September 18, 2019 10:50AM

Statement on President Trump’s Decision to Impose Additional Sanctions on Iran

This morning, President Trump announced via Twitter that he had directed Treasury Secretary Mnuchin to "substantially increase Sanctions on the country of Iran!"

I issued the following statement in response:

The problem with the Trump administration’s maximum pressure campaign isn’t the pressure. No one doubts that U.S. policy is imposing considerable pain on the Iranian people. Additional U.S. sanctions will likely increase this suffering, as my Cato colleague John Glaser predicted here.

But to no good end. The Iranians will never give in to U.S. demands; to do so would amount to utter capitulation, the complete surrender of Iranian sovereignty, and the de facto end of the Iranian government. This has been a fervent hope among certain hawks for decades, but hope is not a strategy. Additional pressure and pain cannot resolve the fundamental contradiction at the heart of the Trump administration’s strategy toward Tehran.

More broadly, if President Trump is serious about resetting U.S. foreign policy, he must revisit his expectations – and his administration’s policies. He may claim to want to end our endless wars, but his actions are leading in the opposite direction. A combination of bluster, threats, and intransigence will not produce a diplomatic breakthrough. On the contrary, it is likely only to exacerbate the many ongoing conflicts in the Middle East, and increase the chances that Americans are drawn more deeply into them.

September 17, 2019 2:02PM

Hong Kong Protests and the Political Effects of an “Exit” Option

Sparked by a Chinese extradition bill that would have made it possible for people in Hong Kong to be tried in the mainland’s justice system, protesters in Hong Kong have demonstrated against Beijing for 100 days as of this week. Since starting, the protests have grown to include a broader critique of the Chinese communist government’s policies in Hong Kong. In anticipation of a potential government crackdown, no doubt influenced by fear of a repeat of the massacre at Tiananmen Square 30 years ago, the option for protesters and their families to leave seems increasingly important.

One of the potential downsides of a universal “exit option” is that many Hongkongers would just leave the city permanently rather than trying to convince the government there to be more respectful of individual rights. My colleague Christopher Preble and I discussed this on a recent Cato podcast. That is a small concern compared to the potential humanitarian downsides of a deadly crackdown in Hong Kong where people do not have the option to leave, but such a universal exit policy from authoritarian regimes could undermine protest movements around the world and slow the advancement of individual liberty.

On the other hand, emigrants could help support pro-freedom protest movements in their home countries from relative safety in the United States or elsewhere. Protesters might also be more bold and people might be more likely to join the protest movement if they know that they can leave if the government responds in a more tyrannical fashion. A last potential outcome is that the possibility of a mass exit will induce governments to be less authoritarian. On this last point, Anne Robert Jacques Turgot went so far as to argue that American open borders in the 18th century would “oblige the European governments to be just and enlightened.”

Fortunately, there is a large and robust academic literature on how emigration affects institutions in home countries. Michelangelo Landgrave and I even co-authored a short literature survey on this topic a few years ago to accompany other good surveys.

Unfortunately, only a small portion of that literature is relevant to the situation faced by Hongkongers. Much of that literature examines how return migrants affect institutions in their home countries, which wouldn’t be relevant to the potential effects for Hongkongers as they would likely never be able to return. Another large portion of that literature investigates how monetary remittances affect institutional development, which isn’t relevant for a rich place like Hong Kong. This post focuses on a handful of case studies on how emigrant communities affect political developments in their home countries.

The most relevant paper on this topic is by Toman Barsbai, Hillel Rapoport, Andreas Steinmayr, and Christoph Trebesch. It found that Moldovans who emigrated to Western Europe had a strong and positive impact on the opinions of those left behind through both return migration and by maintaining communication. The lines of communication with emigrants allowed Moldovans living in Western Europe, especially Italy, to influence voters in Moldova to turn against the Communist Party and to embrace more liberal norms, values, and information from outside of the country.

Another paper by José Itzigsohn and Daniela Villacrés found that Salvadorans in the United States worked with hometown associations in El Salvador to support political projects that promote economic development. They also found that emigrants from the Dominican Republic did much lobbying from a distance to maintain émigré voting rights and political participation back in their home countries.

