Archives: 02/2017

Yes, Suspend — Then Repeal — Dodd-Frank’s Conflict Minerals Rules

Here’s good news: President Trump may sign an executive order suspending the failed conflict minerals provisions of the Dodd-Frank law. Days before, Securities and Exchange Commission Acting Chairman Michael Piwowar had issued two statements directing the SEC to revisit its enforcement of the same provisions.

The provisions, enacted in 2010 as part of the wider Dodd-Frank law, impose a complex and in places impractical disclosure regime on publicly held companies that make products containing such minerals as tin, tungsten, tantalum, and gold. The idea is that laying bare supply chains leading to war-torn areas of central Africa will facilitate consumer boycotts. Some reports on the draft executive order, such as that in the Guardian (via Simon Schama on Twitter), seem intent on judging the Loi Obama (as it was known in some of the affected regions) by these original intentions rather than by its actual results. Yet those actual results are no secret. More than two years ago, the Washington Post, confirming what was widely known already, ran front-page reportage about how the law had

set off a chain of events that has propelled millions of miners and their families deeper into poverty, according to interviews with miners, community leaders, activists, and Congolese and Western officials, as well as recent visits to four large mining areas.

As the economy of the area had destabilized, some miners with no other way to support their families had themselves thrown in with lawless armed groups.

At the same time, the law was set to impose billions of dollars in cost on American companies and consumers. I won’t repeat the case against the rules, since I summarized it in this space two years ago, and little appears to have changed since. (For more, check the coverage at Overlawyered.)

The rumored draft of the executive order looks good, but a president’s leeway under the law extends only to suspending its effect for a time. Putting this fiasco to an end will call on Congress to repeal the relevant sections of Dodd-Frank, and that is what it should now proceed to do.

The United Kingdom and the Benefits of Spending Restraint

When I debate one of my leftist friends about deficits, it’s often a strange experience because none of us actually care that much about red ink.

I’m motivated instead by a desire to shrink the burden of government spending, so I argue for spending restraint rather than tax hikes that would “feed the beast.”

And folks on the left want bigger government, so they argue for tax hikes to enable more spending and redistribution.

I feel that I have an advantage in these debates, though, because I share my table of nations that have achieved great results when nominal spending grows by less than 2 percent per year.

The table shows that nations practicing spending restraint for multi-year periods reduce the problem of excessive government and also address the symptom of red ink.

I then ask my leftist buddies to please share their table showing nations that got good results from tax increases. And the response is…awkward silence, followed by attempts to change the subject. I often think you can even hear crickets chirping in the background.

I point this out because I now have another nation to add to my collection.

From the start of last decade up through the 2009-2010 fiscal year, government spending in the United Kingdom grew by 7.1 percent annually, far faster than the growth of the economy’s productive sector. As a result, an ever-greater share of the private economy was being diverted to politicians and bureaucrats.

Beginning with the 2010-2011 fiscal year, however, officials started complying with my Golden Rule and outlays since then have grown by an average of 1.6 percent per year.

The Right to Hope for Jury Nullification

Jae Lee came to the United States legally as a child but never became a citizen. In 2009, he pled guilty to a drug crime after his lawyer assured him that he could not be deported as a result. The lawyer was wrong, because the conviction made Lee subject to mandatory removal.

When Lee learned of this mistake, he asked the court to vacate his plea so he could instead face trial, arguing that his counsel’s assistance was ineffective. The district court denied this motion because of the overwhelming evidence against Lee, ruling that his conviction at trial was so certain that his counsel’s bad advice didn’t actually harm him, particularly given the much longer prison sentence he would receive if convicted after trial.

The U.S. Court of Appeals for the Sixth Circuit agreed that a jury wasn’t needed to determine Lee’s guilt and that denying the “chance to throw a Hail Mary at trial is not prejudicial” and therefore doesn’t violate Lee’s Sixth Amendment right to a jury trial. The court reasoned that that the only chance Lee had was acquittal by “jury nullification” and thus such a gambit was so irrational—and the idea of nullification so antiquated—that it is not to be allowed.

