As much as any other institution, the Ford Foundation has shaped the modern American law school, having provided key backing for developments such as clinical legal education, public interest law, identity-based legal studies, and transnational law. Whether you agree or disagree with Ford’s ideological thrust—and as a libertarian, I regularly disagree—it’s a pretty remarkable set of accomplishments. I give an overview and brief history in this new article for the Capital Research Center’s Foundation Watch, adapted from my book Schools for Misrule.

The Senate immigration bill would ease quotas on legal immigration (particularly for highly-skilled and farm workers), and also allow those now here unlawfully to apply for a green card after ten years if they pay a fine and back taxes. In an effort to defend our current tight but leaky immigration quotas, a few legislators and commentators seized on the first half of a sentence in the Congressional Budget Office report on this bill: “CBO’s central estimates also show that average wages for the entire labor force would be 0.1 percent lower in 2023… under the legislation than under current law.” The CBO goes on to predict average wages would be “0.5 percent higher in 2033” (roughly in line with academic studies). But the CBO cannot possibly predict such data with any precision for a year ahead, much less 10 or 20. The larger problem is a common yet severe misunderstanding of what “average wage” really means.

If the Senate bill were enacted, claims Alabama Republican Senator Jeff Sessions, “the wages of U.S. workers — which should be growing — will instead decline… It would be the biggest setback for poor and middle-class Americans of any legislation Congress has considered in decades.” Indeed, if it were to pass, he added, “the wages of American workers will fall for the next 12 years. They will be lower than inflation rates.”

This is quite mistaken. The CBO never said wages of U.S. workers would fall for even one year, much less twelve, nor did the CBO claim wage gains might be “lower than inflation rates.” All the CBO did was to predict that average nominal wages might end up one-tenth of one percent (0.1%) lower in 2023 than they would be if legal immigration remained as restrictive as it is under current law. If the average wage would otherwise have risen to $45 an hour in 2023, for example, it would instead turn out to be just $44.996 with the Senate bill.

Under the current law baseline, the CBO projects that the employment cost index would rise by 3.7 percent per year from 2014 to 2023, while prices would rise by only 2 percent. That means real compensation (the projection includes benefits, not wages alone) is projected to rise by 1.7 percent a year over the next decade, with or without immigration reform. 

If you add up all the yearly increases, the estimated cumulative rise in worker compensation would be 48.7 percent from 2014 to 2023 under current law, or 48.6 percent − 0.1 percent lower − with the Senate immigration bill. The difference is doubly insignificant, because CBO ten-year projections are no better than throwing darts. But for a U.S. Senator to misidentify such as trivial 0.1 percent difference over 12 years as a 12-year spell of falling wages, and for Fox News and others to report that error as though it had substance, involves monumental misunderstanding. 

Although the Senate bill involves much greater expansion of work visas for highly-skilled immigrants than for unskilled workers, the CBO nevertheless assumes “the new workers would be less skilled and have lower wages, on average, than the labor force under current law.” The assumption that most of the new legal immigrants would be relatively low paid is a major reason why the statistical average wage is assumed to be held down by greater numbers of legal immigrants (despite presumably smaller numbers of illegal immigrants). Note carefully, however, that this does not mean wages of current U.S. workers would be lower. It only means a greater number of new workers (from other countries) would have lower wages than current workers: “The estimated reductions in average wages,” notes the CBO, “do not necessarily imply that current U.S. residents would be worse off.” This key point has been so meticulously misunderstood that it apparently requires more explanation.

Suppose there was an island with five workers. One worker earned $10 an hour, another earned $20, another $30, another $40 and another $50. Their combined wages of $150, when divided by five, results in an average wage of $30. 

Now, suppose a new immigrant arrives and earns $20 an hour. The group’s wages then add up to $170 divided by six, so the average wage drops to $28.33. Yet the wages of all the original non-immigrant population remain exactly the same as before. The average wage of the larger group has been diluted by the addition of one more low-wage worker, but that does not mean anyone else’s wage went down. Because wages generally rise over time, as the CBO sensibly assumes, real wages and benefits of both new immigrants and existing workers would likewise rise over time – by17 percent over ten years, using CBO estimates, or 16.9 percent (the 0.1 percent difference) with the Senate bill − under the debatable CBO assumption that bill would result in greater immigration of low-paid workers.

Confusing an “average wage” with a “typical wage” is an interminable and mischievous fallacy. That confusion was revived by recent news reports wrongly suggesting the CBO had predicted average wages would fall as a result of allowing slightly greater numbers of legal immigrants to displace illegal immigrants.

In an attempt to beat Western sanctions and halt the fall in the Syrian pound, the Assad regime – with the help of Iran, Russia, and China – has begun conducting all of its business in rials, roubles, and renminbi. This decision supplements other existing arrangements between Syria and its allies that are keeping the Syrian economy on life-support. These include transfers of $500 million per month in oil and an unlimited credit line with Tehran for food and oil-product imports.

According to Kadri Jamil, Syria’s prime minister for the economy, this life support is necessary because Syria’s devastated economy is the target of an elaborate plot, hatched by the U.S. and Britain, to “sink the Syrian pound.”

So, what about the sinking pound? As the accompanying chart shows, the Syrian pound has lost 66.2% of its value in the last twelve months.

The rout of the Syrian pound has been widely reported in the press. But, Syria’s inflation problems that have accompanied the collapse of the pound have gone largely unreported. That’s because, beyond the occasional bits of anecdotal evidence, there has been nothing to report by way of reliable economic data.

To fill that void, I employ standard techniques to estimate Syrian’s current inflation. Currently, Syria is experiencing an annual inflation rate of 200% (see the accompanying chart).

Indeed, Syria is experiencing a monthly inflation rate of 34%. To facilitate the monitoring of the quickly deteriorating situation in Syria, I am creating a resource which will allow readers to view up-to-date data on the Syrian pound and the country’s inflation problems. Soon, black-market exchange-rate data and ­inflation estimates for countries with troubled currencies like Syria will be made available via the “Troubled Currencies Project” – a joint Cato Institute-Johns Hopkins collaboration under my direction. In consequence, the days of Syria’s plunging pound and raging inflation being covered in a shroud of secrecy are soon coming to an end.

On Sunday, one year since President Morsi’s arrival in office, Egypt saw what might have been the largest protests in the history of the country. The anti-Morsi ‘Rebel’ campaign claims they have collected over 22 million signatures asking for his departure, and they are asking the Egyptian head of state to resign by 5 p.m. tomorrow.

The current events were predictable. There was a long build-up of popular dissatisfaction with the direction Mr. Morsi and his Freedom and Justice Party (FJP) had taken the country. Little has been done to reduce the deficit, restore robust growth and tackle the country’s debilitating subsidy problem. To the extent to which the events of the Arab Spring were driven by people’s desire to access economic opportunity, Mr. Morsi’s presidency has been a lost year.

Politically, Mr. Morsi’s presidency has been marked with a disdain for civil society, and few signs of a genuine commitment to limited, constitutional, and democratic political order. So is it time for Mr. Morsi to go, as many in Egypt seem to believe?

Though we may agree that Mr. Morsi is an inept leader, what are the alternatives to the continuation of his presidency? Given the severity of the country’s economic problems, and the existing political uncertainty, a protracted transition – with a likely involvement of the Supreme Council of the Armed Forces – might be even worse than the status quo. The journalist Farah H. Hope, who runs the blog Rebel Economy, says:

While politically his exit may be required by the millions who want him out, economically, the last thing Egypt needs is another period of chaos, uncertainty and confusion. Investors and Egyptians alike are looking for rule of law and order, not another limbo period.

However that may be, Mr. Morsi’s political mandate is tenuous. If he goes, it is imperative that the transition is orderly and planned. Setting a firm early date of the parliamentary election – which has already been postponed – would be a good place to start, accompanied by a broad agreement to shorten Mr. Morsi’s presidency and convene an early presidential election.

Although it looks like Egypt is quickly running out of good options, it may well be that the current unrest is exactly the impetus needed for political elites to start addressing the country’s economic problems. The sooner we see credible reformers fixing the country’s public finance problem and removing barriers to trade, entrepreneurship and innovation, the better.

Washington hasn’t passed a new law to avert it, so today’s the day that all of higher education has, it seems, been dreading: The day that interest rates on subsidized federal student loans double, going from 3.4 percent to 6.8 percent.

Hooray?

In the long term, it might actually be good if these rates — which will only affect some federal borrowers — go up. (Congress could still lower them retroactively.) Why? Because federal aid has fueled decades of rampant price inflation, giving basically anyone whom a college would accept — and many colleges will accept anyone — the money necessary to pay sky-high prices. Perhaps the rates rising will dissuade some people from going to college who should be doing something else, or some people going to college who should be there from choosing a more expensive school that offers no better academics but lots of superfluous frills.

That said, the uptick in rates is likely to have little major effect on what people are willing to pay. And to some extent that is as it should be. The average college graduate will earn enough additional money as a result of having a degree that the additional debt is worth taking on. However, roughly half of people who enter college won’t complete their studies, and half of those will earn below the average for whatever piece of paper — some sort of certification or degree — they complete.

Perhaps the most discouraging aspect of all this isn’t the financial impact of the doubling, but that Congress couldn’t get a deal done. If you are going to have federal student loans, it makes sense to peg them to interest rates such as those of the 10-year Treasury Bond rather than having Congress fix a number for several years. At least then they will fluctuate with the overall time value of money. Indeed, that concept was sufficiently agreeable that President Obama proposed such an idea, and the Republican-controlled House passed roughly similar legislation. But, in a surprise move, President Obama threatened to veto the legislation without, it seems, any effort to negotiate with House leaders first, and Democratic Senate leaders called mainly for freezing rates at 3.4 percent until they could reauthorize the Higher Education Act. There was even a bipartisan effort in the Senate to push through a bill similar to the House measure and the president’s, but it went nowhere. 

Why the breakdown? It’s hard to know exactly, but easy to see a suspect: politicians, especially Senate Democrats and to a lesser extent the president, didn’t want to do anything that didn’t appear to give students the cheapest loans possible. That’s bad news for any future compromise, but much more importantly, a clear and troubling sign of why, barring loud public outcry, we won’t get the long-term solution we need: phasing out federal student aid to force students and colleges to demand and furnish efficient, effective higher education.

I’m a big proponent of tax reform, so at first I was very excited to learn that Senators Max Baucus (D‑MT) and Orrin Hatch (R‑UT) were launching an effort to clean up the tax code.

But on closer inspection, I don’t think this will lead to a simple and fair system like the flat tax. Or even a national sales tax (assuming we could trust politicians not to pull a bait-and-switch, adding a new tax and never getting rid of the income tax).

But judge for yourself. Here’s some of what’s contained in a letter they sent to their colleagues, starting with some language about the growing complexity of the tax code and the compliance cost for taxpayers.

…since then, the economy has changed dramatically and Congress has made more than 15,000 changes to the tax code. The result is a tax base riddled with exclusions, deductions and credits. In addition, each year, it costs individuals and businesses more than $160 billion to comply with the tax code. The complexity, inefficiency and unfairness of the tax code are acting as a brake on our economy. We cannot afford to be complacent.

Sounds good, though they also could have mentioned other indicators of nightmarish complexity, such as the number of pages in the tax code, the number of special tax provisions, or the number of pages in the 1040 instruction manual.

I’m a bit mystified, however, at the low-ball estimate of $160 billion of compliance costs. As explained in this video, there are far higher estimates that are based on very sound methodology.

But perhaps I’m nit-picking. Let’s see with Senators Baucus and Hatch want to do.

In order to make sure that we end up with a simpler, more efficient and fairer tax code, we believe it is important to start with a “blank slate”—that is, a tax code without all of the special provisions in the form of exclusions, deductions and credits and other preferences that some refer to as “tax expenditures.”

I don’t like the term “tax expenditure” since it implies that the government taking money from person A and giving it to person B is equivalent to the government simply letting person B keep their own money. These two approaches may be economically equivalent in certain cases, but they’re not morally equivalent.

Once again, however, I may be guilty of nit-picking.

That being said, there is a feature of the “blank slate” approach which does generate legitimate angst. There’s a footnote in the letter that states that the Joint Committee on Taxation is in charge of determining so-called tax expenditures.

A complete list of these special tax provisions as defined by the non-partisan Joint Committee on Taxation.

This is very troubling. The JCT may be non-partisan, but it’s definitely not non-ideological. These are the bureaucrats, for instance, who assume that the revenue-maximizing tax rate is 100 percent! Moreover, the JCT uses the “Haig-Simons” tax system as a benchmark, which means they start with the assumption that there should be pervasive double taxation of income that is saved and invested.

This is not nit-picking. The definition of “tax expenditure” is a critical policy decision, not something to be ceded to the other side before the debate even begins.

As illustrated by this chart, the tax code is very biased against saving and investment.

Between the capital gains tax, the corporate income tax, the double tax on dividends, and the death tax, it’s possible for a single dollar of income to be taxed as many as four different times.

This is a very foolish policy, particularly since every school of thought in the economics profession agrees that capital formation is a key to long-run growth. Even the Marxists and socialists!

To make matters worse, double taxation puts America at competitive disadvantage. To get a sense of how the U.S. tax system is a self-inflicted wound, check out these sobering international comparisons of death tax burdens and the degree of double taxation of dividends and capital gains.

Here’s what the Haig-Simons tax base means.

1. An assumption that new business investment should be penalized with depreciation instead of being treated neutrally with expensing.

2. An assumption that IRAs and 401(k)s are loopholes to be eliminated, when they’re actually ways to protect against double taxation.

3. An assumption that various other forms of double taxation — such as the capital gains tax — should be retained.

But that’s not the only preemptive capitulation to bad policy.

The “blank slate” assumes that the class-warfare bias in the tax code also should be part of the benchmark against which possible reforms will be judged.

…we asked the nonpartisan Joint Committee on Taxation and Finance Committee tax staff to estimate the relationship between tax expenditures and the current tax rates if the current level of progressivity is maintained. …The blank slate approach would allow significant deficit reduction or rate reduction, while maintaining the current level of progressivity.

Since the internal revenue code already imposes a disproportionate burden on upper-income taxpayers — even when compared to European welfare states, it doesn’t make sense to automatically assume an ideological agenda such as progressivity.

This has been a painfully long post, but it’s very important to realize that tax reform is a three-legged stool. If we want to minimize the economic damage of generating revenue for government, we should have 1) a low tax rate, 2) no distorting tax preferences, and 3) no distorting tax penalties such as double taxation.

Unfortunately, too many people focus only on the first and second legs of the stool. And while tax rates and deductions are important, so is double taxation.

I’m not asserting that the “blank slate” should have assumed no double taxation (sometimes referred to as the “Fisher-Ture” tax base or “consumption” tax base).

But I don’t think it would have been unreasonable for Senators Baucus and Hatch to have told other Senators that one of their choices would be to pick either the Haig-Simons approach or the Fisher-Ture approach.

Heck, even the Congressional Budget Office acknowledged that there are two ways of measuring tax expenditures. To reiterate, the choice of tax base should be a policy decision, not a built-in assumption

I’m no cheese connoisseur. I’m usually happy with American or provolone, and I’ll even go for that Philly favorite, Cheese Whiz. But I understand that some people have more refined tastes, and they feel very strongly about the issue. And they get very upset when their favorite cheese is taken away. The Washington Post reports on a recent instance of this:

For centuries, microscopic mites have been part of the process for making Mimolette, a mild-tasting cheese shaped like a cannonball and electric orange in color. For decades, the cheese has been imported from France and distributed to shops and grocery stores across the United States.

divThat is, until this spring, when the Food and Drug Administration began blocking shipments of the Gouda-like product at U.S. ports, leaving thousands of pounds of it stranded in warehouses from New Jersey to California.

The FDA says inspectors found too many cheese mites per square inch crawling on the cantaloupe-like rinds of Mimolette, raising health concerns. But it hasn’t explained exactly why it began holding up the cheese shipments after decades of relatively few problems. “The only thing we can do is cite our regulations, which show very clearly that our job is to protect the food supply,” FDA spokeswoman Patricia El-Hinnawy said.

divCato’s Caleb Brown has just done an excellent video on this issue, and Walter Olson explains a bit more here:

Mimolette is a beloved French cheese produced for hundreds of years around the city of Lille. It looks somewhat like a ripe cantaloupe and tastes not unlike classic Dutch Gouda, to which it is related. Its distinctively pitted rind and hard-to-pin-down taste both arise from the action of microscopic cheese mites that are deliberately introduced to its surface as part of its production. Mimolette has been imported to specialty cheese shops in the United States for many years without incident, but now it’s come to the attention of the federal Food and Drug Administration (FDA), which is afraid that someone might have an allergic reaction to lingering remnants of the insect helpers (which are mostly removed in processing before final shipment). Now a large quantity of the expensive cheese is sitting in a warehouse in New Jersey, legally frozen, while its American fanciers prepare to go without. 

Hans Bader of CEI has also reported on this.

I just wanted to weigh in briefly on the trade law aspects of the issue. One of the WTO agreements deals with “Sanitary and Phytosanitary Measures.” It covers a number of government measures, including those applied “to protect human or animal life or health … from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs,” where those measures “directly or indirectly, affect international trade.” My sense is that the FDA actions would be covered by these terms, and thus the agreement applies here.

So then you get into the substance of the agreement. Among other things, it requires that governments “shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence … .” It also says that governments “shall ensure that their sanitary or phytosanitary measures are based on an assessment, as appropriate to the circumstances, of the risks to human, animal or plant life or health, taking into account risk assessment techniques developed by the relevant international organizations.”

What these and related provisions mean, in a nutshell, is that these kinds of government actions have to be backed up by science (there are other obligations, too, but I don’t want to drag this post on too much). That’s easy to say in the abstract, but what does it mean in practice? Basically, if there is a complaint under the agreement, a WTO panel hearing a claim under these provisions will consult with scientific experts to figure out what the science is, and then reach a conclusion on whether the measure violates the agreement (that is, if it is based on sound science).

What does the science say here? I don’t know much about it myself, but there is the following from the Post article:

Rachel Dutton, a microbiologist who runs a cheese research lab at Harvard University, said people who handle cheese and come into contact with large amounts of mites have been known to have occasional allergic reactions. But she said she’s unaware of anyone getting sick from eating mites in cheese, which itself is full of various microbes that provide distinct textures, flavors and aromas.

“I understand their desire to protect the consumer,” Dutton said of the FDA’s caution. But “it’s true that these cheeses have been consumed for hundreds, if not thousands, of years with no apparent link to disease from the mites.”

Whether a WTO complaint is brought depends on how hard the EU (which acts for the French government at the WTO) wants to press this issue. Some behind the scenes lobbying might be quicker, but if that fails, perhaps they will decide it’s worth taking the case to the WTO.