Taxpayers and Transatlantic Trade: How TTIP Must Open Procurement Markets

In today’s Cato Online Forum essay, Gary Hufbauer and Tyler Moran explain why opening up more government procurement projects – especially U.S. procurement projects (and even more especially, state-level procurement projects) – to foreign competition is essential to a successful TTIP deal. Currently, even with the WTO Government Procurement Agreement in place, a treasure trove of U.S. business (in the trillions of dollars, unfortunately) is shielded from competition because it is “government spending” on “sensitive” projects.  

Those designations ensure that U.S. taxpayers get smaller bangs for their bucks, while entrenching inefficient firms as advantaged bidders.  Moreover, if TTIP fails to open U.S. procurement to more competition from EU firms, then EU negotiators will be less likely to meaningfully open their own markets to U.S. exporters and service providers.

Read it. Provide feedback. And sign up for the Cato TTIP conference on October 12.

Bitcoin Air-Kisses the Euro

Volatility is a well-recognized impediment to the success of Bitcoin as a currency. An example of the argument for volatility-based caution about Bitcoin, chosen at random, appears in Professor David Yermack’s December 2013 NBER working paper, “Is Bitcoin a Real Currency? An Economic Appraisal.” Wide swings in the price of bitcoins vis á vis other things will obviously tend to suppress its utility as a store of value or unit of account. Nobody wants to deal with recalculating prices denominated in Bitcoin day over day or hour over hour.

But I’ve long felt the volatility knock on Bitcoin to be slightly unfair. My favorite response line has been to say that judging Bitcoin based on its current volatility is like declaring a 10-year-old unfit to play in the NBA because he’s too short.

As a new asset class (or very different member of the “cash or cash equivalent” asset class), Bitcoin has yet to find its place in the world. The uses to which it is put will ultimately translate into a dollar price based on a recognized, relatively steady level of demand. Right now, speculation about where demand for Bitcoin will end up takes place in thinly traded markets. Just those two ingredients — uncertain future use and thin markets — are recipe enough for plentiful volatility.

But there’s every reason to believe that the market for Bitcoin will deepen and grow in sophistication, tempering its volatility. The capacity of the Bitcoin protocol to transfer and store value in exciting new ways will produce transaction demand — supplanting speculative demand, which today dominates because of anticipated price appreciation. Transaction or “use” demand will also increase because of Bitcoin’s capacity to administer countless economic and social functions beyond value transfer, including messaging, proof of authorship, land and title registry, and identity/naming. This will drive volatility down, I believe, both because it will shift bitcoins out of speculation and because it will give the markets more concrete information about what use demand is and will be.

Pope Francis Graph of the Day

As the Argentine Pope, ever critical of capitalism, visits the United States, my colleagues at have posted this graph.


It shows that in 1896, income per person in the United States and Argentina, two of the richest countries in the world, was about identical. Argentina subsequently eschewed the free market, replacing it with trade protectionism and other corporatist policies intended to help the poor by redistributing wealth. By 2010, Argentine income was a third of that of the United States.

Perhaps Pope Francis doesn’t endorse Argentine economic policies, but having just arrived from Cuba, he missed an opportunity to denounce the lack of freedoms that have kept that island and other Latin American countries poor and repressed. He met with none of the many admirable Cuban dissidents, in or out of prison, who have been peacefully advocating basic rights. Nor did he mention the plight of the Cuban people they represent, even as authorities arrested or detained 250 Cuban activists during his visit.

The Cuban Forum for Rights and Liberties (Foro por los Derechos y Libertades), an independent group of dissidents in Cuba, summed up how it felt about, and experienced, the Pope’s visit. It read, in part:

            “We human rights activists, regime opponents and independent journalists have experienced days full of threats, harassment, telephone connections being cut off, homes besieged by the authorities, and violent, arbitrary arrests.

            The behavior of the regime was expected. However, the position of the church has been surprising. The exaggerated and repeated shows of approval of the dictatorship, the silence toward its excesses, and the refusal to hear dissident voices have created broad discontent among Cuban believers and non-believers both within and outside of the island.”

