Archives: 05/2018

Kill the Iran Deal, Open Pandora’s Box

This afternoon, Donald Trump made an announcement regarding the future of the Iran nuclear deal. Ahead of a self-imposed May 12th deadline, the President announced that he will not be waiving the sanctions. This decision places the United States in violation of the deal. But while it may not kill the JCPOA completely – European states and Iran could decide whether to keep some version of the deal going without the United States – it will start a period of profound uncertainty about the future of U.S-Iranian relations.

In some ways, this uncertainty is the most concerning thing about the current administration’s approach to the JCPOA. Trump’s speech included no realistic alternate strategy, other than “get a better deal.” His decision probably won’t be followed by public debate over whether conflict with Iran is desirable, a proposition that many in the administration seem to favor, but which most Americans would undoubtedly oppose.

Instead, by blowing up the nuclear deal today without offering any clear strategy or plan for an alternative, Donald Trump is opening Pandora’s Box, increasing the risks of escalation and bringing us gradually closer to conflict with Iran.

Initially, it probably won’t look that bad. Sanctions penalties will not kick in for 180 days. Iran has said it will take a few weeks to decide on its response, and discuss the issue with European signatories of the JCPOA. These countries may well try to keep some form of the deal running without the United States. 

GOP to Boost Food Stamp Bureaucracy

The Republicans have so forgotten how to control spending, even when they try something conservative it is not really conservative. Consider the House GOP’s proposed reforms to the food stamp program in the upcoming farm bill.

The GOP wants to put work requirements on a small share of food stamp (“SNAP”) recipients. The Congressional Budget Office says: “starting in 2021 certain SNAP recipients must either be employed or in a state-government-sponsored training program unless they qualify for certain waivers. CBO estimates that this provision would reduce spending on benefits by $9.2 billion over the 2019-2028 period because it would cause some people to lose eligibility.”

That sounds like a good change, and change is needed in this program. Spending on food stamps doubled under President Bush then doubled again under President Obama, as shown in the chart below. It rose from $18 billion in 2001 to $80 billion in 2013. It has since dipped to $68 billion, but we are in the ninth year of an economic expansion so it should have fallen much more.

Anyway, the GOP bill would trim food stamps $9.2 billion over 10 years, or less than $1 billion a year. But here is the next line in the CBO report: “The federal government’s administrative costs for this provision would increase by $7.7 billion over the same period.”

The GOP plan would blow most of the cost savings on new bureaucracy! The rest of the savings would be consumed by other spending increases, according to the CBO. The scorekeeping agency finds that the plan would create an overall increase on food stamp spending over 10 years of $0.5 billion.

There are no net taxpayer savings from the Republican food stamp plan. Democratic Representative Colin Peterson said of the plan, “It mystifies me how the party that doesn’t like government wants to make it so much bigger.” Me too! Except, as I discuss here, most Republicans like government and want to make it bigger.

Congress Tees Up an $867 Billion Farm Bill

If you thought that the congressional spending orgy would slow down after the bloated omnibus bill passed in March, you were wrong. Republicans are preparing to bring to the House floor a farm bill that will cost taxpayers at least $867 billion over 10 years.

While this is a “farm bill,” one-quarter of the spending will be for farm subsidies and three-quarters for food stamps. The latter is officially called “nutrition” spending. But since almost one-quarter of food stamp spending is for junk food, that label is as absurd as calling Social Security’s Ponzi-style accounting a “trust fund.”

The essence of the farm bill is a giant log roll. Much of the spending likely does not have majority support in Congress or among the public, so politicians mash together hand-outs to different groups in a broad farm-food omnibus. As the number of farmers has fallen over the decades, politicians have had to buy off an increasing number of special interest groups to pass the “farm bill.” The Congressional Research Service recently discussed how the farm bill logroll developed:

The economic depression and dust bowl in the 1930s prompted the first “farm bill” in 1933, with subsidies and production controls to raise farm incomes and encourage conservation. … The 1973 farm bill was the first “omnibus” farm bill; it included not only farm supports but also food stamp reauthorization to provide nutrition assistance for needy individuals. Subsequent farm bills expanded in scope, adding titles for formerly stand-alone laws such as trade, credit, and crop insurance. New conservation laws were added in the 1985 farm bill, organic agriculture in the 1990 farm bill, research programs in the 1996 farm bill, bioenergy in the 2002 farm bill, and horticulture and local food systems in the 2008 farm bill.

We’re subsidizing horticulture now? What’s next—subsidies for grocery stores, restaurants, flower shops, and landscape architecture?

Even with the wide-ranging logroll in the current House bill, supporters may have difficulty getting enough votes. Many Democrats are objecting to modest changes in the food stamp program, while some Republicans are objecting to the high spending on both farm and food subsidies. We will see what happens in coming weeks. 

