Archives: 12/2018

Is The Trump Administration Willing To Make A Deal With China?

The escalating tariffs imposed by the United States and China in recent months are making people and markets nervous, and just about everyone would like to see a deal of some sort. Over this period, prospects for a deal have gone up and down with the latest Trump tweet, but some reports suggest that the prospects now look promising. The current negotiating timetable is based on a 90-day period that Presidents Trump and Xi agreed to at their dinner in Buenos Aires on December 1 during the G20 talks. But what exactly would a deal look like? The Trump administration talks a lot about what it wants China to do, and the media mostly focuses on that. But what, if anything, will the administration give as part of this deal? Mike Santoli of CNBC Closing Bell asked  White House trade adviser Peter Navarro this question recently:

MIKE SANTOLI: Peter, you started out by saying how President Xi in 45 minutes gave a presentation showing a willingness to address all the United States’ concerns and then you say but everything else they have done essentially means that you’re very skeptical, I assume, of the likelihood of them delivering that. In exchange for what was the President suggesting that they would perhaps promise these reforms? In exchange for what from the United States?

PETER NAVARRO: …In terms of what we give back, I mean therein lies the rub. President Trump has been eloquent in stating that we are the piggy bank of the world. We’re in all these sorts of one sided bad trade deals and the problem that we have whenever we negotiate with whoever we negotiate is they are getting such a great deal they really don’t want to give us anything. So we are not prepared to give them anything in terms of a deal quid pro quo because we are so much behind the eight ball. We are not stealing their technology. We are not forcing the technology transfer. We are not manipulating our currency. We are not counterfeiting and pirating Chinese goods and flooding their markets. We are not having state owned enterprises run rampant around the world, basically exploiting the rest of the world. So what is there for us to give? What we have to give is access to our markets, period. The largest market in the world. Access to our financial markets, our capital markets. This is a great gift that we give to other nations. But we’re not going to do it anymore – President Trump’s made it clear – we’re not just going to give that away and be exploited.

In short, Navarro says that the administration will not be giving anything. Of course, even if he knew otherwise, he probably feels like he has to say this as part of the administration’s negotiating strategy. But regardless of what he or the administration says about this, the reality is likely to be different. Generally speaking, trade deals involve concessions by both sides. And with China in particular, given its “century long humiliation” of being pushed around by foreign powers, one-sided deals are going to be very difficult politically. And that seems to be how China is thinking about these negotiations, as a spokesperson for China’s Ministry of Commerce recently suggested: “In the next 90 days, China and the U.S. will negotiate on major issues of bilateral concern based on the principle of ‘mutual respect, equality, mutual benefit, and being mindful of each other’s concerns,’ aiming at the ultimate goal of removing all additional tariffs, and striving to reach consensus.”

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69% Oppose Creating Federal Paid Leave Program If It Harms Women’s Career Prospects

The national Cato 2018 Paid Leave Survey of 1,700 adults finds widespread support for creating a federal paid leave program, with 74% in favor. However, 69% of Americans would oppose establishing a federal paid leave program if it meant that fewer women would get promoted and become managers. But would establishing a federal program actually do this? Research suggests that it could and that’s why we asked about it on the survey:

Read about the full survey results and methodology here.

First, let’s consider the different career outcomes between women in the United States and women in Western Europe and Scandinavia. Academic research finds that American women are more likely to rise up the corporate ladder than their European counterparts who have access to generous family social welfare programs. 

An analysis of OECD countries reveals that American women are about 3 to 14 times as likely as Scandinavian women to be employed as managers with 14.6% of American women who are managers compared to 4.6% of Norwegian, 4.2% of Swedish, and 1% of Danish women. American women are also more likely than women in France (5.1%), the United Kingdom (7.8%), Germany (2.7%), and the Netherlands (3.6%) to hold managerial positions. 

Another measure of corporate success is the share of women who serve on company executive committees—these include the CEO and those who directly report to the CEO. The 20-First’s 2018 Global Gender Balance Scorecard finds that a majority—53%—of American companies have three or more women on executive committees.(1) In contrast, only 14% of European companies have three or more women serving on company executive committees. Some argue that once a company starts to have three or more women on executive committees, the company culture changes to see women in leadership roles as the norm rather than the exception.

But correlation is not causation, as every good statistics student knows. Just because Western European and Scandinavian countries have generous paid leave programs and family policies doesn’t mean it necessarily causes fewer women managers in Europe.  However, academic studies suggests that it might.