A more recent paper by Mounir Karadja and Erik Prawitz looked at how 19th-century Swedish emigration affected voting, labor union membership, strikes, and political institutions in Sweden. Using an instrumental variable method that uses the interaction between harsh winters in Sweden in the late 1860s and the distance to a port, they find that the emigration option improved their bargaining position vis-à-vis local elites. In 19th and early 20th century Sweden, that meant fewer landlord privileges, stronger labor unions, and more progressive welfare and government policies. An increase in immigration by 10 percent increased voter turnout by 0.8 percent and the labor membership rate by 2.3 percent.

On the other side, emigration from Italy during the Great Recession slowed down political reform and reduced political change in that country according to work by Massimo Anelli and Giovanni Peri. Using an instrumental variable approach, they uncovered these results:

First, greater emigration rates had a negative impact on indicators of political change such as the average age of local politicians, the share of highly educated, and the share of women among them. Second, greater emigration rates also increase the probability of very negative local political outcomes, as captured by the dismissal of a city council.

Political reform in Italy is not as dire nor as important as the protest movement for individual rights in Hong Kong, but it's important to include results that push in the opposite direction to get a full range of the possibilities.  

Those short case studies are only somewhat analogous to the current situation in Hong Kong or what would happen to the freedom movement there if the United States government or other governments opened their borders to the protesters. Ultimately, allowing Hongkongers to leave will provide an important humanitarian safety valve for people who share American values even if it has an adverse effect on the protest movement. American policymakers shouldn’t second guess the actions of those on the ground protesting China’s totalitarian policies, whether those actions are to stay and continue to protest or to emigrate to the United States. Ideally, the United States government should make it clear that any Hongkonger who wants to leave can come to the United States and be granted asylum with a minimum of restriction.

September 17, 2019 12:12PM

Presidential Spending Update

Federal spending is rising and the government’s debt is growing by a trillion dollars a year. President Trump came into office promising spending cuts and debt reduction, but he has delivered the opposite so far.

How fast has Trump raised spending compared to past presidents? Spending for Trump’s third year (fiscal 2020) was roughly set in the August budget deal with Congress, so we can look at the president’s spending over his first three years.

Presidents share budget power with Congress. They can either sign or veto spending bills, which gives them a lot of leverage. Presidents can dig in their heels against congressional profligacy, or they can go with the flow and let political pressures push spending ever higher.

The following charts show annual average real (inflation-adjusted) spending growth under presidents back to Eisenhower. The data comes from Table 6.1 here, except I updated 2020 based on August CBO. See further notes at the bottom.

Figure 1 shows total federal outlays. Ike is negative because defense spending fell at the end of the Korean War. Obama is the most frugal president since Ike based on this metric.

LBJ is the big-spending champ, followed by George W. Bush. Both Texans pushed for large increases on both guns and butter. Trump also presides over increases in defense and nondefense spending.

By contrast, real defense spending fell under both Bush I and Clinton, which helped reduce their growth rates in Figure 1.

Figure 2 shows total outlays less interest. Carter, Reagan, and Trump perform better on this metric than the first one because they faced rising interest costs during their tenures.

Figure 3 shows total outlays less interest and less defense. Thus, it includes spending on nondefense discretionary and entitlement programs. Prior to Carter, the White House was a horror show of big spenders from both parties.

Figure 3 also shows that for frugality in nondefense spending, Reagan stands alone.

I measured spending growth by calculating the compound annual rate between the first and last years of a president’s term. For example, Bush II was 2001 to 2009. Trump was 2017 to 2020, with the latter year based on the current CBO baseline estimate.

I made two adjustments to the budget data, both for 2009. First, the official data includes an outlay of $151 billion for TARP in 2009. But TARP ended up costing taxpayers nothing, and official budget data reverses out the spending in later years. So I’ve subtracted $151 billion from the 2009 amount.

Second, 2009 is the last budget year for Bush II, but that year was extraordinary because Obama signed into law the giant stimulus bill, which included $114 billion in outlays for 2009. It is not fair to count that spending for Bush II, so I’ve subtracted it out.

Note also that spending in the stimulus bill was mainly temporary and had petered out by Obama’s last year in office. Obama thus added a trillion dollars or so to federal debt that is not reflected in my measure here, which uses the spending total in the last year to measure the growth.

