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Nicaragua and the Irony behind its Orthodox Economic Policies
Nicaragua is in flames as the 11-year-old kleptocracy of Daniel Ortega is rocked by massive protests that threaten its continuity. The unrest began after the government announced some adjustments to its bankrupted social security system. Ironically, for a self-proclaimed socialist who constantly rails against U.S. imperialism, Ortega was implementing the recommendations of the International Monetary Fund (IMF).
Ortega’s second spell in power has been quite the puzzle. He was a fervent supporter of the late Hugo Chávez and continues to be one of Venezuela’s most vocal allies in Latin America. Huge billboards that portray Nicaragua as “Christian, Socialist, and Solidary” greet visitors to Managua. Yet the economic policies of the Ortega regime are among the most orthodox in Latin America: inflation is relatively low (5.7% in 2017), the projected fiscal deficit for 2018 is just 1.1% of GDP, and economic growth has averaged 4.2% per year in the last decade. Nicaragua boasts free trade agreements with the United States and the European Union. In January, Standard & Poor’s highlighted Nicaragua’s “track record of steady GDP growth and pragmatic economic policies, its low fiscal deficits, and moderate government debt burden.” Moreover, in 2016 the IMF closed its office in Managua because of “Nicaragua’s success in maintaining macroeconomic stability and growth.” Not bad for a left-wing populist.
Since coming back to power in 2007, Ortega kept his revolutionary rhetoric but dropped his socialist economic policies of yore. He reached an understanding with the business sector: Ortega would guarantee macroeconomic stability and a good environment for private investment in exchange for allowing him to dismantle Nicaragua’s democratic institutions and impose a corrupt dynastic dictatorship. The business community acquiesced.
That is the irony about what triggered the protests: Faced with the imminent insolvency of the social security system, Ortega had several options. The easiest for a populist would have been to make up the shortfall by printing money. That would have fueled inflation, but Ortega could have blamed it on external factors—just as Nicolás Maduro does in Venezuela. Instead, Ortega decided to follow the IMF recommendations of increasing payroll taxes and cutting pension benefits. That is certainly less irresponsible than debasing the currency.
In fairness, the adjustments to the social security system were the straw that broke the camel’s back. Nicaraguans reacted to years of widespread corruption and nepotism. The heavy-handed way in which the regime handled the first bouts of unrest—by suspending independent TV channels and violently cracking down on demonstrators—just fueled the protests. Nicaragua’s turmoil is no longer about the controversial adjustments to social security—which Ortega called off anyway. It is about the massive corruption of the Ortega regime and the legitimate aspiration of many Nicaraguans to live in a democratic country with more or less decent institutions.
It is quite ironic that Ortega was elected as a left-wing populist but rules as an economic centrist who closely follows the advice of international financial institutions. The protests in Nicaragua show that macroeconomic stability without democracy, transparency and political freedoms is neither desirable nor sustainable.
Some More Insensitivity about Global Warming
Hot off the press, in yesterday’s Journal of Climate, Nic Lewis and Judith Curry have re-calculated the equilibrium climate sensitivity (ECS) based upon the historical uptake of heat into the ocean and human emissions of greenhouse gases and aerosols. ECS is the net warming one expects for doubled atmospheric carbon dioxide. Their ECS ranges from 1.50 to 1.56 degrees Celsius.
Nic has kindly made the manuscript available here, so you don’t have to shell out $35 to the American Meteorological Society for a one-day view.
The paper is a follow-on to their 2015 publication that had a median ECS of 1.65⁰C. It was criticized for not using the latest-greatest “infilled” temperature history (in which less-than-global coverage becomes global using the same data) in order to derive the sensitivity. According to Lewis, writing yesterday on Curry’s blog, the new paper “addresses a range of concerns that have been raised about climate sensitivity estimates” like those in their 2015 paper.
The average ECS from the UN’s Intergovernmental Panel on Climate Change (IPCC) is 3.4⁰C, roughly twice the Lewis and Curry values. It somehow doesn’t seem surprising that the observed rate of warming is now running at about half of the rate in the UN’s models, does it?
Lewis and Curry’s paper appeared seven days after Andrew Dessler and colleagues showed that the mid-atmospheric temperature in the tropics is the best indicator of the earth’s energy balance. This means that any differences between observed and forecast midatmospheric temperatures there can be used to adjust the ECS.
