201410

October 2, 2014 8:51AM

Grading America’s Governors

This morning, Cato released the 12th edition of the “Fiscal Policy Report Card on America’s Governors.” The report card uses statistical data to grade the governors on their tax and spending performance from a limited-government perspective. The governors who cut taxes and spending the most receive an “A,” while the governors who increase taxes and spending the most receive an “F.”

Four governors were awarded an “A” on this report card: Pat McCrory of North Carolina, Sam Brownback of Kansas, Paul LePage of Maine, and Mike Pence of Indiana.

The common theme among these Republican governors is fiscal restraint. All four proposed or signed into law large tax cut packages in their state while also holding the down the growth of state spending.

At the other end of the fiscal spectrum, eight Democrat governors were awarded an “F.” These governors substantially increased taxes and spending within their states. They were: Mark Dayton of Minnesota, John Kitzhaber of Oregon, Jack Markell of Delaware, Jay Inslee of Washington, Pat Quinn of Illinois, Deval Patrick of Massachusetts, John Hickenlooper of Colorado, and Jerry Brown of California.

Over the years, the data-driven Cato report cards have shown that Republican governors are more fiscally conservative, on average, than Democrats. However, there are some Democratic centrists who have recently made important tax reforms, including Andrew Cuomo of New York and Lincoln Chafee of Rhode Island, who both earned a “B.”

Fiscal decisions made by governors matter to state economies. Much attention is paid to the uncompetitive federal corporate income tax, which collected $274 billion in 2013. But state and local taxes cost businesses $671 billion in 2013. The largest state taxes on businesses are property taxes of $242 billion and sales taxes on business inputs of $140 billion. The good news is that some governors are working hard to reduce these job-killing burdens.

The airwaves are full with pundits making observations about the political situation of various governors. The Cato report card allows you to sidestep the noise and see what the data shows about whether a governor is growing or restraining government.

Curious how your governor scored? Check out the full rankings.

October 1, 2014 3:00PM

Cargill v. Syngenta: Biotechnology and Trade

On September 12, Cargill, a major commodity trading and processing firm, filed a lawsuit in a Louisiana state court against Syngenta Seeds for selling genetically engineered MIR 162 (also known as “Agrisure Viptera®”) seed corn to farmers. China has not yet approved importation of corn containing MIR 162, so U.S. exports to that country of corn and corn products have come to a halt. Demand for U.S. corn has fallen. Cargill believes its losses exceed $90 million. 

Syngenta’s view?  “Syngenta believes that the lawsuit is without merit and strongly upholds the right of growers to have access to approved new technologies . . .”. The company’s position is that it has been legally selling seeds containing MIR 162, a trait that provides useful insect resistance, to U.S. farmers since 2010.  Other major corn importers – including Japan, South Korea, Mexico, Colombia and the European Union – have approved importation of corn with the MIR 162 trait. Syngenta has been seeking approval in China since March 2010. MIR 162 has not raised any health or environmental safety issues. 

Cargill’s view is that Syngenta has rendered U.S. corn supplies ineligible for export to China. Corn containing MIR 162 has spread throughout the U.S. marketing system to the extent that it would be expected to be present in any ocean vessel loaded for export:

“Cargill is a supporter of innovation and the development of new GMO seed products.  But we take exception to Syngenta’s actions in launching the sale of new products like MIR 162 before obtaining import approval in key export markets for U.S. crops.  Syngenta’s actions are inconsistent with industry standards and the conduct of other biotechnology seed companies.” 

China’s decision to inspect imports for MIR 162 has led to the rejection of several corn cargoes since November 2013.  In January 2014, the National Grain and Feed Association (NGFA) and the North American Export Grain Association (NAEGA) issued a joint statement urging Syngenta not to sell seed with the MIR 162 trait for planting until such time as China had granted the required regulatory authorization.  Syngenta continued to sell MIR 162 for planting in 2014.  NGFA followed up in April with an economic analysis indicating that grain-handler losses from MIR 162-related trade disruptions in the 2013-14 marketing year would amount to between $1.0 and $2.9 billion.  In addition, the study estimates a $1.1 billion loss to U.S. corn farmers in 2013-14 due to an 11-cent-per-bushel decline in the price of corn in response to reduced demand. 