Finally, while spending growth rates are generally down from the pre-Reagan decades, economic growth is slower these days. As a result, the government’s share of the economy has crept upward since Clinton left office, and CBO projects that the share will continue to rise in coming years.

September 16, 2019 3:43PM

Deportation Rates in Historical Perspective

In last week’s Democratic primary debate, Univision anchor Jorge Ramos asked Joe Biden about President Obama’s record on immigration enforcement. Ramos said, “you served as vice president in an administration that deported 3 million people, the most ever in U.S. history.”

Democratic partisans were very upset on twitter, but the numbers don’t lie. President Obama removed more people from the United States, no matter how you dice the numbers than any other president. But was President Obama's removal record an anomaly? To answer that question, I looked at the number of removals per president going back to 1892 when the government first started recording them. Table 1 shows the presidents, the number of removals under each administration, and the number of removals per year. The latter number is important as it controls for the number of years in office.

From 1892-2018, Democratic presidents were in power for 60 years and removed about 4.6 million people for an average of 76,635 per year. During the same time, Republican Presidents were in power for 67 years and removed about 3.7 million people for an annual average of 54,670. Presidents usually inherit the immigration enforcement policies of their predecessors for at least a year. I adjusted for that by assigning the number of removals in the first year of any administration to the previous administration and the results were almost identical.

But the political parties changed quite a bit over the 1892-2018 period. Shortening the period to 1990-2018 produces a similar result. During that time, Democratic presidents were in power for 55 percent of the time and removed 60 percent of all those removed or over 3.9 million. Republican presidents were in power for 45 percent of the time and removed 40 percent of all those removed or about 2.7 million. From 1990-2018, Democratic president removed an average of 246,006 people per year in power and Republican presidents removed 205,453 people per year in power.

Removals as a percentage of the illegal immigrant population have varied considerably over the 1990-2018 period (Figure 1). Estimates for the number of illegal immigrants come from the Department of Homeland Security, the Center for Migration Studies, and linear interpolation for missing years except for 2018 where I assume that the number of illegal immigrants is the same as estimated by the Center for Migration Studies.

George Bush removed an average of 0.91 percent of the estimated illegal immigrant population each year, Bill Clinton removed an average of 1.86 percent per year, George W. Bush removed an average of 2.42 percent per year, Barack Obama removed an average of 3.33 percent per year, and Donald Trump has removed an average of 2.59 percent per year through 2018. President Trump can still increase the pace of deportations, but he won’t overcome President Obama’s record.

One problem with the removal statistics above is that they changed in the mid-2000s to include some illegal immigrants apprehended at the border rather than just removals from the interior of the United States. It would be better if we had the number of removals from only the interior of the United States and then recalculated the numbers for Figure 1. Even adjusting for that for the years that we have interior removals still shows that President Obama broke removal records.

September 16, 2019 1:06PM

Striking Iran In Response to Abqaiq Attack Would Be a Mistake

The smoke hasn’t yet cleared from the attack on Saudi Aramco’s facility, but U.S. officials were quick to pin blame on Iran, with some even going so far as to suggest that military strikes could be – and should be – in the offing.

Such a move should upset constitutional purists; Congress hasn’t authorized military action against Iran for these purposes. The case that the Trump administration might present to Congress in an attempt to build support for strikes is unlikely to be compelling. Indeed, the story of the attack and what U.S. military strikes in retaliation would achieve is a lot more complicated than the war hawks would have you believe.

First, everyone should keep the likely economic impact in perspective. The Wall Street Journal reported on Saturday that production losses from the shutdown at the Abqaiq facility would amount to “about 5.7 million barrels a day,” or “roughly 5% of the world’s daily production of crude oil.” But such supply shocks are rarely long-lasting, and facilities like the one at Abqaiq are often quickly repaired. Saudi Aramco is no different from any other company in that it wants to increase production as quickly as possible, and so is highly motivated to make speedy repairs. (Boston University’s Josh Shifrinson makes a related point here.)

