North Carolina Bids To Close the Door On Its Bathroom Wars

The North Carolina legislature has passed and sent to Democratic Gov. Roy Cooper H.B. 142, unveiled last night as a compromise intended to end the state’s acrimonious year-long battle over discrimination laws and transgender persons’ access to bathrooms and changing rooms. From what I can see, it’s a basically sound measure that gives both sides much of what they legitimately asked.

HB2, the bill passed last March, was a response to a successful push in the city of Charlotte to enact anti-discrimination laws going well beyond state law in numerous areas, including making LGBT persons a protected class and regulating private actors in various ways (including bathroom policies) through employment and public accommodations laws. Opponents went to the state legislature and – as has happened in other states lately as well – proposed yanking back those portions of home rule that allowed for local ordinances to go beyond state law. (How you feel about yanking back home rule powers probably has a lot to do with how you feel about the substantive laws involved, since neither libertarians nor most other thinkers hold to a rigid always-or-never view of municipal home rule powers. Should towns in your state have the power to jail people for using alcohol or medical marijuana? Enact rent control? Ban the construction of any residence worth less than $1 million?)  

One part of HB2, then, eliminated towns’ and cities’ power to go beyond state law in some areas of employment and public accommodations law. But HB2 went a fateful step further by enacting into law the idea of some organized social conservatives that transgender persons should use the bathroom of their sex at birth, unless they succeed in jumping over the legal hurdles needed to get a changed certificate. There are all sorts of things wrong with that approach, and I said some of them in a Wall Street Journal letter last year

[The relevant section] of the bill imposes affirmative, uniform new duties of exclusion on North Carolina government entities such as schools, town halls, courthouses, state agencies and the state university system, taking away what had generally been local discretion. This not only will inflict needless burdens on a small and vulnerable sector of the public, but presumes to micromanage local governments and districts in an area where they had not been shown to be misusing their discretion. Whatever the merits of the rest of the bill, the provisions on state-furnished bathrooms are a good example of how legislation in haste from the top down can create new problems of its own.

The new HB142 compromise retreats, and rightly so, from this worst portion of HB2, but it does not retreat (or at least not very much) from the other elements, including those that are not so bad. By repealing HB2, it abandons the wretched aim of trying to prohibit transgender-friendly bathrooms. But it also takes away local governments’ power to mandate them in the private sector. It provides that “State agencies, boards, offices, departments, institutions, branches of government, including The University of North Carolina and the North Carolina Community College System, and political subdivisions of the State, including local boards of education, are preempted from regulation of access to multiple occupancy restrooms, showers, or changing facilities, except in accordance with an act of the General Assembly.” 

“Regulation of access to” is not an entirely clear phrase in this context. Clearly, cities like Charlotte need to go on carrying on the “regulation of access to” their own city-run facilities. The debate in the legislature today, according to several sources, emphasized sound local discretion – Charlotte can run bathrooms in municipal buildings the way it sees fit. 

The bill further pre-empts municipalities temporarily from enacting discrimination laws that go beyond the states’. “No local government in this State may enact or amend an ordinance regulating private employment practices or regulating public accommodations. That latter pre-emption expires in 2020.

The new compromise is being met with peals of outrage from some of the predictable ultras on both sides. But it looks to me like a more careful attempt to respect the legitimate rights of both sides than we’ve seen in this controversy up to now.

Six Sobering Charts about America’s Grim Future from CBO’s New Report on the Long-Run Fiscal Outlook

I sometimes feel like a broken record about entitlement programs. How many times, after all, can I point out that America is on a path to become a decrepit European-style welfare state because of a combination of demographic changes and poorly designed entitlement programs?

But I can’t help myself. I feel like I’m watching a surreal version of Titanic where the captain and crew know in advance that the ship will hit the iceberg, yet they’re still allowing passengers to board and still planning the same route. And in this dystopian version of the movie, the tickets actually warn the passengers that tragedy will strike, but most of them don’t bother to read the fine print because they are distracted by the promise of fancy buffets and free drinks.

