Archives: 05/2018

Proof That The Government Is Cheating Legal Immigrants

I have previously laid out the case that the government has cheated legal immigrants for decades by erroneously counting the spouses and children of immigrants against the quotas for immigration, thereby reducing the total amount of immigration substantially. My argument relied primarily on the text of the law and not the legislative history. But I have recently come across evidence that proves that members of Congress believed that spouses and children wouldn’t count against the cap.

The Immigration Act of 1990 provided the basis for issuing green cards to spouses and children of legal immigrants in section 203 of the Immigration and Nationality Act (INA). Congress divided section 203 into subsections. Subsection (a) provides green cards for certain family-members of U.S. citizens and residents, subsection (b) for employment-based immigrants, and subsection (c) for diversity lottery winners. Each of these categories have a quota. Subsection (d) separately awards green cards to the spouses and minor children of the primary applicants under subsections (a) through (c).

This means that if an employee, for example, qualifies for a green card through employer sponsorship under subsection (b), their spouses and children qualify for green cards under subsection (d). Subsection (d) has no quota, while subsections (a) through (c) do have quotas, so the question is, do the spouses and children count under subsection (d) without a limit or under the other subsections with limits?

While no member of Congress directly addressed this question in 1990, they made comments that we can only interpret as indicating that they believed spouses and children would not count toward the quotas. In the same bill in 1990, Congress created the EB-5 Investor Program in subsection (b) of section 203. Under the law, up to 10,000 immigrants can receive green cards if they invest in a new commercial enterprise that creates at least 10 jobs. Thus, a minimum of 100,000 jobs would be created if all the green cards went to investors. However, if their families count against the green card limit, then fewer than 10,000 investors would receive green cards and fewer than 100,000 jobs would be created.

Can Agencies Adjudicate Patentability?

Can agencies adjudicate patents once they are issued, or can patents be altered only through judicial proceedings? The Supreme Court recently decided in Oil States Energy Services v. Greene’s Energy Group for the former view and upheld the constitutionality of an administrative review process that opponents say violates the rights of patent holders. The current issue of Regulation contains two articles that argue strongly for and against these two views of patents.

In “The Patent System at a Crossroads,” Jonathan Barnett, a law professor at the University of Southern California, argues that Oil States is a pivotal moment in a decades-long erosion of intellectual property rights. In his view, this erosion is misguided.

Barnett contends that the criticisms of a strong patent-rights system overlook recent empirical evidence and have overestimated the impact and scope of problems including “patent trolls” (firms that own patents but do not manufacture products), “royalty stacks” (the total demands of multiple intellectual property holders for remuneration leave too little revenue left for the manufacturer), and “patent thickets” (complex and conflicting legal claims that increase transaction costs for manufacturers).

In “Miles to Go Before We Sleep,” Jonathan Stroud, chief intellectual property officer at Unified Patents, argues that Barnett ignores other evidence that supports the elimination of “weak” patents through an administrative process created by the 2011 America Invents Act.

Stroud argues that patents are and always have been a complex regulatory framework designed by Congress to incentivize innovation rather than simple property. The administrative process at issue in Oil States is just another in a long series of adjustments to the patent system.

After reading these two articles readers can decide for themselves how they view the Court’s decision.

Written with research assistance from David Kemp.

Average Tax Rates by Income Group

For months, news articles and commentaries have decried the supposedly huge tax cuts for the rich passed by Republicans in December. In a classic rhetorical formulation, a New York Times editorial in February said, “Republicans designed the law to principally benefit wealthy families while offering crumbs to low-income and middle class families.”

Actually, the largest relative tax cuts went to the middle class, as I discuss here. But perhaps some people have fixed views on the tax cut, and can’t imagine the Republicans doing anything other than favors for plutocrats.

So let’s try a different angle and look at overall burdens under the GOP tax law, which went into effect January 1. The official tax scorekeeper, the Joint Committee on Taxation, recently published estimates of average income tax rates by income group for 2018, which are presented in the table below. The tax rates are income taxes paid divided by total income within each group.

Tax rates rise rapidly as income rises above $50,000 a year. The $1 million and over group pays a 10 times higher share (26.3 percent) of their income to taxes than does the middle $50,000 to $75,000 group (2.4 percent).

