November 2017

November 30, 2017 8:54AM

A Tax Bill Provision Only Athletic Directors Could Hate

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It’s obviously too early to spike the football, but there is a provision in both the Senate and House tax bills that everyone should be able to endorse, except maybe colleges and their athletics departments: eliminating the 80 percent federal tax deduction college sports season ticket holders get when they pay “seat license” fees—often called “charitable gifts”—charged by schools. It’s an absurd deduction that I’ve complained about periodically, and it’s nice to see it targeted for elimination. And in case we need a reminder that this deduction has zilch to do with the “public good” that higher ed so often gives as its excuse for every special treatment it demands, USA Today has reported that this season 12 big football schools alone are on the hook for at least $70 million to buy out fired head coaches. Sounds like a lot of private good there.

These days it seems like we on Team America can’t agree on anything, but we all ought to agree on this: the seat license deduction must go.

November 29, 2017 2:15PM

Global Science Report: JRA-55—Better Than the BEST Global Surface Temperature History, and Cooler Than the Rest

This is the first in a series of posts on global temperature records. The problems with surface thermometric records are manifold. Are there more reliable methods for measuring the temperature of the surface and the lower atmosphere?

Let’s face it, global surface temperature histories measured by thermometers are a mess. Recording stations come on- and offline seemingly at random. The time of day when the high and low temperatures for the previous 24 hours are recorded varies, often changing at the same station. This has a demonstrable biasing effect on high or low readings. Local conditions can further bias temperatures. What is the effect of a free-standing tree 100 feet away from a station growing into maturity? And the “urban heat island,” often very crudely accounted for, can artificially warm readings from population centers with as few as 2,500 residents. Neighboring reporting stations can diverge significantly from each other for no known reason.

The list goes on. Historically, temperatures have been recorded by mercury-in-glass thermometers housed in a ventilated white box. But, especially in poorer countries, there’s little financial incentive to keep these boxes the right white, so they may darken over time. That’s guaranteed to make the thermometers read hotter than it actually is. And the transition from glass to electronic thermometers (which read different high temperatures) has hardly been uniform.

Some of these problems are accounted for, and they produce dramatic alterations of original climate records (see here for the oft-noted New York Central Park adjustments) via a process called homogenization. Others, like the problem of station darkening, are not accounted for, even though there’s pretty good evidence that it is artificially warming temperatures in poor tropical nations.

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November 29, 2017 12:02PM

Eliot Spitzer: “I Hate to Sound Like Ayn Rand, but…”

Former New York governor Eliot Spitzer, who resigned in disgrace after a 2008 scandal, has written a short essay by way of memoir in the recent 50th anniversary issue of New York magazine. As one who’s written more than my share about Spitzer’s abuses of power as governor and attorney general, I wasn’t expecting to feel much sympathy, and mostly I didn’t. But then I got to the last paragraph: 

I’m a builder now. Most of what my dad built was on the Upper East Side, because that was the heart of the city. Now it’s Brooklyn. We have a site under construction on Kent Avenue in Williamsburg. As a lawyer, as a prosecutor, in politics, there’s a lot of talk. Occasionally things happen. When you’re building, you actually see concrete being poured and curtain wall being applied to the façade. It’s enormously satisfying. I hate to sound like Ayn Rand, but there’s something very rewarding about that tangible productivity.

My reaction was: hold that thought! And pursue it further, maybe even to the point where being a builder—or for that matter sounding like Ayn Rand—involves no trace of apology or embarrassment.

November 29, 2017 11:00AM

Problems with a “Fiscal Trigger”

Fiscal rules can theoretically improve policy by eliminating “time inconsistency” among lawmakers. But the proposed fiscal trigger being discussed in the Senate tax reform bill would be a terrible fiscal rule.

You can see the thinking. Several senators worry about tax cuts blowing a big hole in the public finances. If they do not have the desired impact on economic growth, resulting in less revenue than expected, the budget deficit will grow and drive the national debt even higher. Concerned senators therefore seek a mechanism whereby if revenues are lower than expected, tax cuts will be partially reversed.

It’s welcome that some senators take the US federal government’s burgeoning national debt seriously. But there are obvious flaws with this plan (though we do not know details as yet), some of which have been discussed widely already.