As recently as September 2013, USDA had projected Chinese corn imports of 7.0 million metric tons (MMT) in the 2013-14 marketing year.  The final figure now is expected to be about 3.5 MMT, with most of the decline representing lost sales opportunities for U.S. corn.  Exports to China of distillers dried grains with solubles (DDGS), a co-product of ethanol production, also have stopped due to MIR 162.  In 2013, China was the largest foreign buyer of DDGS, accounting for one third of U.S. exports--more than 3 MMT.  Loss of this much business genuinely hurts the corn sector. 

So why is China being so difficult regarding importation of MIR 162?  That country has a process for reviewing and approving biotechnology products that often has worked fairly well; lack of progress with MIR 162 is noteworthy.  Perhaps the most likely explanation is that China’s domestic corn production has been expanding rapidly. The crop in the world’s second-largest producer has grown 37 percent over five years; USDA projects it to reach 217 MMT for the harvest now underway. (By comparison, the current U.S. crop is projected to be 365 MMT.)  Chinese policies have had the effect of raising domestic corn prices to more than twice the level in the United States. Farmers have responded to that strong incentive by boosting output, and the government has kept the market price from falling by buying and storing surplus supplies. The Chinese government now has the dubious distinction of holding 77 MMT of corn in its grain stocks, some 40 percent of the world’s total.

Given this rather awkward juxtaposition of flawed policies and market realities, it isn’t hard to imagine Chinese officials looking for ways to discourage corn imports. After all, the price gap between domestic and world prices creates a strong commercial incentive to import.  Delaying approval of the MIR 162 trait makes most of the world’s corn supplies ineligible for importation into China. 

Now, back to the lawsuit. There is no commercial agreement between Cargill and Syngenta, so Cargill can’t sue for breach of contract.  Syngenta made a conscious decision to market MIR 162 despite knowing that such action had the potential to cause large losses to others involved in the supply chain. Does that constitute a legitimate basis for this legal action? It’s unclear, but the disgruntlement of Cargill and other grain handlers is not difficult to understand. Stay tuned as this case works its way through the court.

Stepping back a bit from the specifics of this situation, it’s reasonable to ask whether Syngenta can maintain a successful long-term biotech seed business if it insists on acting primarily to maximize its short-term earnings. Yes, the company no doubt spent several years and millions of dollars in developing MIR 162, so its interest in commercializing the technology is obvious. But the potential benefit to Syngenta from marketing MIR 162 in the current year likely would be measured in millions of dollars. The loss in value to the rest of the agriculture/food supply chain--including farmers-- is being measured in billions. The potential costs could multiply quickly due to Syngenta’s decision to allow limited planting in 2014 of a newer trait--Agrisure Duracade--that is not approved for importation by either China or the European Union.  Syngenta seems to be rolling the dice.

Corn prices have fallen 35 percent in the past four months and are now at their lowest level since 2010. Low prices may prompt farmers to question the wisdom of seed companies acting in ways that reduce demand for corn. At a minimum, selling MIR 162 and Duracade under these conditions seems like a questionable strategy for promoting customer satisfaction. Syngenta may yet conclude that building a constructive relationship with growers over time could prove to be of more value than a year’s earnings from selling seeds not approved by importers.

October 1, 2014 2:32PM

Little Evidence Supports the FDA’s Proposed Food Label Rules

In the upcoming issue of Regulation magazine, Robert Scharff, associate professor in the Department of Consumer Sciences at the Ohio State University, and Sherzod Abdukadirov, research fellow in the Regulatory Studies Program at the Mercatus Center at George Mason University, argue that the FDA's two proposed rules on food nutrition labeling are supported by little evidence and should be scrapped.

The food labeling rule would, as Scharff and Abdukadirov explain, result in a number of changes "involving both formatting and content changes to labels, increases in recordkeeping, and new analytic requirements." The second rule, the serving size rule, would affect packages that contain a small number of servings. 

