When the Department of Labor (DoL) rolled out its fiduciary duty rule last year, I (and others) noted that its likely effect would be to harm the very people it purports to protect. Unfortunately, it seems I was right.
The rule is intended to help individuals make good choices when saving for retirement. Under the rule, brokers who sell retirement investments are to be held to a “fiduciary duty” standard. This is often expressed in the legal world as the care a prudent person would take in managing his or her own affairs. Those who hold positions of great trust, such as those who are given authority to act for another, are often designated fiduciaries under the law. For example, corporate board members are fiduciaries of the company they serve, and lawyers owe a fiduciary duty to their clients.
As I’ve discussed previously, the legal reality of being subject to a fiduciary duty standard is much more than simply deciding to offer good customer service. And “more” in this case means more liability and more cost. The risk is therefore that brokers may find it’s just not worth the risk or the cost to serve clients with only moderate amounts of money to invest.
It seems a recent poll of the industry shows my predictions may be correct. According to a letter submitted to the DoL by the Financial Services Roundtable, its members have reported the following trends as a result of the rule:
(1) less guidance and support to IRA owners and small plans; (2) increases in minimum account size; (3) limited product shelf; (4) shift to fee‐based accounts; (5) moving clients with smaller accounts to self‐service or robo‐advice; (6) orphaning of smaller, less profitable accounts due to heightened risks; (7) reduced willingness to discuss or consider unmanaged assets with clients due to risks; (8) poor client service due to the time required to perform comparative analysis on the proposed account to the existing account; (9) disinclination to sell annuity products because of uncertainty surrounding the Rule and inability to launch new products because resources are tied up with Rule implementation; (10) additional disclosure documents and other changes to sales process make the sales process markedly longer in each client appointment; (11) less discretion on small accounts and compensation changes make working with small accounts more challenging and less cost‐effective for financial professionals; (12) higher manufacturing and distribution costs; and (13) new liability concerns.
Specifically, the poll found that 68 percent of respondents would be taking on fewer small accounts due to increased compliance costs and legal risks. It also found that 63 percent expected that the new rule would limit the investment options or products the firms could provide to their clients. And that 52 percent expected that higher compliance costs would be passed on to clients in the form of additional fees. Only 12 percent of respondents said the rule “is helping me to serve my clients’ best interests.” Most notably, the poll report highlights the following: “Even advisors who say that the rule is ‘helping me to serve my clients’ best interests’ or has had ‘no impact on my ability’ say that there will be more complicated paperwork and fewer small accounts.”
An anonymous source sent an advanced copy of S.1757, otherwise known as the “Building America’s Trust Act,” to Ars Technica. If passed as written, the bill would dramatically expanded surveillance at the border and ports of entry, putting the privacy of immigrants and citizens alike at risk.
The bill, sponsored by Sen. John Cornyn (R‑TX) and co‐sponsored by six of his Republican colleagues, mandates increased border drone surveillance and the collection of more biometric information, including but not limited to voice prints and facial scans.
The drone provisions of the bill are consistent with President Trump’s campaign rhetoric. During his campaign, he said drones should patrol the border 24/7. Cornyn’s bill doesn’t quite go that far, requiring Customs and Border Protection (CBP) to fly drones at least 24/5.
Drone surveillance at the border isn’t new, nor is it effective. In 2014 the Department of Homeland Security’s Office of Inspector General (OIG) released a report on CBP’s drone operations. It found that the drone program, which includes Predator B drones originally designed for military use, did not achieve expected results and contributed to very few apprehensions of illegal border crossers and marijuana. The report also found that the drone program cost $12,255 per flight hour. In FY2013, CBP’s drones flew for 5,102 hours for a combined cost of around $62.5 million.
This was a large expense for an inefficient border security tool. Aside from the fiscal costs, the increased use of drones on the border will worsen the militarization of the border, with American citizens being under the ever‐snooping eye of border patrol surveillance equipment. In 2013, Americans on the border were already regularly seeing military‐grade surveillance tools in the air. From a 2013 New York Times report:
The United States‐Mexico border has become a war zone. It is also a transfer station for sophisticated American military technology and weapons. As our country’s foreign wars have begun to wind down, defense contractors look here, on the southern border, to make money.