We now have the book version of this grim movie. It’s called The 2017 Long-Term Budget Outlook and it was just released today by the Congressional Budget Office.

If you’re a fiscal policy wonk, it’s an exciting publication. If you’re a normal human being, it’s a turgid collection of depressing data.

But maybe, just maybe, the data is so depressing that both the electorate and politicians will wake up and realize something needs to change.

I’ve selected six charts and images from the new CBO report, all of which highlight America’s grim fiscal future.

The first chart simply shows where we are right now and where we will be in 30 years if policy is left on autopilot. The most important takeaway is that the burden of government spending is going to increase significantly.

Trump Advisers Are All Wrong about South Korea Trade Deal

The Wall Street Journal reports: “Mr. Trump’s nominee for U.S. Trade Representative singled out Mexico and South Korea during his Senate confirmation hearing as sparking American trade deficits. ‘In some cases, the rules don’t seem to be working as well as others,’ Robert Lighthizer said. Critics say the deal has led to a flood of South Korean cars, auto parts, memory chips, motors and pumps into the U.S., weighing on American competitors and jobs. A U.S. Trade Representative report this month said the pact… doubled the U.S. trade deficit in goods with South Korea.”

National Trade Council boss Peter Navarro has likewise claimed “We lost 100,000 jobs because of that South Korean deal. Our trade deficit has doubled, and, more importantly, 75 percent of the damage that has been caused by that deal has been to the auto industry itself, which, of course, is based in Michigan.”

Navarro, Lighthizer and the Journal’s unnamed critics are entirely wrong about the March 15, 2012 Korea/U.S. Free Trade Agreement (KORUS).  

KORUS could not possibly have “led to a flood of South Korean… memory chips, motors and pumps into the U.S.” because memory chips were already duty-free before that FTA, and so were motors (HS code 8501) and pumps (8413).

KORUS could not possibly explain the post-recession 2010-2015 rise in U.S. imports from South Korea because most U.S. tariffs were scheduled to be reduced from 2016 to 2021not from 2010 to 2015. 

KORUS had precisely zero effect on U.S. imports of Hyundai and Kia vehicles before 2016 because the U.S. tariff on Korean cars (HS code 8703) was 2.5% before KORUS and remained at 2.5% through 2015.  Ironically, when U.S. tariffs on autos and other products finally did come down in 2016, total U.S. imports from South Korea fell 2.6% (by $1.9 billion).

 The Korean tariff on imports of U.S. cars was cut from 8% in 2012 to 4% in 2015 and zero in 2016 and a 10% Korean tariff on U.S. trucks was eliminated.  Even before Korea cut its tariff on U.S. cars to zero in 2016, U.S. exports of cars to So. Korea tripled from $418 million in 2011 to $1.3 billion in 2015, according to the USTR.  Incidentally the USTR also notes that “Korea is currently our fifth-largest market for agricultural exports thanks to KORUS,” with farm exports up 208% from 2011 to 2015.

Nevada Drops Idea of Mandatory Wait for Rideshare Drivers

In numerous states and cities, taxi interests – notably unions representing taxi drivers – have come up with creative legislation to hobble the rise of ridesharing apps like Lyft and Uber. In Nevada, the taxi union recently proposed a package of measures to slam the apps good and hard, of which perhaps the most startling was this: drivers getting a rideshare booking would be required by law to wait to ensure that their fare was not picked up in less than ten minutes.  

What a great idea – all must be brought down to the level of the least able! Echoing Vonnegut’s funny-dystopian short story Harrison Bergeron, the speediest would have to sit out in artificial penalty time to ensure that they did not arrive before the poky. “In a brief interview, [union president T. Ruthie] Jones said the union only wanted a level playing field,” reports the Nevada Independent.

