Paul Krugman managed to discover “America’s Taxation Tradition” in an unlikely spot – a fiery old political speech by an unsuccessful presidential candidate who called for a “graduated inheritance tax on big fortunes.” Dripping with irony, Krugman asks “Who this left-winger? Theodore Roosevelt, in his famous 1910 New Nationalism Speech.”
Readers are supposed to assume that because Roosevelt had been a Republican, his New Nationalism speech could not possibly have been remotely left of center. Yet the phrase “new nationalism” and the advocacy of an inheritance tax were both borrowed from Herbert Croly’s highly influential 1909 manifesto of the Progressive Era, The Promise of American Life.
As Christopher Lasch noted, “Theodore Roosevelt read The Promise, found it highly flattering to himself, publicly praised it, and used it as an argument for his 'new nationalism.' Croly did not so much influence Roosevelt as read into his career an intellectual coherence which Roosevelt then adopted as his own view of things.” Croly, who later launched The New Republic magazine, supported Roosevelt in the 1912 Presidential race and Robert La Follette’s Progressive Party campaign in 1924, before becoming disenchanted and (as Lasch put it) “flirting with socialism.”
In his 1909 book, Croly said, “In economic warfare . . . it is the business of the state to see that its own friends are victorious. It holds ... a hand in the game.” The state, said Croly, must look out for “the national interest,” and help those to win “who are most capable of using their winnings for the benefit of society.” To the properly cynical, that sounds like an open invitation to crony capitalism and corruption, if not kleptocracy.
In the New Nationalism speech Roosevelt said, “We should permit [a fortune] to be gained only so long as the gaining represents benefit to the community. This, I know, implies a policy of a far more active governmental interference with social and economic conditions in this country . . . No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar’s worth of service rendered — not gambling in stocks, but service rendered” (Roosevelt gambled-away his own inheritance on a ranching venture, not stocks).
Not quite socialist in 1909, Croly tolerated, “preservation of the institution of private property in some form, [but only with] the . . . radical transformation of its existing nature and influence.” Similarly, Roosevelt allowed that he would prefer to stop short of government ownership of business (socialism), if government control (fascism) would suffice. “I do not wish to see the nation forced into the ownership of the railways,” said Roosevelt, “if it can possibly be avoided.”
In short, the Roosevelt/Croly New Nationalism certainly did lean in a “leftist” (statist and collectivist) direction with respect to state supremacy over private property.
As afterword, here is something I wrote in a 1995 anthology revisiting Croly’s The Promise of American Life:
Herbert Croly's quaint 1909 vision of the merits of increased centralization was founded on the notion that 'American state governments have been corrupt and inefficient largely because they have been organized for the benefit of corrupt and inefficient men.' The federal government, by contrast, was apparently organized for the benefit of saints and angels. Still, Croly's idea of ‘big government’ in Washington looks like a bargain by today's standards. He reasoned that a much stronger federal government could be financed out of a graduated inheritance tax: 'The tax at its highest level,' Croly wrote, 'could be placed without danger of evasion at as much as 20 percent.' Some recent estimates suggest that Croly may have been correct about how high the estate tax could be pushed without losing money. In any case, if a 20 percent inheritance tax were the only federal tax we had to worry about, as Croly proposed, the states would have little difficulty in raising money for the services that are still almost entirely a state or local responsibility, such as police protection, public schools, and roads. (The federal government, by contrast, is almost entirely involved in taking money from some people and giving it to others).
Based on what's happened in Greece and other European nations, we know from real-world evidence that even nations from the developed world can spend themselves into debt trouble.
This has led to research that seeks to pinpoint when debt reaches a dangerous level.
Where's the point where investors stop buying the debt? Where's the point when interest on the debt becomes too much of a burden?
Most famously, a couple of economists crunched numbers and warned that nations may reach a tipping point when debt is about 90 percent of GDP.
I was not persuaded by this research for two reasons.
First, I think it's far more important to focus on the underlying disease of too much government, and not get fixated on the symptom of too much borrowing. If I go see a doctor because of headaches and he discovers I have a brain tumor, I want him to address that problem and not get distracted by the fact that head pain is one of the symptoms.
Second, there are big differences between nations, and those differences have a big effect on whether investors are willing to buy government bonds. The burden of debt is about 240 percent of GDP in Japan and the nation's economy is moribund, for instance, yet there's no indication that the "bond vigilantes" are about to pounce. On the other hand, investors are understandably leery about buying Argentinian government debt, even though accumulated red ink is less than 40 percent of economic output.
So what about America, where government borrowing from the private sector now accounts for 82 percent of GDP? Have we reached a danger point for government debt?