Join us Friday at noon on Capitol Hill for a briefing on the farm bill featuring myself, Daren Bakst of the Heritage Foundation, and Scott Faber of the Environmental Working Group.

CBO’s cost estimate of the farm bill is here.

Logrolling is explained here.

An overview of farm subsidies is here.

California Picks on Fruit Pickers

Contract law is premised on a “meeting of the minds”: the common agreement between two parties to strike a mutually beneficial bargain to which they both assent. When unions and employers spar over wages and working conditions, they align their divergent interests in a manner that is fair to both parties.

California, alone among the 50 states, is dissatisfied with the fairness of this procedure. Instead, it requires a “mandatory mediation and conciliation process” for agricultural employers. Under this law, unions need not use their market power to negotiate with the employer. Instead, a state-sanctioned “mediator” drafts the agreement and imposes its terms on the parties. Such “contracts” dictate not simply wage rates or benefits packages, but the full spectrum of employment policies in a particular workplace.

And particularity here is the precise issue: the power of the state injects itself into the employment relationship not by setting general standards of conduct applicable to all employers, as with minimum wage laws or workplace safety standards, but by singling out employers for idiosyncratic treatment. This is not a “collective bargaining agreement,” but a mini-labor code applied to a single employer, who must now compete in the marketplace under a regulatory regime unique to him.

There are no safeguards to ensure that similarly situated employers or unions will be treated as similarly. Indeed, the law by its terms singles out a single industry for no discernable reason (other than possible rent-seeking by agricultural unions). Arbitrary burdens violate the core principle of the Fourteenth Amendment, which guarantees each of us the equal protection of the laws. A law for me but not for thee is no law at all.

An employer named Gerawan Farming challenged this imposition on its rights, but the California Supreme Court failed to recognize the constitutional principle at stake. Gerawan now petitions the U.S. Supreme Court to review its case. Cato has joined in a brief with the Pacific Legal Foundation urging the Court to take the case and require unions in California to vindicate their interests in the same manner as unions in the rest of the country: at the bargaining table.

A Fair Look at Possible Changes to Rental Assistance

Last week Secretary Carson’s Department of Housing and Urban Development (HUD) proposed changes to federal rental assistance programs. There were a variety of changes in the HUD proposal, but so far reactions have focused mainly on tenant rents. This narrow focus on a single element of the proposal doesn’t do the full proposal justice.

The three major changes are the ability to institute work requirements, the changes to tenant rents, and reductions in paperwork and monitoring. A few words on each, below.

1) Work Requirements

The proposal allows housing authorities to institute work requirements. Despite concerns from activist groups like the National Low-Income Housing Coalition (NLIHC), the proposal does not allow housing authorities to apply work requirements to the elderly, disabled, or minors.

According to the Center for Budget and Policy Priorities, 60 percent of households on public assistance are elderly or disabled. These households would be exempt. Of the remaining households, some are already working and so ostensibly they would not need to change their behavior.

In short, if all housing authorities adopted strong work requirements a minority of HUD households would be impacted, perhaps 13 - 18 percent. Work requirements are likely more of a symbolic change that expands the universe of what’s possible under government rental assistance than a provision that would dramatically change rental assistance.

2) Rent Changes

This change has drawn a lot of attention. The increase from 30 to 35% of income for rent is not ideal from a policy standpoint, because it reduces tenant incentives to earn additional dollars (or to report additional dollars if they are earned).

If rents need to be raised, the change from $50 to $150 for minimum rent is superior to the increase from 30 to 35% of income for rent. In fact, HUD would likely be better off moving all of their units to flat rate rents, similar to how minimum rents are structured.

HUD’s view is that rent changes must be made as a result of budgetary constraints. Indeed, changes in rent due to budget constraints are not unprecedented in HUD housing. In 1981, Congress increased rent from 25 to 30% of income for HUD rental assistance programs for this reason.

One important point: where the rent changes result in a financial hardship, tenants are exempt under the proposal. Examples of financial hardship include A) risk of being evicted, B) financial issues (like lose their job, a death in the family, a change in circumstances) C) tenants have lost eligibility for other welfare benefits, or are waiting to find out if they’re eligible for them, etc. Despite activists’ concerns the proposed reform would put people out on the street, it looks as though it’s designed not to.

3) Less Paperwork, Less Monitoring

There are a couple of changes related to reducing paperwork and bureaucracy in the program. The first is changing the rent calculation from adjusted income to gross income. Determining what counts as income for tenants is a very complicated process which leads tenants of similar economic circumstances to be treated differently. That’s a fairness issue, one among many in the provision of housing benefits. It’s nice to see an attempt to simplify and treat tenants similarly.