In aggregate, households with incomes of less than $50,000 do not pay any federal income taxes. Instead, they receive large subsidies from the U.S. Treasury in the form of refundable tax credits. Those subsidies to low earners are expected to jump from $83 billion a year before the tax law to $99 billion after the tax law (page 48).

That is more than crumbs.


Data from Table A-6.

Why I Think Conservatives Have the Alfie Evans Case All Wrong

Conservatives are railing against dual decisions by the British government to prevent Alfie Evans’ parents from transporting him to Italy for further treatment, and to order Alfie’s doctors to withdrawal life support from Alfie, which they did, and which soon led to Alfie’s death. Conservatives are claiming this is what you get under socialized medicine: heartless government will override parental rights to pull the plug on your children. My thoughts on Alfie’s case are still tentative, but I think that’s a total misreading. The tragic case of Alfie Evans had almost nothing to do with socialized medicine. 

As hostile as libertarians are to government, even we believe government can legitimately order the withdrawal of life support, and prohibit parents from moving a child to obtain further treatment, when that treatment would fruitlessly prolong a child’s suffering – i.e., when further treatment would be akin to torture. In such cases, the government intervenes to protect the child’s rights. (British law frames the decision in terms of the “best interests” of the child, but it seems to me that language clouds the issue and thereby unnecessarily inflames passions.) 

There is no objectively right place to draw the line between cases in which the government should and should not intervene. But I don’t know anyone who thinks it never should. If anyone does make that argument, they’re just wrong. 

There is plenty of room to argue about whether British law and courts drew the line in the right place here. It did not appear Alfie was suffering, but doctors could not completely rule it out. They all agreed that further treatment was futile, though. Is it torture to provide futile treatment to a kid who likely can’t feel pain?

The only way socialized medicine might have something to do with Alfie’s case is that decades of socialized medicine might have shaped the values and attitudes of the elites who make the ultimate decision about where to draw that line. It is not crazy to think that the incentives the British National Health Service creates to provide less care, and the stiff-upper-lip attitudes that lead Britons to tolerate queues and other forms of explicit and implicit government rationing all for the Greater Good, might influence where the elites draw that line. But if the influence of the NHS leads British elites to be more likely to pull the plug on Alfie, that is not obviously or objectively wrong. 

Nor is it the only way socialized medicine might influence where elites draw the line. The U.S. Medicare program is a system of socialized medicine that imposes no constraints on medical spending or consumption. Decades of experience with it and similar socialized-medicine programs have created a pervasive belief among U.S. physicians and policymakers that more medicine is always better. (Spolier alert: it’s not.) So if U.S. conservatives want to make the argument that decades of socialized medicine have made Britain’s elites too willing to pull the plug on Alfie, they must also confront the possibility that decades of socialized medicine have made them too willing to tolerate the torture of children like Alfie.

I don’t know what the right answer was in Alfie’s case. I do know Alfie’s case is not an illustration of the failures of socialized medicine.

I also know that advocates of socialized medicine have exactly zero right to complain about the ignorance of some opponents of socialized medicine, because socialized medicine also socializes the cost of ignorance.

And I know one more thing: there’s a hug and a pint waiting for Alfie’s parents, Tom and Kate, in Washington, D.C.

More Immigrants Come From Democracies Today Than Prior Waves

During my panel at the Conservative Political Action Conference, conservative columnist Ralph Hallow said that the United States is “bringing in people with no experience with our idea that the individual has ultimate worth and that the government exists only because we say it can.” For the past couple of months, I gathered data to test this claim. Here’s what I found: while immigrants do have less experience with liberal democracy than Americans do, the recent wave of immigrants actually comes from much more democratic countries than earlier waves.

I calculated the level of democracy using the Polity dataset from the Center for Systemic Peace, which is the only data series on democracy that goes back to the mid-19th century. Polity scores are measured on a 21-point scale from -10 (absolute autocracy) to +10 (consolidated democracy). They cover all independent states with a population greater than 500,000. Their variables measure how open and competitive the electoral system is and how controlled the executive is in its use of power—not the perfect measure of Hallow’s idea, but the best that we have.

