October 2017

October 30, 2017 12:37PM

How Time Can Move Backward For Immigrants Waiting for Green Cards

Many Americans want immigrants to “get in line.” But they cannot do so on their own. They need to get a sponsor, either a U.S. citizen family member or a U.S. employer, to petition the government to grant them permanent residency (a “green card”). Even if immigrants do obtain sponsors, there isn’t just one line to get into. Rather, immigrants have separate lines based on the type of sponsorship and their country of origin, and these lines all move at different speeds. Even two immigrants working in essentially the same position whose employer petitions for them on the same day can end up receiving their green cards decades apart if they were born different places.

How America still discriminates based on nationality

This bizarre fact is a consequence of the racist history of U.S. immigration law. In 1921, Congress created the first quota on legal immigration (the “worldwide limit” ). Three years later, it created limits for individual nationalities (the “per-country limits”). The per-country limits give each nationality a share of the worldwide limit. If nationals of a certain country use up their share of the green cards, they have to wait, and immigrants from other countries get to skip ahead of them in line. (And no, Congress made sure that immigrants can’t evade the per-country quotas by getting citizenship somewhere else. Birthplace is all that matters.)

Initially, the per-country limits openly discriminated against “undesirable” immigrants, defined as Asians, Africans, and Eastern Europeans (mostly Jews). But in 1965, Congress made the per-country limits uniform across countries. Today, no country can receive more than 7 percent of the worldwide limit in any green card category. But this reform just shifted the discrimination toward nationalities with the highest demand for green cards. The goal here was not any less racist. The debates over the law abounded with “liberals” reassuring conservatives that America wouldn’t be flooded with Asians.

In order to apply for a green card, green cards must be available under both the worldwide limit and the per-country limit for the relevant category. After their sponsors petition for them to receive a green card, immigrants wait in line to apply for the green card themselves. The State Department releases a green card bulletin every month to inform immigrants of which ones can apply that month. Immigrants whose sponsor petitioned for them before a certain date—called the “priority date”—can apply. Everyone else must continue to wait.

Right now, for example, Filipinos can apply for a green card this month if their U.S. citizen siblings petitioned for them before June 8, 1994—23 years ago. But here’s the critical point: this “priority date” tells Filipinos nothing about how long they will have to wait if their sibling petitioned for them today. If a lot fewer U.S. citizens applied for Filipino siblings after June 8, 1994, they might be able to receive their green cards a decade or more sooner than those receiving them today. However, if the number of petitions increased, then the wait could be even longer—maybe decades longer.

For example, the priority date for Filipino siblings of U.S. citizens in June 1994—when those who are today receiving their green cards started the process—was June 1977. In other words, Filipino siblings filing green card applications in June 1994 had waited from 1977 to 1994. The U.S. citizen who filed an immigrant petition on June 8, 1994 may have looked at the green card bulletin and thought his Filipino sibling would have to wait “only” 17 years. In fact, he had to wait 23.

Read the rest of this post »
October 30, 2017 11:36AM

FCC Finally Deregulates Telegraph Service, 11 Years After Its Demise

“The FCC said in a notice it was removing ‘outmoded regulations’ on telegraphs effective in November.” And none too soon: “The last Western Union telegram in the United States was sent in 2006” and the “last major telegram service worldwide ended in India in 2013.” Reuters reports:

AT&T Inc, originally known as the American Telephone and Telegraph Company, in 2013 lamented the FCC’s failure to formally stop enforcing some telegraph rules.


“Regulations have a tendency to persist long after they outlived any usefulness and it takes real focus and effort to ultimately remove them from the books even when everyone agrees that it is the common sense thing to do,” the company said.

In 2011, I observed that Connecticut had yet to get around to repealing old state laws like those regulating the working conditions of telegraph messengers (cross‐​posted and adapted from Overlawyered).

October 30, 2017 4:03AM

Supreme Court Should Protect Federalism against Pests Both Rodential and Congressional

Does the federal government enjoy plenary power to regulate every aspect of corporeal existence, down to the rodents living in your backyard? People for the Ethical Treatment of Property Owners (PETPO), an organization of concerned citizens from Utah, say no, and want the Supreme Court to hear them out.


