Archives: 10/2018

Let’s Face It: US Policy in the Middle East Has Failed

The ongoing controversy surrounding the murder of a dissident Saudi journalist and Saudi Arabia’s brutal bombing campaign of a largely defenseless neighboring Yemen, which has come with an enormous human toll, have elicited increased scrutiny over the U.S.-Saudi alliance. The White House remains supportive of Riyadh, both diplomatically and with continued military aid. Republicans have offered mildly critical words for the Saudi regime, while an increasing number of Democrats are calling for a fundamental reassessment of the U.S.-Saudi relationship.

Such a reassessment is long overdue. Washington’s partnership with Riyadh has often been treated as sacrosanct, at least here in the nation’s capital. It should have been clear long ago that the Saudis are not good allies. In fact, they often act in ways that undermine U.S. interests. Backing one of the world’s most appallingly tyrannical regimes to the hilt has actually not been a net positive for U.S. national security or for stability in the region.

With any luck, the unfolding drama over the U.S.-Saudi partnership will extend beyond merely this troubled bilateral relationship to U.S. policy in the Middle East as a whole. The United States is deeply entangled in this region, with roughly 50,000 boots on the ground, dozens of permanent military bases and deployed assets, and a staggering sum of taxpayer dollars, essentially wasted. We are engaged in active combat operations in at least five countries across the Middle East and North Africa, bogged down in endless counter-insurgency campaigns, grisly counter-terrorism operations, and inglorious proxy wars. Washington also tasks Central Command with the responsibility of supporting, training, arming, and stabilizing various corrupt dictatorships, while we also try to put the squeeze on Iran.

A well-timed paper  by Chatham House’s Micah Zenko clarifies the failure of U.S. regional objectives, despite the gargantuan resources devoted to them. Zenko lists four primary objectives: (1) enhancing regional security and reducing political instability within Middle East governments; (2) preventing the emergence of terrorist safe havens; (3) ensuring the free flow of energy resources; and (4) enabling allies to build enough military capacity to defend themselves.

We have failed at each of these. Indeed, far from serving a stabilizing role, U.S. policy has rather plainly destabilized the region. The Iraq War upended the Middle East, empowered Iran, and fueled a new generation of jihadist terrorists. Washington bungled a series of changes in the Egyptian regime and helped (along with other external actors) fuel Syria’s civil war. The Obama administration’s Libya war created anarchy and new refugee flows. And our longstanding support for Saudi Arabia as a balance to Iran has not only failed to roll back Iran’s regional activity, but it has also emboldened Riyadh to act aggressively and pick fights with several of its neighbors.

Second, the effort to prevent terrorist safe havens is based on a false premise that territorial safe havens matter much at all. But even accepting the flawed premise, U.S. policies have multiplied the number of “ungoverned spaces” as incubators for terrorist groups. As Zenko points out, “troops maintained in foreign countries to prevent terrorism actually increase the probability that those troops’ home countries and global interests will experience terrorism.”

Third, there is good reason to believe that U.S. efforts to ensure the free flow of oil actually address a problem that largely solves itself. Each state has a strong interest in maintaining the flow of oil through the Persian Gulf, and Saudi Arabia is not the juggernaut it once was. Global energy markets have evolved over the last 40 years and are much more resilient and able to overcome supply shocks than in the past. At best, patrolling the Persian Gulf waterway deters a scenario - an attempt by Iran or some other party to close to Strait of Hormuz - that is already an extremely low probability event.

Fourth, the United States has certainly provided numerous authoritarian regimes in the Middle East with the military capability and know-how to protect themselves, but whether that has redounded as a benefit to U.S. interests and regional stability is another question entirely. Much of what we provided to Iraq ended up in the hands of ISIS. American made weapons have been used to ruthlessly suppress peaceful protesters, from Egypt to Bahrain. And U.S. military support for Saudi Arabia is currently enabling unspeakable war crimes in Yemen, in a conflict that has actually bolstered the position of Al-Qaeda in the Arabian Peninsula (AQAP).

