On Monday, Americans witnessed a stunningly brazen act of what can only be called political gangsterism. Speaking from the White House, Donald Trump declared that for “security reasons” the popular video sharing platform TikTok—which is owned by a Chinese company called ByteDance—would be “shut down” in the United States on September 15, unless it were purchased by Microsoft or another American firm. Moreover, since the government was effectively forcing the sale by threatening to shutter TikTok, Trump expected the U.S. Treasury to get a piece of the action—though the exact legal mechanism by which the government would take payment for this “service” was left vague. It’s worth quoting Trump’s explanation at length:
I did say that if you buy it, whatever the price is, that goes to whoever owns it, because I guess it’s China, essentially, but more than anything else, I said a very substantial portion of that price is going to have to come into the Treasury of the United States. Because we’re making it possible for this deal to happen. Right now they don’t have any rights, unless we give it to ’em. So if we’re going to give them the rights, then it has to come into, it has to come into this country.
It’s a little bit like the landlord-tenant [relationship]. Uh, without a lease, the tenant has nothing. So they pay what is called “key money” or they pay something. But the United States should be reimbursed, or should be paid a substantial amount of money because without the United States they don’t have anything, at least having to do with the 30%.
So, uh, I told him that. I think we are going to have, uh, maybe a deal is going to be made, it’s a great asset, it’s a great asset. But it’s not a great asset in the United States unless they have the approval of the United States. So it’ll close down on September 15th, unless Microsoft or somebody else is able to buy it, and work out a deal, an appropriate deal, so the Treasury of the — really the Treasury, I suppose you would say, of the United States, gets a lot of money. A lot of money.
Let’s not mince words: This is the Mafia’s business model. “We’ll threaten your competitor, forcing them to sell the business cheap, but we expect our cut in return.” The national security powers of the executive branch are now officially muscle for hire.
But how—one might reasonably wonder—could an app best known for videos of teenagers dancing and lip-syncing pose a national security threat in the first place? A threat so dire it justifies the use of emergency powers to close down an expressive platform used by millions of Americans every day? Can a president even do that?Read the rest of this post »
Early on, a talmid called with a complicated question. As an operator of several nursing homes, he was being forced to accept residents who’d tested positive for the virus as they were released from hospitals that no longer wanted them. Despite the clear danger to their current residents and staff, the nursing homes were being given no choice.
Rav Shmuel told him unequivocally that to accept these patients was a form of retzichah, murder, since it put the other residents at serious risk. But then, on a conference call, the governor informed all nursing home operators that failure to accept the patients would mean losing their licenses.
The talmid called Rav Shmuel again. Lose your license, the Rosh Yeshivah ruled, but you can’t put your elderly residents in danger.
The nursing home operator listened to his rebbi.
Weeks later, he stood tall as the only major nursing home operator in the state of New Jersey who didn’t lose a single resident to Covid‐19.
The full article, a profile of Rav Shmuel Kamenetsky, is here.
Seeking to prove the old adage about roads and good intentions, Missouri Senator Josh Hawley has recently introduced legislation, The Slave‐Free Business Certification Act of 2020, that would impose steep fines and other penalties on large companies doing business in the United States, unless they regularly audited their global supply chains and certified that they and their suppliers did not utilize “forced labor.” The bill’s presumed intent is to discourage slave labor around the world – a goal that’s both laudable and, given troubling reports out of China and elsewhere, still quite important. Unfortunately, good intentions don’t
usuallynecessarily make good policy, and in this case recent history shows how Hawley’s bill would likely make things worse, not better, for the world’s most vulnerable people.
The Mercatus Center’s Tyler Cowen helpfully summarized the bill’s theoretical flaws in a recent Bloomberg column, noting that the onerous supply chain regulations would most likely cause companies – worried about high compliance costs, bad publicity, and scary penalties – simply to move their supply chains “from the poorest and neediest” countries to wealthier places clearly free of “forced labor” (which, as Cowen helpfully adds, the Hawley bill defines more broadly than slavery). Sadly, forced labor remains somewhat common around the world, but an exodus of multinational capital and business practices from these places would likely lead to worse, not better, labor conditions. And, like most forms of regulatory protectionism, the law also would likely boost largest corporations (i.e., the ones with the in‐house lobbying, legal and accounting resources to shoulder new compliance burdens) and increase prices for U.S. consumers. This is Trade Econ 101.
