The Conquest of the United States by China

In 1898, after the United States’ quick victory in the Spanish-American war, the great Yale social scientist William Graham Sumner gave a speech titled “The Conquest of the United States by Spain.” He told his audience, “We have beaten Spain in a military conflict, but we are submitting to be conquered by her on the field of ideas and policies.”

He argued that early Americans “came here to isolate themselves from the social burdens and inherited errors of the old world” and chose to “to strip off all the follies and errors which they had inherited…. They would have no court and no pomp; no orders, or ribbons, or decorations, or titles. They would have no public debt. They repudiated with scorn the notion that a public debt is a public blessing; if debt was incurred in war it was to be paid in peace and not entailed on posterity.”

The American citizen “was, above all, to be insured peace and quiet while he pursued his honest industry and obeyed the laws.”

But, he said, if America became a colonizing nation like the empires of Europe, we would become afflicted with “war, debt, taxation, diplomacy, a grand-government system, pomp, glory, a big army and navy, lavish expenditures, and political jobbery – in a word, imperialism.” And in that day we would have thrown away the American principle of liberty for “a Spanish policy of dominion and regulation.”

I was reminded of Sumner’s warning when I read a column in the Washington Post by Eswar Prasad, a prominent trade economist at Cornell University and the Brookings Institution. Prasad warns that in its trade war with China the Trump administration seems determined to emulate China:

China might seem in a better position to cope with a trade war, since it is a heavily managed economy and the government squashes political resistance. Yet its every maneuver carries enormous risks. Meanwhile, Trump, who manages a durable and flexible economy, is not exactly seeking victory for the American way of doing business. His approach, in some ways right out of Beijing’s playbook, would make our economy quite a bit more like China’s.

Prasad enumerates some of China’s “advantages” in a trade war: a state-dominated economy, with state-owned banks, and an autocratic government that can shut down dissent and censor bad news. Trump, on the other hand, has the advantage of an “enormously flexible and resilient” economy and bipartisan support for “getting tough on China.” But Prasad warns:

Yet in exercising his power, he could end up making America’s economy a bit more like the state-dominated one operated by Beijing — and, in so doing, permanently damage the U.S. free market. To rescue the agricultural sector from the consequences of the trade war, Trump has already dispatched $28 billion in government subsidies. He has also jawboned American companies to move their production bases back to U.S. shores, rather than letting them make their own commercial decisions. Trump has even pressured the Federal Reserve, whose independence is seen as sacrosanct, to lower interest rates and suggested that the Fed should help drive down the value of the dollar. With such moves, he risks undermining the true strengths of the United States: the institutions that make the U.S. dollar and the American financial system so dominant.

What’s worse, Trump suggests that the rule of law is up for negotiation. After imposing sanctions on Chinese technology companies such as ZTE and Huawei for running afoul of U.S. rules, he hinted that those sanctions could be negotiated away as part of a trade deal.

Much as Sumner worried in 1898 that the United States was trading its peace and liberty for “a Spanish policy of dominion and regulation,” Prasad fears that

China has made its lack of independent institutions a source of strength in dealing with external economic aggression. In that model, Trump sees something Washington should copy — and seems ready to abandon what makes the United States special. 

We faced a similar challenge in the 1980s when powerful American voices called for an industrial policy similar to the one they credited with the success of the then-booming Japanese economy. But critical analysis from Cato scholars and others across the political spectrum stopped that campaign, just in time for us to watch Japan sink into its “lost decade” of economic stagnation.

Sumner got a lot right. The United States did become a globe-circling imperial power burdened by war, debt, taxation, regulation, and rent-seeking. Will Prasad prove equally prophetic? Will we fight a trade war with China, only to discover that we have adopted “a Chinese policy of dominion and regulation”?

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Repeal Old AUMFs and Salt the Earth

For months now, the Trump administration has pursued a “maximum pressure” campaign that—by accident or by design—has brought the United States to the brink of war with Iran. The branch of government with the constitutional power to declare war ought to have the final word here. Lately, however, Trump officials have hinted that Congress has already had its say—nearly 18 years ago, when it authorized war with Al Qaeda and the Taliban.  