Late last year, University of Alabama’s John Christy and Richard McNider showed that the observed rate of warming in the tropical mid-atmosphere is around 0.13⁰C/decade since 1979, while the model average forecast is 0.30⁰C/decade. This adjusts down the IPCC’s average ECS to the range of 1.5⁰C (actually 1.46⁰).
That’s three estimates of ECS all in the same range, and all approximately half of the UN’s average.
It seems the long-range temperature forecast most consistent with these findings would be about half of what the IPCC is forecasting. That would put total human warming to 2100 right around the top goal of the Paris Accord, or 2.0⁰C.
Stay tuned on this one, because that might be in the net benefit zone.
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Still No Crisis At the Border
This month, Attorney General Jeff Sessions announced that the Department of Justice would institute a “zero-tolerance policy” along the Southwest border, stating that he wants to criminally prosecute 100 percent of all illegal entries. Sessions claimed that “a crisis has erupted at our Southwest Border that necessitates an escalated effort to prosecute those who choose to illegally cross our border.” Yet the “crisis” amounts to a flow of illegal immigration 96 percent lower than the level in the 1980s and lower than just two years ago.
Because we cannot know how many border crossers actually evade capture, the best measure of illegal entries is the number of crossers that Border Patrol apprehends. Of course, more agents results in more apprehensions for the entire Border Patrol, which is why it is important to control for the effect of enforcement, focusing on the number each agent arrests. More attempted crossings generally translate into more apprehensions for the average agent. Figure 1 presents the average number of monthly apprehensions along the Southwest border per Border Patrol agent. The average apprehensions per agent in a month in Fiscal Year 2018 was less than 2—which is 95.5 percent lower than the rate in the peak year of 1986.
Figure 1: Average Monthly Southwest Apprehensions Per Border Patrol Agent, FY 1980 to FY 2018
Source: Agents—Border Patrol & TRAC; Apprehensions—Border Patrol (1980–2017 & 2018)
The 1.9 average monthly apprehension rate for each agent so far for 2018 is exactly the average rate for the last decade. How does the Department of Justice find a crisis in these figures? It states, “the Department of Homeland Security reported a 203 percent increase in illegal border crossings from March 2017 to March 2018.”
To show why comparing one month in 2018 to the same month in 2017 is misleading, Figure 2 compares the first six months of each fiscal year since 2010. I bolded FY 2018 in black just so that it is visible among the thicket of near parallel lines. It is obvious that FY 2017 (orange), not 2018, is the abnormal year. Every other year followed the same pattern: lower apprehensions in the fall and winter, higher apprehensions in the spring and summer. 2017 broke this pattern. People came in higher numbers in the fall and winter of FY 2017—i.e. October 2016 to February 2017—while fewer came in the spring of 2017. Now the pattern has simply returned to normal.
Figure 2: Average Southwest Apprehensions Per Border Patrol Agent by Month, FY 2010 to FY 2018
Source: Border Patrol (agents); Apprehensions—Border Patrol (2010–2017 & 2018)
This fits with the hypothesis that I proposed last August: that Trump’s campaign rhetoric had a major effect on border crossings. People moved up their travel plans to hedge against the possibility that President Trump would institute major reforms to border security. In other words, Trump caused an increase in illegal immigration starting before the election and a decrease after his inauguration, but no net change in total arrivals. I predicted that the prior trend would return once migrants and asylum seekers realized that the hype was overblown. This is exactly what has happened.
Sessions should not use the anomalous months of 2017 to argue that the border crossings in 2018 are at “crisis” levels. There is simply no evidence to support this view.
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A Troubling Nomination to the U.S. Sentencing Commission
One of the jobs of a think tanker is to synthesize information from other sources and put it in the context of his or her particular field. Hard data are particularly important to our work because data are measurable outcomes from policy and practice in the real world. No one cares what anyone at Cato “feels.” Feelings have their place, of course. Measuring the feelings of a particular group or groups of people can be useful in the aggregate because people will act in accordance with those feelings, but those feelings make up just another metric on which we collect data to explain the world. Reliable data and provable outcomes are fundamental to shaping and forming effective public policy.
As irritating as strict libertarians may find it, several bodies within the federal government are very good at collecting and analyzing data. One of these bodies is the U.S. Sentencing Commission. From the USSC website:
The U.S. Sentencing Commission, a bipartisan, independent agency located in the judicial branch of government, was created by Congress in 1984 to reduce sentencing disparities and promote transparency and proportionality in sentencing.
The Commission collects, analyzes, and distributes a broad array of information on federal sentencing practices. The Commission also continuously establishes and amends sentencing guidelines for the judicial branch and assists the other branches in developing effective and efficient crime policy.