We needn’t, however, rely on wonky economic theory to see the likely consequences of Hawley’s legislation. In fact, recent experience with a similar policy – the “conflict minerals” reporting requirements in Section 1502 of the 2010 Dodd‐Frank Act – shows that, contrary to some some claims that onerous supply chain reporting mandates are easy and effective, their end result would most likely be more, not less, of the very thing the mandates are trying to discourage. Section 1502 was similar to Hawley’s proposal in that it required multinational manufacturers like Apple and Intel to audit and disclose whether their supply chains utilized “conflict minerals” (tantalum, tin, gold or tungsten, which are commonly found in smartphones and other consumer electronics) sourced from the Democratic Republic of the Congo (DRC) or an adjoining country. Section 1502 also had similar intentions: the mining of these minerals reportedly funded warlords and fueled violence in the region, so a supply chain disclosure rule would force multinationals to scrutinize their suppliers and weed out the bad actors, and thus cut off the warlords’ funds.
Unfortunately, the Section 1502 rules proved to be a huge mistake. Shortly after the law entered into force, reports emerged that, instead of complying with the new regulations, global corporations simply abandoned the DRC – and its poor miners and small‐scale purchasers – entirely. This effective embargo on the region not only devastated it further, but it actually benefited “some of the very [DRC warlords] it was meant to single out,” allowed less‐scrupulous Chinese manufacturers to move in, and undermined civil society groups working to end horrific violence and poverty in the DRC.
Things didn’t improve in the following years, either. In fact, Hawley’s fellow Republicans in 2013 held a hearing before the House Subcommittee on Monetary Policy and Trade on “The Unintended Consequences of Dodd-Frank’s Conflict Minerals Provision,” at which several participants from across the spectrum advocated for Section 1502’s reform or elimination due to its harmful impact on the DRC. In 2014, dozens of human rights activists and academics called for the provision’s repeal because, while a few industry giants had resumed business in the DRC, most mines remained off limits and millions of Congolese miners remained unemployed (or worse). Meanwhile, armed groups and smugglers continued to thrive.
Subsequent academic work has confirmed these anecdotes – and the activists’ worst fears. A 2016 study found that Dodd‐Frank conservatively “increased infant mortality from a baseline average of 60 deaths per 1,000 births to 146 deaths per 1,000 births over this period—a 143 percent increase,” likely by reducing mother’s consumption of infant health care goods and services. A separate study from 2016 found that the “legislation increased looting of civilians and shifted militia battles toward unregulated gold‐mining territories” in 2011 and 2012. Another paper from 2018 found that the policy also backfired in the longer run (2013–2015): “the introduction of Dodd‐Frank increased the incidence of battles with 44%; looting with 51% and violence against civilians with 28%, compared to pre‐Dodd Frank averages.” Finally, in late 2019 economist Jeffery Bloem found that “the passage of the Dodd‐Frank Act roughly doubled the prevalence of conflict in the DRC,” and “[v]iolence against civilians, rebel group battles, riots and protests, and deadly conflict all increase within the DRC due to the passage of the Dodd‐Frank Act.”
In short, a U.S. law seeking to discourage conflict and suffering in the DRC ended up breeding more it.
It’s a depressing tale of Unintended Consequences that puts a real face on Cowen’s theory and crystallizes the flaws in Hawley’s plan to stop forced labor around the world. It also shows why alternative policies, such as the Xinjiang boycotts and targeted sanctions that Cowen suggests, are a better approach to attacking the serious issues of slavery and human trafficking. Of course, as I noted last year, arguably the best way to improve working conditions for the world’s poorest people is freer trade with least developed countries:
The lowering of U.S. trade barriers, along with American leadership in creating agreements and institutions such as the WTO, has produced immeasurable benefits for the world’s poorest people. As the World Bank noted in its Report on the Role of Trade in Ending Poverty, since 1990, “a dramatic increase in developing‐country participation in trade has coincided with an equally sharp decline in extreme poverty worldwide,” and the number of people living in extreme poverty has collapsed. Trade has also “helped increase the number and quality of jobs in developing countries, stimulated economic growth, and driven productivity increases.”
