The Brussels Behemoth Isn’t Just a Conservative Fever-Dream

In a 2016 interview, Daniel Hannan, an MP in the European Parliament, offered the following criticism of the UK’s continued membership in the European Union:

The economic price is not just the £19bn gross (£10bn net) that we hand to Brussels every year—enough to build and equip a state-of-the-art NHS hospital every week. It also takes the form of the regulatory burden that falls on our businesses, especially smaller firms…for we pay both a democratic price and an economic price. The democratic price is that laws are handed down by institutions that no one elects… European commissioners are immune to public opinion, invulnerable to the ballot box.

His attack against over-regulation by Brussels as both an economic drag and a violation of representative democracy neatly echoes conservative and libertarian lamentations over the administrative state on this side of the pond. Far from a Madisonian republic in which the legislative branch “necessarily predominates”, the U.S. Congress has delegated sweeping grants of authority to the executive branch, thereby derogating its constitutional role as the creator of law (with apologies to Randy Barnett and his natural law fellow-travelers). Far from the canard of three “co-equal” branches, the original constitutional ambition was to establish a legislative branch and two derivative branches to respectively execute and exposit the former’s output.

Libertarians argue that excessive regulation is not only violative of democratic principles, it is economically costly to boot. Yet this is only cause for alarm, in Hannan’s case, if the EU is in fact over-regulating. Let’s look at the numbers.

The online EUR-Lex database contains comprehensive measures of EU legal output since 1990. The three principle lawmaking bodies of the EU are the Parliament, the Council, and the Commission. The first two are popularly elected, whereas the Commission is the unelected executive arm, currently headed by Jean-Claude Juncker. EUR-Lex categorizes all legal output from the Parliament and the Council as “legislative” in nature, whereas Commission output constitutes “non-legislative acts”. Each of the three entities may generate three types of output: regulations, directives, and decisions.

Every year, each of these three entities promulgates X number of new regulations, directives, and decisions, and every year Y number of regulations, directives and decisions are either repealed or expire after a sunset period. This means that it’s possible to tabulate the net number of regulations, directives and decisions emanating from each of the three legal bodies each year since 1990, and to then generate a yearly cumulative count of all extant legal acts. And that’s precisely what I’ve done:

First, some limitations on the data. I present only raw numbers, without a measure or word length or number of restrictive words. Thus, it is difficult to translate these trends into the regulatory burden they impose on the private sector. Moreover, because the data begin in 1990, any negative cumulative numbers indicate a net drop from the unknown 1990 baseline, and not the metaphysical absurdity of a negative number of laws!

Caveats duly heeded, the patterns that do emerge are worth commenting on. As we can see, the EU Parliament is the least active of the three bodies. Perhaps these infrequent legislative acts are massive in size, providing the statutory basis for the explosion of executive activity being pursued by the Commission. Whatever the explanation, the trendlines unambiguously demonstrate that the unelected “non-legislative” EU Commission is an order of magnitude more active than its “legislative” peer branches.  

    

Immigration and Civil War - Should You Be Worried?

Some modern immigration restrictionists are arguing that immigration will cause a civil war in the United States or other countries unless it is curtailed or radically altered. Reihan Salam’s recent book Melting Pot or Civil War? is the most glaring example. In addition to the title, he points to immigration being a problem in and of itself that also increases the severity of other issues dividing American society. The result could be a civil war. Salam writes that “[t]he divisions that define this moment in American history are not yet as worrisome as those that led to the Civil War or the bloody battles putting workers against industrialists at the dawn of the last century … [n]evertheless, it is hard to shake the feeling that our luck might soon run out.”  

David Frum hints at the possibility of a racialized civil war by arguing that young white voters are also worried about immigrants bringing demographic changes, leading to the rise (again) of nationalist political parties in Europe that are running on platforms to restrict immigration. The problems of immigration are apparently so well-known that even countries that are not the destinations for immigrants, such as Hungary and Poland, are turning to nationalist politicians – sometimes. The notion of a racialized civil war caused by immigrants or as a reaction to them has even entered popular culture. Michel Houellebecq’s novel Submission, which is about a Muslim political party winning a presidential election in France in the near future and pursuing policies to turn that nation into an Islamic theocracy, includes conversations between characters about a civil war in France. 

But could immigration cause a civil war? Since it’s been raised so often, I think it’s an important issue to address. Much of my research over the last several years is about how immigrants affect the economic and political institutions of the countries where they settle, finding positive or null effects. But if immigrants did cause civil wars, which are usually the deadliest types of wars, then that would be a very large cost that we’d need to consider. 

