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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Figure 1. Difference between satellite-measured and ground-measured trends. Artificial warming is largest in the poor regions of Africa and South America. (Source: Figure 4 in McKitrick and Michaels, 2007).

There are multiple “global” temperature histories out there, but they all look pretty much the same because they all run into the problems noted above, and while the applied solutions may be slightly different, they aren’t enough themselves to make the records look very different. The most recent one, from Berkeley Earth (originally called the Berkeley Earth Science Team (BEST) record) is noteworthy because it was generated from scratch (the raw data), but like all the others (all using the same data) it has a warming since 1979 (the dawn of the satellite-sensed temperature era) of around 0.18⁰C/decade. (Computer models, on average, say it should have been warming at around 0.25⁰C/decade.)

They all have a problem with temperatures over the Arctic Ocean as there’s not much data. A recent fad has been to extend the land-based data out over the ocean, but that’s very problematic as a mixed ice-water ocean should have a boundary temperature of around freezing, while the land stations can heat up way above that. This extension is in no small part responsible for a recent jump in the global surface average.

It would sure be desirable to have a global surface temperature record that suffered from none of the systematic problems noted above, and—to boot—would be measured by electronic thermometers precisely calibrated every time they were read.

Such a dream exists, in the JRA-55 dataset. The acronym refers to the Japan Meteorological Office’s (originally) 55-year “reanalysis” data, and it updates to yesterday.

Here’s how it works. Meteorologists around the world need a simultaneous three-dimensional “snapshot” of the earth’s physical atmosphere upon which to base the forecast for the next ten to sixteen days.  So, twice a day, at 0000 and 1200 Greenwich Mean Time (0700 and 1900 EST) weather balloons are released, sensing temperature, pressure, and moisture, and tracked to determine the wind. There’s also satellite “profile” data in the mix, but obviously that wasn’t the case when JRA-55 began in 1958. These are then chucked into national (or private) computers that run the various weather forecast models, and the initial “analysis,” which is a three-dimensional map based upon the balloon data, provides a starting point for the weather forecast models.

Once the analyzed data had served its forecasting purpose, it was largely forgotten, until it dawned upon people that this was really good data. And so there have been a number of what are now called “reanalysis” datasets. The most recent, and the most scientifically complete one is JRA-55. In a recent paper describing, in incredible detail, how it works, the authors conclude that it is more reliable than any of the previous versions, either designed by the Japan Office or elsewhere.

Remember: the thermistors are calibrated at the release point, they are all launched at the same time, there’s no white box to get dirty, and the launch sites are largely in the same place. They aren’t subject to hokey homogenizations. And the reanalysis data has no gaps, using the laws of physics and a high-resolution numerical weather prediction model that generates physically realistic Arctic temperatures, rather than the statistical machinations used in the land-based histories that inflate warming over the Arctic Ocean.

There is one possible confounding factor in that some of the launch sites are pretty close to built-up areas, or are in locations (airports) that tend to attract new infrastructure. That should mean that any warming in those places is likely to be a (very slight) overestimate.

And so here is JRA-55 surface temperature departures from the 1981–2010 average:

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Figure 2. Monthly JRA-55 data beginning in January, 1979, which marks the beginning of the satellite-sensed temperature record.

The warming rate in JRA-55 until the 2015–16 El Niño is 0.10⁰C/decade, or about 40% of what has been forecast for the era by the average of the UN’s 106 climate model realizations. There’s no reason to think this is going to change much in coming decades, so it’s time to scale back the forecast warming for this century from the UN’s models—which is around 2.2⁰C using an emissions scenario reflecting the natural gas revolution. Using straight math, that would cut 21st century warming to around 0.9⁰C. Based upon a literature detailed elsewhere, that seems a bit low (and it also depends upon widespread substitution of natural gas for coal-based electricity).

JRA-55 also has a rather obvious “pause” between the late 1990s and 2014, contrary to recent reports.

The fact of the matter is that what should be the most physically realistic measure of global average surface temperature is also our coolest.

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.

Second, the inclusion of a trigger mechanism actually dampens the pro-growth effects of the tax plan, and risks lower-than-expected revenues becoming a self-fulfilling prophecy. Take corporate rates. On the margin, uncertainty about what the corporate rate might be in the long term deters investments today. Less investment today results in lower GDP and lower tax revenues elsewhere in the code. This lower-than-expected tax revenue then activates the trigger (if it applies across total revenues) which raises corporate taxes. There is good reason why economists say that tax policy should provide certainty and permanence in regard to rates. The GOP plan already has a lot of phase outs resulting from the Senate reconciliation rules. The last thing it needs is the risk of more.