A new report from the International Labor Organization provides jaw‐dropping stats in this regard: Between 1993 and 2018, the share of individuals in low‐ and middle‐income countries working in extreme poverty fell from almost 42 percent to less than 10 percent — a decline of around 600 million people. Most moved from subsistence farming to formal wage or salary work, providing themselves with first‐time access to health care and other benefits. And, contrary to popular belief, the job creation in developing countries did not happen primarily in “sweatshop” manufacturing: The share of industrial workers in low‐ and middle‐income countries almost did not change between 1991 and 2018, with job growth instead coming from sectors such as construction and retail trade; between 1999 and 2017, inflation‐adjusted real wages in these countries tripled. Child labor is also disappearing: The overall number of child workers (ages five to 17) decreased by approximately 94 million between 2000 and 2016 (from 246 million to 152 million) and is projected to decline by tens of millions more by 2025. These improvements have been especially strong among women and girls, who in many countries faced truly horrible social conditions (hunger, arranged marriages, etc.) before these new jobs existed.
I can’t say I’m optimistic that the Senator – who has elsewhere demonstrated a questionable understanding of trade and forced labor (which U.S. law already restricts) – will learn this economic lesson or the unfortunate history of Dodd‐Frank and the DRC. Hopefully, his colleagues in Congress will learn about it before millions of the world’s poorest suffer a similar fate.
With an unemployment rate currently over 10 percent and many businesses permanently closing due to the pandemic, policymakers should make it as easy as possible for unemployed workers to find new opportunities.
State policymakers have tools at their disposal that could help put the unemployed back to work by eliminating barriers that prevent workers from moving between careers. Despite a wave of deregulation early in the COVID-19 crisis, many states still have occupational licensing requirements on the books that are hindering economic recovery by choking off access to new jobs, hindering interstate mobility for workers, and increasing costs for consumers.
The often lengthy and costly process involved in getting a license to practice hair‐braiding, nail care and many other trades represent a significant barrier to would‐be small business owners who cannot afford the time or expense involved. Nearly two million jobs are lost annually due to licensing requirements — a burden that falls hardest on low‐income communities.
Despite claims by licensing proponents, studies looking at a wide variety of professions have found that the licensing process does not significantly protect public health and safety. Some research has even found that licensing has a slightly negative effect on quality. But, while quality remains unchanged, prices to consumers increase. According to economist Morris Kleiner, licensing can raise prices anywhere from 5 to 33 percent depending on the type of occupation and location. It is estimated that consumers pay, in total, $200 billion annually in extra costs due to licensing.
And forget easily moving your business from one state to another. Most states will not recognize an occupational license from another state, requiring entrepreneurs to go through the costly hassle all over again.
As a result, both the current and previous administrations have called for licensing deregulation. Licensing reform is one of the major aspects of President Trump’s Governors’ Initiative on Regulatory Innovation.
States have slowly begun to act. In signing legislation that allows his state to recognize licenses from other states, Missouri Governor Mike Parson said, “Eliminating governmental barriers to employment and allowing citizens to become licensed faster is an impactful, commonsense step that we believe will have a positive impact in the lives of a lot of Missourians.”
Arizona enacted similar reforms last year. Iowa has also created a universal licensing system with hopes of increasing migration into the state. Several more states, including California, Florida, and Missouri, have made it easier for people with criminal records to receive licenses. Florida has loosened other licensing requirements as well, as has South Dakota.
While those reforms are a good first step, all states can and should go further, reviewing all current occupational licensing requirements with an eye toward standardizing requirements, reducing costs, and eliminating restrictions that are not related to public safety.
The pandemic has created a unique window of opportunity for reform, forcing states to reevaluate the impact of regulations on jobs and poverty. States should seize on this opportunity to expand the freedom to work.
With a presidential candidate known as Amtrak Joe, a House Transportation & Infrastructure Committee proposal to triple funding for intercity passenger trains, and a proposal before Congress to spend $205 billion on high‐speed trains, it is likely that increased subsidies to Amtrak and faster trains will be promoted in the near future. That makes it worthwhile to look at how the last major push to spend money on passenger trains worked out.
