October 2016

October 31, 2016 4:34PM

Less Populous States Stand to Gain the Most from State‐​Based Visas

In 2014, the Cato Institute published a policy analysis that argued that Congress should create a work visa program that would allow states to select some of the foreign workers that the federal government admits—a model that Canada has used for decades. All states would benefit from this approach, since they all suffer from low federal caps on visas and since they all have the best knowledge of their local labor markets. But the states that will likely benefit the most are states with lower populations.

While there is no breakdown of the total number of visas issued to workers by state, we know how many workers enter each state annually. This number is imprecise as a measure of the total number of workers in each state because it double counts people who leave the state and reenter during the year, but it is still useful for looking at the distribution of workers among the states.

Figure 1 presents the distribution of all worker entries and entries of workers under the most important category—the H temporary work visa—by grouping the states into three roughly equal baskets: 1) the very large states with more than five percent of the entire U.S. population, 2) those in the middle with 2 to 5 percent, and 3) those with 2 percent or less. As is readily apparent, the big four states—California, Texas, New York, and Florida—receive a much higher percentage of workers than their share of the population. The middle group of states receives only slightly less than their population share for all worker entries.

On the other hand, the smallest states receive not only fewer workers in absolute terms, but disproportionately less than other states compared to their population. These 34 states are home to 30 percent of all Americans, but receive just 18.6 percent of guest workers overall—an 11.4 percent difference between population share and worker share.  A similarly large gap can be seen for worker entries under the important H category.

Figure 1: Difference Between Share of All Worker Entries and Share of U.S. Population; Share of H Worker Entries and Share of the Population in 2014


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Sources: DHS (Entries); Census (Population)

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October 31, 2016 3:20PM

Amazon Patents Police Traffic Stop Drone

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Last July, Dallas police used a robot to kill the man who fatally shot five Dallas‐​area police officers. Shortly after the shooting I noted that new technologies, such as robots, should prompt lawmakers to find ways to make the face‐​to‐​face interactions citizens have with officers safer and less frequent. A recent Amazon patent reveals how new technologies can play a role in improving traffic stops, one of the most common citizen‐​police encounters.

Amazon Technologies, Inc. recently securedpatent for small shoulder‐​mounted police drones. The patent abstract explains that, “The techniques and systems can include routines to provide enhanced support for police during routine traffic stops.”

Drones like the one detailed in the Amazon patent could help improve traffic stops. Drones would allow police to examine a pulled‐​over vehicle before approaching in person. This increased situational awareness would help police officers, providing them with valuable information about how many people are in the car and whether the driver or any passengers have their hands in sight. As drone technology improves it’s likely that police will be able to use similar drones to issue commands. 

If appropriate accountability policies are enacted, these small drones could serve as useful tools in police misconduct investigations. Drone footage of the Philando Castile and Samuel DuBose shootings, for example, would have been helpful to investigators.

But despite the potential for these small drones being useful in misconduct investigations and helping police during traffic stops, citizens may be concerned about the impact such drones could have on their civil liberties. Having a small drone buzzing around your car during a traffic stop may be unnerving, but unless the drone is outfitted with sophisticated surveillance tools it’s unlikely that it will prompt a robust Constitutional challenge.

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If these small Amazon drones are equipped with traditional cameras and don’t enter a car during a traffic stop, then they will only be capturing images of material in “plain view.” Nonetheless, citizens should be wary of small police drones being outfitted with surveillance technology that could raise constitutional issues, such as thermal scanners.

New technologies such as drones and body cameras will undoubtedly play an increasingly prominent role in law enforcement. Small drones like the one described in Amazon’s patent could help make routine traffic stops safer for officers and citizens. However, as the ongoing debates about body cameras have demonstrated, these new technologies can only serve as tools for worthwhile criminal justice reform if they’re governed by good policies. It’s not hard to see how small drones could help police and citizens during traffic stops. But as police drones become more common we shouldn’t forget that they can serve as platforms for a host of technologies that threaten civil liberties.

October 31, 2016 3:12PM

The Server Will Bewitch You Shortly

It’s been a little over a year since Bernie Sanders assured America that the public was “sick of hearing” about Hillary Clinton’s “damn e-mails,” and to put it mildly, the claim has not aged well. Even before Friday’s announcement that the FBI had uncovered an additional cache of e-mails from Clinton’s personal assistant Huma Abedin—and the inevitable media feeding frenzy that followed—Clinton’s use of a private e-mail server during her tenure as Secretary of State had remained a central campaign issue. If anything, the controversy had metastasized: The FBI’s investigation into Clinton’s server, culminating in a recommendation that no criminal charges be brought, was received by many as evidence of a corrupt cover-up even more disturbing the underlying offense, a clear-cut case of a Beltway elite getting a pass for conduct that would have seen a normal schlub clapped in irons. It’s this, probably more than any other alleged misdeeds, that has made “lock her up!” a popular refrain at Donald Trump’s rowdy rallies.