These regimes can be grouped into democracies (+5 and up), autocracies (-5 and less), and anocracies (between -5 and +5). An example of a democracy with a polity score of +10 is Sweden, which elects its parliament in free and open elections. An example of an autocracy with a polity score of -10 is Saudi Arabia, which has a hereditary system of government and few civil liberties, and an example of an anocracy with a score of 1 is Bangladesh, which has struggled with military control of its elections and civil liberties.

Figure 1 groups immigrants into these three political system classifications since 1857, when the United States began recording country of origin of legal immigrant arrivals. As it shows, the 19th and early 20th century saw large numbers of immigrants from anocracies, some from democracies, and few from autocracies. Only in the 1920s, after World War II and the closing of immigration to the United States from Eastern Europe, were democracies temporarily in the majority. During the Cold War period, autocracies played a larger role in driving immigrants to come to the United States, but following the collapse of the Berlin wall in 1989, immigrants from democracies have dominated the flow.

U.S. immigrants by political system in home country

Figure 2 groups immigrants into three periods: the “Great Wave” of immigrants who came before 1930 (32 million), the “Small Wave” who entered during the period of limited immigration from 1930 to 1975 (9 million), and the “New Wave” who entered after 1975 (34 million). It also shows the most recent group of new immigrants from 2012 to 2016. The exact start of the New Wave is debatable. Many people point to 1965, but I prefer to count from 1976 because it is the first year that topped 500,000 immigrants since the 1920s, coinciding with the decision to admit Vietnamese refugees, and 90 percent of all immigrants still in the United States in 2016 entered after 1975.

As Figure 2 shows, a majority of New Wave immigrants came from democracies, a share that was more than double the share during the Great Wave. From 2012 to 2016, the share from democracies reached two thirds of all arrivals. The share from autocracies was a little larger during the New Wave, but from 2012 to 2016, it had dropped back to 18 percent.

U.S. immigrants by political system in home country

Figure 3 provides the weighted average polity score for all immigrants for the three periods of immigration, showing that the average immigrant has increasingly come from countries that are more democratic. The weighted average polity score increased from -0.2 during the Great Wave to +2.8 during the New Wave. During the most recent five years, it has risen to +4.1.

Weighted polity score of home country for immigrants

The bottom line is that although immigrants to the United States today are less likely to have experience with liberal democracies than Americans, they are much more likely to have lived in liberal democracies than the ancestors of most Americans when they first arrived here.

Despite Growing Tensions, There Is Still Scope to Avert a U.S-China Trade War

If 2017 was the year of fiery trade talk, 2018 has been the year of provocative trade actions. During the first four months, President Trump imposed or announced intentions to impose tariffs on thousands of products stemming from five investigations conducted under three different, seldom-used laws. Talk of trade war is rampant and, as May begins, the troops are in formation—a circular formation, but a formation nonetheless! By Memorial Day, it should become much clearer whether their orders will be to shoot, hold fire, or demobilize.

What follows is a brief recap of the relevant trade policy actions of 2018 that have taken us to the present situation.

In January, the president imposed “safeguard” restrictions following two separate investigations of imports of large washers and solar cells, under Section 201 of the Trade Act of 1974.  Tariffs and tariff rate quotas, respectively, were imposed for a period of four years in both cases against imports from most countries. These safeguard measures are absolutely stupid as a matter of economics, but relatively trivial as far as the impact on U.S.-China relations and the prospects for trade war are concerned.

In March, under the guise of acting to protect national security, Trump invoked Section 232 of the Trade Expansion Act of 1962 to impose tariffs on imported steel and aluminum from all countries. Soon after the announcement and before the tariffs took effect, Trump offered temporary exemptions to several trading partners to “encourage” them to play nice: buy more U.S. stuff; sell Americans less foreign stuff; increase NATO spending (EU countries); agree to U.S. terms on various aspects of the NAFTA renegotiations (Canada, Mexico); agree to export quotas (South Korea) and the temporary exemptions will be made permanent. Well, as the temporary exemption period was about to expire on May 1, the president extended the deadline to June 1. Presumably, if the NAFTA negotiations wrap up this month (apparently, a real possibility) and Trump gets what he wants, Canada and Mexico will be permanently exempted from the steel and aluminum tariffs. Congrats!  It’s much less clear that the Europeans are willing to submit to these tactics. They’ve crafted a retaliation list and seem likely to go that route.  The Chinese, whose steel and aluminum exports have been subject to the tariff since March 23, have already retaliated against a list of 128 U.S. products (amounting to about $3 billion in U.S. exports), including ethanol, wine, nuts, fruit, and a few other commodities. 

