Archives: 02/2018

Trump’s Policies Would’ve Banned Most Legal Immigrants Since 1965—23 Million

In his State of the Union address, President Trump railed against America’s current legal immigration system. Given that this system first originated in 1965, it is worth considering how his policies would have altered America’s flow of immigrants had Congress adopted his proposed policies in 1965. Based on his statements and bills that he has endorsed, President Trump’s ideal immigration policies would have banned at least 57 percent of all legal immigrants since 1965, nearly 23 million people. Such an extreme policy would have radically changed America’s population, economy, and culture.

How Trump’s Plans Would Have Cut Immigration

From 1965 to 2016, nearly 40 million immigrants received legal permanent residency in the United States. President Trump’s policies-fully implemented as he intends-would have reduced that number to just 17.2 million, banning at least 22.7 million people, a majority of all legal immigrants since 1965 (Table 1). Nearly 60 percent of the banned immigrants would have been sponsored by U.S. family members-children, parents, or siblings. The rest of the reduction would come from fewer refugees and asylees, no diversity visa lottery and similar categories, and a much smaller legalization program for illegal immigrants. See Table 2 at the end for a detailed breakdown of these categories.

Table 1: Legal Immigrants by Category, 1965-2016

Sources: Department of Homeland Security; Immigration and Naturalization Service; White HouseS.354 - RAISE ActH.R.4760 - Securing America’s Future Act. *The category for spouses and minor children of residents would be preserved, but under Trump-endorsed bills, no visas would be issued (see text below)

This estimate only considers the direct effects of his policies on the categories that he would reduce, not how those reductions would affect other categories. For example, fewer legal immigrants would reduce the number of naturalized citizens. This would, in turn, result in fewer citizens who could marry foreigners and sponsor their spouses and children. Conversely, the fact that his proposed legislation would issue no visas to spouses and minor children of permanent residents would cause more immigrants to naturalize and sponsor their spouses and minor children. These two effects would at least partially offset each other.

Federal Bureaucracy Resists Reform

The Department of Veterans Affairs (VA) has been scandal-plagued for years. It has run up huge cost overruns on hospital projects and been guilty of appalling mismanagement and fraud related to waiting lists for veteran’s care. Congress has held hearings on the VA’s failures and passed some reforms to make it easier to fire bad employees.

But a new Washington Post story suggests that the department still doesn’t have its act together.

The piece says that the VA fired 2,537 workers last year. Maybe that sounds like a lot, but the VA has a massive 381,000 employees, indicating an annual firing rate of just 0.7 percent. By contrast, the firing rate in the U.S. private sector is 3.2 percent, or four times more than the VA firing rate.

The WaPo story describes how one VA employee who was caught essentially stealing from taxpayers kept her job:

When the VA Medical Center in Bedford, Mass., spent hundreds of thousands of dollars hiring landscapers and ordering rock salt, mulch and crushed stone, one whistleblower in the department found it suspicious that the supplies never showed up.

Turns out they were never delivered, and an employee had steered the contract to her brother’s landscaping business, according to a recent investigation by the Office of Special Counsel, an independent federal agency that investigates whistleblower claims.

The employee was allowed to keep her federal job. She was demoted only one pay grade, despite President Trump’s VA Accountability Act, which allows for quick removal of employees who violate standards or break the law in the troubled agency. …

“By allowing an employee who engaged in this conduct to remain with the agency, VA demonstrates a shocking degree of indifference to government ethical standards, procurement regulations, and public integrity,” Special Counsel Henry J. Kerner wrote to the president in a recent letter.

The landscaping scheme was brought to the OSC’s attention by a whistleblower who led investigators to nearly $1 million in “improperly spent or documented purchases” at the Bedford VA. The whistleblower disclosed suspicious, frequent and significant purchase orders for landscaping materials, such as rock salt, mulch and crushed stone, and said the majority of these orders were never delivered to the facility despite payment.

Ultimately, VA largely substantiated the whistle-blower’s allegations. VA found that Dennis J. Garneau and his daughter, Heather Garneau-Harvey, as Bedford VA employees, steered $200,000 snow removal and groundskeeping contracts to a business owned by a family member, their son and brother, respectively.

VA also found that Dennis Garneau directed purchases of more than $750,000 in “landscaping materials without appropriate verification of delivery, among other purchasing irregularities.”

