Archives: 04/2018

US Only Country With Projected Rising Government Debt to GDP Ratio Through 2023

Where government debt is concerned, advanced economies should be fixing the roof while the sun shines. That’s the central message of a new IMF Fiscal Monitor entitled “Capitalizing on Good Times.”

The paper entails projections based on growth forecasts and budget plans of what will happen to deficits and debt across advanced economies. And the results for the United States are not pretty. In fact, as the chart below shows, the US is now the only advanced country projected to see a rising debt-to-GDP ratio in the coming 5 years.1

Debt to GDP

Now we have to take all this with a pinch of salt of course. For advanced economies as a whole the IMF says “the fiscal stance is expected to be mildly expansionary in 2018 and 2019, followed by gradual adjustment in outer years”. I’ll believe that when I see it. Governments around the world have a tendency to plan to be fiscally responsible in a few years’ time, without eventually delivering, and to be overoptimistic about their growth prospects (many of which, it’s worth noting, are much, much worse than the US).

But it is notable that the US is now the only country which is explicitly planning for larger budget deficits, and higher public debt to-GDP, over the next half decade. Hot on the heels of the CBO analysis last week, this report again shows just how unprecedented current US policy action (deliberately expanding borrowing via the tax and omnibus spending bills) and inaction (on entitlement spending) is given the favorable economic conditions.


1 The IMF uses a different definition of debt here – gross government debt – whereas figures usually reported in the media, and by the Congressional Budget Office related to public debt held by the public.

Contrary to Theresa May’s Comments, the West Is Interfering in Syria’s Civil War

Shortly after the air and missile strikes that U.S., British and French forces launched against the Syrian government’s alleged chemical weapons sites, British Prime Minister Theresa May insisted that the goal simply was to degrade the ability of Bashar-al Assad’s regime to use such weapons in the future and to bolster the longstanding international taboo. “These strikes are about deterring the barbaric use of chemical weapons in Syria and beyond.” May stressed: “This was not about interfering in a civil war.  And it was not about regime change.”

Her comment simply lacks credibility. There is no such thing as a neutral military intervention by outside powers. Even if the intervenors do not intend to affect the wider political context, the act of attacking one party in a civil war automatically works to the disadvantage of that party and strengthens the position of its adversaries. President George H. W. Bush’s deployment of U.S. troops in Somalia in late 1992 did not seem to have an underlying geopolitical purpose. The situation in that fractured country was indeed dire, with tens of thousands of people already starving. Washington’s relief effort aimed at using the U.S. military to distribute food and take other measures to ease the widespread suffering. It fit the definition of a truly humanitarian military mission.

Nevertheless, the moment U.S. troops arrived, they inevitably began to affect the balance of power among the contending militias. Some of those factions soon resented the American presence, and sporadic armed clashes erupted between their fighters and U.S. troops. That dynamic culminated an intense firefight in the capital, Mogadishu—the “Blackhawk Down” episode in early October 1993 that claimed the lives of 18 U.S. Army Rangers and more than 300 Somalis.

In the case of Syria, Western officials cannot even invoke the defense of not wanting to meddle in that country’s larger political and military struggles. Within months after demonstrations erupted against Assad’s rule in 2011, Washington and its allies began to aid the insurgency. Washington helped organize an ad hoc collaboration of some 60 nations (primarily a combination of Western and Sunni Muslim powers) to do so. That group, which became known as the Friends of the Syrian People, met in Tunis in late February 2012 to formulate aid plans, including the provision of “emergency” supplies to refugees and “increased training” for Syrian opposition leaders. In her memoirs, Secretary of State Hillary Clinton stated that although the United States was “not prepared to join such efforts to arm the rebels,” she did tell the Saudi-led coalition that Washington would supplement their efforts by providing nonlethal assistance. By September 2013, the CIA was indisputably providing weapons to insurgent forces.

U.S. support for so-called moderate rebels has increased inexorably since then. In addition to aiding existing factions, the Obama administration asked Congress in June 2014 to authorize $500 million to vet, train, and equip a new force of moderate fighters. Officials spent all of those funds over the next 14 months, but managed to graduate only a few dozen fighters, most of whom quickly defected or surrendered to more radical Islamist forces. 

In light of such a lengthy track record of Western aid to anti-Assad insurgents, it is preposterous for U.S. and Western European leaders to claim that they have no intention of interfering in Syria’s internal strife. From the beginning, their goal has been to help oust Assad from power. Interference in the internal affairs of another nation is objectionable on principle, but it also is strategically unwise in the case of Syria. The reality is that there are very few “moderate” Syrian rebels in any Western meaning of that term. The few secular, democratic types who do exist are largely ineffectual militarily. Militant Sunni Islamists dominate the ranks of the anti-Assad insurgents. With the decline of ISIS, the most powerful faction is Jabhat Fatah al-Sham (formerly the Nusra Front, Al Qaeda’s Syrian affiliate).