Studies have found that government-provided paid leave may lead to fewer women getting promoted and becoming managers because they take longer leaves than they otherwise would. Other studies have noted that employers, particularly smaller companies that have difficulty accommodating workers taking leave, may be less willing to hire female employees to begin with. Some argue that American women’s corporate success may be due to the fact that the United States does not provide generous family leave policies like Europe.

Proving Your Wealth Is “Legitimate”

This story from WAPO sent a chill down my spine:

Until quite recently, Zamira Hajiyeva was living the high life, according to British authorities. She had a $15 million townhouse in London’s tony Knightsbridge neighborhood, a golf club in the English countryside and a gold-plated shopping habit at Harrods.

That was before a British court this year asked the 55-year-old from Azerbaijan an impertinent question: How did she afford those purchases?

That query is at the heart of a bold British push to try to reverse what the government believes is a flood of foreign investment stemming from overseas corruption and criminality.

In other words, the U.K. is shifting the burden of proof onto foreign investors; they must now prove their wealth is legitimate.

No doubt, some foreign investestments into the U.K., U.S., and elsewhere are attempts to launder ill-gotten gains.

But the slippery slope implications of the U.K.’s new approach are terrifying.

To start, governments can expand this “presumption of guilt” to its own citizens, not just foreign investors.  Can you prove all your wealth is from legitimate sources?  Unless you have kept scrupulous records your entire life, probably not.  And even if you can, doing so is likely an accounting and legal nightmare.

And where would this presumption of guilt stop? Will we someday have to prove we do not use outlawed drugs?

The presumption of innocence is fundamental to a free society.  The U.K. is playing with fire.

Another Failed Defense of the Jones Act

As the Cato Institute continues to press the case for Jones Act reform, defenders of this flawed and failed law have repeatedly made clear that they’ve taken notice. Fresh evidence of this was seen earlier this month with the publication of an op-ed on the leading maritime website gCaptain.com. Entitled “CATO’s Continued Attempt to Skin the Jones Act,” the piece was an obvious preemptive salvo launched a day prior to Cato’s recent conference on the law’s shortcomings. A close reading, however, reveals it to be another instance of Jones Act defenders missing the mark.

Examining the law’s history, author Sal Mercogliano—a professor at Campbell University—claims that prior to the outbreak of World War II that “the Jones Act, reinforced by the Merchant Marine Act of 1936 ensured that not only was there a domestic shipbuilding industry, but it could be ramped up to support the building of over 5,000 merchant ships…” This is, at best, incomplete. As the book Global Reach points out, during this time U.S. merchant shipbuilding was almost non-existent and the fleet itself in obvious decline:

By the mid-1930s American merchant shipbuilding had come to almost a complete halt. In the nearly twenty years following the end of World War I, America’s merchant fleet, including its cargo and passenger ships, was becoming obsolete and declining in numbers; nearly 90 percent of the merchant fleet was more than twenty years old, and few ships could do more than ten or eleven knots. Although the Maritime Commission established by the Merchant Marine Act of 1936 had planned to build 50 ships a year under its CDS provisions, by 1939 the United States had only about 1,340 cargo ships and tankers, fewer than the total built by U.S. shipyards in 1914-17, even accounting for wartime losses. In no respect was the U.S. commercial industry capable of meeting the demand for sealift posed by the looming conflicts in Europe and the Pacific.

It’s also worth pondering why, if the Jones Act should be regarded as a success, the Merchant Marine Act of 1936 was even needed.

Dr. Mercogliano’s explanation of stupefying U.S. shipbuilding costs—commonly estimated to be three to five times greater than those of Asian shipyards—similarly leaves much to be desired:

CATO contends that the Jones Act is a burden that American can no longer bear. Specifically, they cite the higher cost to build ships in America as opposed to overseas. The largest builders of commercial ships in the world today are the Republic of Korea, the People’s Republic of China, and Japan; nine out of every ten ships afloat are built in East Asia. The question that needs to be raised is why? It is the exact reason that the CATO Institute rails about with the United States – government subsidies. The South Korean government announced the injection of over $700 million dollars into Hyundai Merchant Marine to stabilize the largest Korean shipping line. It was announced that the South Korean government would be infusing over $1 trillion into shipbuilding, in violation of the World Trade Organization.