Article I of the Constitution lists the federal legislative powers: Congress may only act pursuant to one of these enumerated powers. One of these powers is the regulation of commerce “among the several states.” Starting with the New Deal, however, Congress has increasingly looked upon that power as a license to do whatever it likes. And for decades, the courts rubber‐​stamped these increasingly expansive federal intrusions into areas traditionally reserved to the states.


But in a series of cases, starting with 1995’s United States v. Lopez, the Supreme Court began to push back, reaffirming that federal regulation under the Commerce Clause must be, well, commercial. Recall that while Chief Justice John Roberts ultimately saved Obamacare by transmogrifying the individual mandate into a tax, he and the Court majority rejected the government’s arguments regarding the Commerce and Necessary and Proper Clauses.


That brings us to the current case. The Utah prairie dog, which resides only within a small corner of southwest Utah, has no commercial value: there is no market for it—they make terrible pets—or any product made from it. Moreover, the current population is large and expanding. Yet it is listed as “threatened” under the federal Endangered Species Act.


Its legal status derives from the distribution of its population: the government deems the 70% residing on private land a nullity, counting only the federal‐​land population, on the theory that the citizens of Utah would declare open‐​hunting on privately domiciled prairie dogs if the species were delisted. And, according to the U.S. Court of Appeals for the 10th Circuit, it doesn’t matter that the varmint is commercially worthless; other unrelated animals have commercial value, so the federal government can stick its nose into whichever animal it likes. Under this theory, of course, all organic life in the United States is subject to congressional whim, because some conjectural private party might impose some vaguely defined harm at some hypothetical future date.


PETPO has filed a petition asking the Supreme Court to review the case. Cato, joined by the Reason Foundation and the Individual Rights Foundation, has filed an amicus brief urging the Court to review PETPO v. U.S. Fish & Wildlife Service. At stake is not simply the beleaguered citizenry of Utah who wish to live their lives unmolested by pests—neither those living underground nor in the District of Columbia—but also the very system of enumerated powers that has protected the liberty of all Americans since the Founding.

October 27, 2017 11:07AM

Consumers Losing Interstate Wine Options

Eric Asimov at the New York Times has an excellent, detailed, and highly discouraging look at the reversal of one of the favorable trends for freedom of commerce in recent years, the greater ease of interstate wine shipment. Excerpt: 

In the last year or so, carriers like United Parcel Service and FedEx have told retailers that they will no longer accept out‐​of‐​state shipments of alcoholic beverages unless they are bound for one of 14 states (along with Washington, D.C.) that explicitly permit such interstate commerce.…


Strictly speaking, it was probably never entirely legal in New York or in many other states to have wine shipped in from out‐​of‐​state retailers. Yet, these laws requiring a license for interstate wine shipments seemed vague and were rarely enforced.…

But now, states — urged on by wine and spirits wholesalers who oppose any sort of interstate alcohol commerce that bypasses them — have stepped up enforcement efforts. Retailers say that the carriers began sending out letters to them a year ago saying they would no longer handle their shipments.

Asimov notes that the cost of restraints on commerce falls most heavily on those who live far from high‐​end markets: 

For consumers who live in states stocked with fine‐​wine retailers, like New York, the restrictions are an inconvenience. For consumers in states with few retail options, they are disastrous. It’s hard enough outside major metropolitan areas to find wines from small producers. The crackdown makes it that much harder.

Unfortunately, alcohol wholesalers are among the most powerful of state‐​level lobbies, and intent on keeping a system that serves their interests. They invoke far‐​fetched health and safety rationales, claiming that restraints on interstate shipment are “all that protects the wine and spirits business from descending into chaos. The Supreme Court did not buy the argument in 2005, and to me, their economic interest seems a far more likely motivation than public health,” writes Asimov.