Finally, HUD rental assistance recipients currently have to recertify their income annually. The proposal changes the certification to be less frequent, from annually to once every three years. The idea is to give low-income tenants greater ability to grow their income while eliminating paperwork. Both libertarians and liberals should find this element of the proposal at least somewhat appealing.

In short, a fair analysis of the proposal requires greater nuance than what’s being offered.

Ukraine, Trump, and Javelin Missiles

Yesterday the New York Times reported that in early April Ukraine’s president, Petro Poroshenko, ordered his chief federal prosecutor to halt four anticorruption investigations involving Ukrainians connected to Paul Manafort, Donald Trump’s former campaign chairman and a central figure in Robert Mueller’s investigations here in the United States.

Perhaps not coincidentally, Ukraine announced on April 30 that it had received 210 Javelin antitank missiles, purchased from the United States to bolster its fight against Russian proxies in the Donbass region of Ukraine. Though the State Department initially approved the sale in December and Pentagon gave its blessing in March, Trump himself was reluctant to arm Ukraine given the potential effect on the U.S. relationship with Russia.

The burning question is whether anyone in the Trump administration suggested this course of action to Ukraine. Ukraine, of course, is free to pursue whatever policies it deems necessary to defend itself from encroachments by Russia. But to use arms sales to interfere with the Mueller investigation would represent obstruction of justice on a truly epic scale.

To be sure, Ukraine already had plenty of motivation to help the Trump administration. If Ukraine shuttered the investigations to curry Trump’s favor, it was only one of several efforts designed to garner American support. Concerned that Trump’s affection for Vladimir Putin would translate into anti-Ukraine policies, Ukraine has gone out of its way to butter up Trump since he took office. Ukraine has promised U.S. construction firms contracts for future infrastructure projects in Donbass, brokered a $80 million coal deal with the U.S., signed a $1 billion deal with GE Transportation for new locomotives, and hired former Republican National Committee chairman Haley Barbour to help Ukraine lobby the Trump administration.

But even if this has nothing to do with the Mueller investigation, the sale of Javelin missiles to Ukraine reflects both poor judgment on the part of the Trump administration and a longstanding neglect of the potential negative consequences of American arms sales.

Arming Ukraine makes little strategic sense. A couple hundred antitank missiles will not alter the military balance between Ukraine and Russia in Donbas in any meaningful way. Russia can quickly move additional forces and equipment to the region at will. The bigger danger is that arming Ukraine will in fact prompt Russia to do just that, thereby risking an intensification of the conflict and potentially leading to more casualties than the 10,000 already suffered. It is clear, in fact, that this is exactly how Russia sees things. In December after the State Department approved the sale, Russian Foreign Ministry spokesperson Maria Zakharova said, “The United States is, in fact, encouraging the resumption of large-scale bloodshed in Donbass, where the situation is already on the edge due to continuing shelling from the Kiev-controlled side…Washington, in fact, becomes an accomplice in the killing of people.”

Arming Ukraine also raises the political stakes and risks turning Ukraine into a test of the president’s foreign policy effectiveness, increasing the likelihood of the United States getting entangled more deeply in the conflict. It seems clear that encouraging greater U.S. involvement is a key element of Ukraine’s strategy. Major General Volodymyr Havrylov, Ukraine’s defense attaché to the U.S., told a reporter that the missiles were “a political symbol that allows others to understand that Ukrainian security is important to the U.S.” The risk of entanglement is not trivial given the presence of powerful advocates for doing more in the U.S. Congress. Senator Bob Corker, chairman of the Senate Foreign Relations Committee approved of the sale back in December, telling the press that “This decision was supported by Congress in legislation that became law three years ago and reflects our country’s longstanding commitment to Ukraine in the face of ongoing Russian aggression.”

More broadly, the dangers generated by U.S. arms sales go well beyond Ukraine. Ukraine is just one of many risky customers to whom the United States has sold advanced weapons over the past fifteen years. In pursuit of short-term foreign policy influence and economic gains, the United States has turned a blind eye to what happens after the deals are done. Among the list of questionable clients are countries like Saudi Arabia, which has used American weapons in its disastrous intervention in Yemen; Iraq, whose army managed to provide the Islamic State with three army divisions’ worth of American tanks, armored vehicles, and infantry weapons; and Nigeria, whose human rights record, internal conflicts, and overall state fragility call into serious question whether it will use its latest purchase of Super Tucano attack aircraft in a responsible manner.

Time will tell if the smoke surrounding the sale of Javelin missiles to Ukraine stems from collusion to obstruct the Mueller investigation or simply misguided foreign policy making. Either way, arming Ukraine reflects a reckless approach to the use of arms sales that the Trump administration seems all too eager to embrace.