The FDA claims that implementing both of these rules will help Americans make healthier food choices. However, as Scharff and Abdukadirov point out, the FDA does not cite any work that supports the underlying assumption that consumers will change their short-sighted behavior if changes are made to food labels. In fact, an FDA-commissioned study found that increasing the font size for calorie information on food labels had no effect on consumer behavior. In addition, the FDA has provided little evidence that inserting a separate line on labels for "added sugars" will result in health benefits.

Aside from the lack of evidence cited by the FDA, Scharff and Abdukadirov explain that the study on the effects of regulations written to comply with the Nutrition Labeling and Education Act of 1990, which is used by the FDA to make the benefits calculations of its proposed rules, is flawed. Not only is the study unpublished and yet to be peer reviewed, its sample is limited to women aged between 19 and 50 years old, which artificially inflates the effects of nutrition labels on behavior because women are more likely to view nutrition panels than men.    

If the two proposed rules are implemented they will add billions of dollars in costs for consumers. Such an expensive change in regulations should have to be justified with good empirical data. Scharff and Abdukadirov show that the FDA's proposed rules are justified mostly by good intentions, not data.  

October 1, 2014 12:13PM

Obama Puts Americans at Risk: ISIL’s Neighbors Should Eliminate the “Caliphate”

President Barack Obama is channeling George W. Bush in launching a new Mideast war. Why is Washington involved? 

The Islamic State is evil, but the organization’s raison d’etre is establishing a Middle Eastern caliphate, or quasi-state, not terrorizing Americans. In fact, grabbing territory provided the United States with a target for retaliation in response to any attack, something lacking with al-Qaeda. 

The murder of two Americans captured in the region was horrid but opportunistic. Morally abominable, yes. Cause for war, no.

Washington has never had much success in fixing the Middle East. The United States has been bombing Iraq since 1991. ISIL would not exist but for America’s 2003 invasion. 

Washington has been battling al-Qaeda since 2001. While the national organization is largely kaput, the group has spawned multiple national off-shoots.

The Bush administration justifiably overthrew the Afghan Taliban as punishment for hosting al-Qaeda. But 13 years of nation-building has been far less successful.

Three years ago, the Obama administration declared that Syria’s Bashar al-Assad had to go. Since then, “moderates” have lost ground. The Islamic State’s capture of the city of Raqqa created a base for attacking Iraq.

Washington joined European states in ousting Libya’s Moammar Qaddafi in the name of the Arab Spring. Today the country is in collapse. Yemen, the subject of a lengthy and heavy drone campaign, appears headed in a similar direction.

Now Washington plans to rid the world of ISIL.

Targeting the “caliphate” removes the most important deterrent to terrorist attacks by the Islamic State. If it finds its conventional ambitions frustrated by Washington, the group might switch direction and cooperate with groups such as al-Qaeda.

The administration almost certainly will be drawn ever deeper into the conflict. Pinprick aerial bombing won’t wipe out ISIL adherents. 

U.S. policy in Syria, the scene of the group’s initial success, is bound to fail. The administration intends to step up efforts to train and arm the “moderates,” some of whom cooperate with ISIL. The likelihood of these groups defeating both Assad and Islamic State is small. While American bombing will hamper the latter’s efforts, the organization has been adapting and advancing. The administration could end up helping ISIL plant its flag in Damascus.

The administration’s campaign is particularly misguided because there are so many other candidates to take on the Islamic State. The organization is essentially at war with every major country in the Middle East. 

ISIL’s territorial claims directly threaten Iraq, Syria, Jordan, Turkey, and Lebanon, as well as autonomous Kurdistan. The group’s stance as self-proclaimed Sunni guardian challenges Iran and Israel. ISIL’s Sunni radicalism targets Saudi Arabia and the smaller Gulf kingdoms, as well as assorted Islamist and secular insurgents in Syria. 

No doubt, Washington’s allies prefer that the world’s superpower take care of the problem. But they obviously are capable of acting. Indeed, since its spectacular summer successes, the Islamic State has lost momentum and the element of surprise.