More on federal mismanagement here.

Budget Deal: Bipartisanship Wins, Taxpayers Lose

Leaders of the two parties in Congress have agreed to a budget deal that raises discretionary spending a huge $300 billion over two years. While $300 billion is the headline, the deal may end up hiking spending $1.5 trillion over the next decade as the near-term increases get baked into federal budgets in later years.

The sad irony is that December’s Republican tax cut is supposed to save Americans $1.5 trillion over 10 years. But the new spending is essentially a $1.5 trillion tax hike imposed on people down the road.  

The centrist group CFRB summarizes the irresponsibility:

No one who supports this bill can consider himself or herself a deficit hawk or fiscally responsible. … This bill not only reverses the sequester cuts without sufficient pay-fors, it also includes significant further increases in discretionary spending that reverse much of the pre-sequester caps. And to add insult to injury, it also proposes further spending meant to satisfy everyone’s Christmas list.

Politico notes, “The agreement increases defense spending this year by $80 billion and domestic spending by $63 billion beyond strict budget caps, according to a summary of the deal obtained by Politico. Next year defense spending will increase by $85 billion and domestic funding will be boosted by $68 billion beyond the caps.”

As during the George W. Bush years, the eagerness of Republicans to jack up defense spending has led them to cave in on nondefense spending:

“I’m not going to say every piece of it. But obviously we’re excited about the defense numbers,” said Marc Short, the White House legislative director. White House press secretary Sarah Huckabee Sanders also told reporters the deal accomplished “our top priority,” with the defense boost.

So enjoy your tax cuts while you can because the pressure to repeal them will mount as rising spending pushes deficits over $1 trillion and ever higher levels after that.

T-Shirt Printers Have First Amendment Rights Too

Hands On Originals, a t-shirt printing company in Kentucky, refused to print t-shirts promoting a gay-pride event, the Lexington Pride Festival. Its owners weren’t objecting to any customers’ sexual orientation; instead, they didn’t want to print the ideological message conveyed by the shirts.

The Gay and Lesbian Services Organization nevertheless filed a complaint with the Lexington-Fayette Urban County Human Rights Commission under an antidiscrimination ordinance that bans public accommodations from discriminating against individuals based on sexual orientation. The Commission ruled against Hands On Originals, but the state district court reversed on free speech and free exercise grounds, and the court of appeals (where Cato had filed a brief supporting the print shop) affirmed.

The case is now before the Kentucky Supreme Court. Cato has again filed an amicus brief, drafted by Prof. Eugene Volokh and UCLA’s First Amendment clinic. Our brief urges the court to uphold the right of printers to choose which speech they will help disseminate and which they won’t.

In Wooley v. Maynard (1977)—the New Hampshire “Live Free or Die” license-plate case—the U.S. Supreme Court held that people may not be required to display speech with which they disagree because the First Amendment protects the “individual freedom of mind.” Wooley’s logic applies equally to Hands On Originals’ right not to print messages with which they disagree, which is an even greater imposition than having to passively carry the state motto on your car’s tag.

Thanks to Prof. Volokh and his student, Ashley Phillips, for their work on the brief, and on this blog post.

Class Action Abuse for Fun and Profit

When a user clicks on a Google search result, the web browser transmits a “referral header” to the destination website, unless a user has disabled them. The referral header contains the URL of the search results page, which includes the user’s search terms. Websites use this information for editorial and marketing purposes.

In 2010, Paloma Gaos filed a class action in the Northern District of California, seeking damages for the disclosure of her search terms to third-party websites through referral headers, claiming fraud, invasion of privacy, and breach of contract, among others. She eventually settled with Google on behalf of an estimated class of 129 million people in return for an $8.5 million settlement fund and an agreement from Google to revise its FAQ webpage to explain referral headers. Attorneys’ fees of $2.125 million were awarded out of the settlement fund, amounting to 25 percent of the fund and more than double the amount estimated based on class counsel’s actual hours worked.

But no class members other than the named plaintiffs received any money! Instead, the remainder of the settlement fund was awarded to six organizations that “promote public awareness and education, and/or…support research, development, and initiatives, related to protecting privacy on the Internet.” Three of the recipients were alma maters of class counsel.