I have several comments on this video.
- Some people have complained that the video is deceptive because it focuses on debt held by the public rather than the gross federal debt. The video could have been more explicit and explained why that choice was made, but I have no objection to the focus on publicly-held debt. After all, that's the measure of what government has borrowed from the private sector. The gross federal debt, by contrast, also includes money the government owes itself (such as the IOUs in the Social Security Trust Fund), but that type of debt is merely a bookkeeping entry.
- The video asserts that inflation is low and therefore we don't have to worry that government might have to "print money" at some point to finance additional debt. I don't think there's any immediate danger that the Fed will be put in a position of financing the federal government, but I nonetheless don't like this logic. It's sort of like saying it wouldn't be a problem to start eating ten pizzas per day because you currently aren't heavy. The simple truth is that low inflation now doesn't mean low inflation in the future.
- I also reject the assumption in the video that interest rates drive the economy. Indeed, it's probably more accurate to say that the economy drives interest rates, not the other way around. Suffice to say that the video is based on the same thinking that led the Congressional Budget Office to imply that you maximize growth by putting tax rates at 100 percent.
The video also warns that politicians shouldn't raise taxes or reduce government benefits since either policy would "take money out of people's pockets." This is Keynesian economic theory, which I've explained many times doesn't make sense. No need to regurgitate those arguments here.
- Which brings us to the main problem of the video. It ignores the problem of unfunded liabilities. More specifically, it doesn't address the fact that politicians have made commitments to spend far too much money in the future, largely because of poorly designed entitlement programs. And it is these built-in promises to spend money that give America a very grim fiscal future, as show by this BIS, OECD, and IMF data.
Here's the video, produced by the Center for Prosperity, that accurately puts all this information together (the data is now several years out of date, but the analysis is still spot on).
Remember, the problem - both today and in the future - is the burden of government spending.
It’s become clear over the last few months that something very funny is going on with immigration enforcement statistics (here, here, and here). The data generally show that interior enforcement, what most people commonly think of as “deportations” (but also includes I-9, Secure Communities, and E-Verify), has declined as a percentage of total removals. Many of the removals appear to be unlawful immigrants apprehended by Customs and Border Protection (CBP) and then turned over to Immigration and Customs Enforcement (ICE) for removal – a trend that began in 2012 and accelerated in 2013. That transfer makes it appear as if there was more internal enforcement than there really was. The administration is therefore deporting an increasing number of recent border crossers and a decreasing number of unlawful immigrants apprehended in the interior.
It appears, then, that President Obama’s reputation for severe interior enforcement was earned for 2009, 2010, and 2011 but is somewhat unjustified in 2012 and 2013. The Bipartisan Policy Center has an excellent report on the enormous court backlogs and other issues that have arisen due to interior immigration enforcement. I’m waiting for additional information from a FOIA request before wading into the data surrounding the interior versus border removals controversy because we do not have data on internal enforcement numbers prior to 2008.
Interior enforcement is only part of the government’s immigration enforcement strategy and must also be looked at as a component of broader immigration enforcement that includes border enforcement.
Jessica Vaughan at the Center for Immigration Studies (CIS) combines returns at the border and removals that appears to show President Obama as the weakest immigration enforcer in decades. Her conclusion mistakenly conflates lower numbers of unauthorized immigrant crossers with a lack of enforcement. Since fewer unauthorized immigrants are crossing the border now than prior to the Great Recession, the decrease in returns is due to the decreasing quantity of crossers and not a lack of enforcement. However, Vaughan’s combination of border enforcement’s returns of unlawful immigrants and interior enforcement’s deportation numbers rightly shows how linked these two functions of immigration enforcement are.
After reading research from CIS for years, I can safely assume that they view border and interior immigration enforcement as complementary. Increased border enforcement multiplies the effectiveness of interior enforcement and vice versa. Under their view, less interior enforcement will lead to less effective immigration enforcement even if all of those resources are transferred to border enforcement – losing out on the supposed synergies that only exist when both types of enforcement work in tandem. Unsurprisingly, I think interior and border enforcement are more likely to be substitutes than complements – but imperfect substitutes. Moreover, many more resources would have to be devoted to interior enforcement to get the same deterrent effect from an equivalent amount of resources devoted toward border enforcement.
Some history of immigration enforcement strategy: Since the mid-1990s, the border enforcement strategy has been one of “prevention through deterrence” – the idea that concentrating personnel, infrastructure, and surveillance along the most crossed regions of the border will most effectively discourage unlawful immigration. By reducing the flow, the long run gradual attrition and voluntary return migration will gradually reduce the stock of unauthorized immigrants.