Washington is terrible at self-evaluation. Our record in the Middle East is one of abject failure. Strangely, even when we have presidents that agree with that assessment to one degree or another, policy doesn’t change. President Obama wanted to shift U.S. focus and resources away from the Middle East to East Asia. It didn’t happen. Trump, in April 2018, said, “We’ve spent $7 trillion in the Middle East and we’ve got nothing for it. Nothing, less than nothing, as far as I’m concerned.” And yet his administration has increased overall troop levels in the region, doubled down on backing traditional allies, and revived an anti-Iran posture that harkens back to the Bush era neocons.

A real reevaluation of U.S. policy toward this region is imperative. After decades of trying, Washington has failed in its primary objectives. A new and enlightened policy framework for the region should appreciate the dearth of serious threats to core U.S. security emanating from the region and should emphasize diplomacy as a way to manage relations with regional actors, rather than apply heavy-handed military solutions to every conceivable problem in the area.

Markets Can Calm Opioid Epidemic If Government Gets out of the Way

Yesterday, WBUR in Boston reported on a simple technology that could reduce the number of opioid deaths: fentanyl test strips. The strips can be used by drug users to test for the presence of fentanyl in drugs they buy on the street. A Brown University study found that,

Sixty-two percent of young adult drug users who participated in the study in Rhode Island dipped the thin, pliable strips into the cooker where they heated the powder, or into their urine sometime after injecting. Half reported a positive result — a single dark pink line emerging on the strip — signaling fentanyl.

Most changed their routine as a result in at least one of these ways: 45 percent said they used a smaller amount of the drug; 42 percent slowed down their use; 39 percent used with someone else who could help if they ODed; and 36 percent did a test amount before injecting the full syringe.

While these routine changes aren’t as effective at preventing overdose as not taking the drugs at all, they do reduce the risk of a fentanyl overdose. So why aren’t more of these potentially lifesaving strips in the hands of those who could use them? As WBUR recounts,

But few drug users have access to fentanyl test strips. They are not FDA-approved, so are not for sale in drugstores or other outlets in the U.S. A handful of harm reduction groups fund distribution through private contributions. Other groups say they’d like to order the strips from the Canadian manufacturer but can’t afford the cost: about $1 per strip.

As federal and state officials are scrambling to come up with policy responses to the opioid epidemic it seems they are ignoring one easy measure: get out of the way and let the market provide low-cost harm reduction tools to those who can benefit from them.

Written with research assistance from David Kemp.

Impeach Justice Kavanaugh?

If the Democrats take the House, they’ll impeach Justice Kavanaugh, President Trump warned at a mass rally in Iowa last week. “Impeach, for what? For what?” Trump demanded. For perjury, most likely: “If we find lies about assault against women,” says Rep. Luis Gutierrez (D.-Ill.) one of several House Judiciary Committee members calling for renewed investigation, “then we should proceed to impeach.” 

I’m not the newly-minted Justice’s biggest fan. From the start, I thought Kavanaugh was a lousy pick for the Court: weak on the Fourth Amendment and unreasonably fond of extraconstitutional privileges for the president. I’ve also argued, at great length, that we ought to impeach federal officers more frequently than we do. That goes for Supreme Court Justices as well. The Framers thought impeachment could serve as a valuable check on abuses of judicial power: that we’ve managed to impeach just one member of the “high court” in 230 years is pretty anemic. 

All that said, I find the case for impeaching Justice Kavanaugh uncompelling, for the reasons that follow.

It’s true that there’s ample precedent for impeaching federal judges for perjury. Our last five judicial impeachments were based on charges of lying under oath. 

Here’s a brief rundown of each case: in 1986, the House impeached, and the Senate removed, Judge Harry E. Claiborne (D. Nev.) for filing false tax returns under penalty of perjury (Claiborne had been convicted of those offenses earlier that year, becoming the first sitting federal judge to be incarcerated). Three years later, the Senate removed two more judges for lying under oath. One, the inauspiciously surnamed Walter L. Nixon (S.D. Miss.), was serving five years in prison for lying to a federal grand jury about his attempt to influence a drug smuggling prosecution. The other, Alcee L. Hastings (S.D. Fla.), had been prosecuted for soliciting a $150,000 bribe in exchange for reducing the sentences of two mob-connected developers who’d robbed a union pension fund. He beat the rap in court, but lost his post when the Senate voted to remove him for the bribery scheme and perjuring himself at trial. (Hastings bounced back pretty quickly, however, winning election to the U.S. House of Representatives in 1992. He currently represents Florida’s 20th congressional district.)

