Archives: 05/2017

Thank You Allan Meltzer

Allan Meltzer passed away this week. He was one of the great economists I was lucky to have known and to have occasionally worked with. My colleague Jim Dorn wrote a very nice summary of his scholarship and influence here. Jim also recounts his close work with Cato over the years. Jerry O’Driscoll offers a remembrance here.

My own thinking on economic development benefitted substantially from Allan’s work on international debt, foreign aid, and financial crises. I benefitted even more from Allan’s guidance and interest in my work on those issues. He always took whatever time needed to discuss economic and policy topics with me, and recommend readings and research ideas. When Mexico experienced its 1994-95 peso crisis, Allan was an invaluable and generous resource. At the time, few market advocates in Washington criticized the proposed bailout of Mexico. The country, after all, had been considered a star reformer, and the government there was deemed worthy of U.S. support. We at Cato dissented and published a strong critique against “rescuing” Mexico because we thought it promoted moral hazard, it was a use of public resources that was unfair to ordinary Mexicans and Americans alike, and it supplanted and undermined superior market solutions to the crisis. From his perch at Carnegie Mellon University and the American Enterprise Institute, Allan was one of the few making the same arguments. It was useful to have him on our side and to employ some of the arguments he developed.

More Data, More Problems

In recent years, criminologists, law enforcement organizations, government agencies, and other criminal justice experts have been experimenting with various methods of data collection to improve American criminal justice. For example, some researchers look at recidivism—that is, how likely a person who has been incarcerated will end up back in jail or prison—to stem the tide of mass incarceration. Others have turned to “hot-spot policing” to better focus limited police resources on preventing new crimes in highly specific, high-crime areas.  Each method typically has its strengths and weaknesses, and much can be learned from new techniques.

But more data isn’t always a good thing. After a long battle with the Sun-Times, the Chicago Police Department released its “Strategic Subject List.” From the report:

“We have 1,400 individuals that drive this gun violence in this city,” police Supt. Eddie Johnson said in August, assuring the public his department was keeping tabs on the people on its closely guarded “Strategic Subject List.” “We’ve gotten very good at predicting who will be the perpetrators or victims of gun violence.”

Yet the list is far broader and more extensive than Johnson and other police officials have suggested. It includes more than 398,000 entries — encompassing everyone who has been arrested and fingerprinted in Chicago since 2013.

Nearly half of the people at the top of the list have never been arrested for illegal gun possession. About 13 percent have never been charged with any violent crime. And 20 of the 153 people deemed most at risk to be involved in violent crime, as victim or shooter, have never been arrested either for guns or violence.

Knowing about Segregationist Housing Policy Is the First Step to Justice

In education, there is a widespread belief: the federal government ended segregation. This is, of course, based on the Supreme Court’s landmark ruling in Brown v. Board of Education, and subsequent federal efforts to end segregated schooling. But as a sobering new book by the Economic Policy Institute’s Richard Rothstein makes clear, while all levels of government forced, coerced, or cajoled racial segregation through housing policy, the feds may have been the worst, and the crippling legacy of those actions may be much further reaching than even schooling policy.

The Color of Law: A Forgotten History of How Our Government Segregated America is essentially a catalogue of discriminatory housing policies perpetrated throughout the 20th Century, but peaking from the 1930s through the 1960s. It chronicles local injustices including police ignoring or even stoking mobs that tormented African Americans who dared buy a home in a white neighborhood, and states with segregationist intent mandating local referenda to approve low-income family public housing. But it is the federal government that seems to have had the most powerful hand in it all, if for no other reason than only it could sweep every American into the corners where it decided they did—or did not—belong.

Poverty, Politics, and (Crony) Profit

Earlier this week, PBS Frontline ran a documentary titled Poverty, Politics, and Profit discussing major barriers to housing America’s poor. The show centered on the Low Income Housing Tax Credit (LIHTC) program, a federal program that subsidizes low-income housing construction.

Chris Edwards described Frontline’s LIHTC investigation well here. In short, the show found LIHTC costs taxpayers 66% more, but produced 20,000 fewer housing units than 20 years ago. Frontline made the case that the program’s failure is partly due to poor oversight and attendant corruption.

