October 7, 2016 10:20AM

Bucking the Protectionist Trend

By Christine Guluzian

In September, the UK government gave the green light for the construction of the Hinkley Point power plant through a French-Chinese consortium. The project—which has received wide international attention after being very nearly relegated to the protectionist dustbin—has been agreed to after much hemming and hawing. It has been mired in controversy mainly over security concerns related to foreign ownership, viewed by some as smacking of protectionism.

It is no secret that there has been a worrying trend toward protectionism in the global markets. The appetite for international trade agreements and foreign investment has been consistently listless. In the United States, and globally, some politicians have been banking on this by flaunting protectionist rhetoric in an effort to garner support. But while protectionism may win votes in the short-term, domestic economic growth will lose out in the long-term. Ultimately, politicizing the global economic rut will only make matters worse.

A Global Trade Alert by the independent London-based think-tank, the Centre for Economic Policy Research, shows that between January 1 and October 31 2015 a total of 539 governmental measures adopted worldwide “harmed foreign traders, investors, workers, or owners of intellectual property” followed by a sobering observation that “in no previous year have we found so many trade distortions so quickly.”

According to the study, the three countries subjected most often to foreign protectionism have been China, the European Union and the United States, in order of ranking. Settling in to this new protectionist normal, however, will have dire economic consequences for all countries and not just developed ones.

Protectionism and an over-reliance on quantitative easing (QE) measures are key contributing factors toward the “new mediocre” which has set hold of the global economy. In this “new mediocre”, global growth is stuck at barely 3 percent a year, with the United States, the European Union, and Japan as the poorest performers. Relying on QE as a long-term solution as opposed to a short-term “fix” following the Financial Crisis of 2008 has had a hampering effect, lengthening rather than stemming the impact of the Financial Crisis – especially for countries that combined QE with austerity measures. Likewise, governments are exacerbating the situation by raising roadblocks on trade and investment opportunities.

The global economic outlook and mood has been gloomy. However the passage of the Hinkley Point deal, once security concerns were addressed, offers a light at the end of this clogged-up tunnel. In the post-Brexit world, the UK government’s decisions on investment and trade will come up against the current popular sentiment towards protectionism. The Hinkley Point deal bucks this protectionist trend, possibly signaling a shift in attitudes towards trade and investment.

Prime Minister May has announced that she would like to turn Britain into a “global leader in free trade,” even though barriers against doing so are going up. In the United States, both presidential candidates seem to be putting up the barriers themselves, shunning trade and investment opportunities and riding the wave of popular protectionist rhetoric instead. President Obama, in a new piece penned for The Economist, instead argues that trade helped the U.S. economy much more than hurt it. There is a choice, he continues: “retreat into old, closed-off economies or press forward, acknowledging the inequality that can come with globalization while committing ourselves to making the global economy work better for all people.”

Regardless of who takes office in the White House come January 2017, economic growth should not be held up or held back by congressional impasse or politicized protectionism. Jump-starting the global economy will require less reliance on federally enacted economic measures and more restraint from protectionist and nationalist tendencies instead. Only then can domestic and global economies stand the best chance of awakening from this prolonged slumber of stagnation. 

March 10, 2016 1:11PM

President Obama Needn’t Go to SXSW…

In his weekly address last Saturday, President Obama touted the importance of technology and innovation, and his plans to visit the popular South by Southwest festival in Austin, Texas. He said he would ask for "ideas and technologies that could help update our government and our democracy." He doesn't need to go to Texas. Simple technical ideas with revolutionary potential continue to await action in Washington, D.C.

Last fall, the White House's Third Open Government National Action Plan for the United States of America included a commitment to develop and publish a machine-readable government organization chart. It's a simple, but brilliant step forward, and the plan spoke of executing on it in a matter of months.

Having access to data that represents the organizational units of government is essential to effective computer-aided oversight and effective internal management. Presently, there is no authoritative list of what entities make up the federal government, much less one that could be used by computers. Differing versions of what the government is appear in different PDF documents scattered around Washington, D.C.’s bureaucracies. Opacity in the organization of government is nothing if not a barrier to outsiders that preserves the power of insiders—at a huge cost in efficiency.