The 2001 Authorization for the Use of Military Force, passed three days after the September 11 attacks, targets the perpetrators of 9/11 and those who “harbored” or “aided” them. In the intervening years, the 2001 AUMF has been stretched far beyond its original purposes—but the Trump team apparently believes it can be stretched further still. In June we learned that, in a closed session, Secretary of State Mike Pompeo gave House members “a full formal presentation on how the 2001 AUMF might authorize war on Iran.” Two weeks ago, at a Senate Foreign Relations Committee hearing, administration officials left the door open to that interpretation with an ominous qualifier: “the administration has not to date interpreted [the 2001 AUMF] as authorizing military force against Iran.” Why the caveat? Five different senators pressed for answers, but the State Department legal adviser refused to address “hypotheticals”: “we can’t predict future events.” 

Last Wednesday, the Charles Koch Institute hosted a panel discussion, “Unauthorized? The 2001 AUMF and Iran,” featuring Steve Vladeck, Heather Brandon-Smith, and myself. No question mark necessary, we argued: no good-faith reading of the AUMF could conclude it covers war with Iran in 2019. 

I’d like to amplify a point I made there: this is a line of argument that proved too brazen even for the Bush-Cheney administration, back when the AUMF was young. That should tell us something about how spurious the Trump administration’s position is, nearly two decades later. 

E-Verify Is Not an Effective Immigration Enforcement System, as Mississippi ICE Raids Show

Last week, Immigration and Customs Enforcement raided many meat processing plants in Mississippi and arrested 680 suspected illegal immigrants. The raids were front page news as some of their children were pleading on television for the government to release their parents. Political pundits were busy excusing the raids and calling for more or highlighting the plight of the families left behind and the supposed hypocrisy of immigration enforcers who aren’t targeting President Trump’s properties. 

Although the plight of families and discrepancies in enforcement based on possible political sensitivities is worth investigating, the long-term lesson from the Mississippi raids is that E-Verify does not stop the hiring of illegal immigrants. Mississippi passed a mandate that required all firms to run all new hires through E-Verify at the point of hire as of July 1, 2011. According to the promises made by E-Verify proponents, there should have been zero illegal immigrants employed in Mississippi – yet ICE had to raid some plants there. Rather than showing the strength of government immigration enforcement efforts, the raids in Mississippi show that E-Verify mandates are incapable of preventing illegal immigrants from working. 

This post will explain how E-Verify functions (I won’t say “works”), how illegal immigrants get around the system, how immigration restrictionists want to reform E-Verify, and why the real solution is increasing legal immigration.

Free the Eyebrow Threaders

One of the encouraging signs for the future of liberty is the spread of state-based groups engaging in constitutional litigation, often with a focus on economic liberty – protecting the right to earn an honest living and thus to pursue the American Dream. That’s why I recently joined the Mississippi Center for Public Policy (MCPP) as a nonresident senior fellow and chairman of the board of advisors to MCPP’s legal arm, the Mississippi Justice Institute (MJI).

Today, MJI filed a new federal lawsuit and joined the ongoing legal fight against occupational licensing laws. MJI’s client is Dipa Bhattarai, a Mississippi eyebrow threader. 

If you don’t know, eyebrow threading is a very safe method of hair removal that doesn’t involve the use of sharp implements, harsh chemicals, or heat. Instead, threading artists use nothing but twisted cotton thread, acting like a mini-lasso, to remove stray hair. It’s also much more precise, convenient, and affordable than waxing and tweezing. It’s an ancient technique that has been practiced for centuries in South Asian countries like Nepal, where Dipa was born.

Dipa was attending the Mississippi University for Women when she saw an opportunity to pursue her dream of starting a business. When she threaded her friends’ eyebrows as a favor, word quickly spread across campus of this superior technique. She soon had more classmates asking for her help than she could keep up with. Seeing an unserved market, Dipa opened a threading business with her brother. In less than two years, they opened a second location and hired four employees to accommodate all of their customers.

Dipa was truly living her American Dream—until an inspector from the Mississippi State Board of Cosmetology showed up and forced her to shut down her business. Dipa did not have an esthetician’s license, you see, which is required for beauty care in Mississippi.