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Trump Administration Continues to Expand Interior Immigration Enforcement

Today, the Department of Homeland Security (DHS) released a report detailing deportations (henceforth “removals”) conducted by Immigration and Customs Enforcement (ICE) during fiscal year 2018.  This post presents data on removals in historical context – combined with information from Pew and the Center for Migration Studies on the number of illegal immigrants present in the United States.

ICE deported 95,360 illegal immigrants from the interior of the United States in 2018, up from 81,603 in 2017.  Removals from the interior peaked during the Obama administration in 2011 at 237,941 (Figure 1).  The Trump administration would have to increase the pace of interior removals dramatically to reach Obama’s previous peak.  Unless something dramatic changes, that won’t happen as local law enforcement agencies are much less likely to cooperate with President Trump’s ICE than they were with President Obama’s ICE.   ICE also removes large numbers of illegal immigrants apprehended at the border.  Since 2012, border removals have outnumbered those from the interior of the United States.

 

Figure 1

Interior and Border Removals by ICE, 2008-2018

Source: Immigration and Customs Enforcement.

 

The Obama administration removed 1,242,486 from the interior of the United States during its full eight years, averaging 155,311 removals per year.  Data from the earlier Bush administration are more speculative, but they show an increase in deportations during the last half of Bush’s administration that continued during Obama’s first term before flattening and, finally, dropping rapidly in his second term.    

The percentage of all illegal immigrants removed from the United States is a better measure of the intensity of interior enforcement than the total numbers removed.  Based on estimates of the total size of the illegal immigrant population from Pew, ICE removed about 0.89 percent of the illegal immigrant resident population from the interior of the United States in 2018, up from 0.76 percent in 2017.  Interior removals as a percent of the illegal immigrant population peaked at 2.11 percent in 2009. 

 

Figure 2 

Removals as a Percent of the Illegal Immigrant Population

 

Sources: Immigration and Customs Enforcement, Pew, and Author’s Estimates.

 

ICE under President Obama’s administration removed an average of 1.38 percent of the interior illegal immigrant population per year of his presidency.  The Obama administration’s interior removal statistics show a downward trend beginning in 2011 and continued until the end of his administration.  So far, ICE under President Trump has only managed to deport an average of 0.83 percent of the illegal immigrant population each year.   

The Obama administration also focused immigration enforcement on criminal offenders (not all illegal immigrants are criminals).  During the Obama administration, 52.6 percent of all illegal immigrants removed were convicted criminals, including those convicted of immigration crimes.  About 57 percent of those deported during the Trump administration were convicted criminals. 

 

Figure 3

Criminal Removals as a Percent of All Removals

 

Source: Immigration and Customs Enforcement.

 

The Trump administration is continuing to ramp up interior immigration enforcement.  The 2018 figures show a reversal of the declining interior immigration enforcement efforts under the Obama administration, but they have not reached Obama’s previous deportation records.  Trump is unlikely to come close, but he will continue to try.

 

Trump Administration Increases Immigration Enforcement at Businesses

President Trump’s administration has increased immigration enforcement at worksites, just as he promised.  Immigration and Customs Enforcement (ICE) arrested 2,304 people at worksites in the fiscal year 2018, a more than 7-fold increase from the previous fiscal year and about 6.7-fold more than the last full year of the Obama administration. 

ICE’s worksite arrests fall into two categories: criminal or administrative.  Any citizen or noncitizen whom ICE suspects of having committed a criminal violation, such as identity fraud, can be arrested.  Administrative arrests are for civil violators of the Immigration and Nationality Act (INA), which means that only non-citizens can be arrested for such violations.  An administrative arrest is usually the first step toward deportation for an immigrant.  ICE doesn’t make most of its initial administrative arrests as it relies on other law enforcement agencies to arrest illegal immigrants, but it does directly arrest those at worksites in these cases.

Figure 1 shows the rapid and recent increase in all ICE criminal and administrative arrests.  The number of arrests peaked in 2008 at 6,287 after several steady years of increases, but then declined during Obama’s presidency with a single blip in 2011.

Figure 1

All ICE Arrests at Worksites

Sources: Immigration and Customs Enforcement and Congressional Research Service.