The Supreme Court’s constitutional pronouncements in this area, alas, provide only spotty and indirect protection for consumers’ rights to do business with willing providers, concentrating instead on improper protectionism directed by states against other states. Ilya Shapiro analyzed the case law in this 2011 post and related podcast. Brandon Arnold, then Cato’s director of government affairs, wrote about a 2010 attempt by wholesalers to get their way through federal legislation. And while state‐​by‐​state liberalization efforts are underway in many state capitals, they are routinely stymied by the well‐​entrenched wholesaler lobby. For more background reading, the California‐​centric Wine Institute has this FAQ.

October 26, 2017 12:15PM

Blockchain + Gold

The Bitcoin system has the great virtue of securely sending value directly from stranger to stranger. It is open to anyone, anywhere in the world. The sender does not need to trust the recipient, nor any bank or other institution, to accurately record the transfer. The Bitcoin “blockchain” provides a readily consulted online public ledger with immutable records. Transfers are indelibly captured, like flies in amber, and made tamperproof by massive duplication and reconciliation of the ledger over thousands of nodes.

Bitcoin also has well-known limitations as a currency, however. First, it doesn’t scale well. The Bitcoin blockchain can process about four transactions per second, whereas Paypal does hundreds, Visa or Mastercard thousands. The blockchain has become congested as the number of transactions has grown. (Reducing the congestion was the motivation for the proposals to enlarge the block size that recently roiled the bitcoin world.) Validation takes at least ten minutes, longer for more secure validation, and even longer when the system is congested.

Cryptocurrency pioneer Nick Szabo has clearly explained that this tradeoff — high security at the cost of slow transaction speed and low capacity for transaction validations per second — is built into Bitcoin’s massive-duplication design:

Bitcoin's automated integrity comes at high costs in its performance and resource usage. Nobody has discovered any way to greatly increase the computational scalability of the Bitcoin blockchain, for example its transaction throughput, and demonstrated that this improvement does not compromise Bitcoin’s security. … Compared to existing financial IT, Satoshi [Bitcoin’s pseudonymous designer] made radical tradeoffs in favor of security and against performance.

Thus a blockchain system like Bitcoin is not itself capable of quickly processing large numbers of retail payments.

Read the rest of this post »
October 26, 2017 12:08PM

Labor’s Share of GDP: Wrong Answers to a Wrong Question

A recent paper by David Autor of MIT, Lawrence Katz of Harvard and others, “The Fall of the Labor Share and the Rise of Superstar Firms,” begins by posing a mystery: “The fall of labor’s share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain.” They construct a model to blame it on U.S. businesses that are too successful with consumers. 


Five broad industries, they found, became more dominated by fewer firms between 1982 and 2012: retailing, finance, wholesaling, manufacturing and services. But those aren’t industries at all, much less relevant markets: they’re gigantic, diverse sectors. Is all manufacturing becoming monopolized? Really? Census data ignores imports, but why ruin this bad story with good facts.


Noah Smith at Bloomberg ran an audacious headline about this tenuous paper: “Monopolies drive down labor’s share of GDP.” Smith writes that, “The division of the economy into labor and capital is one place where Karl Marx has left an enduring legacy on the economics profession.” He goes on to claim that “at least since 2000 — and possibly since the 1970s — capital has been taking steadily more of the pie.” Yet, Jason Furman and Peter Orszag found “the decline in the labor share of income is not due to an increase in the share of income going to productive capital—which has largely been stable—but instead is due to the increased share of income going to housing capital.” Depreciation and government, they noted, also gained an increased share (i.e., grew faster than labor income.) 


President Obama’s Council of Economic Advisers, under Jason Furman, nonetheless worried that the 50 [!] largest firms in just 10 “industries” (if you can imagine retailing and real estate to be industries) had a larger share of sales in 2012 than in 1997 (using Census data that excludes imports). They concluded that, “many industries may be becoming more concentrated.” Noah Smith, Paul Krugman and many others have suggested that this nebulous “concentration” allowed monopoly profits to rise at the expense of the working class, supposedly explaining labor’s falling share of GDP during the high‐​tech boom. A quixotic search for even one actual example of monopoly soon morphed into advice about using unconstrained antitrust to constrain Amazon, which is apparently feared to have monopoly profits invisible to the rest of us. 