Lately it has become entirely normal to look up into the Arizona sky and to see Blackhawk helicopters and fixed‐wing jets flying by. On a clear day, you can sometimes hear Predator B drones buzzing over the Sonoran border. These drones are equipped with the same kind of “man‐hunting” Vehicle and Dismount Exploitation Radar (Vader) that flew over the Dashti Margo desert region in Afghanistan.
CBP drones do not have to be large, military‐grade predator drones. Earlier this year I noted that The Department of Homeland Security (DHS), CBP’s parent agency, is interested in small, portable drones outfitted with facial recognition technology.
Facial recognition is also mentioned in S.1757 as part of the bill’s passport screening section, requiring that CBP “utilize facial recognition technology or other biometric technology” to “inspect travelers at United States airports of entry.”
Writing at the Niskanen Center, Samuel Hammond has some harsh words for libertarians. It’s a short step, he says, from anti‐statism to some particularly ugly forms of nationalism:
The appeal of white nationalism to libertarian anti‐statists should not be surprising. After all, nationalist and revanchist movements have historically represented powerful tools for mobilizing secession and other forms of political resistance to “the state.” Their common cause is all the stronger in multicultural, liberal democracies where ethnic grievances can be called upon to portray “the state” less as a political compact between competing groups, and more as tyrannical sovereign infringing on some sub-group’s right to self‐determination.
To the extent that he’s right about this, that’s pretty embarrassing. Hammond cites AnCap YouTube to argue that there have been all too many who took this path. I’m not sure that it’s fair to judge anyone else by AnCap YouTube, although his judgment on some of them is certainly correct.
Other parts of his essay I think are quite wrong: It’s not necessarily crazy or evil to think that the state should be at least somewhat congruent to the nation. That proposition does not necessarily entail ethnonationalism, and certainly doesn’t when I assert it. A nation, as an imagined community, need not be ethnic at all. A pluralist nation may include people of many different ethnicities, religions, and other affiliations. The American nation has always been pluralist in its aspirations. Throughout our history we have increasingly delivered on the promise of pluralism, not just to favored groups, but to all. That work should continue, and if saying “you too are a part of this nation” can help with the task, then we should say it loudly and often.
Hammond also claims that “liberty needs the state.” On this point I am sure that the Niskanen Center will get the usual howls of protest from exactly the people who should be the least surprised. Of course the Niskanen Center would say something like this. But is it true?
It’s clearly correct to say, with Hammond, that in many cases “state sabotage automatically empowers the most dominant and dominating subgroups in our otherwise open society,” it’s much less clear that this must always be the case.
The way forward for radical libertarians and others who dream of a stateless (or just a less state‐dominated) society consists of figuring out how to manage these tendencies toward domination, so that when the state does retreat, it is individual that liberty advances, rather than some other form of unjust domination.
I don’t know quite to what extent the project can succeed. But I think it’s reasonable to expect that we can enjoy a much smaller state than the one we have right now. Reasonably as well, this development could leave the vast majority of citizens, and particularly the least well off, better off by a range of widely acceptable criteria. What seems in order is not a broad declaration for or against the state, but a constant and relentless tinkering on the margins, with the aim of delivering less arbitrary domination of one person or group by another. Racial groups most certainly included.
To be blunt, Republicans are heading in the wrong direction on fiscal policy. They have full control of the executive and legislative branches, but instead of using their power to promote Reaganomics, it looks like we're getting a reincarnation of the big-government Bush years.
As Yogi Berra might have said, "it's déjà vu all over again."
Let's look at the evidence. According to The Hill, the Keynesian virus has infected GOP thinking on tax cuts.
Republicans are debating whether parts of their tax-reform package should be retroactive in order to boost the economy by quickly putting more money in people’s wallets.
That is nonsense. Just as giving people a check and calling it "stimulus" didn't help the economy under Obama, giving people a check and calling it a tax cut won't help the economy under Trump.
Tax cuts boost growth when they reduce the marginal tax rate on productive behavior such as work, saving, investment, or entrepreneurship. When that happens, people have an incentive to generate more income. And that leads to more national income, a.k.a., economic growth.
Borrowing money from the economy's left pocket and then stuffing checks (oops, I mean retroactive tax cuts) in the economy's right pocket, by contrast, simply reallocates national income.
The annual Education Next gauge of public opinion on numerous education issues is out, and as always it offers lots to contemplate, including special questions this year on the “Trump effect.” I won’t hit everything, just what I see as the highlights.