According to the Congressional Research Service,
[s]ince 2005, CBP has attempted to discourage repeat entries and disrupt migrant smuggling networks by imposing tougher penalties against certain unauthorized aliens, a set of policies eventually described as "enforcement with consequences." Most people apprehended at the Southwest border are now subject to "high consequence" enforcement outcomes. Across a variety of indicators, the United States has substantially expanded border enforcement resources over the last three decades. Particularly since 2001, such increases include border security appropriations, personnel, fencing and infrastructure, and surveillance technology.
The strategic goals of interior enforcement are similar to the goals of border enforcement. According to Bryan Roberts, Ted Alden, and John Whitley at the Council on Foreign Relations, the goals of interior enforcement are to “turn off the jobs magnet” and prompt “attrition through enforcement” (pp. 34-35). In other words, the strategic goal of interior immigration enforcement is to deter the entry of unauthorized immigration and then incentivize the return of those who come anyway.
This leads us to the issue of whether interior enforcement is even effective.
Assuming that the effectiveness of immigration enforcement should be maximized, shifting immigration enforcement actions from interior to border enforcement makes more sense. Bryan Roberts, Ted Alden, and John Whitley sum up the studies and evidence comparing the marginal effectiveness of additional resources spent on border versus interior enforcement (pp. 34-38). For both categories, the main effect is to change immigrant behavior once in the United States or to change their mode of entry. The decision to unlawfully enter is not reconsidered due to increased internal enforcement. The exceptions are two studies that purported to find that increased interior enforcement was twice as cost effective as border enforcement in Arizona, mainly by lowering the wage for unauthorized immigrants. Those studies were written before it was revealed how ineffective E-Verify has been in lowering wages for unauthorized immigrants in Arizona (the results might be different if E-Verify was nationalized), so the deterrent effect is likely less than reported.
The counter argument to the common finding that interior enforcement is inefficient is that it has not really been tried, so we don’t necessarily know how effective it could be if more resources were devoted to it. Given the disappointing (from the restrictionist point of view) results of E-Verify, the lack of studies investigating the deterrent effect of Secure Communities, and the known effectiveness of border enforcement in deterring unlawful entries, shifting resources from internal enforcement to border enforcement is likely a better use of scarce resources to disincentivize unauthorized immigration.
Border enforcement is likely getting more effective. A December 2012 GAO report found that about 81 percent of all those who attempted to enter illegally along the Southwest border in 2011 were either apprehended or turned back (caution, the denominator is not always known here). That percentage is up dramatically from previous years.
Get Aways, Apprehensions, and Turnbacks on the South West Border
Apprehensions and Turnbacks as a Percent of Estimated Unlawful Entries
The government has been getting better at border security although the decrease in the number of unauthorized border crossers due to the poor economy can take most of the credit. The reallocation of interior immigration enforcement resources to border enforcement appears to be rational from the perspective of a government seeking to increase the deterrent effect of immigration enforcement. Effective border security likely affects the flow of unauthorized immigrants more directly than the stock, but it also leads to long run decreases in the latter.
None of this blog post should be taken as an endorsement of a heavy-handed enforcement-only strategy to diminish unauthorized immigration. The best way to have well-enforced immigration laws is to have better laws that allow lower skilled immigrants to come permanently or temporarily to work with minimal regulations. Channeling lower skilled workers into the legal market will dramatically reduce the flow of unlawful immigrants, making immigration enforcement along the border more effective – similar to how current border enforcement is more effective during the lousy economy, but without having to suffer low economic growth. Visa overstays are another matter entirely.
A decrease in interior immigration enforcement relative to increased border enforcement does not signal the end of immigration enforcement, as so many are hyperbolically claiming. Interior and border immigration enforcement are substitutes, but border enforcement is much more efficient at actually deterring unauthorized immigration – the actual strategic goal of immigration enforcement.
That's the upshot of a column by Froma Harrop appearing in the Seattle Times.
"Arguments leveled against Real ID are being recycled to bash the National Security Agency’s surveillance program," she writes. "They inevitably lead to the assumption that the government is up to no good."
Well, ... yes.
The argument against creating a U.S. national ID is that its cost in dollars and privacy are greater than the tiny margin of security they might provide. Over years, I've pointed out that spending billions of dollars to herd law-abiding Americans into a national ID system might mildly inconvenience any terrorists. It's not worth doing.
That idea---that security measures should be cost-effective---is wisely 'recycled' for use with respect to the NSA's program to gather data about every call made in the United States. Doing so doesn't provide a margin of security worth the cost in dollars, privacy, and menace to liberty.