And it gets even better. When legislators got a look at the union’s wish list of requests, whoever was in charge of drafting apparently decided that a 10 minute wait time didn’t go far enough. So Senate Bill 485, introduced on Monday, instead upped the handicap delay to 15 minutes. Per the Nevada Independent, “Taxi companies — long an influential Nevada industry — gave to 50 legislators throughout the 2016 campaign cycle for a total of $476,200.” 

But the bill’s introduction stirred immediate and searching news coverage Tuesday. An Uber representative termed the 15 minute obligatory wait time “really absurd, frankly, on its face,” and said the service would pull out of the state if it were enacted. (That was the idea, right?) And by yesterday, Sen. Kelvin Atkinson (D-North Las Vegas), who chairs the committee on Commerce, Labor and Energy, said the bill was “bad policy,” dead and wouldn’t get a hearing. One of his opposite numbers had already commented critically:

Republican Assembly Leader Paul Anderson said in an earlier interview that the proposed restrictions were “atrocious” and said the measure was a blatant attempt to kneecap the industry.

“All it does is stifle an industry that is significantly providing a better service,” he said in a Tuesday interview.

My favorite comment came on Twitter: “I dunno, maybe the lawmakers should be forced to wait a while before they can drop this proposal…”

Imagine how many proposals of this sort would quietly slip through were it not for the vigilant, independent, and free press we are used to having in America.

Trump’s NAFTA Renegotiation

The NAFTA renegotiation Donald Trump promised during his campaign may finally be getting started.  The specialty trade publication Inside US Trade (subscribers only) has a draft of the administration’s notice to Congress “that the President intends to initiate negotiations related to the North American Free Trade Agreement (NAFTA) and its architecture,” in which the administration sets out “specific objectives for negotiation.”  

At first glance, the administration’s plan looks like more than just a tweak to NAFTA, but will not come close to blowing up the system (as it sometimes sounded like during the campaign).  Things may change before the final notice is sent out, but for now a lot of what’s in there seems like an attempt to upgrade NAFTA to reflect provisions that have been developed in U.S. trade agreements over the last 15 years, including in the TPP.  In a sense, this NAFTA renegotiation is an attempt to make NAFTA more like the TPP.  Some examples are:  

  • adding rules on digital trade and cross-border data flows
  • adding enforceable provisions on labor, the environment, and state-owned enterprises
  • revising the provisions on investor-state dispute settlement
  • strengthening intellectual property rights

To the extent that the NAFTA renegotiation just incorporates TPP provisions, it is not too worrying.  That’s not to say that we in Cato’s trade policy center like all of the TPP provisions, but it would indicate that the Trump administration is not looking to do anything too radical on trade.

On the other hand, there are some proposals that could take NAFTA in a more protectionist direction.  Some examples of that are proposals to:

  • Eliminate a special procedure to have an international panel review U.S. anti-dumping/countervailing duties
  • Address the perceived unfairness of foreign border adjustment taxes (“level the playing field on tax treatment”)
  • Make sure NAFTA allows Buy America provisions (“establish rules that require government procurement to be conducted in a manner that is consistent with U.S. law and the Administration’s policy on domestic procurement preferences”)
  • Tighten up rules of origin, that is, restrict who can benefit from low NAFTA tariffs
  • Add new procedures that allow special tariffs when there are increased imports (“a safeguard mechanism to allow a temporary revocation of tariff preferences, if increased imports from NAFTA countries are a substantial cause of serious injury or threat of serious injury to the domestic industry”)

Keep in mind that this is just the draft, so the objectives stated here may change a bit.  Also, note that this is simply what the U.S. will ask for, and not necessarily what it will get after sitting down with Canada and Mexico.

All in all, it is somewhat of a relief to see that the proposed changes do not completely undermine NAFTA.  However, there will be some aspects of these proposals that we will be pushing back on, once the specifics of the proposals become more clear.