This diversion of settlement money from the victims to causes chosen by the lawyers is referred to as cy pres. “Cy pres” means “as near as possible,” and courts have typically used the cy pres doctrine to reform the terms of a charitable trust when the stated objective of the trust is impractical or unworkable. The use of cy pres in class action settlements—particularly those that enable the defendant to control the funds—is an emerging trend that violates the due process and free speech rights of class members.

Wasteful Pentagon Spending

Just as Congress is preparing to hike defense spending, a new report suggests the inefficiency that has plagued the Pentagon for decades continues unabated. Politico discusses a new audit of one of the Pentagon’s purchasing agencies:

Ernst & Young found that the Defense Logistics Agency [DLA] failed to properly document more than $800 million in construction projects, just one of a series of examples where it lacks a paper trail for millions of dollars in property and equipment. Across the board, its financial management is so weak that its leaders and oversight bodies have no reliable way to track the huge sums it’s responsible for, the firm warned in its initial audit of the massive Pentagon purchasing agent.

“Ernst & Young could not obtain sufficient, competent evidential matter to support the reported amounts within the DLA financial statements,” the Pentagon’s inspector general, the internal watchdog that ordered the outside review, concluded in issuing the report to DLA. The accounting firm itself went further, asserting that the gaping holes uncovered in bookkeeping procedures and oversight strongly suggest there are more.

Politico says that the Department of Defense “has never undergone a full audit despite a congressional mandate,” and that the “$40 billion-a-year logistics agency is a test case in how unachievable that task may be. The DLA serves as the Walmart of the military, with 25,000 employees who process roughly 100,000 orders a day on behalf of the Army, Navy, Air Force, Marine Corps and a host of other federal agencies — for everything from poultry to pharmaceuticals, precious metals and aircraft parts.”

Does the “Walmart of the military” deserve a break because $40 billion is a lot of purchases?

I don’t think so. Walmart itself has sales of almost $500 billion a year and manages to keep track of products from 10,000 suppliers. And then there is Amazon, which has annual sales of almost $180 billion. The online goliath sells 600 million different items and it ships five billion items through its Prime service a year.

So the Pentagon’s large size is not the root cause of its inefficiency and waste. Instead, it suffers from the same sorts of structural failures as other federal bureaucracies, and the same lack of congressional oversight.

More on Pentagon mismanagement here and here.

Trade Deficit Disorder

It’s been a tough week for President Trump – and it’s only Tuesday. Just when Trump nearly had the country acknowledging his omnipotence, the stock market took a record one-day plunge on Monday and then, this morning, we learned that the president’s first year in office coincided with the largest U.S. trade deficit in nine years. Lest Mr. Trump concludes that he hasn’t been protectionist enough, there is another way for him to explain (without need of contrition or humility, of course) how he presided over a bigger trade deficit in his first year than was experienced in any of President Obama’s eight.

Trade deficits are pro-cyclical and have nothing to do with trade policy. Imports rise when the economy grows. When the economy grows—and it has been growing relatively strongly this past year—households, businesses, and governments consume more. They purchase more domestic and imported goods and services. Stronger growth tends toward larger trade deficits. Maybe Trump can try that slogan on for size.

But as sure as the sun rises in the east, business writers at most of the major newspapers, magazines, and online news venues will conclude that the trade deficit is a drag on growth.  Here’s Bloomberg Markets (randomly selected): 

The [December deficit of $52.1 billion] add[s] to details for the fourth quarter, when trade was a substantial drag on the economy, and show[s] how a widening deficit may mitigate any gains in the pace of expansion in 2018. Net exports subtracted 1.13 percentage points from gross domestic product growth…

These writers rely on—and then misinterpret the meaning of—the so-called National Income Identify.  The identity tells us how we dispose of our national income. It is not a “growth formula,” as some of the president’s advisers suggest. In an op-ed last year, Commerce Secretary Wilbur Ross and trade adviser Peter Navarro wrote:

When net exports are negative, that is, when a country runs a trade deficit by importing more than it exports, this subtracts from growth… The structural problems driving the slow growth in the US economy over the last 15 years have primarily been the investment and net exports drivers in the GDP growth equation.

The reference was to the national income identity, Y = C + I + G + X - M, which says that national output is either (C)onsumed by households; consumed by businesses as (I)nvestment; consumed by (G)overnment as public expenditures; or e(X)ported. Those are the only four channels through which national output is disposed.