When the government wastes our money, privacy, and liberty on programs that don't provide a sufficient margin of security, that is bad. That is government "up to no good."
The states asked to implement our national ID law rejected it because, in the disorganized way our federal republic makes decisions, it was decided that REAL ID does not pass muster. (Some states and national ID advocate groups continue to press forward with it, a subject on which I'll say more soon.)
In a similarly messy process, the organs of democracy are finding that the NSA's programs---originally constructed and conducted in secrecy---do not pass muster either. We're rightly pushing this plate of peas away.
Anne Applebaum reports on how old smears are still used to support illiberal ideas and authoritarian government:
Halfway through an otherwise coherent conversation with a Georgian lawyer here — the topics included judges, the court system, the police — I was startled by a comment he made about his country’s former government, led by then-president Mikheil Saakashvili. “They were LGBT,” he said, conspiratorially.
What did that mean, I asked, surprised. Were they for lesbian, gay, bisexual and transgender rights? For gay marriage? Were they actually gay? He couldn’t really define it, though the conversation meandered in that direction for a few more minutes, also touching on the subject of the former president’s alleged marital infidelity, his promotion of female politicians, his lack of respect for the church.
Afterward, I worked it out. The lawyer meant to say that Saakashvili — who drove his country hard in the direction of Europe, pulled Georgia as close to NATO as possible and used rough tactics to fight the post-Soviet mafia that dominated his country — was “too Western.” Not conservative enough. Not traditional enough. Too much of a modernizer, a reformer, a European. In the past, such a critic might have called Saakashvili a “rootless cosmopolitan.” But today the insulting code word for that sort of person in the former Soviet space — regardless of what he or she thinks about homosexuals — is LGBT.
None of this is new, as Applebaum notes. We've seen it recently in Venezuela. In 2012, as soon as Henrique Capriles won a primary to become the candidate of the democratic opposition against Venezuelan strongman Hugo Chavez, the Wall Street Journal reported that he
was vilified in a campaign in Venezuela's state-run media, which insinuated he was, among other things, a homosexual and a Zionist agent.
Homosexual and Jewish, I thought. When they attack him for being rich, they'll have the trifecta of populist prejudices.
And sure enough, they did. Chavez himself declared:
The bourgeoisie have their candidate -- the candidate of the anti-fatherland, of capitalism, of the Yankees. We are going to thrash that bourgeoisie.
Chavez, of course, also threw in "the candidate of the Yankees," that is, the Americans. German democrats used to say that "anti-semitism is the socialism of fools." Now in many countries we could say that anti-Americanism is the new anti-semitism. They're often found in tandem.
The authoritarian government of Malaysia calls its chief opponent, Anwar Ibrahim, a homosexual and a gay propagandist, and has even prosecuted and jailed him on trumped-up sodomy charges.
All of these epithets -- homosexual, Jewish, bourgeoisie, and more recently, "American" -- have been staples of illiberal rhetoric for centuries. Liberals -- advocates of democracy, free speech, religious freedom, and market freedoms -- have been tarred as "cosmopolitan" and somehow alien to the people, the Volk, the faithful, the fatherland, the heartland.
Authoritarians such as Putin and Chavez's successor Nicolas Maduro also like to denounce their opponents as "fascists," even though they themselves fit most of the textbook definition of fascism -- nationalism, anti-liberalism, a charismatic leader as the embodiment of the nation, and an economy controlled indirectly by the state, typically through nominally private owners.
Liberals should denounce these sorts of vile and illiberal attacks, whether they stem from the American far right or far left, Vladimir Putin, the ruling party in Malaysia, or the Venezuelan socialists.
ABUJA, NIGERIA—Like so many developing states, Nigeria showcases poverty while exhibiting potential. People are entrepreneurial but the state is exploitative. Wealth is made but too often stolen. Evidence of security—which really means insecurity—is everywhere.
I traveled with a journalist group on a business tour of Nigeria. We were met by representatives of the organizer, along with a driver and two national policemen armed with AK-47s.
All of my hotels around the country had metal detectors. High walls and gates manned by armed security personnel.
Nevertheless, Abuja, as the seat of government, is relatively safe. Former governor Orji Uzor Kalu, a successful businessman considering a presidential run, complained that “without a police escort you can’t move” in much of the country: “You can move in Abuja, maybe some parts of Lagos, but you cannot move elsewhere.” Security checkpoints on major roads were common as we traveled outside of major cities.
As I explain in my latest article on the American Spectator online: “The Niger Delta, host to manifold energy and maritime operations, is particularly risky. Residents resent northern domination and perceive that, as one businessman put it, money being extracted from the ground and water isn’t going to the local people. These attitudes have prompted kidnappings of foreigners and attacks on facilities and ships.”