Lee is now pressing the matter at the Supreme Court, which has agreed to hear his argument, which Cato is supporting with this amicus brief. The idea of an independent jury’s nullification power is encompassed in the original meaning of the Sixth Amendment. Colonists frequently viewed juries as a shield against the crown, as juries frequently protected defendants against unjust and oppressive laws.

Independent juries were important enough in the American colonies that a section in the Declaration of Independence was devoted to assailing the King for depriving them of that right. The importance of an independent jury, and what such a jury meant at the time, informed the creation and adoption of the jury-trial right in the Bill of Rights. The meaning is made clear by Alexander Hamilton, who argued as defense counsel in 1804 that it is up to the jury to decide facts and the law, and it is in the deciding of the law that the nullification power comes from. The meaning is further solidified by John Adams’s statement that it is the duty of a jury “to find the verdict according to his own best understanding, judgment, and conscience, though in direct opposition to the direction of the court.”

The Sixth Circuit actually admits in this case that the power of juries to acquit, despite strong evidence for conviction, was central to the decision to enshrine the jury right in the Constitution. In spite of the incontrovertible evidence that the right to seek an acquittal by nullification was enshrined in the Sixth Amendment, Jae Lee had this right revoked simply because it was considered irrational or unwise.

The Supreme Court must now protect the right to pursue a risky trial strategy; it may not be wise to seek acquittal by nullification, but Lee should be able to decide that the risk is worth facing as against the certainty of deportation. It is not up to courts to pick which strategy is best for criminal defendants to follow, but judges should protect the right to choose a jury trial even when they might not make the same choice under the same circumstances.

The Supreme Court hears argument in Lee v. United States on March 28.

Cutting Legal Immigration Won’t Help Low-Skilled American Workers

Senators Tom Cotton (R-AR) and David Perdue (R-GA) recently introduced the Reforming American Immigration for Strong Employment (RAISE) Act.  If it were to become law, RAISE would cut legal immigration by 50 percent over the next ten years by reducing green cards for family members of U.S. citizens and lawful permanent residents, slashing refugees, and eliminating the diversity visa lottery.  These goals are in line with President Trump’s stated objective to cut legal immigration in most categories. 

The RAISE Act’s goal is to increase wages for lower-skilled Americans by reducing the supply of lower-skilled immigrants.  Their press release argues that the “generation-long influx of low-skilled labor has been a major factor in the downward pressure on the wages of working Americans, with the wages of recent immigrants hardest hit.”  Under such a worldview, only a drastic reduction in green cards and the supply or workers can raise American wages - and it’s not crazy.

The National Academy of Sciences’ (NAS) exhaustive literature summary on the economic effects of immigration concluded that: “When measured over a period of 10 years or more, the impact of immigration on the wages of native-born workers overall is very small.  To the extent that negative impacts occur, they are most likely to be found for prior immigrants or native-born workers who have not completed high school—who are often the closest substitutes for immigrant workers with low skills.”  Although the effect is small, RAISE seeks to take advantage of the finding in the academic literature by inferring that if an increase in the supply of workers slightly lowers some wages then a decrease in that same supply will do the opposite.

It might seem odd then that RAISE doesn’t target employment-based green cards but that category is for highly skilled workers while the categories this bill would cut are more likely to allow in lower-skilled workers who have fairly high labor force participation rates.  I’ve rebutted Senator Cotton’s poor economic arguments for immigration restrictions before but recent research is even more compelling. 