One of the most important ideas and technologies that could help update our government and democracy is already a White House promise. In fact, it's essentially required by law.

Publication of spending data in organized, consistent formats is required under the terms of the DATA Act---the Digital Accountability and Transparency Act---which the president signed in May 2014. To organize spending data, you must have data reflecting the governmental entities that do the spending.

We've studied the availability of data from the federal government that reflect deliberations, management, and results, and we reported in November 2012 on the somewhat better progress on transparency in Congress compared to the administration.

Our Deepbills project added computer-readable code to every version of every bill in the 113th Congress, showing where Congress mentioned agencies and bureaus, proposed spending money, or referred to existing law. It would have been that much better were there an authoritative list of what the units of government are.

President Obama noted in his weekly address that improving the government along these lines has been a goal of his since before he was elected. Given the need and the potential, the achievements he cites wouldn't get a victory lap out of the starting blocks. But there is still time to deliver on a transparency promise by publishing an authoritative, machine-readable organization chart as the administration promised just last October.

September 29, 2015 11:25AM

To Russia with Love: Why Obama Should Be Glad Russia Is Getting Involved in Syria

Russia’s push to support Assad in Syria and its agreement to share intelligence with Syria, Iran, and Iraq has evoked the predictable handwringing here in the United States. Some worry that Russian involvement will derail the U.S. fight against IS. Others worry that Russia’s engagement will weaken U.S. influence in the Middle East and further embolden Vladimir Putin in his various misadventures. Such concerns are misplaced. Even though Putin has no intention of helping the United States his maneuverings have in fact done just that. Rather than ramping up U.S. engagement to outdo the Russians, as hawks are calling for, Obama should instead take this opportunity to reassess and redirect U.S. policy.

Russian actions have improved Obama’s Middle East “strategy” in three ways.

First, Russian initiative in 2013 kept the United States from getting involved in Syria too early. As horrendous as the $500 million training initiative turned out to be, it was a drop in the bucket compared to what the United States would have spent by now had the United States engaged earlier and more aggressively. When Assad’s regime blew past Obama’s ill-advised “red line” on chemical weapons, it was Russia that came in to save the day, brokering an arrangement that led Syria to give up its chemical weapons. Had Obama instead launched a few meaningless missile strikes at the Assad regime the United States would have shouldered greater responsibility for the regime’s behavior. Both Republicans and liberal interventionists in his own party would have pushed Obama toward deeper and ultimately more costly intervention.

Second, Putin’s recent actions make clear that the United States does not have to carry the expanding burden of fighting IS alone. In the absence of any real partners on the ground and with no desire to go it alone, the United States has been reduced to half-measures in Syria. Had there ever been an identifiable group of moderate rebels then perhaps a U.S. training program would have made sense. Today, however, with IS pressing hard and moderates thin on the ground, such a strategy is clearly too little and too late. Without partners, the United States has no real ability to influence events on the ground. Airpower has many strengths, but even a much broader campaign of airstrikes could not win the day without the backing of U.S. ground troops. Russia is not the partner the United States would have chosen, of course, but the fact remains that Russia is willing and able to take the fight to IS in ways that benefit the United States.

Third, to the extent that Russian involvement replaces U.S. involvement, the United States will benefit from passing the role of “bullseye” to Russia. Fourteen years of military intervention, occupation, and aggressive counterterrorism has not produced a pro-U.S. coalition determined to combat IS but instead a widespread and deepening anti-Americanism. As the Arab Barometer reveals, robust majorities of many Arab publics believe that U.S. interference in the Middle East justifies attacks against the United States. Expanding the U.S. footprint in Syria and Iraq at this point will produce more unhappiness, more radicalism, and more anti-American violence.