In 2009 and 2010, President Obama persuaded Congress to spend $10.1 billion on “high‐speed intercity passenger rail” projects. Obama used other federal funds to bring this up to $11.5 billion, all of which was partially matched by at least $7 billion in state and local funding. After ten years, at least some of those projects must be working, right?
Of course not. I recently reviewed the ten major projects that were funded with this money, ranging from $116 million spent in Maine to $4 billion in federal money and a total of at least $10.5 billion from all sources spent on California high‐speed rail. The results are even worse than I expected.
A comparison of Amtrak’s 2009 timetables with the timetables for 2019 shows that all of this money produced almost no results. In one corridor, trains were speeded up from 40.7 to 45.0 miles per hour. In another corridor, frequencies were increased from two to four trains per day. Finally, new train service was provided to two towns in Maine whose combined population is under 30,000 people.
That’s it. Average speeds in the Maine corridor actually declined, as they did in two other corridors. The California high‐speed rail project, of course, will probably never be completed. Amtrak spent $1.6 billion on the money pit known as the Northeast Corridor, which has a $52 billion maintenance backlog, so the money didn’t lead to any real improvements.
One of the more tragic results was in the state of Washington, which accepted $800 million to speed up and increase the frequencies of trains between Seattle and Portland. The speed‐up wasn’t going to result from faster trains but from a new, shorter route. Although Congress had passed a law requiring the installation of positive train control, the state didn’t bother. On the first day of running trains on the new route, the engineer, unfamiliar with the route, missed a speed limit sign and crashed the train, killing three people. Today, trains in the corridor are no faster or more frequent than they were in 2009.
Personally, I love passenger trains, but the fact is that they are obsolete. They are expensive, requiring large amounts of infrastructure which must be precisely maintained at great expense. They are inflexible, so if travel patterns change they are left in the dust. They take years to plan and build, and no one really knows what transportation will be needed a year from now much less a decade from now. Unlike highways and airports, high‐speed trains could never be expected to pay for themselves. Whether high‐speed or conventional‐speed, passenger trains are a technology we can live without.
In the end, it is pretty clear that this $18 billion was completely wasted, at least as far as improving passenger trains goes. That won’t be surprising to critics of megaprojects, but it should give pause to those who think that spending billions or trillions on an obsolete form of travel will improve the quality of life in America. For a complete review of all ten corridors, see my policy brief.
The bipartisan, process oriented “Platform Accountability and Consumer Transparency Act” joins a recent parade of Section 230 reform proposals. Sponsored by Sens. Brian Schatz (D-HI) and John Thune (R-SD), the PACT Act proposes a collection of new requirements intended to optimize social media platforms’ governance of user speech. These government mandated practices for handling both illegal speech and that which merely violates platform community standards would upset delicate, platform specific balances between free expression and safety. While more carefully constructed than competing proposals, with provisions actually tailored to the ends of accountability and transparency, the bill threatens to encumber platforms’ moderation efforts while encouraging them to remove more lawful speech.
The PACT Act would establish a process for removing illegal speech, giving platforms 24 hours to remove content that deemed illegal by a court. A company that fails to act would lose Section 230’s protections against liability. Such protections are generally thought essential to these companies. Leaving decisions of legality to the courts is important, it preserves democratic accountability and prevents platforms from laundering takedown demands that wouldn’t otherwise pass legal muster. Under Germany’s NetzDG law platforms must remove “manifestly unlawful” content within 24 hours or risk steep fines, a set of incentives that have encouraged the removal of legal speech on the margins.
The bill’s proposed process for removal would be improved by the addition of a counter‐notice system, more specific illegal content identification requirements, and a longer takedown window to allow for either user or platform appeal. Still, it is a broadly reasonable approach to handling speech unprotected by the First Amendment.
The breadth of covered illegal content is somewhat limited, including only speech “determined by a Federal or State court to violate Federal criminal or civil law or State defamation law.” This would exclude, for instance, New Jersey’s constitutionally dubious prohibition on the publication of printable firearms schematics.