However, the United States is determined again to “lead.”  Other countries will help out a little, but most coalition members are likely to do only as much as they believe necessary to limit Washington’s kvetching.

America should leave ISIL to its neighbors. Only they can create stability.  As I wrote on Forbes online, “they must adopt economic and political reforms to satisfy discontented publics, nurture popular loyalties to thwart triumphal ideological and theological movements, and employ competent militaries to suppress security threats.” 

Obviously, such a regional effort would take time.  But administration officials are saying the same for the American-led campaign against an enemy that has not seriously threatened America.

Washington has made a hash of the Mideast. Yet President Obama is continuing Washington’s policy of endless war in the Middle East.  As Yogi Berra said, it’s “déjà vu all over again.”

October 1, 2014 11:36AM

Washington Should Recognize India as an Emerging Great Power

Before becoming prime minister, India’s Narendra Modi was barred from receiving a visa to visit the United States.  A rising leader in the Hindu nationalist Bharatiya Janata Party (BJP), he was tied to deadly sectarian violence. But now he leads one of Asia’s most important powers and the Obama administration is rolling out the red carpet.

India long was ruled by the dynastic India National Congress Party, which enshrined dirigiste economics as the state’s secular religion.  Eventually, however, reality seeped into New Delhi. The Congress Party liberalized the economy. The BJP broke the Congress monopoly on power. 

New Delhi appeared ready to follow the People’s Republic of China to international superstar status. But then enthusiasm for economic reform ebbed, economic growth slowed, and conflict with Pakistan flared. 

However, on May 26, Narendra Modi became prime minister.  He is visiting the United States to speak before the United Nations and meet with President Barack Obama. The trip could yield rich benefits for both countries.

Of course, there was that embarrassing visa ban, the only one ever issued for that reason by Washington.  While serving as the chief minister of the state of Gujarat in 2002, Modi was implicated in Hindu riots which killed more than 1200 people, mostly Muslims. However, Modi escaped responsibility and the matter has been quietly forgotten in Washington.

The prime minister’s visit to America offers an opportunity for a reset in bilateral relations. The George W. Bush administration improved ties by accepting New Delhi’s development of nuclear weapons, but little progress has occurred during the current administration. Indeed, trade and diplomatic controversies have put the two governments at sharp odds.

The result is a lost opportunity for both nations. India, which trails only America and China economically in purchasing power parity, performs far below its potential.

Modi naturally hopes to expand his nation’s commercial ties throughout Asia, which increasingly is the world’s economic center of gravity. But America remains the most important single state—with the largest (depending on measure), most sophisticated, and wealthiest economy. 

Geopolitically, India has yet to play the international game as well as possible, though the new prime minister embarked upon an ambitious travel schedule abroad. New Delhi’s most persistent foreign antagonist is Pakistan.  In the long term, New Delhi’s desire to develop international counterweights to China, even while cooperating economically, is most important.

The greatest prize for New Delhi would be the strengthening relations with the United States.  The prime minister recently cited the improvement in bilateral relations and explained:  “Our ties have deepened.  India and the United States of America are bound together, by history and by culture.  These ties will deepen further.” 

Washington is thinking in similar terms. When Secretary of State John Kerry visited New Delhi in July, he said he wanted the two nations to become “indispensable partners.”

No one expects a formal military alliance, which would be in neither nation’s interest.  And important issues will continue to divide the two capitals.  But friendlier political relations, increased security cooperation, and enhanced trade and investment would remind the PRC that its growing power is matched by that of its wary neighbors. 

India has further to travel than China to geopolitical greatness, but it still matters today.  New Delhi will matter much more tomorrow, especially if Prime Minister Modi commits his political capital to eliminate barriers to entrepreneurship, investment, and growth.

The 21st century will be the Asian century, with a major assist from the United States. Most analysts presume Chinese dominance, but India could prove them wrong.  As I wrote in Forbes online:  “If Barack Obama and Narendra Modi make a serious effort to overcome past differences, their governments could find themselves, like Rick and Captain Renault in the movie Casablanca, at the ‘beginning of a beautiful friendship’.”