More recently, we have the grotesque behavior of Judge Samuel Kent (S.D. Tex.), impeached in 2009 for sexually assaulting two court employees and lying about it to federal investigators. (Kent resigned before completion of his Senate trial.) Finally, there’s Judge G. Thomas Porteous (E.D. La.), impeached and removed in 2010 for “a longstanding pattern of corrupt conduct,” including kickbacks from attorneys, perjury in his personal bankruptcy filing, and “knowingly ma[king] material false statements about his past” to the Senate Judiciary Committee “in order to obtain the office of United States District Court Judge.” 

In principle and in practice, then, perjury is an impeachable offense. That obviously includes lying under oath to gain confirmation to higher office. In Monday’s Wall Street Journal, David Rivkin and Lee Casey insist that “Justice Kavanaugh cannot be impeached for conduct before his promotion to the Supreme Court,” including “any claims that he misled the Judiciary Committee.” But that’s nonsense. Misleading the Judiciary Committee about prior conduct was precisely what was at issue in the Porteous impeachment. 

And yet, the cases outlined above differ from Brett Kavanaugh’s in at least one crucial respect: in each of them, Congress had overwhelming evidence of impeachable falsehoods. Claiborne, Nixon, and Kent were already in federal prison when the House voted to impeach. Hastings and Porteous were removed after exhaustive investigations pursuant to the Judicial Conduct and Disability Act convinced their colleagues impeachment referrals were warranted. Indeed, despite Hastings acquittal in his criminal trial, a Judicial Investigating Committee concluded there was “clear and convincing evidence” he lied and falsified documents in order to mislead the jury.

Federal Jobs Guarantee Would Be Largest Single Global Employer, By Far

Max Gulker of the American Institute for Economic Research has a great short paper out summarizing the problems with a federal jobs guarantee. It echoes many of the issues that I raised about such a program on this blog.

One thing that is often underappreciated is just the sheer scale of the programs proposed. For reasons I outlined, the true numbers could potentially be much higher than the Levy Institute and Center on Budget and Policy Priorities (CBPP) worked proposals. But even taking their numbers as given, the estimated 10.7 million participants according to CBPP and 12.7-17.5 million from Levy would make the federal program by far the world’s largest employer, if thought as a single firm or entity.

Consider the striking chart below.

At the Levy report’s upper-bound estimate, the numbers employed would exceed the world’s nine largest employers combined. Even the CBPP’s lower estimate would only be marginally below the employment level of the world’s five largest employers combined.

Employment by entity

Bloomberg/NYU Center Embeds Lawyers In AG Offices To Pursue Green Causes

When is it appropriate to privatize the work of public prosecutors? And does it make things better or worse when “cause” lawyering is at issue? As Jeff Patch reports at Real Clear Investigations, a project called the State Energy & Environmental Impact Center at New York University supplies seasoned lawyers to the offices of nine state attorney general offices, plus D.C. They serve there in such roles as special assistant attorney general while being paid by the NYU project, which is funded by and closely identified with former New York City Mayor Michael Bloomberg. The catch, which explains why the program is not likely to hold appeal for AGs in some other states: “Under terms of the arrangement, the fellows work solely to advance progressive environmental policy at a time when Democratic state attorneys general have investigated and sued ExxonMobil and other energy companies over alleged damages due to climate change.” 

Private funding of lawyers inside public prosecutors’ offices is not a new idea. Iowa’s AG office, for example, told Patch that it has employed legal talent from an American Bar Association-supported program. In another variation, it is not unusual for prosecutors to accept funding from the insurance industry for efforts to combat insurance fraud. Undergirding the political viability of these schemes is the (perhaps wobbly) premise that the state office is not farming out influence over politically or ideologically sensitive policy matters to outside groups that may have their own agenda.  