Research that starts with such a meaningless question as “labor’s share of GDP” was never likely to lead us to any profound answers. Workers do not receive shares of GDP – they receive shares of personal or household income. 


Contrary to popular confusion, dividing employee compensation (wages and benefits) by GDP does not measure how a capitalist private economy (e.g., “superstar firms”) divides income between labor and capital. Most obviously, the government makes up a huge share of GDP, including nonmarket goods like defense and public schools. Nonprofits also account for a lot of GDP, with no obvious payout to labor or capital. Less obviously, depreciation makes up another huge share of GDP, including wear and tear on public highways and bridges as well as private equipment, homes, and buildings. The “imputed rent on owner‐​occupied homes” is another large piece of GDP. Asking if labor is getting a fair share of defense, depreciation and imputed rent is a truly foolish question. Net private factor income would be a better gauge than GDP, for the purpose at hand, but still flawed. 


The ratio of compensation to GDP uses the wrong numerator as well as an untenable denominator. Labor income must add the labor of self‐​employed proprietors.


When people say “labor’s share is falling,” they surely mean income people receive from work has not kept up with income people (often the same people) receive from property: dividends, interest, and rent. But, that crude Piketty‐​Marx labor/​capital dichotomy ignores another increasingly important source of personal income: namely, government transfer payments from taxpayers to those entitled to cash and in‐​kind benefits. 

Shares of Personal Income

The first graph shows shares of income from labor, property, and transfers. The property share peaked at 21.1% in 1984–85, as the Fed kept interest rates very high, but averaged 19.3% and was 19.4% in 2016 (after dropping to 17.8% in 2009). The labor share averaged 66.5% but was 63.3% in 2016 even though property owners’ share was virtually flat. What went up? Transfer payments. Transfers rose from 11.7% of personal income in 1988 to 17.4% in 2016. Personal income that has been growing persistently faster than income from work has not been income from property (since the 1980s), but income from Social Security, Disability, Medicare, Medicaid, EITC, TANF, SNAP, SSI, UI, and so on.


Some might object that personal income leaves out retained corporate profits. But profits not paid out as dividends add to people’s income only if they are reinvested wisely enough to lift the value of the firm and thus generate capital gains. Personal income excludes capital gains because national income statistics measure flows of income from current production, not asset sales. That is also true of GDP, adding another reason to discard GDP as the basis of comparison.


However, Congressional Budget Office reports on the distribution of income do include realized capital gains when assets are sold (turning wealth into income). 

CBO Shares of Household Income

The second graph shows that labor’s share of household income is highest in deep recessions (77.5% in 1982, 76.2% in 2009) and lowest at cyclical peaks (70.6% in 2000, 68.3% in 2007). The higher labor share in recessions does not mean recessions are good for workers, of course, but that they are even worse for business and investors. Those who equate a higher labor share of income (e.g., during recessions) with higher real income for workers are making a basic and very large mistake. 


Capital income was highest in the early 1980s because the Federal Reserve kept interest rates very high, and capital income (dividends, interest, and rent) has shown no upward trend since then. Dividends and rent are up, but interest income is down.


Capital gains rose at specific times, but there has been no upward trend. There was a spike in capital gains in 1986 because the tax on gains jumped to 28% the following year. Realized gains also rose for four years after the capital gains tax was brought back down to 20% in 1997, and again after the capital gains tax was cut to 15% in mid‐​2003.


The white space at the top is important because it increases by four percentage points from 1990 (15.3%) to 2016 (20.3%) while labor’s share fell by 2.5 percentage points (from 75% to 72.5%). That white space is transfer payments: income from neither labor or capital. As the first graph showed, labor’s somewhat smaller share of income is not because of any sustained rise of capital income or capital gains. It is because of a sustained rise in the share of income from transfer payments and a sustained fall in the labor force participation rate.