As a frequent critic of the FBI’s routine demands for broadened surveillance powers, it’s heartening to see people recognizing that the Bureau is not somehow immune to improper political influence. Moreover, given the Obama DOJ’s unprecedented use of the Espionage Act to prosecute whistleblowers (rather than spies)—his administration has pursued more cases under that law than all his predecessors’ combined—it’s hard not to feel a twinge of schadenfreude when the public concludes that Clinton’s “extreme carelessness” with classified information (as FBI director James Comey characterized it) must surely be criminal too. But in large part because I’m uneasy about normalizing this aggressive approach to the Espionage Act, I think it’s necessary to explain why this widespread perception is wrong, and Comey’s conclusion that “no reasonable prosecutor” would have pursued charges against Clinton on the available facts was pretty clearly right. While it’s impossible to know what other damaging revelations the newly discovered tranche of e-mails may contain, it seems unlikely they will materially alter that basic legal conclusion.

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October 31, 2016 2:46PM

Some Long‐​Awaited Answers on the Long‐​Term Impact of Cash Assistance

By Charles Hughes

In the search for ways to reform the flawed current welfare system, some form of basic income guarantee has received more attention. My colleague Michael Tanner has reviewed some of the related pros and cons, but most of those studies confined themselves to the immediate to short-run impact on work, leaving many important questions unanswered. A new paper from Daniel Price co-authored with Jae Song offers one of the first studies to analyze the long-term impact of cash assistance from the negative income experiments that took place last century. Their findings suggest “unintended and unexpected long-term consequences for recipients” and ambiguous effects on their children. It’s important to understand these effects when considering ways to try to address the many problems with the troubled status quo.

In the 1960s and 1970s, when interest in a basic income was at a peak, there were large-scale evaluations of the idea of unconditional cash transfers in the Seattle and Denver Income Maintenance Experiments (SIME and DIME, respectively). Recipients were given an unconditional cash transfer that was phased out as earned income rose, for a period of either three or five years. There were a host of studies analyzing the impact on poverty, work impact, and other measures, but these were more focused on the short-term effects.

This paper is so important because, as the authors explain, “virtually no other research has been conducted on the impact of cash assistance—or, indeed, any other type of government assistance—on beneficiaries themselves long after the assistance has ended.” Some of this is due to data limitations, and the authors are able to combine SIME/DIME date with administrative records from the Social Security Administration and the Washington State Department of Health.

The impact on poverty and material hardship is more straightforward and easier to measure, but some of the effects on work effort and other measures are still not as well understood. In this paper the authors find some evidence that participation did seem to have an impact on both work and earnings later in life for adult recipients. Participation reduced the probability a worker was active in any given year by 3.3 percentage points, and decreased average earnings by $1,800 (about 7.4 percent of mean annual earnings).

Another way to put it: for each $1 in additional government transfers, the authors find that an individual’s discounted lifetime earnings are $4.50 lower. 

Impact on Propensity to Work and Earnings for Parents, by Age

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Source: Price and Song (2016).

Notes: Each data point represents the estimate and 95% confidence interval of the coefficient on a dummy for financial treatment status in one regression, limiting the sample to data from individuals when they are a certain age. Earnings variables are based on one observation per year for all years between 1978 and 2013.

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October 31, 2016 1:47PM

Muslim Immigration and Integration in the United States and Western Europe

Muslim immigrant assimilation in the United States is proceeding well. American Muslims have either similar or greater socio-economic status and levels of education than the average American. They are also active in civil and political society. However, this is not the case in Europe where Muslim immigrants tend to have worse labor market outcomes, are less well educated, and less socially integrated. The lack of assimilation and integration in Europe is affected by policies regarding multiculturalism, welfare, labor market regulation, citizenship, and guest worker laws that make integration more costly.

Integration in Europe

Social opinions show how Muslims in Europe are less integrated than in the United States. In Europe, there is a wide gap between Muslim and non-Muslim acceptance of homosexuality (Figure 1) and abortion (Figure 2) according to three surveys published in 2007 and 2009. The acceptance gap on these issues is the smallest in the United States – meaning that Muslims in the United States have opinions that are closer to the general public than in European countries (Figure 3).    

Figure 1

Is Homosexuality Morally Acceptable?

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Sources: Pew and Gallup.

Figure 2

Is Abortion Morally Acceptable?

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Sources: Pew and Gallup.

Figure 3

Acceptance Gap


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Sources: Pew and Gallup.

Opinions on social issues are just one aspect of this gap in assimilation but an important one for judging how assimilated immigrants are into Western culture.  Although there are many other areas that could be compared, opinions of abortion and homosexuality show that Muslim Europeans are less well-assimilated than Muslims in the United States.

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October 31, 2016 12:20PM

Of Agencies and Amendments

Following my recent blog on Obama’s Housing Toolkit, Michael Hamilton took exception with the question: “Who better to determine local needs than property owners and concerned citizens themselves?” and suggested that this type of local‐​centric thinking raises questions about the reach and influence of constitutional protections for property rights. 

But the Obama Toolkit does not propose protecting or amending constitutional rights. At the federal level, it suggests spending $300 million to modernize cities’ housing regulation, when the only modernization required is a reduction in zoning regulation. Theoretically, this reduction in regulation should cost nothing.