While the legal takedown mechanism requires a court order, the bill’s requirement that platforms investigate all reports of community standards violations is ripe for abuse. Upon receiving notice of “potentially policy‐violating content,” platforms would be required to review the reported speech within 14 days. Like law enforcement, content moderators have limited resources to police the endless flow of user speech and must prioritize particularly egregious or time sensitive policy violations. Platform‐provided user reporting mechanisms are already abused in attempts to vindictively direct moderators’ focus. Requiring review (with a deadline) upon receipt of a complaint would make abusive flagging more effective by limiting moderators’ ability to ignore bad‐faith reports. Compulsory review will be weaponized by political adversaries to dedicate limited platform enforcement capacity to the investigation of their rivals. Community standards can often be interpreted broadly; under sustained and critically directed scrutiny even broadly compliant speakers may be found in breach of platform rules. Moderators, not the loudest or most frequent complainants, should determine platform enforcement priorities. While the bill also mandates an appeals process, this amounts to a simple re‐review rather than an escalation and will at best invite an ongoing tug of war over contentious content.
Some of the bill’s components are constructive. Its transparency reporting requirements would bring standardization and specificity to platform enforcement reports, particularly around the use of moderation tools like demonetization and algorithmic deprioritization. This measure would formalize platforms’ hitherto voluntary enforcement reporting, allowing for better cross‐platform comparisons and evaluations of disparate impact claims. Beneficent intentions and effects aside, as requirements these reporting standards would likely raise compelled speech concerns.
However, other aspects of the bill are sheer fantasy in the face of platform scale. PACT would require platforms to maintain “a live company representative to take user complaints through a toll‐free telephone number,” during regular business hours. If in a given day even a hundredth of a percent of Facebook’s 2.3 billion users decided to make use of such an option, they would generate tens of thousands of calls. In the early days of Xbox Live, Microsoft maintained a forum to answer user moderation complaints. The forum was so inundated with unreasonable and inane questions that the project was later abandoned. While Microsoft may have incidentally provided some valuable civic education, other platforms should not be required to replicate its Sisyphean efforts.
Provisions drafted without regard for the demands of scale will fall hardest on small firms trying to scale, hindering competition. Parler is a conservative alternative to twitter with 30 employees and 1.5 million users as of June. It’s large enough to lose the bill’s small business exemption (applying to services with less than a million monthly users or visitors) but not large enough to dedicate employees to call‐center duty or review all reports of policy violations within 14 days.
There is a real danger that the bill may be treated as a solution to perceived problems with Section 230 simply because it is less radical or more thoughtfully drafted than competing proposals for reform. The PACT Act may be better than other proposed modifications, but that doesn’t make it, on net, an improvement on the status quo. While bill would increase the transparency of moderation, its impositions on policy enforcement and appeals processes will create more problems than they solve. In heaping new demands on complex moderation systems without regard for platform constraints, the PACT Act places a thumb on the scale in favor of removal while creating new avenues for abuse of the moderation process.
Unidentified, camouflage‐wearing federal agents carrying military‐style equipment have been caught on video abducting people in Portland, Oregon. They do not bother to make formal arrests, read the captured their rights, or even announce the reason for detainment. The fact that the number of those abducted thus far appears small and that they have later been released without charges being filed does not make the abuse of basic civil liberties less shocking.
The deployment was ordered by Acting Secretary of Homeland Security Chad Wolf, who has said he is willing to send similar units to other cities that fail to bring an end to the post‐George Floyd protests, a position that President Trump has affirmed. This has been done over the objections of both the governor of Oregon and the Mayor of Portland. The Oregon Department of Justice has since filed a lawsuit against multiple federal agencies alleging “unlawful law enforcement in violation of the civil rights of Oregon citizens by seizing and detaining them without probable cause.” Those of us who still believe in the importance of protecting state and local prerogatives in the face of an ever‐encroaching federal government should be alarmed.
The fact that Wolf is an acting secretary is significant; he is able to wield this power by executive will alone and without having to go through the checks and balances constitutionally provided by Senate confirmation, a habit that Cato scholars have condemned in the past. Indeed, Wolf is the fifth to hold the position in the Trump administration and the third to do so in an acting capacity. It is an unprecedented rate of turnover for the office; nearly as many people have filled the position in Trump’s single term (five) as during the last four presidential terms combined (six). It raises the prospect of a future executive being able to cycle through acting officials in order to avoid legislative scrutiny until he or she finds one willing to grossly violate the Constitution.
