October 24, 2017 5:05PM

Trump Hits Motorists with Ethanol Costs

The Trump administration acquiesced to the ethanol lobby in a recent decision on the costly Renewable Fuel Standard (RFS), says the Wall Street Journal. Under a Bush‐​era 2007 law, the mandated amount of biofuels in your gas tank is increasing, which puts upward pressure on gas and food prices and likely harms the environment.

Rather than supporting repeal of the anti‐​environmental RFS, the EPA announced it “won’t reduce its proposed 19.24 gallon biofuels quota for 2018, and many even increase it,” said the WSJ. Sadly, the administration “caved under pressure from the ethanol lobby and political extortion from Republican Senators Joni Ernst, Deb Fischer, and Chuck Grassley.”

At Down​siz​ing​Gov​ern​ment​.org, Nicholas Loris explains how the RFS harms consumers, damages the economy, and produces negative environmental effects. The RFS is also a bureaucratic nightmare, and has spawned a complex credit‐​trading system, which investor Carl Icahn said is a “$15 billion market full of manipulation, speculation and fraud.”

Loris notes that ethanol has only two‐​thirds the energy content of regular gas, so drivers get fewer miles per gallon the higher the share of ethanol and other biofuels mixed into their tanks.

So the next time you are pumping gas and see that “10% Ethanol” sticker, remember it’s a Big Government swindle perpetrated by the GOP.

For more on ethanol, see here.

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October 24, 2017 12:43PM

Don’t Blame Us Libertarians for School Choice Disappointment

The headline of Megan McArdle’s latest Bloomberg View piece stings, at least for a libertarian whose job is to advance educational freedom: “We Libertarians Were Really Wrong About School Vouchers.”

Ouch! But to this I say: Speak for yourself!

To be fair, I don’t know how things work for big-time columnists, but there’s a good chance McArdle didn’t pen her own headline. Pubs need clicks, and the shrewd marketeers at Bloomberg were no doubt well aware that such an inflammatory header would draw in all roughly ten professional libertarian school choicers, boosting readership by huge hundredths of a percent. And it is worth saying: While I’m not sure you would call them libertarians, John Chubb and Terry Moe’s Politics, Markets, and America’s Schools was seminal in launching the modern choice movement, and they did assert that choice would be a “panacea.” If that is what libertarians expected from the tiny choice programs we’ve gotten so far, yes, we were wrong. But that is not what libertarians should have expected.

The fact is we have not even come close to getting what we need—real, broad freedom, which McArdle and lots of libertarians call “the market.” (I’ve decided, by the way, that a "market” is a horrible way to conceptualize what libertarians want, because it implies education is all about efficient financial transactions. What we want is full-on human freedom.) None of the voucher, charter, scholarship tax credit, or education savings account programs we have gotten have even come close to a free market, as many libertarians have been decrying for decades.

How far are we? Thankfully, you don’t have to dig into old books to find out—we give you the lowdown in Educational Freedom: Remembering Andrew Coulson, Debating His Ideas (available in free PDF version or wherever fine books are sold)! Andrew was a leading critic of the kinds of hamstrung programs many choice supporters lauded for years—a few thousand kids with small vouchers here, public charter schools there—and the book contains multiple chapters examining what is needed for a true free market. As the Heartland Institute’s George Clowes lays out:

  • Parental choice of school
  • Direct parental financial responsibility
  • Freedom for educators to establish different types of schools
  • Explicit competition among educators
  • The profit motive for educators (and the need for a reliable revenue stream)
  • Universal access (including low- and high-income families)
  • Per-pupil funding comparable to the public schools, with the funding following the child
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October 24, 2017 11:45AM

ADA: Deaf/​Blind Patron Can Sue Movie Theater Demanding “Tactile Interpreter”

Reversing a trial court, the Third Circuit has ruled (McGann v. Cinemark) that a deaf/​blind man is entitled to sue Cinemark under the Americans with Disabilities Act (ADA) demanding that it provide a “tactile interpreter” so that he can experience the movie Gone Girl. Each interpreter — two would be required because of the movie’s feature length — would narrate the film in American Sign Language (ASL) while McGann places his hand in contact with theirs to read the signs. The appellate judges rejected the argument that because of the need for subjective stylistic judgments about how to describe the movie’s action, on‐​the‐​fly translation would “fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered,” an exception that the law recognizes to its accommodation requirement. It sent the case back for further proceedings on whether the theater can plead “undue hardship,” a narrow defense that is often unavailable to large businesses which (it is argued) can cover even very high costs of accommodation with revenues earned from other patrons.