Second, the energy market in general is far more resilient than people give it credit for. In addition to the strategic petroleum reserve, which President Trump has hinted he might tap, other energy producers will want to replace the lost Saudi supplies. If President Trump were truly concerned about the possible impact on gasoline prices for consumers, he might also reconsider his decision to try to keep Iranian oil off the market.

That is unlikely, however, because too many in his administration –and the DC policy community, generally – seem genuinely excited to use this latest incident as a justification for a widening of the conflict with Iran.

Last week, for example, before the attack, the State Department’s Brian Hook suggested that Iran is primarily responsible for fueling the war in Yemen, and claimed that greater U.S. involvement in the conflict was essential to preserving American security. The facts suggest otherwise.

Mr. Hook and others exaggerate the extent to which Iran controls the Houthis. The latter are a distinct group largely driven by narrow, local goalsnot a proxy group doing Iran's regional bidding. They don't take orders from Tehran. Aiding the Houthis hasn't brought Iran greater regional control. What it has done is frustrate the Saudi coalition's objectives, sticking them in a quagmire that has earned them much of the world's ire.

While some in Congress want Americans to become even more deeply embroiled in the Saudi-Iran dispute, we might instead take this occasion to reconsider our reflexive support for the House of Saud. The United States is, after all, already heavily involved in the proxy war that the two countries are waging in Yemen, mostly through intelligence sharing and arms sales. A report earlier this year concluded that Saudi Arabia and the United Arab Emirates “used the US-manufactured weapons as a form of currency to buy the loyalties of militias or tribes” in Yemen, including some who are affiliated with Al Qaeda. Other arms reportedly flowed to Iranian-backed militias. The Senate voted in June to block further sales, with seven Republicans joining the Democrats to rebuke the White House. This rare case of bipartisanship is unsurprising given that numerous polls show that the American people are anxious to avoid getting sucked into yet more conflicts in the region. Americans also strongly disapprove of continued U.S. support for the Kingdom of Saudi Arabia, one of the most illiberal and repressive regimes on the planet.

Congress should seriously consider the implications of military action in response to the attack on Abqaiq. Military strikes against Iran would only exacerbate tensions and increase the likelihood of a larger military conflict. The Trump administration’s bid to embroil the United States even more deeply in a brutal civil war undermines Americans' security and erodes American values.

September 16, 2019 11:41AM

Today’s Hyper‐​Partisanship Would Have Torpedoed Nixon’s China Initiative

My new article in the September-October issue of the American Conservative ponders whether President Richard Nixon could have pursued his diplomatic initiative to normalize relations with the People’s Republic of China (PRC) if today’s extreme partisanship in foreign policy had existed then. The shrill partisan criticism directed against President Trump’s attempt to establish a less confrontational relationship with North Korea suggests that that the answer is “no.”

Nixon’s 1972 trip to China marked the abandonment of the U.S. campaign to isolate and demonize the PRC. His conciliatory effort did generate some domestic controversy, but most members of Congress were reasonably supportive. The New York Times noted that Nixon was winning the “broad approval of Congress” for his new China policy. Perhaps most crucial, the support was firmly bipartisan. The majority of the major news outlets also generally praised the president’s initiative.

Raw partisanship was little in evidence. Indeed, most of the criticism that did emerge came from conservative Republicans who complained that the embryonic rapprochement undercut America’s longtime ally, Taiwan. Leading congressional Democrats, including Sen. Ted Kennedy and Senate Majority Leader Mike Mansfield, praised the president for easing tensions with China. Liberal columnist James Reston stated that it was Nixon’s finest hour.

Trump’s experience has been strikingly different. His critics, mostly congressional Democrats and their media allies, along with a small contingent of neoconservative hawks, launched a barrage of criticism about his outreach to Kim Jong-un from the onset. Some of them denounced the president’s willingness even to meet with the North Korean leader, contending that according Kim such an honor implicitly “legitimized” his brutal dictatorship. Washington Post columnist Jennifer Rubin epitomized that view, fuming: “The spectacle of the murderous dictator Kim Jong Un on equal footing with the president of the United States . . . was enough to turn democracy lovers’ stomachs.” President Trump “elevated North Korea to the level of the United States while preserving the regime’s status quo,” intoned House minority leader Nancy Pelosi. Sen. Chris Murphy (D-CT) later exuded outrage in a tweet that Trump insisted on continuing a dialogue with such a monstrous leader. “Kim Jong Un is a homicidal tyrant who deliberately starves his people and murders those who displease him. This is who he is and who he has always been. It’s simply heartbreaking to know tonight that his biggest global cheerleader is the President of the United States of America.”