A recent paper by economists Michael Clemens, Ethan Lewis, and Hannah Postel seems tailor-made to test what would happen if a bill like the RAISE Act were to become law.  The paper studies the effectiveness of an immigration policy “designed to raise domestic wages and employment by reducing the total size of the workforce.”  The U.S. government’s 1964 termination of the Bracero program for Mexican farm workers provides a natural experiment for their paper which is comparable to what would happen if RAISE becomes law.  Senators Cotton and Perdue will be disappointed to discover that this new research found that ending lower-skilled migration for farm workers had little measurable effect on the labor market for Americans who worked in those occupations.

Why the Government Cannot Ban All Immigrants from a Certain Country

I previously reviewed the exceptionally poor arguments that the Trump administration used to defend its blanket ban on immigration from seven majority Muslim countries in the State of Washington v. Donald Trump. Now, in its appeal of the district court’s temporary restraining order to the 9th Circuit Court of Appeals, the government has added a new argument in favor of its position that is still fatally flawed. It claims:

The State continues to argue that Section 3(c)’s temporary suspension of the entry of aliens from seven countries contravenes the restriction on nationality based distinctions in [section 202(a)(1)(A) of the Immigration and Nationality Act (INA)]. But that restriction applies only to “the issuance of an immigrant visa,” Id., not to the President’s restrictions on the right of entry [under section 212(f)].

The government was right not to attempt this argument initially. Their argument is that a visa does not entitle the recipient to entry in the United States, but merely to travel to the United States. Therefore, they are free to discriminate at the border. To bolster the argument, INA 101(a)(4) does specifically distinguish between admission and visa issuance.  Essentially, they are defining “visa” in section 202 to include only the visa document that permits travel to the border, but does not grant status in the United States. And status is what grants a person the legal right to reside inside the country.

The problem is that the definition of a “visa” in section 202 includes “status” that grants a right to enter and reside in the United States. The State Department’s regulations define visa in section 202 to mean visa or status and have for as long as the INA has been around. Eligibility for status is either determined by an adjustment of status application for immigrants residing inside the United States or at the border for immigrants entering the United States on an immigrant visa for the first time. It is the act of granting entry that confers legal permanent residency status.

Thus, the government would be violating the prohibition on discrimination in section 202(a)(1)(A) just as much by denying entry as by denying visas. An immigration officer cannot deny entry based on nationality without also discriminating in the issuance of status to an immigrant at a port of entry.

Socialized Medicine: From Anecdote to Data

Last night’s CNN duel between Senators Bernie Sanders and Ted Cruz on the future of Obamacare was pretty illuminating for a recent arrival to the United States, with Senator Sanders’ playbook all-too-familiar to those of us from the UK.

Sanders wants a single-payer socialized healthcare system in the United States, just as we have in Britain. Any objection to that is met with the claim that you are “leaving people to die.” The only alternatives on offer, you would think, are the U.S. system as it exists now, or the UK system. Sanders did not once acknowledge that the UK structure, which is free at the point of use, inevitably means rationed care, with a lack of pre-screening. He also failed to acknowledge that lower health spending levels (indeed, even public spending on health is lower in the UK than the United States now) are not the same as efficiency—which is about outputs per input.

In the face of anecdote after anecdote about those saved by Obamacare and the virtues of a government-run health system, Cruz countered with some anecdotes from the UK showing the consequences of rationed care: a Scottish hospital turning away pregnant women, a woman in Wales waiting eight hours on the floor for an ambulance to arrive after a fall, and a hospital in Essex canceling life-saving cancer treatment because there were no free beds in intensive care. He could also have talked about the Mid-Staffs scandal, or a recent documentary showing doctors deciding between saving a cancer patient or a pensioner bleeding to death.