Although the “national security” restrictions on steel and aluminum are a more significant irritant than the safeguard restrictions on washers and solar cells, they still only amount to a flea bite on an elephant’s hide relative to Trump’s most recent, most provocative, and—some would argue—most justifiable action so far. At the beginning of April, Trump announced his intention to impose tariffs on 1,300 Chinese products accounting for about $50 billion of exports to the United States, as a result of an investigation into Chinese intellectual property and forced technology transfer policies, under Section 301 of the Trade Act of 1974. The “remedy” also includes instructions for the Treasury Department to publish new investment rules that will make it harder for Chinese companies to purchase U.S. technology and U.S. tech companies.  Within a few hours of the U.S. announcement, China published a list of U.S. products, amounting to about $50 billion of exports to China (farm products, airplanes, autos, etc.), that it would subject to retaliatory duties of 25 percent should the U.S. measures take effect.

As of that point, between the 232 and the 301 cases, $106 billion of U.S.-China trade was in the crosshairs (about 15% of two-way trade). Then in reaction to China’s retaliation threat, Trump raised the stakes by instructing the USTR to identify another $100 billion of Chinese products to assess with tariffs.  That list has not yet been published, but if it is and China responds commensurately (by targeting another $100 billion of U.S. exports), its list would have to include ALL U.S. exports to China because total U.S. goods exports to China in 2017 amounted to $130 billion. (Services exports add another $50 billion, but they’re not easy to hit with tariffs). The next likely target would be U.S. companies operating in China—discriminatory taxes, regulations, restrictions, etc.  In any event, the amount of trade subject to tariffs ($306 billion) would begin to approach half the value of the two-way trade—a decidedly cataclysmic outcome.

President Trump seems to be aware of the stakes.  Last month he tweeted that trade wars can be good and are winnable. He cites the bilateral U.S. trade deficit as evidence that China needs us more than we need them.  Hopefully, he’s rational enough to realize that his avoidable actions would trigger a massive global economic contraction which, even if the United States is less hurt than others, history would not look kindly upon.

The month of May offers some opportunities to ratchet down the tensions and, even, find some solutions. The Trump administration’s trade policy team—USTR Robert Lighthizer, Commerce Secretary Wilbur Ross, Treasury Secretary Steven Mnuchin, National Economic Council Director Larry Kudlow, and National Trade Council Director Peter Navarro—is in Beijing this week, presumably to get China to commit to certain actions that would enable tensions to be dialed down.  Mid-month, the USTR is holding a hearing for the public airing of views about the Section 301 remedies, where it will be impressed upon the administration how costly a trade war would be.  And, presumably, toward the end of the month is the momentous Korean Summit.  If the president gets the results he’s looking for (whatever they may be) and Beijing is perceived as having played an important role in reaching that outcome, that could give Trump the cover he probably needs to put his pistols back in their holsters and focus on an effective, comprehensive U.S.-China free trade agreement. That should be the primary goal of U.S. trade policy during the Trump administration.


The 14 Most Common Arguments against Immigration and Why They’re Wrong

Arguments against immigration come across my desk every day but I rarely encounter a unique one.  In 2016, I wrote a blog responding to the most common arguments with links to different research.  Since then, academics and policy analysts have produced new research that should be included.  These are the main arguments against immigration, my quick responses to them, and links to some of the most relevant evidence:

1. “Immigrants will take American jobs, lower our wages, and especially hurt the poor.”

This is the most common argument and also the one with the greatest amount of evidence rebutting it.  First, the displacement effect is small if it even affects natives at all.  Immigrants are typically attracted to growing regions and they increase the supply and demand sides of the economy once they are there, expanding employment opportunities.  Second, the debate over immigrant impacts on American wages is confined to the lower single digits—immigrants may increase the relative wages for some Americans by a tiny amount and decrease them by a larger amount for the few Americans who directly compete against them.  Immigrants likely compete most directly against other immigrants so the effects on less-skilled native-born Americans might be very small or even positive.