First, how exactly will deviations in revenues be judged? An economy is a complex organism, and it is difficult to disentangle how much any change in revenue relative to forecasts is due to changes in tax rates as against other factors. Just look at the debate in the UK. Last week, the Daily Mail newspaper published a report that tax receipts following corporate tax cuts there had been much higher than expected. But experts from the Institute for Fiscal Studies pointed out that much of this was due to a faster recovery of corporate profits in the financial sector and the effects of Brexit, which had little to do with the changing rate. Under a trigger which merely judged revenues against forecasts, a host of things that affect revenues (both upwards and downwards) could be chalked up as the effects of tax policy, potentially resulting in damaging tax rises.

Then, as J.D. Foster notes, there are likely to be other tax policy changes and changes in growth forecasts in future years too. How will these be disentangled and the effects of this specific Act isolated? Will the trigger apply to just a particular revenue stream, such as corporate income tax revenues, or more broadly to capture all the spillovers of any investment boost? If the former, the probability that the trigger will be activated is highly dependent on the accuracy of any analysis of the incentives to incorporate versus operating as a passthrough. In other words, there are huge unknowns here.

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November 29, 2017 10:10AM

Ethnic Cleansing vs. Genocide: The Politics Behind Labeling the Rohingya Crisis

On November 22, after some reluctance, Secretary of State Rex Tillerson joined the United Nations and United Kingdom in calling the current Rohingya crisis an “ethnic cleansing.” Holding Myanmar’s military, security forces, and local vigilantes responsible for the crisis, Tillerson stated that the United States could pursue accountability via targeted sanctions. While some hailed Tillerson’s label of ethnic cleansing as a start, it’s worth taking a closer look at the politics behind it. First, ethnic cleansing does not elicit a legal response, whereas the labels of “crimes against humanity” or “genocide” do. Second, targeted sanctions are known to be ineffective, so threatening Myanmar with them seems unproductive.   

The current humanitarian crisis began on August 25, when the Arakan Rohingya Salvation Army coordinated an attack on Myanmar’s police and security forces. Myanmar’s military crackdown on the Rohingya population was severe, resulting in a mass exodus that is now called the fastest growing refugee emergency in the world. Bangladesh, one of the poorest countries in the world, is now host to at least one million Rohingya refugees, and relief agencies like the United Nations Children’s Fund are struggling to establish a health system to try to limit malnutrition and the spread of disease. Stories of burning villages, massacres, sexual violence and rape are emerging daily. So, then, why is there a global unwillingness to label the Rohingya persecution by the Myanmar government and military as genocide?

There are three main reasons why “ethnic cleansing” is preferred as a label over “genocide.”

First, labeling a crisis “ethnic cleansing” has no legal implications—and hence is easier for states to deal with. The Convention on the Prevention and Punishment of the Crime of Genocide has declared genocide to be a crime under international law, and defines it as “the intent to destroy an ethnic, national, racial or religious group.” Ethnic cleansing, on the other hand, refers to the expulsion of a group from a certain area, but there is no treaty that determines its parameters. Even though the lines between ethnic cleansing and genocide are blurry, the former requires no domestic and international legal action. The label of ethnic cleansing, therefore, seems like a call for action but in reality is less politically charged, and is more like a “feel good” option for the international community.    

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November 28, 2017 4:01PM

Something Fishy Is Happening in Honduras

Honduras’ presidential election is mired in controversy as the country’s Electoral Tribunal (TSE) suspended the release of results on Sunday night when president Juan Orlando Hernández was trailing left‐​wing candidate Salvador Nasralla by 5 percentage points, with 58.5% of polling stations counted. There is no precedent in Honduras for such a blackout on the release of election results and many observers are worried—with good reason—that electoral fraud might take place.

First, some context. Juan Orlando Hernández was barred from running for reelection. Honduras’ constitution is famous in Latin America for its repeated emphasis on presidential term limits. It says that any person who has held the office of the presidency cannot be president or vice president again. Moreover, it states that under no circumstance can the constitution be amended to allow for presidential re‐​election. In 2009, Juan Manuel Zelaya was removed from power by a Supreme Court ruling for organizing an illegal referendum on a constitutional amendment to allow for his reelection.