Anecdotes are powerful in helping to persuade people, and there are good reasons to use them in debates. Yet they are always susceptible to the charge that all health systems have extreme failures. Perhaps more powerfully then, the inadequacies of the UK system show up systematically in the data about how well conditions are dealt with (data from my former colleague Kristian Niemietz’s reports here and here):

  • In the United States, the age-adjusted breast cancer 5-year survival rate is 88.9 percent, compared with just 81.1 percent in the UK
  • The United States leads the world on the equivalent stat for prostate cancer (97.2 per cent) vs. 83.2 percent in the UK
  • Lung cancer: 18.7 percent in the United States vs. 9.6 percent in the UK; bowel cancer: 64.2 percent vs. 56.1 percent
  • Just in case you think I am cherry picking: U.S. survival rates are also better for leukemia, ovarian cancer, stomach cancer, and liver cancer—all of those for which I can find comparisons
  • The age- and sex-standardized 30-day mortality rate for ischaemic stroke is just 3.6 per cent in the United States vs. 9.2 per cent in the UK; for haemorrhagic stroke, the figures are 22 percent vs. 26.5 percent

I could go on. All of which is to show that your probability of dying from a range of common conditions is much higher in the UK than here. Perhaps that’s why (with no hint of irony) The Guardian’s write-up of a Commonwealth Fund Report suggesting the UK’s health system was “the best in the world” said “the only serious black mark against the NHS was its poor record on keeping people alive.”

Encouraging NATO Burden Sharing: What Works?

President Donald Trump has repeatedly complained that the United States carries too much of the economic and military burden in NATO. He has even gone so far as to call the European alliance “obsolete” and to suggest that his administration might not fulfill the treaty’s Article 5 obligation that commits NATO countries to come to the defense of any member that is attacked (Note: administration officials have repeatedly sought to reassure NATO allies that we remain committed to the collective defense of Europe, and Trump has contradicted himself on this score).

Many think this provocative rhetoric is just a ploy to get our NATO allies, who habitually underspend on defense and free-ride on America’s security guarantees, to pay more of their fair share of the burden. At the Washington Post’s Monkey Cage blog, Andrea Gilli argues this approach is unlikely to jolt NATO allies into spending more on defense, though. Among other reasons, most NATO allies “face financial and political constraints to increasing military expenditure” in part because U.S. security assurances “have freed up state funds in Europe for other priorities, including a robust system of social services.” And since cutting welfare benefits is typically a political non-starter, we shouldn’t necessarily expect NATO countries to boost defense spending due to Trump’s abrasive rhetoric.

But the historical record seems to contradict Gilli’s argument. According to the RAND Corporation, Europe has historically spent between 43 percent and 78 percent of U.S. spending on defense. The ratio reached its peak in 1980, and then again in 2000 - years that were at the tail end of periods of defense budget cuts. And according to the RAND report, one of the the most successful techniques in getting NATO allies to share more of the burden was “threats by Congress to withdraw its troops from Europe.”

The only period of signficant real growth in European defense spending was during the 1970s; otherwise European defense expenditure has been remarkably flat in real terms…

Historically, efforts to create incentives or to manage the burden-sharing problem have taken four different approaches. The first approach (1966 to the mid-1980s) was based on the threat of U.S. troop withdrawals. With a series of resolutions and amendments from 1966 to 1975, Senator Mike Mansfield sought to use the threat of U.S. troop withdrawals to force Europe to contribute more and to lessen U.S. costs. As noted, that effort—plus other factors relating to economic growth and the Soviet threat—may have had a positive effect: European defense spending grew by 44 percent between 1970 and 1984.

Certainly other factors contributed to this period of growth in NATO burden sharing - higher rates of economic growth, increased perceptions of the Soviet threat, defense budget cuts as we withdrew from Vietnam, etc. But U.S. threats to pare back its commitment to the region seem to have had a significant impact.

That said, European defense spending may never reach the levels that the Trump administration, or for that matter the Washington foreign policy community generally, would prefer. And while U.S. security guarantees are surely one reason for this, it also may be the case that European countries aren’t boosting defense spending levels because they don’t face any major threats. Increasing defense spending to 2 percent of GDP or higher won’t do much about the terrorism problem European countries face. And the supposed geopolitical threat from Russia, meddling in Georgia and Ukraine aside, is consistently exaggerated