interest rates.

The CBO took account of some of the main findings in the economic literature about the economic effects of immigration.  For example, the CBO predicts there will be a 12 percent increase in the wages of legalized immigrants.

Conceptually, dynamically scoring legislation is a big step toward rationally judging the costs and benefits of policy changes.  Legislation that changes the size of the economy or the pace of economic growth will affect future tax revenues that will, in turn, affect the fiscal state of the federal government.  CBO scores have been inaccurate over time—many wildly so.  They should never be the final word on the estimated net fiscal costs of immigration reform, but this is the most thorough examination to date. The CBO’s findings broadly confirm Cato’s research that immigration reform will be economically beneficial to immigrants and the country as a whole. 

Topics: 
Trade and Immigration

Partisanship Plays a Larger Role in Support for “ObamaCare” than Opposition to It

By
Michael F. Cannon

The latest Kaiser Family Foundation tracking poll provides a fascinating look into how factors other than the content of the Patient Protection and Affordable Care Act affect people’s views of that law.

Kaiser asked respondents their views of the PPACA, alternately describing it as “ObamaCare” and “the health reform law.” Here’s what happened:

  • Among Republicans, calling it “ObamaCare” caused the share reporting an unfavorable view to rise from 76 percent to 86 percent (+10 percentage points), with no discernible change in the share reporting a favorable view.
  • Among independents, calling it “ObamaCare” caused the share reporting an unfavorable view to rise from 43 percent to 52 percent (+9 percentage points), with no discernible change in the share reporting a favorable view.
  • Among Democrats, calling it “ObamaCare” produced no discernible change in the share reporting an unfavorable view, but caused the share reporting a favorable view to rise from 58 percent to 73 percent (+15 percentage points).

A few conclusions can be drawn. 

  1. The PPACA remains unpopular among Republicans, independents, and the public overall (see below).
  2. Republicans dislike the law more than Democrats like it.
  3. A substantial share of both the opposition to and support for “ObamaCare” is driven by partisanship or opinions about President Obama (which are pretty close to the same thing), rather than the content of the law.
  4. Partisanship is a larger factor in Democrats’ support for “ObamaCare” (15 percentage points) than in Republicans’ or independents’ opposition to it (10 and 9 percentage points, respectively).
  5. Dropping the term “ObamaCare” causes Democratic support for the law to fall by 15 percentage points.

 

Topics: 
Government and Politics, Health Care

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