The AG offices participating in the program (Illinois, Maryland, Massachusetts, New Mexico, New York, Oregon, Pennsylvania, Virginia, and Washington state, as well as the District of Columbia) might plausibly argue that the projects they’re paying the Bloomberg embeds to work on are mostly ones they’d want to pursue zealously in any case, such as suing the EPA and other federal agencies over alleged lapses. Critics point to the ideologically fraught nature of the work and say the arrangement could violate some states’ ethics rules or generate improper conflicts of interest, as through an obligation to report activities back to the Bloomberg center. 

The spotlight on backstage doings at state AG offices arises from reports by Chris Horner of the Competitive Enterprise Institute based on public records requests that were fought tooth and nail by various AGs. (Besides the CEI report on attorneys general, Horner’s written a companion report on governors.) CEI is anything but a disinterested party in all this, of course, having been hit with a AG subpoena (later beaten back in court) over its supposedly wrongful advocacy on climate issues. That was itself part of a subpoena campaign targeting more than 100 research and advocacy groups, scientists, and private figures on the putatively wrong side of climate debates, which we and others decried at the time as a flagrant attack on rights protected by the First Amendment. 

Brexit Update: Talks Reach Crunch And “No Deal” A Strong Possibility

Where Brexit negotiations are concerned, we have reached (as they say in Britain) “squeaky bum time.” The triggering of Article 50 on March 29th 2017 started a 2-year countdown for the UK and EU to negotiate a withdrawal agreement for a binding international treaty. Yet just 5 months from deadline, the EU’s position on Northern Ireland and a lack of domestic support for Prime Minister Theresa May’s desired long-term trading relationship mean a no deal Brexit in March remains a real possibility (the tweet linked here quotes Britain’s trade minister Liam Fox).

True, much of the withdrawal agreement has been long agreed. A transition period through to 31 December 2020 is planned to essentially keep the UK within the EU’s economic institutions (the single market and customs union), though reports suggest both sides might be willing to extend this for an extra year. Free movement of people would continue for this period, and the UK would pay £39 billion into the EU budget. Importantly, though Article 50 states that a withdrawal agreement must take account of the longer term post-exit relationship, this is not going to be achieved in time: the agreement would merely be accompanied with a joint, loose-languaged political declaration on the future framework.

But it’s here where difficulties have arisen, and most center around the Northern Irish border. Both sides have said from the start that, post-Brexit, they want to keep the border between the Republic of Ireland (an EU state) and Northern Ireland (part of the UK) free of physical infrastructure and associated interventions at politically-sensitive crossings. But making that commitment self-evidently necessitates a trade relationship. Given long-term trade arrangements will not be agreed in the withdrawal agreement, the EU has therefore insisted that the withdrawal deal itself contain backstop provisions to ensure the border remained open should another arrangement or trade deal incorporating not be agreed.

This is what led last December to the UK and EU agreeing in principle to a fudged “backstop” position on Northern Ireland. In vintage legalese, the text stated: “In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement.”

Given the UK government has said repeatedly that the UK would be leaving the EU customs union and single market, this text raised Brexiteer eyebrows. Yes, the UK government agreed this to kick forward future trade relationship talks, and in the hope it would not be ultimately necessary. But talk of full alignment left ambiguity, and the potential for the backstop itself to keep the UK locked into Brussels’ regulatory and customs orbit. However much the UK government insisted that this language did not mean regulatory harmonization, but instead merely achieving shared regulatory goals via detailed sanitary rules, customs procedures, and the Single Energy Market, the backstop left an uncomfortable feeling that the UK had fallen into a trap.

This was not helped when the EU then rejected proposed “technological solutions” and “away from the border checks” that the UK insisted could have avoided the backstop. The unease intensified when, from February, the EU and Ireland began proposing a backstop arrangement where Northern Ireland alone would remain within the EU single market and customs union to ensure a soft border. This was something out of kilter not only with the text but with the wishes of the Northern Irish Democratic Unionist party which props up the Conservative minority government.