Fortunately, there is a large set of peer-reviewed literature on the causes of civil wars that should diminish the fears of immigration restrictionists who think the United States or other Western countries could sink into racialized civil wars due to immigration. According to a wonderful review in the Journal of Economic Literature by Christopher Blattman and Edward Miguel, civil wars are more likely to occur in countries that are poor, are subject to negative income shocks, have weak state institutions, have sparsely populated peripheral regions, and possess mountains. Modern developed countries do not possess most of those features. 

Civil wars likely have causes on both the micro level and on the macro level. On the micro level, a theoretical multiplayer game model developed by Joan Esteban and Debraj Ray where each player has imperfect information about the costs of conflict shows that Pareto-improving social decision making becomes impossible and conflict is certain to ensue with four or more players. Based on additional research by Ray (cited here), conflict may be unavoidable even with enforceable contracts between coalitions. Thus, in a situation where society divides along multiple lines – by geography, religion, race, ethnicity, or economic class – it may be impossible for the government to arrange a set of transfers or policies that prevent conflicts among all divisions simultaneously. If immigration increases the number of divisions in society, then it is theoretically possible that it would increase the chance of civil war according to these models.

On the macro level, a country’s degree of ethnic fractionalization reduces the chance of civil war, income inequality has no effect, and democratic government is not a significant predictor of conflict risk conditional on the existence of poverty, negative income shocks, weak state institutions, sparsely populated peripheral regions, or mountains. The finding that more ethnic fractionalization does not lead to civil war seems counter-intuitive, but that’s due to observer bias.  Economist Paul Collier observed that “[c]onflicts in ethnically diverse countries may be ethnically patterned without being ethnically caused. International media coverage of civil wars often focuses on history and ethnicity because rebel leaders adopt this sort of discourse.  Grievances are to a rebel organization what image is to a business. The rebel group needs to stimulate a sense of collective grievance to build cohesion in its army and to attract funding from its diaspora living in rich countries.” 

Furthermore, republican institutions reduce the chance of civil war as they help to enforce intertemporal commitments and lower transaction costs. As a result, immigrants would be more likely to cause a civil war if they weakened republican political institutions, but there is no evidence of that, no evidence that democratic political institutions attract immigrants (independent of other factors), and plenty of evidence that immigrants move between countries with similar levels of democracy.

The exception to this is that refugee flows increase the chance of civil wars under very specific circumstances that do not exist in developed countries. From 1951 through 2001, Salehyan and Gleditsch found that the baseline chance of a country fighting a civil war if there were no refugees present and no civil war in a neighboring country was about 3.5 percent per year. That percentage rose to 4.5 percent per year if the ratio of refugees to the population goes up to the global average. A similar increase in refugees combined with a civil war in a neighboring country further increased the annual chance of having a civil war to 6.2 percent. From zero refugees and no neighboring civil war to an average number of refugees and a neighboring civil war, the chance of having a civil war increased by 2.7 percentage points or 77 percent. Stronger democratic governments and more interregional trade diminish the chance of civil war even in the presence of civil war in a neighboring country and refugee flows who are members of cross-border ethnic groupsAll of the civil wars during the 1951 through 2001 period that Salehyan and Gledistch considered occurred in poor countries with weak governing institutions. 

Since a civil war has never been caused by immigrants in a developed country and refugee flows only increase the chance of civil war under very specific circumstances in developing countries from 1951 through 2001, immigration restrictionists should feel relieved. On the other hand, the extreme downside risk of electing nationalist governments in the developed world is very high. The extreme downside risk of civil war caused by refugee or immigrant inflows into a developed country has historically been zero. Both or either of these findings could change in the future and there is a possibility that immigration could lead to the election of nationalists, but nationalism is the far greater threat for those concerned about civil war or other radical shifts that could damage our civilization.  In either case, managing the nationalist reaction or immigration seems easier and more likely to succeed than acceding to their policy demands before they are elected.

Retired and Raking It In

President Trump’s budget yesterday provides the latest evidence of out-of-control entitlement spending. In the baseline projections, Social Security spending will grow 5.9 percent in 2020 and Medicare spending will grow 8.8 percent. Social Security will grow at a 5.8 percent compound annual rate over the coming decade, while Medicare will grow at 7.8 percent. By contrast, inflation is expected to average 2.3 percent annually over the coming decade.

Social Security and Medicare are the first- and third-largest programs in the federal budget, and they are pushing the government toward a fiscal crisis. Medicare spending this year, net of premiums, is $645 billion, while the second-largest program, defense, is $674 billion. But Medicare spending will surpass defense in the next year or two, and by 2029 Medicare at $1.36 trillion will dwarf defense at $787 billion, at least in the baseline projection.