The poll’s headline grabber is a big drop in support for charter schools, public schools run by ostensibly private entities but subject to many public school controls, especially state standards and testing. When people with neutral opinions were removed, 52 percent of respondents approved of “formation” of charters — that word likely made some difference — down from a peak of 73 percent in 2012. With neutral answers included, only 39 percent of the general public supported charters.
The good news is that support for private school choice programs — superior to charters because they offer access to far wider options, including religious schools — saw upticks. Scholarship tax credits remain the choice champ, with support (absent neutral respondents) rising from 65 percent to 69 percent. With neutrals, support stood at 55 percent of the general public. For vouchers, a lot depends on question wording, but without a loaded emphasis on “government funds,” support (minus neutrals) stood at 55 percent, up from 50 percent the previous year. With neutrals, support was at 45 percent, with 37 percent opposing. Education savings accounts—basically, money parents can use not just for tuition, but other education expenses like tutoring or buying standalone courses — garnered only 37 support from the general public, but the concept is pretty new and people may just not have wrapped their heads around it yet.
Why the big drop in charter support but improved backing of private school choice? As always, wording, question order, and other artifacts of the poll itself matter, but assuming those aren’t the major causes of the results, perhaps the answer is that charters, as a compromise between empowering parents and maintaining government control, have traditionally tended to have the highest profile bipartisan support of the various choice mechanisms. As a result of Trump‐driven polarization, perhaps they have also had the most visible schisms, maybe casting a more negative light on them. Or maybe people have started to perceive, as Education Secretary Betsy DeVos borrowed from Rick Hess to warn, charters are becoming “the Man” they were supposed to replace.
Kenneth S. Rogoff stands out as the advocate of restricting hand-to-hand currency who has argued the case most comprehensively and probably the most cautiously. I critically reviewed his recent book, The Curse of Cash, in the July 2017 issue of Econ Journal Watch. Here I summarize highlights from my review, taking some passages verbatim. I encourage anyone who is interested to read the review in full. But in this piece I also comment on Rogoff’s response to my review that appeared in the same issue of EJW. When I provide page numbers for quotations, they reference Rogoff’s book; otherwise Rogoff quotations are from his response to my review.
A Case Against Cash
Rogoff does not propose eliminating all cash. In developed countries, he would phase out over a decade or more only large-denomination notes: in the United States, for instance, first $100 and $50 bills and then $20 bills and perhaps $10 bills. For small transactions, he would leave in circulation smaller-denomination notes, although he considers eventually replacing even these with “equivalent-denomination coins of substantial weight” to make them “burdensome to carry around and conceal large amounts” (p. 96). To put this in perspective, $1, $2, and $5 notes comprise less than 2 percent of the value of U.S. notes, or a little over 3 percent if we add in $10 bills. For less developed countries, Rogoff concedes that it is “far too soon” to “contemplate phasing out their own currencies” (p. 205).
While same-sex couples ought to be able to get marriage licenses—if the state is involved in marriage at all—a commitment to equality under the law can’t justify the restriction of private parties’ constitutionally protected rights like freedom of speech or association.
Arlene’s Flowers, a flower shop in Richland, Washington, declined to provide the floral arrangements for the wedding of Robert Ingersoll and Curt Freed. Mr. Ingersoll was a long-time customer of Arlene’s Flowers and the shop’s owner Barronelle Stutzman considered him a friend. But when he asked her to use her artistic abilities to beautify his ceremony, Mrs. Stutzman felt that her Christian convictions compelled her to decline. She gently explained why she could not do what he asked, and Mr. Ingersoll seemed to understand.
Later, however, he and his now-husband, and ultimately the state of Washington, sued Mrs. Stutzman for violating the state’s laws prohibiting discrimination in public accommodations. The trial court ruled against Arlene’s Flowers on summary judgment. The Washington Supreme Court affirmed, holding that Mrs. Stutzman’s floral design did not constitute artistic expression worthy of First Amendment protection. Now the case is on the U.S. Supreme Court’s doorstep and Cato, joined by the Reason Foundation and Individual Rights Foundation, has filed an amicus brief urging the Court to take up the case and consolidate it with Masterpiece Cakeshop, the case of the similarly situated Colorado baker that the Court has already agreed to hear.