Like the Berkeley online courses fiasco, and the Main Street shakedown mills, and the emerging industry of web accessibility suit‐​filing, these are all developments to keep in mind when you hear people say that the courts are capable of working out the problems with the Americans with Disabilities Act by themselves and that Congress need not turn its attention to reform. (cross‐​posted and adapted from Overlawyered)

October 24, 2017 11:21AM

The Use and Abuse of “Reciprocity” in Trade Policy

One of the big demands of the Trump administration is that trade, and trade agreements, must be “reciprocal.” Their concerns about reciprocity are misplaced, and miss the point about why we open our markets in the first place. Sure it’s great when other countries also open their markets, but there is more to be gained from unilateral opening than no liberalization at all. Frédéric Bastiat explained this peculiar desire for reciprocity in Economic Sophisms, where he wrote:

There are people (a small number, it is true, but there are some) who are beginning to understand that obstacles are no less obstacles for being artificial, and that we have more to gain from free trade than from a policy of protectionism, for precisely the same reason that a canal is more favorable to traffic than a “hilly, sandy, difficult road.” 

But, they say, free trade must be reciprocal. If we lowered the barriers we have erected against the admission of Spanish goods, and if the Spaniards did not lower the barriers they have erected against the admission of ours, we should be victimized. Let us therefore make commercial treaties on the basis of exact reciprocity; let us make concessions in return for concessions; let us make the sacrifice of buying in order to obtain the advantage of selling.

People who reason in this way, I regret to say, are, whether they realize it or not, protectionists in principle; they are merely a little more inconsistent than the pure protectionists, just as the latter are more inconsistent than the advocates of total and absolute exclusion of all foreign products. 

This principle applies not just to border measures such as tariffs, but also to internal measures such as government procurement. Closing our procurement market to foreigners ignores the value of greater choice and competition. Politicians tend to oversell the advantages of selling (exports) over buying (imports), and incorrectly frame imports as a loss and exports as a gain. In fact, increased competition from foreign firms bidding on government contracts can get more value out of taxpayer dollars by increasing efficiency and gains in quality. 

Nonetheless, if people are going to make these demands for reciprocity, they should at least have some reasonable basis for determining whether there is, in fact, reciprocity. To paraphrase a famous line from the Princess Bride: They keep using that word, but it does not mean what they think it means. A recent demand from the Trump administration in the NAFTA renegotiation, related to government procurement, distorts the concept of reciprocity beyond recognition. Here’s a Politico report on Commerce Secretary Wilbur Ross’ remarks on the subject: 

Ross was pressed on whether he thought the U.S. proposal on government procurement access was fair, given that it might result in less market access for Canada and Mexico than is granted to other countries through the WTO.

The U.S. proposal would cap Mexican and Canadian access to U.S. government projects at the combined total access those two countries provide to U.S. firms.

“It’s very good faith, our market is 10 times the size of either of those markets, so if you gave equal percentage market share we’d be giving them 10 for one, how is that good arithmetic?” Ross said. “It is actually to the benefit of the parties because it is the cumulative total of two economies rather than the individual one.”

Ross said the proposal helps address “one of the fundamental flaws, the president feels and I agree, that exists in NAFTA to begin with.”

“The fact is we think it was absurd in general to give away 10 times as much market access as you are getting back,” he said.

Ross’ view appears to be that, in order for there to be reciprocity, the Canadian, Mexican, and U.S. procurement markets should all be open to foreign competition in the same nominal amounts. So, to take an illustrative example, if $10 billion of U.S. procurement is open to foreign competition, $10 billion of Canadian procurement and $10 billion of Mexican procurement should also be open. In his view, that is fair. And just to be nice, he says the U.S. will offer the combined amount that Canada and Mexico offer, so the U.S. will offer $20 billion. See, more than fair, right?

No, not at all! What he leaves out is that the differing size of the economies has an impact on outcomes. The share of the procurement market that each country has open to foreign competition is much different when the nominal amounts are the same, with a far smaller portion of the U.S. market open. And because the U.S. economy is much bigger, the United States has more companies that can compete for contracts. So, if Canada opens up $10 billion of procurement to foreign competition, the U.S. is going to grab a big chunk of that. By contrast, if the U.S. opens up $10 billion (or even $20 billion) to foreign competition, Canada won’t take very much. The result is that the approach Ross is pushing won’t lead to reciprocity. Rather, with the nominal amount of market access the same, and the U.S. economy so much bigger, there will almost certainly be more sales by U.S. companies than by Canadian companies.