Although the language in the report is anything but explicit, given HUD’s historical preference for withholding funding from communities that fail to do the agency‐​approved urban policy action du jour, it’s not a stretch to suggest we could see a similar carrot‐​and‐​stick approach used by HUD in the granting of “Local Housing Policy Grants.” Actually, HUD is already punishing or rewarding municipalities this way, through the euphemistically‐​titled Affirmatively Furthering Fair Housing, Community Development Block Grants, Home Investment Partnerships, Emergency Solutions Grants, and other programs.

But simply because this method is employed with regularity, or even with worthy aims, doesn’t mean that we have to favor it. This carrot‐​and‐​stick approach is, for one thing, usually unconstitutional. Sadly, an unconstitutional approach is unremarkable in the climate of complete rejection/​ignorance of constitutional law in which we exist.

It isn’t that cities or even “concerned citizens” aren’t often inimical to reducing regulation; they are. Property values are bolstered by zoning regulation, giving citizens every incentive to support restrictive zoning. The question is whether we would like federal or state administrative agencies involved in policing this.

But if you remain unmoved on the merits of (un)constitutionality alone, HUD’s ability to effectively and impartially police local municipalities is unproven (see: HUD’s involvement in Westchester, NY). It’s not as if HUD goes after the real zoning or affordability problems (see: San Francisco, CA). In other words, this is just bad policy.

On the other hand, local governments should be prohibited from enacting many types of zoning regulations, and one way to do that is to use higher levels of government—state or federal—to help protect people against arbitrary deprivations of property rights. That’s actually more of a “bottoms up” philosophy, individuals asserting rights, than a top‐​down one, expanding federal or state agency policing powers.

So, again: is there anything that can be done by the federal or state government to reduce regulations? Probably not constitutionally via agency blackmail but yes, there are things that could be done that are not suggested in Obama’s Housing Toolkit.

The federal government could overturn Euclid v. Ambler, which legitimized zoning regulations via police powers to begin with, or any of the cases that have expanded zoning regulations following it.

The people could amend the Constitution to protect property owners from regulatory takings, though it’s not obvious this would be necessary: a casual reader of the Constitution has good reason to believe that the Fifth Amendment already covers this quite well when it states that “private property [shall not] be taken for public use, without just compensation.”[1] At the federal level, the Constitution really doesn’t need an addendum; it just needs adherents and adherence.

The same thing goes for states. Amending state constitutions to include language that forbids irrational local zoning regulation is fine, though that’s not what is proposed. Using the state equivalent of the Tax & Spend Clause to justify any and all state agency overreach, which is what we often see in practice, is not.

In summary, the federal government’s role is to preserve [property] rights; it is not to create new programs, new schemes, and new mechanisms for controlling cities to ensure that municipalities finally spawn the elusive urban utopia of planner’s fantasies. Property rights should be thought of as originating with the individual — yes, even with property owners who happen to be concerned citizens. Though there is much to be admired in the report overall, this does not seem to be the position of the Obama Housing Toolkit when it comes to federal or state oversight.

1. The takings clause is sometimes used to compensate citizens for full takings (e.g. eminent domain) and less often to protect citizens against regulatory takings (e.g. zoning regulation).

October 31, 2016 11:15AM

Venezuela’s Inflation – Zero Hedge Repeats the Errors Printed Ad Nauseam in the Financial Press

With each passing day, I find myself reading wildly inaccurate reports about Venezuela’s inflation. I have already had to take no less than the Wall Street Journal to task for its misreporting. Now, it’s Zero Hedge’s one and only Tyler Durden’s time. On October 27th, he asserted that Venezuela was on the cusp of hyperinflation. Durden’s assertion is dead wrong.

Durden relies on the International Monetary Fund (IMF) for his inflation data, as well as estimates for Venezuela’s inflation. This is a big blunder, as the IMF’s reports on Venezuela contain no indication of their methodology. Indeed, it’s clear from reading their reports that they’re using a finger‐​in‐​the‐​wind method to measure current inflation and forecast future inflation. Durden says that Venezuela’s end of year inflation will be 481 percent, a far cry from Venezuela’s current 74.4 percent annual inflation rate courtesy of the Johns Hopkins‐​Cato Institute Troubled Currencies Project. The Hopkins‐​Cato project uses changes in black market (read: free market) exchange rates and the principle of purchasing power parity (PPP) to translate exchange rate changes into deadly accurate inflation rate estimates. 

As the accompanying chart shows, Venezuela’s inflation is not about ready to break out in hyperinflation, but has decelerated dramatically from annual rates exceeding 700 percent in 2015 to today’s still punishing rate of 74.4 percent. 

By the way, for those who play fast and loose with the word “hyperinflation,” the hyperinflation threshold is 12,875 percent, year over year. For those who are seriously interested in the topic, see the only documented treatment of all the 56 hyperinflations in the world: Steve H. Hanke and Nicholas Krus, “World Hyperinflations” in The Handbook of Major Events in Economic History, ed. Randall Parker and Robert Whaples (London: Routledge Publishing, 2013).

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Once again, the 95 percent rule reigns – 95 percent of what you read in the financial press is either wrong or irrelevant.