For those unfamiliar with LIHTC, Frontline’s narrative about developers’ outsized profits may sound extraordinary. But PBS does well to highlight a problem that the social sciences have long provided evidence for. For example, in Rethinking Federal Housing Policy, economist Edward Glaeser suggests that LIHTC’s “prime beneficiaries are the recipients of the tax credits, not poor renters …. [there] is little doubt that … a significant portion of program benefits accrue to developers.” And on the issue of LIHTC oversight, the Government Accountability Office flatly stated in a 2015 report that “oversight of the Low-Income Housing Tax Credit (LIHTC) program has been minimal.”

There are additional issues that were not covered in the Frontline piece. For one, the private market would produce the same housing in the absence of LIHTC subsidies. Economists call this phenomenon “crowd-out” and a recent study suggests “the impact of the [LIHTC] program on the [real] number of newly developed rental housing units appears to be small” because of it. In other words, LIHTC’s advocates are disingenuous when they pretend LIHTC-subsidized housing would not exist without government subsidy.

Sessions Re-Escalates the Drug War

And so it begins:

In a move expected to swell federal prisons, Attorney General Jeff Sessions is scuttling an Obama administration policy to avoid charging nonviolent, less-serious drug offenders with long, mandatory-minimum sentences.

Mr. Sessions’s new guidelines revive a policy created under President George W. Bush that tasked federal prosecutors with charging “the most serious readily provable offense.”

Drug War critics have feared this moment ever since President Trump nominated Sessions; now it is a reality.  The effects will be no different than after past escalations: more crime and corruption, with little or no impact on drug use.

 

State-Sponsored Visa Criticisms Aren’t Grounded in Facts

At a Cato event last week, Sen. Ron Johnson announced that he would be introducing new legislation that day to allow states to sponsor foreigners to live and work in their states. The innovative idea has produced a huge amount of interest and responses. Several business and conservative groups endorsed the bill. Sen. John McCain cosponsored it. Positive write-ups ran online in the Washington Post, The Week, and other outlets. The Wall Street Journal, New York Times, Los Angeles Times, and the Economist have all run articles supporting Congress taking this approach.

However, the organizations that are categorically opposed to all additional immigration—NumbersUSA and Center for Immigration Studies*—as well as a National Review columnist have also responded with some criticisms. I will focus primarily on the criticisms that are specifically related to guest worker programs or state-sponsored visas in particular. Their criticisms arrive primarily from their flawed reading of the bill, assuming that they did read it.

Campus Speech and Progressivism

Jeffrey Herbst, the President and CEO of the Newseum, recently released a report about free speech on campus. It is brief and well worth reading.

Herbst believes we are missing the major problem exposed by recent attacks on free speech at universities.

Systematic public opinion polling and anecdotal evidence suggests, however, that the real problem of free expression on college campuses is much deeper than episodic moments of censorship: With little comment, an alternate understanding of the First Amendment has emerged among young people that can be called “the right to non-offensive speech.” This perspective essentially carves out an exception to the right of free speech by trying to prevent expression that is seen as particularly offensive to an identifiable group, especially if that collective is defined in terms of race, ethnicity, gender, or sexual identity. The crisis is not one of the very occasional speaker thrown off campus, however regrettable that is; rather, it is a generation that increasingly censors itself and others, largely silently but sometimes through active protest.

Many people believe university students have adopted a “right to non-offensive speech” under the influence of their leftwing professors who are hostile to libertarian values. But Herbst shows that high school students and their teachers are equally doubtful about protecting speech that offends. He notes, “young adults come to campus with some fairly well-developed views that explain much of what subsequently occurs as they confront challenging speech.”

Jeffrey Herbst notes that young people support free speech in theory but not, as we have seen with Murray and others, in particular cases. In the past polls showed that while the First Amendment in the abstract received near unanimous support, its applications to unpopular speakers sometimes failed to attract a majority. Maybe the boomers were different, and young people now are returning—ironically enough—to views held by pre-boomers.