By degrading the Syrian government’s military assets with the latest attacks, as well as the missile strikes following the earlier chemical weapons incident in early 2017, the West risks enabling the Islamist rebel coalition to snatch victory from the jaws of defeat in the Syrian conflict. Assad is assuredly a corrupt and brutal ruler, but to help empower such a successor regime is hardly in the West’s best interest. Yet contrary to May’s statements about not interfering in Syria’s struggle, a rebel victory still appears to be the goal of the Western powers.

Cuba: What Transition?

Raúl Castro is stepping down as president of Cuba. His replacement—Miguel Díaz-Canel—is not only a much younger man (57), but also a civilian. The image of an elderly Cuban dictator wearing an olive-green uniform will soon be thing of the past. Perhaps tropical versions of glasnost and perestroika could also be in the offing?

Don’t get your hopes up.

As Cuban dissident and human rights activist Antonio Rodiles puts it, believing that democratic transition is possible from within the regime constitutes the triumph of hope over facts. First, Raúl is not retiring yet. He remains the secretary general of the Communist Party until 2021. This is the post where true power lies in Cuba. Raúl will also stay as the commander in chief of the armed forces. It seems Díaz-Canel will be just a figurehead of the regime.

Second, Raúl has been grooming his son, Alejandro Castro Espín, to replace him as secretary general of the Communist Party in 2021. Castro Espín is already one of the most powerful—and feared—figures in Cuba. Moreover, Raúl’s son-in-law, Luis Alberto Rodríguez López-Callejas is the CEO of Grupo de Administración Empresarial Sociedad Anónima (GAESA), the military-owned conglomerate that controls 60 percent of the island’s economy. The Castro family will continue calling the shots.

Finally, in recent years the Cuban authorities, including Díaz-Canel, have been adamant that Cuba’s Stalinist political and economic system is not negotiable. Those who expect the new president to be a Cuban Gorbachev will be disappointed.

One group that can attest to the brutish nature of the Cuban regime—and how repression of dissidents has actually increased lately—is The Ladies in White. For a decade and a half, they have been beaten and harassed by government thugs for demanding the release of political prisoners and the introduction of more civil and political liberties. I’m very pleased that in the context of this phony transition in Cuba, Cato awarded them the Milton Friedman Prize for Advancing Liberty 2018.

Unfortunately, there is no reason to believe that the struggle for freedom of The Ladies in White will successfully end any time soon. The Cuban dictatorship will stay in place, just with a younger face at its helm.

Government Encourages Third-Party Payment, Which Drives Health Care Prices Higher

Cato adjunct scholars Charlie Silver and David Hyman have an important oped in today’s Houston Chronicle explaining how third-party payment increases prices for drugs and other medical goods and services. An excerpt:

If you’re like us, your health insurance coverage includes a prescription drug benefit. The benefit isn’t free, but you’re willing to pay for it because it saves you money every time you have a prescription filled. You are responsible for your co-pay, and your insurer pays the rest.

At least, that’s how it is supposed to work. But the truth is that your insurer often pays nothing. Your co-pay is all the pharmacy receives. Not only that, but your co-pay often exceeds the amount that someone without insurance would have paid for the drug. That’s right: People who don’t have insurance are paying less than you are for the same drug…

The scam works by taking advantage of consumers’ naive belief that their insurers are watching out for them. Suppose you have high blood pressure and your doctor prescribes amlodipine, a medication used by millions. If you have insurance, you probably think your insurer negotiated a great deal because a month’s supply at the pharmacy costs you only $10. But if you paid cash for the same drug at Costco, you’d have to pay only $1.85…

The real problem is that insurance is a terrible way of paying for things that we can and should pay for directly. Price-gouging does not happen with drugs that are sold over-the-counter at retail outlets like CVS, Costco or Wal-Mart. Those prices are transparent and easy to compare. When people pay directly for drugs, there are no hidden transfers between pharmacies and PBMs either. Competition does for cash customers what PBMs and pharmacies don’t seem able to do for one in four of the prescriptions filled by insured customers — reduce drug prices to the lowest sustainable level.

Overcharges occur throughout the rest of our health care system too, and they drive up the cost of all sorts of procedures. Why? Because insurers don’t care about costs nearly as much as patients do. If we want to get health care spending under control, we should pay for it directly as often as we can.

Read the whole thing.

Attorney General Sessions Proposes An Even More Destructive Opioid Policy

Speaking to a group of law enforcement officials in Raleigh, NC yesterday, Attorney General Jeff Sessions announced proposed rule changes to the way the Drug Enforcement Administration sets quotas on the manufacturing of opioids. The DEA now presumes to be able to divine the likelihood a particular type of prescription opioid will be diverted to the illegal market when setting production quotas. 

The Attorney General said, “Under this proposed new rule, if DEA believes that a company’s opioids are being diverted for misuse, then they will reduce the amount of opioids that company can make.”