October 1, 2014 9:00AM

China Celebrates an Anniversary of Its Dictatorship

Today the People's Republic of China is celebrating the 65th anniversary of its founding on October 1, 1949, which is likely to produce even bigger crowds of protesters in Hong Kong demanding democracy. China's opposition to democracy in Hong Kong and in China itself is not just the recalcitrance of cranky old men. It's part of the Chinese Communist state's founding mission. 

Take the speech of Mao Zedong on July 1, 1949, as his Communist armies neared victory. The speech was titled, “On the People’s Democratic Dictatorship.” Instead of life, liberty, and the pursuit of happiness, it spoke of “the extinction of classes, state power and parties,” of “a socialist and communist society,” of the nationalization of private enterprise and the socialization of agriculture, of a “great and splendid socialist state” in Russia, and especially of “a powerful state apparatus” in the hands of a “people’s democratic dictatorship.”

Tragically, unbelievably, this vision appealed not only to many Chinese but even to Americans and Europeans, some of them prominent. But from the beginning it went terribly wrong, as really should have been predicted. Communism created desperate poverty in China. The “Great Leap Forward” led to mass starvation. The Cultural Revolution unleashed “an extended paroxysm of revolutionary madness”  in which “tens of millions of innocent victims were persecuted, professionally ruined, mentally deranged, physically maimed and even killed.” Estimates of the number of unnatural deaths during Mao’s tenure range from 15 million to 80 million. This is so monstrous that we can’t really comprehend it. What inspired many American and European leftists was that Mao really seemed to believe in the communist vision. And the attempt to actually implement communism leads to disaster and death.

Fortunately, after Mao died in 1976, China changed rapidly. His old comrade Deng Xiaoping, a victim of the Cultural Revolution, had learned something from the 30 years of calamity. He began to implement policies he called “socialism with Chinese characteristics,” which looked a lot like freer markets—decollectivization and the “responsibility system” in agriculture, privatization of enterprises, international trade, liberalization of residency requirements.

The changes in China over the past generation are the greatest story in the world—more than a billion people brought from totalitarianism to a largely capitalist economic system that is eroding the continuing authoritarianism of the political system. On its 65th birthday, the CCP still rules China with an iron fist. There is no open political opposition, and no independent judges or media. And yet the economic changes are undermining the party’s control, a challenge of which the party is well aware. Six years ago Howard W. French reported in the New York Times:

Political change, however gradual and inconsistent, has made China a significantly more open place for average people than it was a generation ago.

Much remains unfree here. The rights of public expression and assembly are sharply limited; minorities, especially in Tibet and Xinjiang Province, are repressed; and the party exercises a nearly complete monopoly on political decision making.

But Chinese people also increasingly live where they want to live. They travel abroad in ever larger numbers. Property rights have found broader support in the courts. Within well-defined limits, people also enjoy the fruits of the technological revolution, from cellphones to the Internet, and can communicate or find information with an ease that has few parallels in authoritarian countries of the past.

The CCP remains in control. But it struggles to protect its people from acquiring information, routinely battling with Google, Star TV, and other media. Howard French noted that “the country now has 165,000 registered lawyers, a five-fold increase since 1990, and average people have hired them to press for enforcement of rights inscribed in the Chinese Constitution.” People get used to making their own decisions in many areas of life and wonder why they are restricted in other ways.

I hope that the protests in Hong Kong will not only succeed in their immediate aims, but will inspire the people of China to demand more political and speech rights than they have ever had. And that's exactly what the leaders of the Chinese Communist Party fear.

October 1, 2014 8:55AM

New Research Erases Global Warming from Pacific Northwest

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.”

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Poof, it was gone.

Just like that, the human fingerprints on a century-long warming trend in Northwestern United States were erased and replaced instead by the telltale signs of natural variability. 