The problem is that obtaining an esthetician’s license requires taking 600 hours of beauty school classes — which can cost up to $12,000 — even though the classes don’t teach anything about eyebrow threading.

Fortunately, Dipa will have some persuasive authority in her corner. Our friends at the Institute for Justice won a similar case in Texas in 2015. In Patel v. Texas Department of Licensing & Regulation, the Texas Supreme Court faced a state constitutional challenge to a rule that threaders obtain esthetician licenses requiring 750 hours of irrelevant instruction.

The Texas Supreme Court adopted a new standard of review that was more stringent on regulations impinging on economic liberty than federal “rational basis” review. Notably, Justice Don Willett (now a judge on the U.S. Court of Appeals for the Fifth Circuit), joined by two other colleagues on the nine-member court, insisted in his concurrence that the law would have been struck down even under the rational-basis standard.

If you missed it, then-Judge Willett’s concurrence is worth a read. Indeed, it almost certainly propelled him onto President’s Trump’s list of potential Supreme Court nominees. Here is a sample:

This case concerns far more than whether Ashish Patel can pluck unwanted hair with a strand of thread. This case is fundamentally about the American Dream and the unalienable human right to pursue happiness without curtsying to government on bended knee. It is about whether government can connive with rent-seeking factions to ration liberty unrestrained, and whether judges must submissively uphold even the most risible encroachments.

I’ll be anxiously watching to see if MJI can prove Willett right: irrelevant licenses for eyebrow threaders can’t survive even rational-basis scrutiny. It’s time to free the eyebrow threaders from this hairy situation.

Don’t Cry for Me, Democratic Socialists

When debating socialists, it often feels as if you’re trying to hit a moving target.

Socialism in action, in the words of Robert Lawson and Ben Powell, “sucks.” But as my former colleague Kristian Niemietz explains through a litany of historical examples, countries once claimed to show another way is possible are quickly dismissed as “not real socialism” when things inevitably turn sour.

Debating socialism is more complex still in the contemporary United States. That’s because today’s self-declared “democratic socialists” are trying to re-define what socialism means entirely.

Gone is the lofty aim of collective ownership of the means of production and exchange. Instead, democratic socialism à la Bernie Sanders and Alexandria Ocasio-Cortez combines a commitment to a massively expanded welfare state with a range of microeconomic interventions, support for alternative business-ownership models, labor market regulation, and economic planning in pursuit of environmental goals.

When asked where this “democratic socialism” has been tried and worked, Sanders, Ocasio-Cortez and others cite Scandinavian countries such as Denmark. The Nordic economies are said to happily combine an extensive welfare state with good social outcomes.

But while Scandinavian countries have extensive social insurance, they are robust market economies that spurn highly intrusive economic controls and regulations. That’s why in 2015, the Danish Prime Minister made clear: “Denmark is far from a socialist planned economy. Denmark is a market economy.”

In Sweden, good social outcomes and low inequality predated the welfare state. There is lots of evidence that there the economy grew much more slowly between the 1970s and 1990s when the state was more economically interventionist (as I outlined on Fox Business when prominent democratic socialist Bhaskar Sunkara highlighted that era as something to aspire to). Indeed, Johan Norberg has explained how Sweden has fundamentally shifted away even from a democratic socialist model in recent decades.

If contemporary Nordic economies are not “democratic socialist” then, do any other countries indicate what the American fate might be under these types of policies?

A recent J.P. Morgan research note broadened the search and:

looked for countries that, relative to the U.S., are characterized by:

  • Higher personal and corporate tax rates, and higher government spending
  • More worker protections restricting the ability of companies to hire and fire, and less flexibility for companies to set wages based on worker productivity and/or to hire foreign labor
  • More reliance on regulation, more constraints on real estate development, more anti-trust enforcement and more state intervention in product markets; and a shift away from a shareholder-centric business model
  • More protections for workers and domestic industries through tariff and non-tariff barriers, and more constraints on capital inflows and outflows

It concluded:

I couldn’t find any country that ticked all these democratic socialist boxes, but I did find one that came close: Argentina, which has defaulted 7 times since its independence in 1816, which has seen the largest relative standard of living decline in the world since 1900, and which is on the brink of political and economic chaos again in 2019.