Meanwhile, household income from owning a closely‐​held private business doubled since 1986: from 4% of household income in 1986 to 8% in 2013. That reflects the well‐​known shift of income from corporate to “pass‐​through” entities after 1986 as the top individual tax rate became even lower than the corporate tax rate (1988–92) or about the same dropped to the same as the corporate rate (35% 2003–2012)) or lower. That did not mean that “business” grabbed a bigger share at the expense of “labor,” but that a larger share of business income shifted from corporate to personal data.


The frequently repeated angst about “the fall of labor’s share of GDP in the United States” is based on a serious yet elementary misunderstanding of both labor income and GDP. “Labor’s share of GDP” is fundamentally nonsensical, because so much of GDP (depreciation, defense, etc.) could not possibly be paid to workers, and because the measure of labor income is too narrow (excluding the self‐​employed). 


Labor’s share of the CBO’s broadly‐​defined household income also fell (unevenly) because the share devoted to transfers rose, but also because the share moved from corporate to household accounts (and individual tax returns) also rose. Business income counted within CBO’s household income has increased its share of such income since the Tax Reform Act of 1986, but that just reflects a change in organizational form from C‐​Corporation to pass‐​through status.


Labor’s share of personal income fell mainly because the share devoted to government transfer payments rose. Labor’s share of GDP fell for other reasons (rising shares going to housing, government, and depreciation), but it is a fundamentally misconstrued statistic used to rationalize irresponsible remedies to an illusory problem of “monopolies.”


 


 

October 26, 2017 9:00AM

It’s Time for the Supreme Court to Take Up the Second Amendment Again

By Ilya Shapiro and Matthew Larosiere

Because the Second Amendment protects the right to bear all arms in common lawful use, any law that limits that right has to pass certain standards to be constitutionally permissible. The courts haven’t yet ironed out exactly what kind of scrutiny laws implicating the Second Amendment must pass, but such laws must have an important government objective and not be so broad as to burden protected activities unrelated to the harm they’re designed to address.


California requires most firearm purchasers to wait 10 days before they can bring their gun home, regardless of whether they already own one, or how long it takes to pass a background check. Several California residents who already own firearms challenged the 10‐​day waiting period and prevailed in federal district court because the state could only assert a general interest in a “cooling off” period.


The U.S. Court of Appeals for the Ninth Circuit ignored that the burden was on California to prove its case—and the state could show no evidence that the wait would have any public‐​safety effect when the purchaser already owns other arms. Instead, the court speculated as to what kind of harms the law might conceivably prevent, not any important interest it does actually serve. In the face of a decision that would allow California to arbitrarily infringe their Second Amendment rights, the challengers now seek Supreme Court review.


Cato has filed a brief supporting their petition. Silvester v. Becerra is an important case that the Court should not let slip by, because it presents an opportunity to provide much needed guidance in an area where lower courts have failed to reach a consensus on anything from what is protected by the right to keep and bear arms to the appropriate level of scrutiny judges should apply when considering lawsuits involving Second Amendment rights.


The morass of case law that has developed since District of Columbia v. Heller (2008) and McDonald v. City of Chicago (2010) is so divergent that the opinions of individual circuits read as though there was no precedent in this area whatsoever. From the Fourth Circuit’s holding that common semi‐​automatic weapons are “beyond the scope” of constitutional protection, to the Second Circuit’s deciding that only “severe” restrictions of the right to bear arms warrant any form of heightened scrutiny, all that’s clear is that the Supreme Court needs to clarify what hurdles the government must cross to justify violating what it itself held in Heller is a fundamental right.


The case here is quite narrow, covering only the application of an arbitrary waiting period to people who already own guns. The Court’s input, then, would not upset the diverse tapestry of gun laws that have developed across the country. Instead, it could help enable lower courts to competently move forward in developing Second Amendment jurisprudence. Because the case is small, the facts straightforward, the error below so clear, and the issue so constitutionally significant, the Supreme Court should step in and remind the Ninth Circuit what was said in McDonald, that the Second Amendment is not a “second‐​class” right for the circuit courts to “single out for special—and specially unfavorable—treatment.”