December 30, 2020 4:44PM

American Compass Shouldn’t Reject the Economics of Immigration

The American Compass recently published a series of pieces about the economic successes of the Trump administration and whither national conservatism after his defeat by Joe Biden. Several commentators criticized the pieces for arguing that restrictive immigration policies were responsible for wage and employment growth during the Trump administration. Oren Cass, the executive director of American Compass, responded to that criticism with a piece arguing that lower immigration did result in higher wages and lower unemployment.

Cass wrote that those critics “fascinate me, in the same way an old-timey ‘cabinet of curiosities’ might capture the attention,” and responded with an essay that contemptuously dismisses social science on how immigration affects the labor market in favor of anecdotes from news stories. This blog post is a response to one of Cass’s points that fascinates me. He wrote:

The empirical case for the ‘nothing to see here’ approach to immigration economics is paper thin; one can typically guess where the hyperlinks will point before moving the cursor to them. Academics debate endlessly whether a sudden and massive influx of Cuban refugees in Miami in 1980 did or did not depress local wages, as if this deeply unnatural ‘natural experiment’ answers for all times and places the question of how a national economy’s labor market might be affected by the rate at which a given class of workers flows into it.

It is fascinating when someone so casually dismisses a vast body of knowledge. This blogpost will explain some basics about labor economics, dive into the immigration literature, and hopefully explain why Cass and others who ignore economic research do so at their own peril. 

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December 30, 2020 10:55AM

The Great Bucatini Shortage of 2020 and the FDA’s History of Telling Italians How to Make Italian Food

Pasta with tomato sauce. Photo by Yeh Xintong on Unsplash.

Rachel Handler has a delightful piece at New York magazine’s food and restaurant blog Grub Street on how Big Pasta is using government regulation to punish competitors and consumers. The result is that the U.S. Food and Drug Administration, in addition to causing a shortage of COVID-19 diagnostic tests and vaccines, is basically causing a nationwide shortage of bucatini.

On March 30, at the beginning of a pandemic whose supply shocks were making everything from toilet paper to pasta harder to get, the FDA blocked imports of De Cecco bucatini. The FDA found the iron content of the Italian company’s bucatini to be—brace yourself—10.9 milligrams per pound rather than the 13 milligrams per pound the FDA requires. The product in question is perfectly safe. It presents no threat to the public. It is legal to sell throughout the European Union. But since the FDA alleges it does not meet the agency’s arbitrary standard, the agency turned a temporary shortage of bucatini into a…less-temporary one. Handler surmises the FDA took the action at the behest of one of De Cecco’s competitors.

You might think it implausible that the FDA would seize one manufacturer’s inventory at the behest of a competitor. If so, you would be wrong. The Great Bucatini Shortage of 2020 isn’t even the first time the FDA told Italians how to make Italian food. In a similar episode, the FDA once told a native Sicilian he didn’t know what tomato sauce is.

Rosario Raspanti was born in Palermo, Sicily, where his father ran a tomato‐​sauce cannery. After learning the trade from his father, in 1913 the younger Raspanti brought that knowledge to the United States. He established a canning factory in Mississippi, which he claimed made him the first canner of tomato sauce in America. Raspanti used practically the same process and sold practically the same product his father did. By 1942, Raspanti estimated he had sold some 100 million cans of tomato sauce to satisfied customers in Arkansas, Louisiana, Mississippi, and Western Tennessee.

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In 1942, however, the FDA seized 36,144 cans of his tomato sauce. The agency furnished no evidence the sauce was harmful to consumers. Its entire justification for seizing the items was that, in the FDA’s opinion, Raspanti’s sauce was thinner than tomato sauce should be and didn’t have enough seasoning.

At trial, Raspanti testified, reasonably, that his customers preferred tomato sauce that was both unseasoned (so they could then season it to taste) and thinner than his competitors’ (allowing them to consume it as‐​is or reduce it to whatever consistency they prefer). Others testified in Raspanti’s defense. Two food brokers with a combined 42 years of experience testified that wholesalers, retailers, and consumers alike all accepted Raspanti’s sauce as tomato sauce; that the trade accepted it over competing products by a ratio of 10 to 1; that one retailer said it enjoyed as much consumer acceptance as Arm & Hammer Baking Soda; that none complained the sauce was too thin or lacked seasoning; that consumers bought it because they preferred a thinner, unspiced sauce; and that they (the brokers) could easily sell a large amount of this established product if it were available. One of Raspanti’s competitors, another Sicilian who also operated a tomato‐​sauce cannery in Mississippi, testified Raspanti knew perfectly well what tomato sauce is and more important (for legal reasons) so did Raspanti’s customers.

