Archives: 02/2018

Problems with Republican Proposal for Paid Leave

A new federal paid leave idea has been produced, promoted, and endorsed by individuals on the right. And now Republican legislators like Marco Rubio, Joni Ernst, and Mike Lee are getting behind it.

Advocates propose using Social Security as a benefit bank for paid leave – the idea is that parents could withdraw Social Security benefits today if they defer collecting benefits later. Of course, if advocates want to provide paid leave, a better idea is cutting Social Security benefits and payroll taxes so new parents don’t have to ask the government for their money back.

Still, it’s a clever idea and maybe the least-bad proposal for federal paid leave. But that does not mean the Social Security paid family leave (SS PFL) proposal is a good idea on its own merit. As described in The Hill yesterday, government-provided paid leave has harmful consequences and is not politically supported. 

Setting that aside, Social Security is a program with an assortment of problems, and allowing beneficiaries to borrow against future benefits does not improve the current model. Given how integral Social Security is to the current proposal, it’s worth a reminder just how deep those issues run.

New U.S. Immigrants Are as Educated as New Canadian Immigrants

President Trump wants to cut legal immigration by more than 40 percent, complaining that the system focuses on family reunification rather than skills. In defending the plan, Attorney General Jeff Sessions generalized today’s immigrants as largely “illiterate”, with “no skills”, and argued that America “should be like Canada” on immigration, evaluating them on their skills. Yet, recent U.S. immigrants are better educated the U.S.-born, and differ little from recent Canadian immigrants.

Figure 1 provides the educational attainment distribution for U.S.-born working-age adults (25-64) compared to recent U.S. working-age immigrants (arrival from 2012 to 2016). As it shows, nearly half of all recent working-age immigrants had a college degree or higher, compared to just 32 percent of the U.S.-born working-age population. Recent immigrant workers to America are 50 percent more likely to have graduated college than U.S.-born workers. Moreover, among college graduates they are much more likely to have advanced degrees.

Figure 1: U.S.-Born Citizens and Recent Immigrants to the United States by Education, Ages 25-64*

Sources: American Community Survey, 2016 5-Year Sample *Including all adults over 25 reduces recent immigrant share of bachelor’s degrees to 47 percent and U.S.-born share to 30 percent

Bitcoin: More Trustworthy than Some Academic Critics

Historian Harold James of Princeton University, known for his scholarly writings on the gold exchange standard and on the euro, has turned his attention to Bitcoin in a recent Project Syndicate commentary on “The Bitcoin Threat.” His commentary labors under a surprising number of misconceptions about Bitcoin and the history of privately issued currency. If even a reputable academic historian falls prey to these misconceptions, they are likely to be widespread. Scrutinizing them may then be of wider interest.

After noting some of the optimistic claims made on behalf of cryptocurrencies and the blockchain technology underlying them, James cautions us:

But others are rightly suspicious that this new technology might be manipulated or abused. Money is part of the social fabric. For most of the history of human civilization, it has provided a basis for trust between people and governments, and between individuals through exchange. It has almost always been an expression of sovereignty as well, and private currencies have been very rare.

To say that government-issued currencies have “provided a basis for trust,” and to imply private currencies have not, is a curious summary of centuries of monetary history. Anyone familiar with the long history of debasements by ancient and medieval government mints, or with the history of fiat money inflations by modern government central banks, knows that governments have often been untrustworthy issuers. Sovereigns have frequently abused rather than rewarded trust in their currencies. (To his credit, James does later observe that “bad states produce bad money.”) Indeed a key service that attracted medieval merchants to private bankers was their more trustworthy payment alternative to the variously debased government-issued coins, namely a ledger-based system where transferable account balances were denominated in units of unchanging silver content. Historians later called these stable private accounting units “ghost monies” because they were not embodied in any of the debased contemporary coins.

James’ statement that “private currencies have been very rare” is simply untrue. It is a surprising misconception for a financial historian to hold. Private silver and gold coins were historically rare, it is true, because governments have legally suppressed private mints to give their own mints monopoly privileges. But during the 18th and 19th centuries, redeemable paper currency became more popular than coins in modern economies, and the majority of paper currency in circulation in most countries consisted of privately issued banknotes. Kurt Schuler and Will McBride report that more than sixty countries have had periods of competitive private note-issue, so it was hardly a “very rare” experience.

Constitutional Defects Big Enough to Drive a (Food) Truck Through

Imagine that it’s your first day at a new job. As you endure the tedious onboarding process, an interesting tidbit catches your attention; among the perks of your new position, you will be issued a company car and cell phone. “Sweet!” you exclaim, now more confident than ever of having made the right career move. But your enthusiasm drops precipitously as you learn that GPS devices have been installed on both the car and phone, allowing the company to continuously track your location. And your shock turns to horror when you are informed that the (mandatory) use of these items requires that you consent to the police having unfettered access to the resulting information, thus waiving your Fourth Amendment rights. While commenting on what a huge mistake accepting the position was on your way out the door, HR drops perhaps the biggest bombshell of all: “Sorry you feel that way, but it’s the city’s rule, not ours, and every other company in the field has the exact same rules… so good luck finding another job!”

Incredibly, such a dystopian scenario could become commonplace if the City of Chicago has its way.