The Commission publishes data on the impacts of sentencing, the levels of recidivism among different populations of the formerly incarcerated, and other inputs and outputs related to our federal carceral system. For criminal justice researchers of all levels, the Commission provides detailed and easily accessible information about how federal policy and law translate into practice and outcomes.
Another component of the Commission’s work is passing along recommendations about sentencing law to Congress. Reasonable people may disagree with these recommendations, but the Commission clearly bases its recommendations on the best available data they have collected and analyzed. Individuals of all ideological persuasions should want any nominee to the Commission to share this dedication to data collection and evidence-based practices. Instead, President Trump nominated William “Bill” Otis.
Otis is an adjunct professor at Georgetown University Law Center and spent many years in the Justice Department. He has continuously lambasted bipartisan efforts to reduce sentences and remains a stalwart proponent of the “tough on crime” rhetoric of the 1980s, warning of great crime waves that will follow widespread sentencing reduction.
Otis marshals no empirical evidence for his claims—because there isn’t any. And that’s the problem.
To be clear, I’m not worried about Otis’s nomination because he’s conservative. Plenty of conservatives work on criminal justice issues, and some have led the way on reforms. Republican governors and GOP-controlled legislatures in Georgia, Texas, and other “red” states have passed significant criminal justice reforms that reduced prison and jail populations while also reducing crime rates. When presented with evidence-based opportunities to help individuals and save public money, many realized criminal justice reform could be a conservative cause.
The problem is, as Julie Stewart, the founder of Families Against Mandatory Minimums wrote in 2015, “Otis is impervious to facts and evidence.” Put another way, Bill Otis is interested in the politics, not the policy, of criminal justice.
The mountains of data that support less carceral policies and alternatives to incarceration have not swayed Otis’s rhetoric at all. When a man who had benefitted from reducing the sentence for a crack cocaine conviction brutally murdered a woman and two children, Otis was quick to blame the shortened sentence:
Three people, including two children, are dead today because of early release from a duly imposed, lawful and fully deserved federal drug trafficking sentence.
How many times were we lectured that those released under lowered sentencing rules would be only “low level, non-violent offenders?” I don’t know, exactly. Hundreds if not thousands.
Question: How many more lives are the congressmen and senators who support the [Sentencing Reform and Corrections Act] willing to see sacrificed for their “we’ve-been-too-tough” agenda?
An exact number, please, gentlemen. We want to remember who you are on election day. And we will.
It’s Willie Horton all over again.
Yes, a few people who are incarcerated for drugs may do horrible things when they get out. Most of them, even those who commit new offenses, will not. According to several Commission reports, the most common reason for re-arrest among federal drug offenders is a violation of supervision policies—that is, getting drunk or committing some other minor infraction—and certainly not murder.
The latest data from the Sentencing Commission shows no statistical difference in recidivism among those released early under new drug sentencing guidelines and those who served the longer sentences:
The recidivism rates were virtually identical for offenders who were released early through retroactive application of the [Fair Sentencing Act] Guideline Amendment and offenders who had served their full sentences before the FSA guideline reduction retroactively took effect. Over a three-year period following their release, the “FSA Retroactivity Group” and the “Comparison Group” each had a recidivism rate of 37.9 percent.
These data coincide with previous data from the Commission that measured the effects of crack cocaine sentencing retroactivity that found no significant statistical difference between recidivism among those who got out early and those who served the full sentence.
All this is not to say that policymakers should not find ways to reduce recidivism, no matter how serious the offenses are. But Otis’s belief that serving long drug sentences will make convicted individuals more lawful citizens is at odds with what liberals, conservatives, progressives, and libertarians in criminal justice have found in years of research and by measuring the effects of new policies put into practice. The push for reducing incarceration is not a conspiracy of groups taken in by George Soros and Al Sharpton, as Otis suggested in 2016, but a broad coalition of individuals, organizations, and lawmakers who look at the evidence and formulate policy accordingly.
The Sentencing Commission provides, among many other things, a trove of information that can teach us more about how our policies do and do not work. Otis’s nomination signals a return to reactionary politics based on what some people think and feel, rather than what they can show and prove.
Travel Ban Argument: Weird Cases Make for Bad Law
I was in the courtroom for this morning’s argument in Trump v. Hawaii, otherwise known as the “travel ban” case. Recall that this is Travel Ban 3.0, which is the most detailed executive action regarding entry restrictions yet. Indeed, Solicitor General Noel Francisco called it the most detailed immigration proclamation ever (in contrast to earlier ones by President Carter regarding Iranians and President Reagan regarding Cubans).