President Trump’s ICE is making more administrative arrests and a greater percentage of those come from worksite enforcement (Figure 2).  In 2016, only 0.35 percent of all of ICE’s administrative arrests (those that ICE makes itself) were at worksites.  In 2018, 3.7 percent of all of ICE’s non-custodial arrests were at worksites.  Since 2017, administrative arrests are up 8.9-fold compared to a 5.6-fold increase in criminal arrests over the same time.  As a share of all ICE administrative arrests, those conducted at worksites are up about 10.7-fold over 2016, the last year of the Obama administration, and 8.8-fold since 2017.      

Figure 2

Worksite Administrative Arrests as a Percent of All ICE Administrative Arrests

Source: Transactional Records Access Clearinghouse, Immigration and Customs Enforcement, and Congressional Research Service.

The I-9 worksite audit was a major innovation in immigration enforcement unrolled during Obama’s administration, which Trump’s administration is using with alacrity (Figure 3).  Although the number of worksite audits increased about 4.4-fold from 2017 to 2018, from 1,360 to 5,981, only a small fraction of all establishments were actually audited.  The Business Dynamics Statistics (BDS) at the U.S. Census reports that there were more than 6.8 million business establishments in 2016, the last year for which data is available.  Not all of those 6.8 million establishments have employees besides the founder and, since he doesn’t have to fill out an I-9 form, not all of them would be subject to audits.  With the aid of a back of the envelope estimate, I assume that about 3.9 million of those establishments had more than one employee in 2016.  Thus, it’s unlikely that the 5,981 ICE I-9 audits in FY2018 covered more than 0.15 percent of all business worksites. 

Figure 3

I-9 Audits

Sources: Immigration and Customs Enforcement and Congressional Research Service.

ICE clustered its I-9 audits by time in 2018.  It sent out 5,278 (88 percent) of the 5,981 notices of inspection for the audits during the two periods of January 29 through March 30 and July 16 through July 20.  Those big operations were meant to frighten illegal immigrants and their employers.  Since ICE only audited about 0.15 percent of establishments, it has to rely on fear to increase compliance with immigration laws at worksites.

The Trump administration was supposed to reduce expensive economic regulation.  In many other sectors of the economy, Trump has followed through on this promise.  Immigration is the exception. 

 

78% of Americans Support Parental Leave Savings Accounts

Nearly 8 in 10 Americans (78%) support creating family and medical leave savings accounts. The national Cato 2018 Paid Leave Survey of 1,700 adults finds the public favors allowing workers to set aside money in tax-advantaged savings accounts that could be used if they need to take family or medical leave. A fifth (20%) would oppose the creation of family and medical leave accounts.

Read about the full survey results and methodology here.

Establishing family leave savings accounts enjoys rare bipartisan support: 82% of Democrats, 80% of Republicans and 69% of independents support offering tax-advantages to people who set aside money for parental, family, or medical leave. 

Women (80%) and men (76%) also overwhelmingly agree about establishing these types of accounts. These numbers include 85% of Democratic women, 82% of Republican women, and 78% of Democratic and Republican men. 

Support for parental and family leave savings accounts aren’t reserved for the wealthy. Nearly three-fourths (73%) of those earning less than $25,000 a year also support such savings accounts. Support heads upwards from there with 86% in favor among those earning $80,000 a year or more.

Finding an image of a piggy bank or savings jar with “family leave” or “parental leave” written on the side to compliment this post was difficult. Instead, one can easily find images of piggy banks and savings jars with labels to save for retirement, to buy a house, for college as well as future travel and stocks. For these needs and wants, we’ve cultivated a culture of saving.

Over time our society has fostered a set of social norms that we instill in our young people starting at an early age. We were reminded when we were young, just as we remind the next generation, to start saving early for an education, a house, big purchases, emergencies, investments in the future, etc. We were reminded to delay consumption today so we have more for later. Doing so can provide peace and security to feel like we’ve done our part to prepare for the future. People usually don’t enter the world with a set of expectations about the value of saving and what they should save for. Thus it’s useful to establish social norms that encourage saving early on.

However, a gap exists in our present cultural norms when it comes to saving for parental and family leave. The fact that I could not easily find an image of a piggy bank or savings jar with “parental leave” or “family leave” as a savings goal is indicative of our culture not yet establishing a norm for these savings goals. While family leave savings accounts need not crowd out other innovations to help support working people who take time to care for new children, family members, or themselves, it can be part of the discussion. These poll results suggest society may be ripe for establishing new social norms of saving for parental and family leave.