Best of all, Russia has given Obama the opportunity to pivot away from the miscues, missteps, and misreads that have produced zero visible impact on IS and zero progress in resolving the mess in Syria or Iraq. Russian involvement essentially precludes increased U.S. military involvement and shifts the balance of power toward Assad. On the one hand this limits U.S. options and stymies Obama’s call for Assad to step down. At the same time, however, it also prevents Obama from doubling down on failed strategies to find and train non-existent moderates and precludes any notion of sending ground troops. This gives Obama the necessary breathing room to reconsider U.S. goals in Syria and to redirect U.S. strategy.

Some will argue that the price tag of Russian engagement is too high: Putin rising, Assad in power, U.S. influence on the wane in the Middle East. The truth, though, is that the United States has wielded unprecedented influence over the Middle East since 9/11 and has discovered that it is the price of influence that is too high. Through 2014 the United States had suffered almost 7,000 casualties and spent over $4.4 trillion on the war efforts in Afghanistan, Iraq, and Pakistan. For that unimaginable toll the United States has bought two broken nations, spurred the creation of IS, and ensured the growth of Iranian power. And as yet there is no end in sight. Vague concerns about our future ability to promote national interests in the Middle East pale in comparison to the certain costs of war. Given this, Obama’s best move today is to thank Putin and reconsider what sort of influence in the Middle East the U.S. truly needs and how to achieve it.

May 14, 2015 12:37PM

Mr. President, Don’t Scapegoat Private Schools

It is not often I get a chance to latch on to someone as high profile as the President of the United States saying that public schools “draw us together.” But in his appearance at Georgetown University a couple of days ago, President Obama blamed, among other things, people sending their children to private schools for breaking down social cohesion and reducing opportunities for other children.

First, let’s get our facts straight: Private schools are not the main way better-off people, or people with high social capital, isolate themselves from poor families. Only 9 percent of school children attend private schools, and as Matt Ladner points out in a great response to the President, that percentage has been dropping over the years. No, the main way the better-off congregate amongst themselves is buying houses in nice places, which translates into access to good school districts. Even the large majority of the mega-rich appear to send their children to public schools, but rather than paying school tuition, their tuition is the far-steeper, far more exclusive price of a house. And let’s not pretend -- as the President hinted -- that we’ve seen anything close to long-term decreased funding for public schools. Even with a slight dip during the Great Recession, inflation-adjusted, per-pupil spending in public schools has well more than doubled since 1970.

On the deeper point, do we really know that public schools “draw us together,” and more importantly, do so better than private schooling? No, we don’t. That’s the accepted wisdom, but basic history doesn’t necessarily bear it out. Roman Catholics ended up starting their own school system – which at its peak in 1965 enrolled about 12 percent of all students – because the de facto Protestant public schools could not accommodate them. African-Americans, of course, were long legally excluded from public schools, especially white public schools. Similar situations existed for Asians and Mexican-Americans in some parts of the country. And, of course, public schools reflected the communities they served, which were often small and homogeneous. Finally, public schooling forces diverse people into a single system, which has led to seemingly incessant, cohesion-tearing clashes over values, personal identities, and much more.

It is also not the case, as President Obama’s critique implies, that private schools don’t build social capital within communities. As discussed in the book Lost Classroom, Lost Community: Catholic Schools’ Importance in Urban America, Roman Catholic schools -- the most numerous of private schools -- have often been hubs of their communities, and when they have closed it has contributed to major losses of social capital ultimately resulting in community disintegration and all the ills that go with that. And as I wrote when the latest NAEP exam results in geography, U.S. History, and civics came out a few weeks ago, private schools also appear to do a better job than public schools of inculcating good civic values in their students, including political knowledge and a proclivity to volunteer in one’s community.

Private schooling is not what’s pulling Americans apart, Mr. President. Indeed, it may be a powerful tool for bringing us together.

January 29, 2015 12:59PM

Conflicted on 529s

If you like feeling conflicted, you’ll love being a libertarian thinking about President Obama’s recent proposal – and even more recent rescinding of that proposal – to essentially end 529 college savings plans. The President proposed killing the ability to use funds saved under a 529 plan tax free to pay for college, which would have gutted the program’s real value.