Then, things changed. In December 2012, the National Assembly—whose speaker at that time was Juan Orlando Hernández—sacked four justices of the Constitutional Court for voting down several government pet projects. In April 2015, the Constitutional Court—with four new justices—struck down the prohibition on presidential reelection claiming it violated human rights. This allowed Hernández to contest this year’s election, even though the popular legitimacy of his reelection bid was always contested.

As president, Hernández built a reputation of a strongman. With the strategic help of the Liberal Party, Hernández implemented much of his economic and security agenda in Congress. Crime has gone down significantly under his watch and public finances have improved. He also became a Washington favorite for his perceived collaboration in fighting drug trafficking. But there are also widespread concerns about his increasingly authoritarian rule and the control he exerts on otherwise independent institutions such as the Supreme Court and the TSE. Tax authorities are fond of harassing businesses and independent professionals.

Polls indicated that Hernández was going to win reelection comfortably. However, on election night Nasralla—who leads a coalition that includes Zelaya supporters—came ahead when the first results were reported. This did not stop Hernández from declaring himself the winner (Nasralla had done the same even before the TSE released the first results). Then came the blackout from the TSE. The head of the electoral body says that the results from rural polling stations cannot be reported until the votes are counted in the capital, (although such a thing did not happen in previous elections). Rumors—spread mostly by members of the ruling National Party—claim that Hernández has overcome Nasralla’s lead and will win by a small margin.

The stage is set for a political crisis. Nasralla’s supporters are already in the streets denouncing a fraud in the making. Their strategy all along was to denounce an electoral fraud if their candidate was defeated, no matter the margin. But now, they have good reason to suspect one. If Hernández is declared the winner, his legitimacy will be very questionable. Honduras could enter a very dangerous period.

November 28, 2017 12:49PM

14 Questions for Trump HHS Nominee Alex Azar

President Trump has nominated Alex Azar to be the next Secretary of Health and Human Services. Azar will appear tomorrow for questioning before (and sermonizing by) members of the Senate’s Health, Education, Labor, and Pensions Committee.

Here are 14 questions I would ask Azar at his confirmation hearings.

  1. Is Congress a small business as that term is defined in the Affordable Care Act?
  2. Colette Briggs is a four‐​year‐​old girl with aggressive leukemia who is about to lose coverage for the one hospital within a hundred miles that can deliver her chemotherapy. She’s losing that coverage because insurance companies are fleeing the Exchanges. What do you plan to do, what can HHS do, about this problem?
  3. What will you do to prevent drug manufacturers from using the regulatory process to corner the market on certain drugs so they can gouge consumers and taxpayers?
  4. HHS already publishes data on Exchange premiums and insurer choice. Will you commit to publishing a review of the growing body of research showing Exchange coverage is getting worse for many expensive illnesses?
  5. Does HHS have an obligation to encourage young, healthy Americans to pay the hidden taxes contained in the ACA’s rising health insurance premiums?
  6. How will HHS increase its efforts to educate Americans about all their options for avoiding the mandate penalty?
  7. Short‐​term health insurance plans are an affordable alternative to increasingly costly Exchange coverage. Will you reinstate the 12‐​month policy term that existed before this year, and allow short‐​term plans to be guaranteed‐​renewable?
  8. The previous administration issued rules making it generally unlawful to purchase or switch Exchange plans for nine months out of the year. The Trump administration has restricted this freedom even more, making it generally unlawful for ten and a half months out of the year. Should consumers be free to purchase and switch health plans when they choose, just like any other product?
  9. Will you require insurance companies to repay the “reinsurance” subsidies the Government Accountability Office found the Obama administration illegally diverted to them?
  10. Will you press the Food and Drug Administration to allow the sale of birth‐​control pills over the counter, without a prescription?
  11. Medicare, Medicaid, and ObamaCare attempt to pay insurance companies according to the cost of each individual enrollee. If those complicated formulas really work, should government just give the money to the enrollees and let them control their health insurance and health care decisions?

  12. Is Obamacare’s Independent Payment Advisory Board constitutional? 

  13. Should seniors be able to opt out of Medicare without losing Social Security benefits?
  14. Will you end government encouragement of “abuse‐​deterrent” opioids, which have not reduced overdose deaths and are borderline unethical because some are literally formulated to hurt people?