Social Security and Medicare are not the only programs for the elderly in the federal budget. A chart from CBO’s latest update shows the share of overall noninterest federal spending going to the old. The share is expected to rise from 40 percent in 2018 to 50 percent by 2029. Spending on the elderly will create sustained pressure on federal finances and taxpayer wallets in the years ahead.

The Imperfect Count of Hate Crimes

Laws on hate crimes raise longstanding questions of fairness both in theory and application, including (when enacted at the federal level) dangers of overextension of federal criminal law and inroads on the prohibition against double jeopardy. The role of hate crimes as culture war rallying points can make things worse. In the Jussie Smollett episode, journalists came under fire for raising questions about unlikely elements of the actor’s story — Smollett had been “doubly victimized as the subject of speculation by the media industry and broader culture,” said the head of one progressive outfit — and even for hedging their stories with words like “allegedly.”

After Smollett’s story fell apart, some advocates argued that no matter what might have happened this one time, data show that hate crimes are sharply on the rise and reports of them hardly ever prove unfounded. Is that the case? I tackle the question in a new piece at Inside Sources

An oft-repeated talking point is that FBI statistics last year, to quote Sen. Kamala Harris (D-Calif.), “revealed a 17 percent increase in the number of hate crimes in America.”

Let’s be polite and say those FBI figures are difficult to interpret….

In the state of Oregon, the college town of Eugene reported 72 hate crimes to the FBI in 2017, about as many as the rest of the state put together. According to the Daily Emerald, the difference reflects “the city’s active approach. … The city carefully catalogs reported instances … and even classifies certain crimes — such as vandalism — as a hate crime that other cities would classify in a different way.”

Word is that the Eugene approach is spreading as other cities get interested in steps such as asking officers to write up on their own initiative as a hate incident a graffiti epithet they might see, rather than only if a public complaint happens to come in.

Should those methods spread in coming years, the FBI count of reported hate incidents is sure to mount — yet still not demonstrate with any certainty a genuine rise.

For whatever reason, many of us are predisposed to accept findings that seem to highlight the prevalence of terrible injustice. The impulse to believe extends to matters of scholarship. So it was with a recently retracted 2014 study that purportedly found “structural stigma” in society shortens the lives of LGBT persons by a remarkable 12 years. The authors acknowledged that they had inadvertently committed a coding error with the data; once it was corrected, there was no statistically significant correlation at all between “structural stigma” and mortality. Yet the paper, with its inherently implausible findings, had already achieved “highly cited paper” status, and has continued to garner citations even after its retraction (cross-posted from Overlawyered).

Trump’s Crazy Military Budget

The White House unveiled its proposed budget for Fiscal Year 2020 and, to the apparent surprise of some military planners, the White House is calling for a top line national defense budget of $750 billion. Pentagon officials had reportedly anticipated a budget of $733 billion, which would have been a 2.4 percent increase over last year’s. They got a 4.7 percent increase instead. According to the supporting documentation, the request is intended to provide the Department of Defense with the resources to “remain the preeminent military power in the world, ensure balances of power in key regions remain in America’s favor, and advance an international order that is the most conducive to U.S. security and prosperity.”

The United States spends more than twice as much on its military as China and Russia combined, and is clearly the world’s “preeminent military power,” but it isn’t obvious that we’re getting the biggest bang for our bucks, nor that this additional spending will be critical to sustaining our edge. More to the point, even with all this “preeminence,” the U.S. military has struggled to bring current conflicts to a satisfactory end. As noted in 2016 by Admiral Mike Mullen, the former chairman of the Joint Chiefs of Staff, “We’re 0 for a lot.” Military historian Andrew Bacevich similarly concludes “having been ‘at war’ for virtually the entire twenty-first century, the United States military is still looking for its first win.” (h/t Steve Walt)

Perhaps it’s not the military’s fault? And perhaps it’s not due to a shortage of funds? I think that the real culprit is that U.S. officials continue to expect the military to solve a host of problems that could be better addressed by other means, or left to be dealt with by other countries.

President Donald Trump has at times shown his frustration, but the reality of his budgets speaks louder than his words. This latest increase comes after he had gone back and forth on what he wanted to spend, initially telling all departments to prepare for a 5 percent cut, then back-tracking and saying the defense budget would not only be exempt from such reductions, but would actually increase. On another occasion, he blurted out on Twitter that it was “crazy” to spend $716 billion on the military, but then reversed himself a week later.