My Cato colleague Marian Tupy once outlined the dramatic decline in relative Argentinian economic performance over the 20th century in this summary table below.

 

The country is of course in the news today due to economic turmoil triggered by its unexpected election result. Its currency is plunging and the economy is in deep recession with high unemployment and inflation at nearly 56 percent.

True, Argentina hasn’t suffered the complete and utter economic and social collapse experienced by “real socialism” in Venezuela, the Soviet Union, North Korea et al. But its economic model has led to a prolonged and fairly dramatic decline. That’s why Jeff Miron and I have described “democratic socialism” as the “scenic route to serfdom.”

The Case against Afghanistan Withdrawal Is Weak

Even in these divisive times, political leaders in Washington are beginning to converge on at least one issue: it’s time to end the longest war in American history and withdraw U.S. forces from Afghanistan. President Trump said in the Oval Office last month that “it’s ridiculous” that we’re still there after almost two decades of stalemate and he reportedly wants to pull out by the 2020 election. His challengers on the Democratic side seem to agree.

Although in 2017 Trump authorized a small surge of troops and left the military strategy essentially unchanged, his special envoy for Afghanistan Reconciliation, Zalmay Khalilzad, has made significant progress in direct negotiations with the Taliban. Daunting obstacles remain, but a political settlement that could include a U.S. withdrawal is at least within reach.

This has advocates of the “forever war” unsettled. Gen. David Petraeus, who once commanded forces in Afghanistan, published an op-ed in The Wall Street Journal, with the Center for a New American Security’s Vance Serchuk, arguing that “under no circumstances should the Trump administration repeat the mistake its predecessor made in Iraq and agree to a total withdrawal of combat forces from Afghanistan.” Notwithstanding the Taliban’s stated promise not to host al Qaeda or other foreign terrorist groups, Petraeus and Serchuk insist that “common sense dictates the U.S. must retain its own means to pressure extremist networks plotting against the American homeland and U.S. allies.”

In making their case for indefinitely extending America’s 18-year quagmire in Afghanistan, they commit three analytical errors. The first is to fault Obama’s withdrawal from Iraq for the rise of ISIS.  The second is to assume that a withdrawal from Afghanistan will, as in Iraq, result in the emergence of a rapacious terrorist army prone to spectacular atrocities and harboring vast territorial ambitions. Their third mistake is buying into the safe haven myth – that is, the claim that the presence of terrorists in Afghanistan represents a major security threat to the United States. In a new Cato Policy Analysis, my colleague John Mueller and I address all of these (and more).

Transit Riders Drop 2.9% in June

The nation’s heavily subsidized transit industry continued its descent into oblivion with a 2.9 percent decline in ridership in June 2019, compared with June 2018, according to the Federal Transit Administration’s most recent data. Ridership dropped in 41 of the nation’s 50 largest urban areas, falling even in Seattle, which had previously appeared immune to the decline that is afflicting most of the industry.

Transit is one of the most heavily subsidized industries in the country, receiving more than $50 billion a year from taxpayers. While highways are also subsidized, subsidies to driving average about a penny per passenger mile while subsidies to transit average more than 90 cents per passenger mile. Yet those subsidies haven’t prevented the industry from losing customers in each of the past five years.

Hardest hit in June was Philadelphia’s Southeastern Pennsylvania Transportation Authority (SEPTA), whose ridership declined by 22 percent, representing 6.2 million fewer riders in June 2019 than in June 2018. Part of this was due to maintenance-related disruption’s to the city’s trolley system, whose ridership fell 21 percent, but SEPTA’s buses lost 31 percent of their riders and its heavy-rail lines lost 15 percent.

While a 22 percent loss is steep, this is just a continuation of trends in Philadelphia since at least 2016. Moreover, SEPTA ridership is falling despite increases in transit service. Since 2013, SEPTA’s vehicle-revenue miles of service have increased by nearly 6 percent, yet ridership has dropped by nearly 18 percent.

Philadelphia is not the only urban area to suffer double-digit losses in ridership. Transit systems in Cleveland, Kansas City, Louisville, Memphis, San Antonio, and Virginia Beach-Norfolk also lost between 10 and 15 percent of their riders.