Yet Nixon initiated a dialogue with Mao Zedong, one of the worst mass murderers in human history, without much criticism from prominent Democrats. They understood that effective diplomacy often requires interaction with deplorable regimes and individuals to reduce tensions and the potential catastrophe of war.

If done purely for cheap partisan advantage, objecting to Trump’s pursuit of a rapprochement with North Korea is irresponsible. If, on the other hand, his opponents are sincere, they are being disturbingly naïve. Indeed, earlier critics would have had a better case to accuse Nixon of “appeasement” and conferring “legitimacy” on a totalitarian regime. Nixon was not only willing to open a dialogue with Mao and Zhou Enlai, he traveled to China to start the process. The latter feature gave the PRC a major prestige coup. Conversely, Trump insisted on holding the first two summits in neutral locations and the third at the Demilitarized Zone between North and South Korea.

If myopic partisan critics had strangled Nixon’s China policy in its cradle, America’s relationship with Beijing today likely would be more dangerous—perhaps far more dangerous--for all concerned. President Trump’s difficult North Korea initiative deserves similar support and encouragement instead of ridicule and knee-jerk hostility. Prominent Democrats in the 1970s behaved in a responsible, constructive manner, despite having to back a political adversary. So, too, did most liberal media outlets. The petty conduct of their successors in response to Trump’s outreach to North Korea stands in depressing contrast to such statesmanship.

September 13, 2019 4:13PM

Minding Money by Migrating

Americans are moving from higher-tax states to lower-tax states. Of the 25 highest-tax states, 24 had net out-migration in 2016. Of the 25 lowest-tax states, 17 had net in-migration, as I discuss in this study

State-local taxes are 14.7 percent of personal income in the largest outflow state, New York, but they are just 7.5 percent in the largest inflow state, Florida. Florida’s government costs half as much as New York’s and the services are probably just as good. Florida is warm and sunny, so why not move?

Bloomberg reported yesterday:

Billionaire Carl Icahn is planning to move his home and business to Florida to avoid New York’s higher taxes. … The move is scheduled for March 31 and employees who don’t do so won’t have a job.

… Hedge fund billionaires have relocated to Florida for tax reasons for years—David Tepper, Paul Tudor Jones and Eddie Lampert being among the most prominent. But Florida officials have been aggressively pushing Miami as a destination for money managers since the Republican-led tax overhaul.

The Republican overhaul in 2017 likely accelerated interstate migration because it increased the relative tax pain of living in high-tax states.

We don’t yet have hard data on the migration impact, but there is a stream of articles with anecdotal evidence. The Wall Street Journal reported this week:

. . . Financial planners say that as high-net-worth taxpayers finalize their 2018 returns to meet the October tax-extension deadline, they expect many residents of New York, New Jersey, California and other relatively high-tax states will decide to spend more time in Florida, Texas, Nevada or other states that don’t collect income taxes, or move there outright.

“People are just starting to see the effect,” says Daniel Bernard, an attorney with Twomey Latham in Riverhead, N.Y. “Over the coming months we’re going to see a lot more people looking to establish Florida residency.”

Ed Wollman, a founding partner who handles taxes and estates with Wollman, Gehrke & Associates in Naples, Fla., says a New York City snowbird couple with taxable income of $500,000 would pay about $50,000 in state and city income taxes. A couple with the same taxable income in Illinois would escape a tax bill of close to $25,000 by moving to a no-income-tax state, he says. In New Jersey, the savings would be nearly $32,000, in California more than $46,000 and in Connecticut more than $32,000.

… In Texas, estate attorney Virginia Hammerle of the Hammerle Finley Law Firm in Lewisville reports an influx of snowbird clients wanting to move their tax residences from California and the East Coast. “This has become a very hot topic,” Ms. Hammerle says. “I’ve had clients who tell me they realize savings of $50,000 to $100,000 annually.”

Map of migration between states in the U.S.