This is all significant because Brexiteers fear now that the Northern Irish border has become the tail wagging the dog not just on the backstop, but on the potential future long-term trade relationship between the EU and UK. They fear the UK is being hoodwinked into a Brexit-in-name-only by threats of breaking up the UK through saying that only a soft Brexit can keep the Northern Irish border without physical infrastructure.

The Prime Minister Theresa May’s proposals for a longer-term trade relationship (known as the Chequers Plan) is Exhibit A. Rather than aiming for the best trade arrangements and then seeking to minimize disruption at the Irish border, the plan seems explicitly designed to keep the border as frictionless as possible, at the cost of an extraordinary loss of policy freedom. Chequers proposes a common rulebook between the UK and the EU on goods and agri-goods trade but not services, where fears of Brussels regulating the City of London alone without a UK vote were reason enough alone for exclusion. Non-regression-like clauses on environmental and labor laws would be included.  A complex facilitated customs arrangement would see the UK collect the EU’s tariffs on its behalf.

This deal has proven anathema to most Conservative Brexiteers, binding as it does the UK to EU goods regulation without voting power over it and stripping away the bargaining chip of goods regulation in making liberalising trade deals with third parties. They see Chequers as an unnecessary loss of sovereignty, and want Theresa May to “Chuck Chequers” and instead negotiate with the aim of a whole of UK FTA and practical solutions at the border.

Incidentally, the EU doesn’t like Chequers either. They rightly see it as cherry-picking parts of the single market, are suspicious of a foreign government collecting its duties and would prefer even tighter integration of lots of regulations (including commitments for full harmonization on labor and environmental laws), such that the UK cannot secure a competitive advantage. Political commentators in the know say Chequers is dead as far as the EU is concerned.

In the EU’s eyes, the preferred long-term options have always been a Canada-style free trade agreement, or maintained UK membership of the single market and a customs union (in essence, a political Brexit but not an economic Brexit). Most Brexiteers very much prefer the former, which comes with more regulatory and trade policy freedoms.

This brings us to the crux of the current political crisis. May’s government have thus far lined up with the EU (and against Brexiteer insistence otherwise) in stating that it’s impossible to solve the border problem satisfactorily through an ordinary UK-EU free trade deal and other practical solutions. They imply that with a Canada-style FTA, Northern Ireland alone would have to remain tied to EU economic institutions to avoid a hard border, effectively creating an economic border down the Irish Sea. Conveniently, May claims that only something like her Chequers plan can avoid this.

But with Chequers seemingly without much support at home or in the EU, the future relationship talks have effectively stalled. With so much uncertainty about it, the backstop agreement has taken center-stage, because de facto that could become the default relationship. And here Brexiteer fears have heightened. Since May insists no UK government would countenance Northern Ireland having different customs arrangements from Britain, she has proposed the whole of the UK remaining in a customs union-like arrangement as a backstop.

Earlier this year she suggested this would last for an extra year beyond transition (to December 2021) and Brexiteers are still keen on this kind of time limit. But the EU says that a backstop cannot be time-limited, because otherwise it’s not a backstop. Brexiteers winced this week when the PM’s position seemingly “evolved” in the EU’s direction, with her suggesting remaining in a customs arrangement as a backstop on a “temporary” but indefinite basis. These fears heightened with news that the EU believed there was not enough time to discuss a UK-wide backstop proposal, and insisting that the withdrawal agreement incorporate a “backstop to a backstop,” with a Northern Ireland-only customs arrangement should a full UK-wide agreement fail to be agreed.

For many Brexiteers, the major economic benefit of Brexit is the ability to conduct independent trade policy, cutting deals and setting tariffs. An indefinite customs arrangement threatens this. Given the EU would seemingly prefer the whole of the UK to remain within its economic institutions, a non-time-limited customs backstop provides little incentive for the EU to agree to a future comprehensive free trade deal the Brexiteers desire.

Combined with Chequers then, Brexiteers fear a huge sell out is on the cards. The UK government’s official position has always been that the country will leave the EU single market and customs union. But now both Chequers and the backstop risk are seen to keep the UK within these arrangements to varying degrees.