Being careful isn’t enough. Nor is hiring protective personnel. Company officials privately acknowledge more directly buying protection, spreading cash throughout local communities.
The smart outsider makes sure he has a well-armed friend or two. A sign on the door leading from the pool to the hotel proclaimed: “All Escorts Terminate Here. Fire Arms Are Prohibited In This Facility.”
Nigeria has had its share of conflict—four decades ago the central government brutally suppressed the attempted secession of the eastern region as the state of Biafra, resulting in anywhere between one and three million dead. More recently ruthless military dictators ruled.
Today the greatest problem may be internal divisions within the population of about 175 million divided into roughly 500 ethnic groups. The country is almost evenly divided between Christian and Muslim, leading to complicated political bargaining. Recently the terrorist group Boko Haram has been slaughtering Christians and moderate Muslims.
The country already suffers from the usual Third World maladies of the over-politicized state. Bureaucracy is pervasive and corruption is rife. One expatriate worker observed: “Nigeria is not a country. It is an opportunity.”
These economic disincentives are greatly exacerbated by problems of insecurity. A potential investor or trader cannot move freely. Expatriate employees much watch their backs. And the costs roll down to indigenous peoples, who lose economic opportunities.
Kalu, who is considering a presidential run, emphasized the need for deregulation and privatization and professed his admiration of Ronald Reagan. He also highlighted the problems of corruption and energy for his oil-rich nation, where bribes are expected and power outages are constant.
But he suggested that the lack of personal safety is even more basic. During a recent interview in Abuja he noted that “internal security is crucial.” Without security, he said, “I don’t know how we can develop. We need internal security so citizens and non-citizens can move more freely.”
Nigeria’s security problems underscore the country’s extraordinary unmet potential. It has Africa’s largest population and Nigeria’s GDP will soon surpass that of South Africa. Nigeria’s energy reserves are an envy of the continent.
Moreover, the Nigerian people exhibit both hard work and entrepreneurship. People are every where on the move, hawking products. What Nigerians lack, one businessman complained to me, was an “enabling environment” from the government.
Which should include security, perhaps the most foundational government responsibility.
Nigeria has many advantages lacking in its neighbors, and other developing states. However, so much of its potential is yet untapped. It is well past time for Nigeria’s leaders to put their people’s interests first.
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
We complain so constantly about the pessimistic view that the government takes on climate change that perhaps some of you are thinking alright already, we get it. Of course, the concept that governments exaggerate threats in order for the populace to clamor to be led to safety is Mencken at his pithiest, and such sentiment is not in particularly short supply here at Cato!
If you think that we are out on a pessimistic limb, check out this story making headlines out of Japan, from the U.N.’s Intergovernmental Panel on Climate Change meeting to hash out the second part of their latest climate change assessment report. The first part, on the science of climate change, was released last fall (it was horrible). The second part deals with the impacts of climate change (isn’t going to be much better). The news is that one of the lead authors on the economics chapter, Richard Tol, Professor of Economics at the University of Sussex, has quit the IPCC over their irrational negativity.
Here is how a Reuters article headlined “UN author says draft climate report alarmist, pulls out of team” captured Tol’s thoughts:
Tol said the IPCC emphasised the risks of climate change far more than the opportunities to adapt. A Reuters count shows the final draft has 139 mentions of "risk" and 8 of "opportunity".
Tol said farmers, for example, could grow new crops if the climate in their region became hotter, wetter or drier. "They will adapt. Farmers are not stupid," he said.
He said the report played down possible economic benefits of low levels of warming. Less cold winters may mean fewer deaths among the elderly, and crops may grow better in some regions.
"It is pretty damn obvious that there are positive impacts of climate change, even though we are not always allowed to talk about them," he said. But he said temperatures were set to rise to levels this century that would be damaging overall.
Tol has developed an economic model that finds that modest climate change will prove economically positive. However, towards that latter part of this century, temperatures in his model are projected to rise to such a degree that that resulting negative consequences eventually overwhelm the positive one. Thus the final sentence in the passage above.
However, the climate projections that are incorporated in Tol’s economic model are likely wrong—they predict too much warming from future carbon dioxide emissions. When those climate model projections are brought more in line with the current best science, the positive economic benefits from Tol’s model likely extend far beyond the end of the 21st century.
The bottom line is that people adapt to climate change and so long as it is relatively modest—and there is growing evidence that it will be—the human condition will almost certainly be no worse off and probably even better.
Enough with the pessimistic outlook! It is high time to celebrate the progress we are making, in the face of, or even in part because of, the earth’s changing climate.