Third, you do not need to be a Keynesian to recognize that an unforeseen recession, which would dampen revenues relative to forecast, would be a terrible time to worsen supply-side incentives by increasing the corporate income tax or marginal income tax rates. In truth, Congress would likely override the trigger in such circumstances. But if the trigger would simply be abandoned when it bound, then it suggests it is not a very well-designed trigger! Of course, there could be a recession escape clause, but similar logic applies more broadly if the economy grows more slowly than expected, due to reasons other than tax reform changes.

In short, a fiscal trigger that threatened higher taxes would introduce considerable uncertainty, risk tax hikes at the worst possible time, and could risk tax hikes when other factors resulted in lower revenue growth. 

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.    

Second, labeling an atrocity as ethnic cleansing is less time consuming. Historically, applying the label "genocide" takes decades. For example, the systematic killing of the Armenian people by the Ottoman Empire in 1915–1917 was first recognized as genocide by the United States in 1975 (though Alabama and Mississippi still do not recognize it). While 28 countries recognize the Armenian genocide, Turkey continues to reject the label. Similarly, the UN recognized the organized targeting and killing of the Tutsis in Rwanda in 1994 as genocide in 2014—20 years after the atrocities. Just last week, Ratko Mladic, the “butcher of Bosnia,” was found guilty of genocide and crimes against humanity twenty years after committing the acts, and after a trial that took five years to conclude.

And third, ethnic cleansing opens the door for the United States to impose specific economic and military sanctions on Myanmar. The State Department is especially interested in pursuing sanctions against Myanmar’s government and military officials who are directly responsible for the atrocities. The problem is that sanctions are typically unsuccessful in changing state behavior, so even if the United States imposed specialized sanctions on Myanmar, it would do little to ease the plight of the Rohingyas. Targeted sanctions could also derail Myanmar’s already slow economic development, which is largely due to decades of oppressive military rule.

Myanmar’s government, military, and Buddhist hardliners not only continue to deny allegations of genocide but have become emboldened in their persecution of the Rohingyas. For example, Myanmar’s authorities constantly link Rohingyas, who are Muslim, to terrorism, taking advantage of the rhetoric of the Global War on Terror that has mostly targeted Muslims worldwide. Though there are some concerns about jihadist recruitment in the Rakhine province, there is little evidence to suggest the Rohingya as a group are a unique threat. Myanmar’s leader, the now defamed Aung San Suu Kyi, even went as far as to blame “fake news” for distorting information regarding the latest military crackdown in the province, calling it a “huge iceberg of misinformation.” Amidst pressure from Bangladesh, Myanmar signed a repatriation program, but has agreed only to take in those refugees who can present identity documents, such as government-issued “white cards.” This of course is an impossible feat for thousands who fled with almost nothing—and will most certainly be unable to produce any evidence of citizenship and/or residency.

The label of genocide, however, is important—and necessary in the Rohingya case. The most significant advantage that genocide has over any other label is that Myanmar’s authorities would come under the jurisdiction of the International Criminal Court (ICC), a special court that investigates and prosecutes war crimes, crimes against humanity, and genocide. Even though proving genocide takes time, there is a great deal of empirical evidence in the Rohingya case. For example, Article II of the Convention on the Prevention and Punishment of the Crime of Genocide outlines five acts that constitute a genocide:

  1. Killing members of the group,
  2. Causing serious bodily or mental harm,
  3. Deliberately inflicting conditions of life calculated to bring about the group’s physical destruction in whole or in part,
  4. Imposing measures intended to prevent births, and
  5. Forcibly transferring children.

There is ample evidence of the Rohingyas being subjected to each of these heinous acts, and human rights groups are rigorously documenting the physical destruction and psychological torment being inflicted on the Rohingyas by Myanmar’s military now.

Not all labels are created equal. This is precisely why it is imperative to use the correct one. In the case of the Rohingya crisis, genocide is perhaps the only label that could give Myanmar’s government and military pause in their persecution, for fear of being tried at the ICC. As for inviting outside military intervention, the label of genocide shares the same risk as the label of ethnic cleansing. What ethnic cleansing does not provide is a legal implication, which is vital. 

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?