While $750 billion already represents a large increase in the budget, the most notable growth comes from within that request. The White House has asked that $165 billion come from Overseas Contingency Operations (OCO). Last year, OCO received $69 billion. While originally intended as a way to fund the supposedly unexpected costs of the wars in Iraq and Afghanistan, OCO has become a sort of “slush fund” for the Pentagon to avoid the budget caps put in place by the Budget Control Act (BCA). As my former Cato colleague Caroline Dorminey points out, $750 billion is an “astronomical increase” and well above the BCA cap of $576 billion. Taxpayers for Common Sense observes that OCO’s funding level would make it the second largest government agency, in terms of discretionary spending – behind the Pentagon, of course.

For a person who was elected to the presidency by railing against the foreign policy establishment, proclaiming America’s overly militarized foreign policy a “complete and total disaster,” and, most recently, declaring in his State of the Union address that “great nations do not fight endless wars,” President Trump has once again funded a military geared toward perpetuating the status quo, and remaining embroiled in the endless wars that he’s promised to quit.

I expect that House Democrats, beginning with House Armed Services Committee Chair Adam Smith (D-WA), will cast a skeptical eye toward the administration’s request. I also hope, however, that all Americans will dare ask how all this spending actually makes us safer, and ponder why the many other instruments of American power and influence – including diplomacy (Trump’s budget calls for cutting the State Department by 23 percent), trade, and voluntary cultural exchange – continue to get short shrift from this administration. 

(Thanks to James Knupp for his help with this post)

Trump Budget 2020

The Trump administration has released its federal budget for 2020. The document lays out taxing and spending proposals and provides projections through 2029.

The chart compares Trump’s proposed revenues and spending to the most recent CBO projections. These are from CBO’s “alternative fiscal scenario” (AFS), which assumes that the Trump tax cuts do not expire after 2025 and that discretionary budget caps are lifted.

 

The Trump budget also assumes that the tax cuts do not expire. However, his budget is much more optimistic about economic growth than the CBO, and so estimated revenues are higher.

Note that the tax cuts went into effect in 2018 but federal revenues did not fall. Revenues would have been higher without the cuts, but rising deficits are being driven by relentless spending increases, not a shortage of revenues.

Even with the tax cuts in place, revenues are expected to rise from $3.5 trillion this year to $5.3 trillion in 2029 under the CBO projections. If we restrained annual spending growth to a reasonable 1.8 percent, the budget would be balanced in 10 years.

Federal Budget Outlook and Trump Tax Cuts

President Trump releases his budget for 2020 today. The budget includes major cuts to domestic programs to deal with rising deficits, which is a good approach because out-of-control spending is the core problem with federal finances.

Many people blame today’s high deficits on the Trump tax cuts. Pointing to growing red ink, the AP said yesterday, “Trump’s 2017 tax cut bears much of the blame, along with sharp increases in spending for both the Pentagon and domestic agencies and the growing federal retirement costs of the baby boom generation.”

The Trump tax cuts reduced revenues relative to what they would have been, but the cuts have not reduced overall federal revenues. According to the CBO, federal revenues were $3.32 trillion in fiscal 2017, $3.33 trillion in fiscal 2018, and an estimated $3.52 trillion in fiscal 2019. The tax cuts went into effect during fiscal 2018.

The tax scorekeeper of Congress estimated that the tax cuts would lose substantial revenues, particularly in the near term. But overall federal revenues have not fallen, and indeed are expected to grow strongly in coming years.

The chart below shows annual increases in total federal spending and revenues under CBO’s “alternative fiscal scenario.” The AFS assumes that a portion of the tax cuts do not expire after 2025 as scheduled, and that discretionary budget caps (currently in place through 2021) are lifted, which is likely.

Despite the tax cuts, you can see that 2018 revenues did not fall—they were roughly flat. And now in 2019 revenues are rising strongly and expected to grow at an annual average rate of 4.2 percent over the coming decade. Again, this is with the Trump tax cuts in place through 2029.

The problem is that spending is expected to grow even faster at a 5.4 percent average rate over the coming decade, according to the CBO. That is far above the expected inflation rate of about 2.1 percent in coming years.

As spending rises faster than revenues, deficits will soar. Under the AFS, the CBO expects annual deficits to climb from $0.9 trillion in 2019 to $2.2 trillion by 2029.

America is in the 10th year of economic expansion, so Washington should be running budget surpluses not pushing up deficits to record highs. In his new budget, Trump proposes some unaffordable defense and security spending increases. But he also proposes balancing the budget in 15 years with domestic spending restraint, which is a modest reform goal in the right direction.