Manufacturing Extension Partnership

The Trump administration’s 2019 budget would eliminate funding for the Manufacturing Extension Partnership (MEP) run by the Department of Commerce. The Wall Street Journal reported on the proposal the other day, although the article read more like an oped by program supporters.

The MEP shells out $140 million a year of taxpayer money to more than 50 offices around the country that aid local businesses. Tad DeHaven and I discuss some of problems with the MEP here.

One problem is that such corporate welfare necessarily favors some businesses over others. Companies receiving MEP aid are given an unfair edge over competitors. The MEP’s annual report does not actually say which particular companies have been aided. Instead, it is full of dynamic-sounding language such as “technology acceleration,” “learning organization,” “high-performance system,” “technology-centric operations,” “cultivate enduring collaborations,” and “actionable items for implementation.”

The MEP suffers from the usual waste and abuse of federal subsidy programs. In one classic case, the MEP charged taxpayers $1.1 million for a big party (I mean “conference”) at a resort in Orlando, with free food, booze, live music, and a trip to Disney World.

In another taxpayer rip off, the South Carolina director of an MEP-funded group (p. 29) submitted fraudulent documentation for $336,000 of expenses, including “contracts and payments to shell corporations that were controlled by friends, family members, and him/herself for work that was not completed.” She was sentenced to 27 months in jail, and then was charged with trying to cover up a further $1 million in dubious MEP charges.

My assistant, Dave Kemp says, “What do you expect, it’s the government?” True, but the fact that such handout programs are routinely abused is a good reason to terminate them.

If we eliminated the MEP’s handouts, we could also eliminate the MEP bureaucracy. The agency has about 100 employees making an average $160,000 a year in wages and benefits, according to the federal budget.

To its credit, the Trump administration has proposed various cuts to corporate welfare, and it has reduced tax and regulatory burdens on businesses. Unfortunately, the administration’s protectionist trade actions are a form of corporate welfare that undermine the benefits of its pro-growth policies.

The MEP’s 2016 annual report leads off with a paean to Alexander Hamilton’s 1791 Report on Manufacturers, which was a call for economic central planning. Fortunately, the Jeffersonian free-enterprise view mainly held sway in subsequent decades, and American industry rose to greatness not because of Hamilton/MEP-style subsidies, but because of the sacrifices and struggles of generations of bold entrepreneurs.

Syrian Civilians Pay the Price in Ghouta

After a third consecutive day of attacks, the Syrian government has killed over 250 people in Eastern Ghouta, a region near Damascus. The Syrian Observatory for Human Rights stated that the death toll included 58 children and 42 women, and will most likely rise as the attacks continue.

The Assad regime, backed by Russia, claims that the attacks, which include air strikes and barrel bombs, are necessary to rid Eastern Ghouta of terrorists. Eastern Ghouta is the last rebel stronghold and home to both Jaysh al-Islam, a Syrian opposition militia that routinely attacks the Assad regime, Islamic State, and selective Kurdish forces, and the al Qaeda affiliate Hay’at Tahrir al-Sham, which aims to overthrown the Assad regime and replace it with the Islamic Emirate of Syria. Meanwhile, Turkish forces attacked a pro-Syrian government force yesterday in the Afrin district, another contested zone in northern Syria, in order to halt reinforcements to the Kurdish YPG militia.

The Syrian civil war has entered a new, more violent and dangerous phase. Who will come out on top when/if the violence ebbs? It will most likely be the Assad regime because: 1) the regime has strong sponsors in the form of Russia and Iran, and 2) the international community has no coherent practical response to the ongoing violence.

An Executive Office Doesn’t Become a Judicial One Simply by Changing Its Name

In sports—including the current Winter Olympics in South Korea—the concept of the “home field advantage” is pervasive. But in government, separating powers among three branches is supposed to protect individual liberties when the government pursues someone for an alleged legal infraction.

Well, Raymond Lucia felt that the Securities and Exchange Commission had such an advantage when he was fined $300,000 and barred from working as an investment adviser after an SEC administrator determined that he had misled prospective clients in a quasi-judicial proceeding that the SEC investigated, prosecuted, and adjudicated without any appreciable oversight.

Lucia fought the SEC, because the agency’s administrative law judges (ALJs) are, in fact, “officers” of the SEC and not mere employees, meaning that under the Constitution’s Appointments Clause, they should have been appointed by and be accountable to the president or a department head. As the Supreme Court held in a similar challenge to the Public Company Accounting Oversight Board in 2010, “if any power whatsoever is in its nature executive, it is the power of appointing, overseeing, and controlling those who execute the laws.” The president has a duty to ensure the law is faithfully executed, and to do so he must be able to remove those officers who fail to uphold their duties.

The U.S. Court of Appeals for the D.C. Circuit deadlocked over the issue of whether ALJs are executive officers and thus subject to the removal power. As it stands, they’re protected from control by the electorate because the president currently lacks the ability to remove ALJs who abuse their powers or otherwise act badly. Cato supported Lucia’s successful petition for Supreme Court review. Now we file on the merits, ahead of oral argument.

The duties of an ALJ are similar to other positions the Court has previously held to be officers, including “special trial judges” and court clerks. If anything, ALJs have more power and discretion than STJs or clerks, and thus it’s critical that they be able to be held accountable.