It’s an odd case: as Neal Katyal, lawyer for Hawaii and the other state and private challengers, put it, if Donald Trump hadn’t made all his various campaign statements and tweets about Muslim bans, “we wouldn’t be here.” In other words, “no president has ever said anything like this.”
In a normal case involving an executive action over national security, no court would ever second-guess the president. But this isn’t a normal case or a typical president, so the Supreme Court struggled mightily over a travel ban that, all sides seem to agree, wouldn’t be a legal controversy if any other president had implemented it. Indeed, the whole course of the litigation would’ve been different if Travel Ban 1.0—the one President Trump signed his first week in office without interagency process or guidance to the line agents who were supposed to implement it, causing chaos at airports—had been skipped and we’d gone straight to the more fully lawyered 2.0. I doubt there would’ve been quite as much judicial resistance and treatment of this president differently from the president.
But that’s a historical counterfactual, so you go to court with the facts you have.
Of course, it’s not that unusual for a court to apply a law to factual circumstances that were never contemplated. Here, the relevant immigration provision gives the executive wide discretion to deny entry to any type of foreigner when citing great national interest—and it’s not hard to square that with other provisions regarding nondiscrimination in granting visas. Courts don’t get to review that kind of determination.
That really should be the end of it, even if one thinks, as I do, that the travel ban doesn’t do much for national security and has a greater symbolic than practical effect. And it should be the end of it regardless whether one think that in his heart of hearts Donald Trump has anti-Muslim animus.
Chief Justice John Roberts will try mightily to cobble together a coalition to make this case go away on jurisdictional or other narrow grounds. Justice Neil Gorsuch seems ready to join him (presumably Justice Clarence Thomas too), while Justice Samuel Alito was clearly with the government on the merits. Justice Elena Kagan was the only one on the left who raised pointed questions of Katyal; given her views on administrative law and the breadth of the immigration statute here, she’s “gettable” for some sort of technical compromise. To do so, the Court would likely have to finesse Sale v. Haitian Centers Council (1993), in which it found claims against immigration-related executive actions to be justiciable (before recognizing the executive’s broad discretion in this area).
Given that weird cases make for bad law, we can only hope that, however the Court rules, no strong precedent is set.
Will Regulations Create Big Marijuana?
I wrote last month that new regulations and taxes in California’s legalized marijuana regime are likely to result in a situation in which
a few people are going to get rich in the California marijuana industry, and fewer small growers are going to earn a modest but comfortable income. Just one of the many ways that regulation contributes to inequality.
Now the East Bay Express in Oakland offers a further look at the problem:
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Ask the people who grow, manufacture, and sell cannabis about the end of prohibition and you’ll hear two stories. One is that legalization is ushering a multibillion-dollar industry into the light. Opportunities are boundless and green-friendly cities like Oakland are going to benefit enormously. There will be thousands of new jobs, millions in new tax revenue, and a drop in crime and incarceration.
But increasingly you’ll hear another story. The state of California and the city of Oakland blew it. The new state and city cannabis regulations are too complicated, permits are too difficult and time consuming to obtain, taxes are too high, and commercial real estate is scarce and expensive. As a result, many longtime cannabis entrepreneurs are either giving up or they’re burrowing back into the underground economy, out of the taxman’s reach, and unfortunately, further away from the social benefits legal pot was supposed to deliver.…
Some longtime farmers, daunted by the regulated market’s heavy expenses, taxes, and low-profit predictions, have shrugged and gone back to the black market where they can continue to grow as they always have: illegally but free of hassle from the state’s new pot bureaucrats armed with pocket protectors and clipboards.
Not all the complaints in the two-part investigation are about taxes and overregulation. Some, especially in part 1, are about “loopholes” in the regulations that allow large corporations to get into the marijuana business and about “dramatic changes to Humboldt County’s cannabis culture, which had an almost pagan worship of a plant that created an alternative lifestyle in the misty hills north of the ‘Redwood Curtain.’ ”
But there’s plenty of evidence that regulations are more burdensome on newer and smaller companies than on large, established companies. Indeed, regulatory processes are often “captured” by the affected interest groups. The Wall Street Journal confirmed this just yesterday, reporting that “some of the restrictions [in Europe’s GDPR online privacy regulations] are having an unintended consequence: reinforcing the duopoly of Facebook Inc. and Alphabet Inc.‘s Google.”