Customs and Border Patrol (CBP), a division of the Department of Homeland Security, has been deeply involved in the Portland action. The Cato Institute has been a consistent critic of mission creep at CBP ever since the creation of this Frankenstein’s monster of an agency in 2003. Cato scholars have called out the agency for running inhumane detention camps, failing to punish gross criminal misconduct, and operating internal checkpoints deep inside the United States.
Indeed, few people realize that the court system has upheld CBP’s claim that the “border zone” should extend 100 miles from any national or coastal boundary, a line that encompasses nearly two‐thirds of all Americans. Within that zone and regardless of whether you are an immigrant, CBP agents can search you without a warrant, detain you without probable cause, and even deport citizens without due process. In short, CBP enjoys very few of the checks on police power that hold state and local law enforcement to account and protect basic civil liberties.
Customs and Border Patrol has eagerly sought out opportunities to enhance these already expansive powers. For example, the particular CBP outfit responsible for the abductions in Portland is the Border Patrol Tactical Unit (BORTAC). It is CBP’s version of a SWAT team and it is ordinarily tasked with conducting high risk raids on drug cartel operations near the border. But earlier this year, CBP pushed to take these units off the border and deploy them in “sanctuary cities” to hunt down illegal immigrants. It was a trial run for the current proceedings given that the targeted cities were opposed to their presence and it brought a militarized force round to bear on a process featuring a relatively low risk of violence. It was a questionable decision that seemed to be more about discomfiting political opponents of the administration than a matter of effective law enforcement.
Worse, CBP’s nascent role as a cut‐rate secret police force that operates at the discretion of the executive branch is merely one manifestation of the creeping, bi‐partisan paramilitarization of the federal government. During the recent Black Lives Matter protests in Washington, DC, the Trump administration staged a force of at least 1,600 active duty military personnel at bases outside the city. Those troops remained outside. The administration did not need the military to suppress urban unrest when it had paramilitary forces ready at hand. If that sounds extreme, consider that the administration easily gathered some 3,000 non uniformed, heavily armed riot control officers from the Bureau of Prisons, some of whom were used to clear protestors from Lafayette Park so that Trump could stage a photo op in front of a nearby church.
Even the Cato Institute found itself part of the unfolding drama when armored vehicles were stationed outside the building. Cato headquarters had been vandalized during the protests (though the plywood shields eventually installed over the windows were a fairly effective deterrent). Even so, responding to petty vandalism with military vehicles mounting heavy caliber machine guns was a rather incredible and unwelcome escalation. Likewise, Acting Secretary Wolf’s justification for deploying paramilitary units to Portland was a list recounting vandalization of federal property; he didn’t bother to justify an escalation from mostly spray painted graffiti to non uniformed agents shoving people in unmarked vehicles.
The use of Bureau of Prisons personnel in Washington and BORTAC in Portland is just the tip of the spear. The federal government under Presidents from both parties has been adding some 2,500 armed agents to the federal bureaucracy every year since 9/11, amounting to more than 132,000 such officers. 2,300 IRS agents carry weapons like AR‐15s and P90s, the National Park Service buys thousands of dollars of hollow‐point bullets each year, and US Fish and Wildlife, afraid of being left out of the fun, obtained silencers for their Glocks. (In their defense, it is hard to sneak up on a fish.)
Most of the 132,000 armed federal agents are based in the DC metropolitan area. While it might be a touch dramatic to call them a Praetorian Guard–given what that evokes of civil instability in the late imperial Roman Empire–it does not take an overactive imagination to think that having the equivalent of a dozen paramilitary divisions in the immediate vicinity of the US capital might be a bad idea for the future of our democracy. Unlike the military with its strict, professionalized chain of command and tradition of avoiding meddling in domestic political affairs, these federal forces serve at the discretion of political appointees and have shown no disinclination against involvement in partisan politics. Consider Washington and Portland—both of which, as it so happens, lie within the 100 mile “border zone”—small trials of how an administration can use paramilitary personnel to repress political dissent. Do we want to entertain even the slightest risk that some future authoritarian executive might try such methods at scale?