The DEA ordered a 25 percent reduction in opioid production in 2017 and another 20 percent reduction for 2018. The tight quotas on opioid production contributed to the acute shortage of injectable opioids being felt in hospitals across the nation. It is not only making patients suffer needlessly but places them at increased risk for adverse drug reactions or overdose. Just the other day, after pleas from numerous medical professional associations, with the shortage reaching crisis levels, the DEA announced it will begin to relax this year’s quotas. But it may take months before things improve. 

The damage to hospitalized patients is an unintended consequence of central planning and should come as no surprise. DEA administrators had the fatal conceit of believing they could determine just how many opioids should be produced for what they call the “legitimate” pain control needs of the nation’s patients. Yet even after the DEA recognized that the quotas caused harm, with these new proposed regulations they are determined to get back up in the saddle and ride that horse again.

Despite the reduction in opioid supply and a 41 percent reduction in the prescription of high-dose opioids by health care practitioners since 2010—the year prescribing peaked—the overdose rate continues to soar, having increased 20 percent from 2015 to 2016. According to the National Survey on Drug Use and Health, nonmedical use of prescription opioids peaked in 2012, and total prescription opioid use in 2014 was less than in 2012. The evidence is that nonmedical users migrate to cheaper and easier to obtain heroin and fentanyl when diverted prescription opioids become less available. The overdose rate from fentanyl has increased at a clip of 88 percent per year since 2013, and the overdose rate from heroin increased 19 percent per year for the past 2 years after increasing at a rate of 33 percent per year from 2010-2014. Meanwhile, the overdose rate increase for prescription opioids has been unchanged at 3 percent per year since 2009.

The Attorney General and the DEA administrators seem unable to learn from their mistakes. They continue to view the opioid overdose crisis as a product of the number of pills produced or prescribed. They have been wrong about this from the get-go. It has always been the result of nonmedical users accessing drugs in a black market fueled by drug prohibition. The underground market responds quickly. It provides nonmedical users with cheaper and more dangerous and deadly drugs in response to prescription opioid restrictions. 

Not content with the damage they have already caused, regulators appear ready to double down on the supply-side approach to the overdose crisis. This means America’s hospitals can look forward to more and possibly greater shortages of vitally needed opioids, while first responders swell their emergency rooms with ever growing numbers of heroin and fentanyl overdoses.

Profiles of Every Terrorism Vetting Failure in the Last 30 Years

In my new policy analysis released today, I identify 65 vetting failures where the visa vetting system allowed a foreign-born person to enter the United States as an adult or older teenager when they had already radicalized—80 percent occurred before 9/11. Just 13 vetting failures have occurred since 9/11, and only one—the last one (Tashfeen Malik)—resulted in any deaths in the United States. That’s one vetting failure for every 29 million visa or status approvals, and one deadly failure for every 379 million visa or status approvals from 2002 to 2016.

As I note, 9/11 is reasonable point of analysis because after the attacks the United States invested heavily in new vetting procedures. I define vetting failure as broadly as possible to include even private thoughts that later became public and anyone who committed their offense within a decade of entry even without evidence that they radicalized before entry. The vast majority of terrorism offenders both before and after 9/11 were born in the United States, grew up here, or lived for lengthy periods before they committed an offense.

Justice Gorsuch on Overcriminalization and Arbitrary Prosecution

“Vague laws invite arbitrary power.”

That’s the opening line and general theme of Justice Neil Gorsuch’s concurring opinion in Sessions v. Dimaya, announced today. In this case, Justice Gorsuch joined the Court’s four “liberals” in a 5-4 decision holding unconstitutional a provision of the Immigration and Nationality Act, which renders deportable any alien convicted of an “aggravated felony.” This statutory phrase is defined to include a “crime of violence,” which itself is defined to include both crimes where use or threat of force is an element, as well as “any other offense that is a felony and that, by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense.” It was this last provision – the “residual clause” of the statute – that was at issue in the case. The majority held that this abstract definition was “impermissibly vague,” and thus a violation of the Fifth Amendment’s Due Process Clause.

In his separate opinion, Justice Gorsuch gave a detailed analysis of the history and legal foundations of the void-for-vagueness doctrine (largely in response to Justice Thomas, who questioned the propriety of this constitutional doctrine both here and in a similar prior case, Johnson v. United States). His concurrence argues that courts must review and strike down unconstitutionally vague statutes, not just to ensure fair notice to potential defendants, but also to enforce the separation of powers between the branches of government:

Under the Constitution, the adoption of new laws restricting liberty is supposed to be a hard business, the product of an open and public debate among a large and diverse number of elected representatives. Allowing the legislature to hand off the job of lawmaking risks substituting this design for one where legislation is made easy, with a mere handful of unelected judges and prosecutors free to “condem[n] all that [they] personally disapprove and for no better reason than [they] disapprove it.”