If you want to get somewhere close to reciprocity (again, not that we’re advocating it), the way to do so is to open up a percentage of the procurement market to foreign competition. For example, each country could open up 10% of its procurement contracts. This is roughly the approach governments usually take now. Opening up procurement markets on a percentage basis is the best way to get us to a result where roughly the same amount of procurement contracts flow in both directions.

Ross doesn’t like the current approach, saying that the U.S. has given away “10 times as much.” But we haven’t, for the reasons noted: There are fewer Canadian and Mexican companies, so they don’t have the same ability to compete for procurement contracts. 

Adding additional restrictions to the government procurement market, which is valued at $4.4 trillion annually, will be a step in the wrong direction. If the U.S. undertakes measures to further restrict its procurement market, it will be equivalent to a self‐​inflicted wound. It may also be inevitable that other countries will follow suit, reducing international business opportunities for both foreign and U.S. firms around the world. 

October 23, 2017 3:20PM

Huge Fiscal Benefits of Including Legal Immigrant Dreamers in the DREAM Act

While Congress is rightly concerned about providing a pathway to citizenship for immigrant Dreamers without legal status, thousands of legal immigrants who are in the same position are being left behind. This decision to exclude legal immigrant Dreamers is not just inequitable. It is costly.

H-1B high-skilled foreign workers can bring their spouses and minor children with them to the United States on H-4 visas. The H-4 is a temporary visa that is valid for as long as the H-1B is. Once the child turns 21, however, the H-4 is canceled. Most employers also sponsor their H-1B employees for permanent residency (a “green card”), and their minor children can receive green cards with them. But again, if their children turn 21 while they are waiting, the law boots them from the line.

In a functioning immigration system, these situations would happen rarely, if ever. But because Congress has failed to update the limits on permanent residency since 1990 and because it discriminates against immigrants from populous countries, H-1B workers from India have to wait at least several decades for green cards. During this time, their children grow up as Americans, but then “age out,” losing both their H-4 status and their place in the green card line on their 21st birthday.

These kids are in almost the exact same position as those in the DACA program right now. Their parents brought them to the United States as young children; they grew up here; they have a temporary status now, but they will lose it if Congress fails to change the law. Yet the DREAM Act and other legislative solutions for immigrant Dreamers expressly and inexplicably exclude these legal immigrants. It is not hyperbole to say that the DREAM Act requires applicants to violate the law to qualify.

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October 23, 2017 9:54AM

GOP Tax Plan: Middle Class Gets Largest Cuts

Critics are saying that the Republican tax plan would give high earners the largest cuts. There has been a flood of news stories with that theme since the Tax Policy Center (TPC) released its analysis of the plan.

The TPC summary says, “Those with the very highest incomes would receive the biggest tax cuts,” and tables in the report encourage readers to come to that conclusion.

However, my parsing of TPC’s data reveals something different: the GOP plan would give the largest relative cuts to people in the middle. On average, middle-income earners would receive larger percentage tax cuts than higher-income earners.

The table shows data from TPC’s analysis and from its current law estimates released in March. Households are split into quintiles, or fifths, by income level. The columns titled “change” present the effects of the GOP cuts in different ways.

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Columns 1 and 2. These results from TPC’s report suggest that high earners would receive the largest cuts.

Column 3. These figures from TPC in March include all federal taxes—income, payroll, estate, and excise. Note that the higher quintiles have higher tax rates, so if we cut everyone’s taxes an equal percent, then the higher quintiles would receive the largest cuts.

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October 20, 2017 3:10PM

Antitrust for Fun and Profit: The Democrats’ Better Deal (Part 3)

This continues Part 1 and Part 2 of my critique of the arguments for aggressive antitrust activism offered in Steven Pearlstein’s Washington Post article, “Is Amazon Getting Too Big,” which is largely based on a loquacious law review article by Lina Kahn of the Google-funded “New America” think tank. 

My previous blogs found no factual evidence to support claims of Pearlstein and Kahn that many markets (which must include imported goods and services) are becoming dominated by near-monopolies who profit from overcharging and under-serving consumers.  

Yet the wordiest Kahn-Pearlstein arguments for more antitrust suits against large tech companies are not about facts at all, but about theories and predictions.

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