The group might have added that the disappointment has spread more widely in the Americas.

No, America, You Don’t Need to Comply with the REAL ID Act

Like countless similar news stories recently, a report on Business Insider claims: “Residents from 5 US states could soon need a passport for a domestic flight.” The idea is that the Transportation Security Administration will begin to enforce the REAL ID Act in 2016 by denying airport access to travelers from non-compliant states.

It’s not true.

Nobody needs to get a passport to fly domestically. No state needs to implement the REAL ID Act’s national ID mandates.

I’ve been collecting examples of misleading reports like this at the Twitter hashtag “#TakenInByDHS.” A recent blog post of mine, also called “Taken In by DHS,” fleshes out the story of widespread misreporting on the situation with our national ID law.

In brief, the Department of Homeland Security is trying to get the states to convert their driver licensing systems into components of a U.S. national ID system. The REAL ID Act, which Congress passed in 2005, allows DHS to refuse IDs from non-compliant states, including IDs travelers present at TSA’s airport checkpoints.

This concerns some people when they first learn about it, but the REAL ID compliance deadline passed more than seven years ago with not one state in compliance. DHS has improvised deadline after deadline since then, and it has caved every single time its deadlines have been reached. I went through the history last year in my Cato Policy Analysis, “REAL ID: A State-by-State Update.”

DHS’s latest story is that it might start to enforce REAL ID in 2016. It won’t. 

How Will the Transatlantic Trade and Investment Partnership Affect U.S. Jobs?

Today’s Cato Online Forum essay comes from economist Laura Baughman, who laments the typical methodological approaches to estimating relationships between trade agreements and jobs, pointing out how those approaches seem to be used to validate a priori positions, either pro- or anti-trade, rather than reveal best estimates.  While economists are better at estimating the relationships between trade agreements and output or between trade agreements and trade flows, Baughman explains that if the likely impact of on jobs is sought, there is a more objective approach to take.  And the results of that method suggest that “it will be hard to argue that [TTIP] will not be a job ‘winner’ for the United States.”

Read it. Provide feedback.  And sign up for the Cato TTIP conference on October 12.


Government Failure: The Role of Congress

In a romantic view of democracy, legislators act with the interests of the general public in mind. They grapple with policy issues, work toward a broad consensus, and pass legislation that has strong support. They frequently reevaluate existing programs and prune the low-value and harmful ones. They put citizens first and limit their actions to those allowable under the U.S. Constitution.

Unfortunately, that is not how Congress works. It often enacts ill-conceived laws that do not have broad public support. Many programs perform poorly year after year, yet Congress gives them growing budgets. Congress almost never terminates programs because members have a hard time admitting that their policies have failed. Indeed, members try to evade blame for government failures, and they only try to fix problems after high-profile scandals have occurred.

A new essay, “Congressional Incentives and Government Failure,” at looks at how Congress operates. It examines the incentives that induce members to support policies counter to the general public interest.

The Year of Educational Choice: Update V

This is the sixth post in a series covering the advance of educational choice legislation across the country this year. As of my last update in early July, there were 17 new or expanded choice programs in 14 states. On Friday, North Carolina lawmakers finally passed a long-overdue budget that expanded the state’s two school voucher programs for low-income and special-needs students, bringing the total number to 19 new or expanded programs in 15 states. The updated tally is below.

A lawsuit against the Tar Heel State’s voucher law impeded implementation so only 1,216 low-income students participated last year, barely 10 percent of the 12,000+ applications the state received. In July, the North Carolina Supreme Court upheld the program, clearing the way for the legislature to expand it. 

Meanwhile, opponents of educational choice have launched a second legal attack on Nevada’s new education savings account law. Last month, the ACLU filed a similar lawsuit. The state of Nevada has hired one of the top law firms in the nation to help defend the ESA program. In addition, the Institute for Justice will be defending the law against both challenges on behalf five families who would benefit from the ESAs. You can learn about their stories in this short video: