We Know Trump Supporters Would Back Immigrant Legalization If He Did

In an interview this weekend, Donald Trump officially dumped plans to deport all unauthorized immigrants, stating that he would focus only on criminals. Trump didn’t specify how he would handle non-criminals, but he shouldn’t hold back on advocating full legalization for fear of losing his backers. His earlier attempts at softening show he can maintain their support; in fact, Trump’s supporters appear more interested in border security than deportation anyway.

During the early part of his campaign, Trump secured a huge amount of support among primary voters who opposed legalization. He then spent the remainder of his campaign trying to convince other Republicans that mass deportation was the way to go.

But it never worked. In fact, Pew Research Center polls show that more Republicans supported legalization after his campaign than before it—rising from 56 percent to 59 percent from March 2015 to March 2016. By the time of the election, 60 percent of self-described Trump voters told Pew that they favored legalization. Trump simply failed to win the argument.

In late August, it seemed like Trump realized that his case was falling on deaf ears, so he toyed with a pivot. During an interview on Fox, he polled a very large audience of supporters. When he asked if they favored mass deportation, the room remained mostly quiet. When he asked about a plan to let non-criminal unauthorized immigrants “stay in some form,” the crowd cheered. He promised that “we’ll work with them,” saying it was “tough to throw them out.”

The Return of Glass-Steagall

With both major party platforms calling for a return to some version of Glass-Steagall, it was a given that, whoever won the Presidential election, the issue would return to the public debate. However, we still need to do considerable work ending bailouts, and a return to Glass-Steagall would most likely divert us from that goal.

In order to help clarify this debate, the Cato Institute is proud to today offer a new paper on the topic, The Repeal of the Glass-Steagall Act: Myth and Reality by Oonagh McDonald, CBE. Dr. McDonald is an international financial regulatory expert, having held senior positions in several U.K. financial regulatory agencies. She was also a member of the British Parliament from 1976–87. Her most recent book details the failure of Lehman Brothers.

The new paper lays out a legislative history of Glass-Steagall, pointing out that of the provisions relating to the separation of commercial and investment banking (sections 16, 20, 21, and 32) only two of those four (sections 20 and 32) were repealed in 1999 by the Gramm-Leach-Bliley Act. Two remain current law today. Dr. McDonald further demonstrates how the two repealed provisions had already been largely eliminated by court and regulatory decisions long before 1999.

Dr. McDonald also reviews the economic literature, concluding that Glass-Steagall was not even the appropriate response to the banking problems of the 1920s and 1930s in the first place. What’s more, had Glass-Steagall remained fully in force after 1999, the financial crisis of 2008 would have largely looked the same. As I’ve written elsewhere, Glass-Steagall has essentially become a symbolic lens—a “Rorschach Test” that reflects one’s views on the power of big banks. However, if we truly wish to end bailouts, we need to get the history, law and economics right. Dr. McDonald’s paper makes an important contribution in that direction.

Political Violence and Domestic Surveillance: Has The Fuse Been Lit?

Ben Schreckinger at POLITICO has a story out today that every American concerned about the current political climate in our country should read. With the lede of “Trump Protesters Plan to Build ‘Tea Party’ of the Left,” Schreckinger quotes several progressive activists, including former Occupy Wall Street veteran Micah White. It’s worth quoting White in full, because his comments will absolutely draw the attention of officials at the FBI and DHS:

American activists are finally starting to understand that protest is broken. The people cannot attain sovereignty over their governments by collective protest in the streets. There are only two ways to achieve sovereignty in this world: Win elections or win wars. Now that street protest is not an option, we will see the Trump resistance split into these two fronts. Some will pursue the strategy of using social movements to [win] elections while others go down the dark path of ’70s guerrilla insurrection. I advocate winning elections.

Without question, the Founders would agree with much of what White says. American colonists spent over a decade trying to get Crown authorities to understand that every new tax or regulation imposed on them without their consent was creating resentments and opposition to British rule that, if not resolved peacefully, would lead to armed conflict.

Some in Parliament understood the dangers and sympathized with Americans—but not enough. It’s worth remembering that the Continental Congress was formed almost a full year before the Declaration of Independence was issued. The warning signs were there, but George III doubled-down on repression rather than negotiate with the colonists. The rest, as they say, is history. The question raised by White’s comments and the rest of Schreckinger’s piece is whether that history is about to repeat itself, this time with the federal government in the lead role of political oppressor.

New President. New SEC. Less Regulation?

The Securities and Exchange Commission (SEC) is poised to have the majority of its seats filled by Trump nominees.  Earlier this week SEC chair Mary Jo White announced she would be stepping down at the end of President Obama’s term. This is not in itself surprising.  The chair serves at the will of the president and it’s customary for the current chair to step aside and let an incoming president install a chair of his or her choosing.  What is remarkable however is the number of vacancies that leaves president-elect Trump to fill. 

The five member commission has had two empty seats for over a year and a half now, following Republican Dan Gallagher’s resignation in May 2015 and the expiration of Democrat Luis Aguilar’s term the same month. Although President Obama nominated two candidates to fill those seats, Republican Hester Peirce and Democrat Lisa Fairfax, their confirmations have been stalled in congress.  (Like many similar commissions, the SEC must be politically balanced with no more than three seats filled by members of the same party.)  White’s resignation will therefore leave only two commissioners in office, Republican Michael Piwowar and Democrat Kara Stein. Until a new chair can be confirmed, it is likely that president-elect Trump will name Piwowar acting chair.  In the meantime, however, with only two commissioners, it is unlikely that the SEC will pursue any kind of ambitious agenda.

Looking forward to what the SEC might look like with its new members in place, it would be reasonable to hope for a less aggressive and more market-friendly agency than we have had under White’s direction.  Trump has sounded a decidedly deregulatory tone both in the course of the campaign, vowing to dismantle Dodd-Frank, and in the days since the election.  His pick of Paul Atkins, a former SEC commissioner known for his strong free-market bent, to head up part of his transition team also signals a commitment to paring back the voluminous regulations that have plagued the financial sector in recent years. 

The Enemy Gets a Vote

Resolute Desk

In the week since election night, foreign policy watchers (myself included) have rushed to speculate about the effects that President Trump’s administration will have on the world. The most dramatic effect is the potential upending of the international order that the United States built after World War II. Of course, at this point it is impossible to determine whether or not such a consequence will come to pass, but it deserves consideration.

Baked into the idea that Trump will tear down the international order is the assumption that Hillary Clinton would have maintained the order if she was president. Jeffrey A. Stacey argued as much in Foreign Affairs when he wrote, “The world’s challenges require a determined use of U.S. leadership, not isolationism. And in the areas where Obama’s restraint has failed, the more activist Hillary Clinton Doctrine…could likely prevail.” However, the idea that the United States can influence events through “leadership” ignores the fact that in foreign policy the enemy gets a vote. In other words, the growing relative power of America’s adversaries will still pose a challenge to the international order, regardless of what actions the United States takes or who sits in the Oval Office.

America’s ability to rein in the bad behavior of other states has diminished, not because the United States is in decline, but rather because the power of our adversaries has grown. In East Asia, for example, the two most important challenges to the security status quo are North Korea’s nuclear weapons program and China’s improving conventional military capabilities. Both developments threaten the regional order in East Asia, and resist American attempts to stop them. Multilateral and bilateral sanctions efforts have failed to stop North Korea’s nuclear weapons program, which has come a long way with minimal external assistance.

China’s growing military power enables more assertive behavior in the South and East China Seas, despite displays of resolve by the United States and its allies. While many have criticized the Obama administration for not doing more against China, the simple fact is that as its military grows strong it becomes harder to deter China from using it. Beyond East Asia, after years of neglect following the Cold War, the Russian military is fielding new capabilities and pushing back against NATO expansion to countries along its border.

The growing relative power of America’s adversaries does not make the president obsolete, but the individual behind the Resolute desk is not omnipotent. They cannot always prevent changes in the balance of power or maintain the international order by dialing up the “leadership” they demonstrate. We don’t know what impact Donald Trump will have on the world, but the threats America faces would exist regardless of who won the election. The assumption that Hillary Clinton would be able to prevent negative outcomes through greater leadership on the international stage disregards the growing power and agency of America’s challengers. 

The “Progressive” Threat to Baltic Exceptionalism

I’m a big fan of the Baltic nations of Estonia, Latvia, and Lithuania.

These three countries emerged from the collapse of the Soviet Empire and they have taken advantage of their independence to become successful market-driven economies.

One key to their relative success is tax policy. All three nations have flat taxes. Estonia’s system is so good (particularly its approach to business taxation) that the Tax Foundation ranks it as the best in the OECD.

And the Baltic nations all deserve great praise for cutting the burden of government spending in response to the global financial crisis/great recession (an approach that produced much better results than the Keynesian policies and/or tax hikes that were imposed in many other countries).

But good policy in the past is no guarantee of good policy in the future, so it is with great dismay that I share some very worrisome news from two of the three Baltic countries.

First, we have a grim update from Estonia, which may be my favorite Baltic nation if for no other reason than the humiliation it caused for Paul Krugman. But now Estonia may cause sadness for me. The coalition government in Estonia has broken down and two of the political parties that want to lead a new government are hostile to the flat tax.

Estonia’s government collapsed Wednesday after Prime Minister Taavi Roivas lost a confidence vote in Parliament, following months of Cabinet squabbling mainly over economic policies. …Conflicting views over taxation and improving the state of Estonia’s economy, which the two junior coalition partners claim is stagnant, is the main cause for the breakup. …The core of those policies is a flat 20 percent tax on income. The Social Democrats say the wide income gaps separating Estonia’s different social groups would best be narrowed by introducing Nordic-style progressive taxation. The two parties said Wednesday that they will immediately start talks on forming a coalition with the Center Party, Estonia’s second-largest party, which is favored by the country’s sizable ethnic-Russian majority and supports a progressive income tax.

And Lithuanians just held an election and the outcome does not bode well for that nation’s flat tax.

After the weekend run-off vote, which followed a first round on October 9, the centrist Lithuanian Peasants and Green Union party LGPU) ended up with 54 seats in the 141-member parliament. …The conservative Homeland Union, which had been tipped to win, scored a distant second with 31 seats, while the governing Social Democrats were, as expected, relegated to the opposition, with just 17 seats. …The LPGU wants to change a controversial new labour code that makes it easier to hire and fire employees, impose a state monopoly on alcohol sales, cut bureaucracy, and above all boost economic growth to halt mass emigration. …Promises by Social Democratic Prime Minister Butkevicius of a further hike in the minimum wage and public sector salaries fell flat with voters.

The Social Democrats sound like they had some bad idea, but the new LGPU government has a more extreme agenda. It already has proposed to create a special 4-percentage point surtax on taxpayers earning more than €12,000 annually (the government also wants to expand double taxation, which also is contrary to the tax-income-only-once principle of a pure flat tax).

DHS: Even-handed Enforcer or Punisher of Select States?

Just over a month ago, another Department of Homeland Security deadline for state compliance with the provisions of the REAL ID Act passed. It was but the most recent in a series of deadlines DHS has improvised since the statutory May 2008 compliance date passed without a single state participating in the national ID program.

Time and again, when faced with resistance from the states, DHS has backed down. But the agency has had more success goading states toward compliance since it stopped issuing deadline extensions in the Federal Register and took the process offline to deal directly with individual states. Divide and conquer works.

A new series of deadlines assigns different states to one of three dates—January 30th, June 6th, and October 16th, 2017—depending on where they are in the compliance process. If the states in each category have not sufficiently answered to DHS by the relevant date, DHS will judge them non-compliant. As it has so many times before, DHS says their residents will then be at risk of having their state-issued IDs refused for federal purposes.

Because so much of this is happening behind the scenes, it is hard to gauge how DHS is choosing which states to play hardball with and which states to treat with kid gloves. But the staggered compliance deadlines have the feel of meting out punishment to states that have been the most vocal in their resistance to REAL ID. It does not have the feel of an agency neutrally enforcing a generally applicable law.

Consider the earliest group, which has a January 30th, 2017 deadline. It consists of Kentucky, Maine, Montana, Oklahoma, Pennsylvania, and South Carolina (as well as the U.S. territories of Guam and the Virgin Islands). DHS already considers Minnesota, Missouri, and Washington State “non-compliant” with REAL ID.