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Washington Has a Clear Choice on the Future of Iran Nuclear Deal

When it comes to foreign policy, the Trump administration has been engulfed in scandal and intrigue from day one. From the resignation of Michael Flynn, to a botched Yemen raid, to a U.S. bombing campaign in Mosul, Iraq that killed up to 200 civilians, to unrelenting controversy over Russian meddling in our election, it’s difficult to even keep up.

With all these distractions, it is easy to forget that there are important issues that demand thoughtful attention. High among these is the Iran nuclear deal. Not only must the Iran deal compete for attention with other controversies swirling around the White House, it has to withstand antagonism from hawks who refuse to acknowledge its success.

At the annual American Israel Public Affairs Committee conference this week, Senate Majority Leader Mitch McConnell criticized the Joint Comprehensive Plan of Action (JCPOA) for “bestow[ing] a windfall of billions for the Iranian regime to distribute to its proxies.” At the same conference, House Speaker Paul Ryan described the deal as “an unmitigated disaster” that is “dangerous for the United States and for the world.”

Actually, most of the tangible benefits in sanctions relief have gone to improving the economy for every day Iranians. And far from being a “dangerous” and “unmitigated disaster,” the deal has been successful in rolling back Iran’s nuclear program and in easing regional tensions.

The rhetorical abuse visited upon the JCPOA doesn’t bode well for the survival of the deal. And even the relative moderates in the Trump administration – people like Secretary of Defense James Mattis and Secretary of State Rex Tillerson, frequently described as the “grown-ups,” in contrast with the opposing bloc of “ideologues” – seem more hawkish than pragmatic on Iran.

In other words, the Trump White House exists in an echo chamber of negativity toward the JCPOA. The deal’s survival depends on deliberate administration support and a measured understanding of its benefits.

The Economic Doom-Mongers Have Been Wrong on Brexit So Far

For an economist, it’s rare that events occur enabling us to directly test our economic theories and assess them against outcomes. Britain’s Brexit vote last year was one such moment. As the formal Article 50 process for EU withdrawal begins today, it’s worth re-examining the consensus view on what a “Leave” vote would mean. Those warning of impending doom today are many of the same people who predicted a decision to exit would bring immediate economic slowdown.

The Economists for Brexit group of which I was a founding member was busy refuting anti-Brexit reports pre-referendum. Britain’s Treasury led the way, claiming GDP would be 6.2 per cent smaller after 15 years if Britain exited the EU and single market (replaced with an EU-UK bilateral trade deal, as Prime Minister Theresa May now desires). Importantly, they forecast the mere act of voting to leave would trigger an immediate 4-quarter recession with 500,000 people losing jobs, higher inflation and lower house prices. There would be a “profound economic shock.” The IMF warned that a path towards leaving the single market would mean a recession in 2017. The OECD predicted a “major negative shock.” An Economists for Remain letter signed by 12 Nobel Laureates likewise said “a recession causing job losses will become significantly more likely.”

Yet the UK economy has proven robust. Immediate financial market turbulence following the unexpected vote quickly subsided. Far from contracting at the Treasury’s forecast 0.4 per cent annualized rate, the economy is currently growing at 2.8 per cent per year. The employment rate for 16 to 64 year olds is at its highest ever level, 74.6 percent, with unemployment at just 4.7 percent. House prices are currently increasing at 6.2 per cent per year. Annual broad money growth was 6.6 percent in January – suggesting robust nominal GDP growth through 2017. Even after Theresa May pledged to leave the single market and customs union, forecasters were revising growth estimates upwards for 2017.

The economic consensus did forecast correctly the pound’s fall on a trade-weighted index (around 13 percent decline), as did the Economists for Brexit analysis. This will raise the UK inflation rate. But even the recent uptick in inflation to 2.3 percent is in part driven by increasing commodity prices affecting U.S. and German inflation rates too. The flipside has been strong export order books, highlighted by the Confederation of British Industry’s buoyant survey last week. What happens to the pound in the longer term of course depends on the economic fundamentals, but what is clear is that so far the doom-mongers have been wrong on the macroeconomic impact overall.

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