On one side, a libertarian should be aggravated by such a proposal. The goal certainly seemed to be income redistribution, generating new revenues from relatively well-to-do Americans and giving it to (presumably) less well-to-do Americans with free community college and expanded “refundable” tax credits. It also seemed intended to support a divisive, rhetorical war of the “middle class” vs. “the rich” (though certainly many people who use 529s consider themselves middle class). And unlike federal grants, loans, and those refundable credits that are often essentially grants for people who don’t owe much in taxes, 529s are about people saving their own money to pay for college, not taking it from taxpayers.

On the other side, libertarians – heck, everyone – should want a simple tax code that isn’t riven with special breaks, loopholes, and encouragements to do things politicians decide are worthy but which have massive negative, unintended consequences. And when it comes to higher education, those consequences are huge, including rampant tuition inflation, awful completion rates, major underemployment, serious credential inflation, and a burgeoning academic water park industry. And where does the federal government get the authority to incentivize saving for college in the first place? Not in the Constitution.

So how should libertarians feel about the demise of the President’s 529 plan? I guess a little sad, because the Feds simply shouldn’t be in the business of encouraging college consumption. Even more, though, they should feel angry, because we are so deep in a federally driven, college-funding quagmire.

January 20, 2015 11:35AM

TONIGHT: Cato Scholars Live‐​Tweet the State of the Union

#CatoSOTU



Tonight at 9 p.m. EST, President Obama will lay out his plans for the upcoming year in his sixth annual State of the Union (SOTU) address. What will the President’s words mean for liberty? 

Find out tonight: Cato scholars will be live-tweeting their reactions to what the president says—and what he leaves out. Following the President’s address, stay tuned for commentary on the Republican and Tea Party responses. Featured scholars will include everyone from David Boaz to Mark Calabria, Walter Olson to Alex Nowrasteh....and many, many more.

This is your chance to ask the experts what to expect from the policy world in 2015—and to add your two cents to the discussion. Follow @CatoInstitute on Twitter and join the conversation using #CatoSOTU

January 9, 2015 9:38AM

Community College Courtesy of the Federal Taxpayer? No Thanks

Word came out last night that in a speech in Tennessee today President Obama will propose that two years of community college be made free to all “responsible” students, primarily funded by federal taxpayers. But one look at either community college outcomes or labor market outlooks reveals this to be educational folly.

The fact of the matter, according to the federal government’s own data, is that community college completion rates are atrocious. The federal Digest of Education Statistics reports that a mere 19.5 percent of first-time, full-time community college students complete their programs within 150 percent of the time they are supposed to take. So less than 20 percent finish a two-year degree within three years, or a 10-month certificate program within 15 months. And that rate has been dropping almost every year since the cohort of students that started in 2000, which saw 23.6 percent complete. Moreover, as I itemize in a post at SeeThruEDU.com, even when you add transfers to four-year schools, the numbers don’t improve very much. Meanwhile, interestingly, the for-profit sector that has been so heavily demonized by the administration has an almost 63 percent completion rate at two-year institutions, and that has been rising steadily since the 2000 cohort.

The other huge problem is that the large majority of job categories expected to grow the most in the coming years do not require postsecondary training. Of the 30 occupations that the U.S. Department of Labor projects to see the greatest total growth by 2022, only 10 typically need some sort of postsecondary education, and several of those require less than an associate’s degree. Most of the new jobs will require a high school diploma or less.

Of course, one of the biggest problems in higher ed is that for so much of it, someone other than the student is paying the bill, tamping down students’ incentives to seriously consider whether they should go to college and what they should study if they do. This proposal would only exacerbate that problem, essentially encouraging people to spend two years in community college fully on the taxpayer dime while they dabble in things they may or may not want to do—and as they maintain a pretty low 2.5 GPA—then maybe focusing a little more when the two years is up and they have to pay something themselves.

Unfortunately, there is no way to look at this proposal (at least as it has been spelled out so far), investigate the reality of community college, and conclude anything other than it is a terrible idea.