The result is a political crisis. The PM this week updated the house on the negotiations but could not provide assurances any customs arrangement backstop would be time-limited. She has since floated and then rowed back on extending the transition period, something that would see UK taxpayers pay for at least another year of EU funding, without settling the backstop issue.

As a result, everyone is unhappy. There is talk of Brexiteers dethroning May as a last gasp attempt to push for the Canada FTA-type deal the EU has offered. The DUP are threatening to derail the government’s domestic legislative agenda should the PM allow Northern Ireland to be treated differently. The hardline Remainers, meanwhile, are pressing for a second referendum on any withdrawal agreement May brings back.

With the clock ticking, and stakes rising, the prospect of no deal is therefore heightening. The EU has engineered a situation where in the long-term it insists either the UK must sign up to a backstop where Northern Ireland must be effectively economically annexed, or the UK must remain locked in the EU’s regulatory and customs embrace itself.

The Brexiteers (to my mind rightly) consider this unacceptable. Ignoring whether a change of Prime Minister or strategy is perceived as bad faith negotiating by the UK, it does not seem an extreme position to say that the EU should not have the right to dictate the economic breakup of a sovereign country, nor determine its domestic economic regulations. But at such a late stage and in such a febrile political environment, who knows where this multi-actor game of chicken ends?

Do Deep Roots Explain Firm Management Practices?

Management practices in firms differ widely between countries according to research summarized by economists Nicholas Bloom and John Van Reenen.  The differences between well-managed firms and those that are poorly managed are significant and could help explain differences in Total Factor Productivity (TFP) between countries.  In the field of economic history, economists Louis Putterman and David N. Weil (henceforth P&W) found that the length of time that a population of a country has lived with a centralized state and with settled agriculture (henceforth, Deep Roots) are powerful predictors of their GDP per capita today.  Perhaps there is a relationship between firm management practices by country and that country’s Deep Roots?

P&W tested their Deep Root’s hypothesis by creating a matrix of contemporary populations of each country based on their population’s ancestral origin in the year 1500.  They use a variable called state history that measures how long a country has lived under a supra-tribal government, the geographic scope of that government, and whether that government was controlled by locals or by a foreign power.  Their second variable is agricultural history and it measures the number of millennia that have passed since a country transitioned from hunting and gathering to agriculture.  P&W then combined the matrices of ancestry with the Deep Roots variables to show how long each national origin group was governed by a centralized state and how long they had settled agriculture.  The Deep Roots score varies dramatically between peoples and locations.  P&W’s findings stand in contrast to those that explain economic development and GDP per capita as the ultimate result of geography, institutions, or other conventional explanations.

Ryan Murphy and Alex Nowrasteh tested whether the Deep Roots variables can explain differing GDP per capita by U.S. state in a paper published in the Journal of Bioeconomics (working paper available here).  They found that P&W’s core result of a statistically significant and positive relationship between Deep Roots variables and GDP per capita does not hold at the subnational level in the United States.  This argument is related to immigration because new immigrants bring different state history and agricultural history scores with them, eventually affecting the Deep Roots of their new country.  Whether that matters for economic growth is up for debate.  

Since Deep Roots are correlated with GDP per capita globally and some economists think that they can explain economic development, firm management practices should probably also be correlated with Deep Roots.  To test this, we ran simple linear OLS regressions testing the relationship between firm management practices and a country’s state and agricultural history.  Our standard errors are robust to heteroskedasticity.  We controlled for the same variables that P&W did as well as the economic freedom score.  We downloaded the firm management practices dataset for 34 countries here

We found precisely nothing interesting related to the Deep Roots (Table 1).  Neither state history nor agricultural history is correlated with better management practices.  However, economic freedom and absolute latitude are positively correlated with state history and agricultural history.  On the positive side, our R-squared is 0.72, so the variables that we included can explain 72 percent of the variation.   

There are a lot of reasons why this could be.  We only had management score data for 34 countries, collinearity was rampant, cross sections are limited, or other explanations that we haven’t considered.  Regardless, there is no evidence here that there is a link between Deep Roots and firm management practices.  

 

Table 1

Firm Management Practices, State History, and Agricultural History

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