That is the conclusion of new research published last week by a pair of scientists from the University of Washington. James Johnstone and Nathan Mantua published their paper titled “Atmospheric controls on northeast Pacific temperature variability and change 1900-2012” in the Proceeding of the National Academy of Sciences (PNAS).

So as not to be accused of putting words in their mouth, here, in full, are the contents of a box labeled “Significance” from their paper:

Northeast Pacific coastal warming since 1900 is often ascribed to anthropogenic greenhouse forcing, whereas multidecadal temperature changes are widely interpreted in the framework of the Pacific Decadal Oscillation (PDO), which responds to regional atmospheric dynamics. This study uses several independent data sources to demonstrate that century-long warming around the northeast Pacific margins, like multidecadal variability, can be primarily attributed to changes in atmospheric circulation. It presents a significant reinterpretation of the region’s recent climate change origins, showing that atmospheric conditions have changed substantially over the last century, that these changes are not likely related to historical anthropogenic and natural radiative forcing, and that dynamical mechanisms of interannual and multidecadal temperature variability can also apply to observed century-long trends.

 

Translation: Natural variability in the atmosphere/ocean dynamics of the northern Pacific Ocean rather than human-caused global warming can largely explain the century-long rise in temperature in the Pacific Northwest.

And the authors have the figures to prove it.

The left-hand panel of Figure 1 (below) illustrates the observed trends over the period 19002012 for weather observing stations in the contiguous United States located west of longitude 116°W—this includes all of Washington and Oregon, most of California, and parts of Idaho and Nevada. Notice all the red, upward-pointing arrows indicating an overall temperature rise since 1900 across the entire region. The right-hand panel shows the trend in the same stations once the natural variability identified by Johnstone and Mantua has been removed.  If global warming were having an influence, it would be evident in both panels—more strongly so in the right-hand one.  Instead, in that panel, we have a mixed bag of up and down trends of very low magnitude—no strong signal of any kind, no sign of global warming.

Media Name: gsr_100114_fig1.jpg

 

Figure 1. (left)  Northeast Pacific annual temperature trends, 19012012.  Map of trends (°C/century) of annual (JulyJune) mean surface air temperature for observing stations west of 116°W. Triangles mark statistically significant (p < 0.05) trends (red, upward pointing: positive; blue, downward pointing: negative). Gray dots mark locations of insignificant trends.  (Right) Map of residual surface air temperature trends after removal of natural variability temperature signals  (adapted from Johnstone and Mantua, 2014).

Now, we’ll be among the first to admit that PNAS does not have the reputation of publishing the most robust of studies, but, still, this result is intriguing. We hope that it will be verified by publication in a more rigorous peer-reviewed journal in the near future.

In the meantime, we can only wonder what the authors of the recent U.S. National Climate Assessment (NCA) are thinking.  After all, they have an entire chapter of their new report (a report basically crafted to support President Obama’s Climate Action Plan) dedicated to present and future climate change in the Northwest. While the NCA authors coyly admit that the region’s “climate trends include contributions from both human influences (chiefly heat-trapping gas emissions) and natural climate variability” they are quick to add “[t]hey are also consistent with expected changes due to human activities.”

Hmm. While the observed trends may be “consistent with” the NCA authors’ “expected changes due to human activities,” in actuality they are, in fact, not caused by human activities.

This is a good lesson that “consistent with” does not equate with “a result of.”  Which means that all the other regional changes in the Northwest noted in the NCA—wildfires, insect outbreaks, changes in the timing of stream flow, etc.—are also largely a result of influences other than human-caused climate change.  And, it means that all the projections of future climate changes forwarded by the NCA are also nonrobust.

Somehow, we doubt a correction will be forthcoming.

After all, the NCA and the president are not particularly interested in what the science actually says about climate change and its causes and effects, but rather how it can be molded to support the climate change activism that will shape the legacy of the current administration. Inconvenient truths are too readily brushed aside.

Reference:

Johnstone, J. A., and N. J. Mantua, 2014. Atmospheric controls on northeast Pacific temperature variability and change, 1900-2012. Proceedings of the National Academy of Sciences, doi:10.1073/pnas.1318371111.