I can’t recall if the FDA’s action stemmed from a complaint by one of Raspanti’s other competitors, but I believe that was the case. Either way, Raspanti’s other competitors helped the FDA convince Judge Harry Jacob Lemley, himself a native of rural Virginia and member of the U.S. District Court for the Eastern District of Arkansas, that Raspanti didn’t know how to make tomato sauce. At trial, witnesses for the government included “chemists employed by FDA and competitors, a plant manager employed by a competitor, a buyer and sales manager of a food wholesaler, a housewife, a chef, [and] a restaurant manager.” Several government witnesses testified, uniformly and with stunning precision, that true tomato sauce contains no less than 8.37 percent tomato solids. Raspanti’s crime was to produce a tomato sauce—the faint of heart should stop reading here—that contained only 6.5 percent tomato solids. Budding tomato‐​sauce expert Judge Lemley personally and thoroughly assessed these claims at trial: “A can of [Raspanti’s sauce] and certain cans of other brands were opened and exhibited to the Court, by whom they were tested by pouring and tasting.”

In ruling for the government, Judge Lemley conceded, “It is true that in…Louisiana, Arkansas, Mississippi, and Western Tennessee, the claimant’s product has been accepted by the consuming public as tomato sauce over a long period of time.” Lemley nevertheless concluded, with similar stunning precision, “There seems to be no question but that dealers in, and consumers of, tomato products generally throughout the United States consider tomato sauce to be a spiced product containing not less than 8.37% of salt‐​free tomato solids.” If Raspanti wanted to sell his tomato sauce in the United States, he would most likely have to relabel it a beverage in accordance with the assessment of one of the witnesses, who was “an expert on beverages, being in charge of the Beverage Section of the Food Division of the Food and Drug Administration.” Lemley ordered the government to re‐​label and sell the 36,144 seized cans of tomato sauce to the government’s benefit or, in the alternative, to release the items to Raspanti provided his company both paid the costs of the seizure proceedings and posted a bond conditioned on the company re‐​labeling the cans prior to sale.

“Government,” Barney Frank reportedly said, “is simply the name we give to the things we choose to do together.” Like tell Sicilians how to make tomato sauce.

December 29, 2020 1:37PM

Trump Cannot Stay In Power By Declaring Martial Law

“There is no role for the U.S. military in determining the outcome of an American election,” Army Secretary Ryan McCarthy and Chief of Staff Gen. James McConville said in a joint statement earlier this month after Michael Flynn, President Donald Trump’s first national security advisor, declared in an interview with Newsmax that Trump could “take military capabilities, and he could place them in those [swing states], and basically re‐​run an election” in those states. Other Trump backers have suggested that he might use a declaration of martial law combined with the powers of the Insurrection Act to overturn Joe Biden’s victory in the November election.

What would happen if a president actually tried these things? The answer, at least in the America we live in today, is that he would fail.

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The Cato Institute has long worked to encourage people everywhere to better understand and appreciate the principles of government that are set forth in America’s Founding documents. Among these principles is the peaceful transfer of power after free and fair elections. “The assault on the Capitol is a tragic violation of these principles,” writes Cato President and CEO Peter Goettler. “We condemn these actions in the strongest terms, support the rule of law and the Constitution, and reject the attempts to overturn the results of the 2020 presidential election.”

In a recent article, Bonnie Kristian at The Week quotes me at length on these questions. Martial law, I noted, involves a wholesale suspension of civil liberties, so “military commanders can issue orders to civilians” as well as “arrest and mete out punishment based on tactical needs of war rather than the civilian law on the books.” The only time it has been tried on a national scale was when Abraham Lincoln suspended habeas corpus rights during the Civil War to silence dissenters.

But in Ex parte Milligan (1866), the Supreme Court ruled Lincoln had overstepped his legitimate bounds. This ruling is “key” to understanding the president’s martial law powers today, Olson said. It means “the president cannot simply declare martial law at his whim. There must be a state of invasion or insurrection such that ground is actually contested, and resort to conventional civil courts and authority must have collapsed.” Absent those conditions, the court said in Milligan, martial law is “a gross usurpation of power,” and in fact “can never exist where the courts are open.”

The courts are open now, which means any declaration of martial law — including in the six states Flynn targeted — would be illegal. “Courts would not be afraid to recognize this as reason to strike down acts pretending to martial law authority,” Olson said, just as they haven’t been afraid to smack down specious election challenges. That might not stop Trump, Olson allowed, but it would stop many of the people he’d need to execute this plan. And even if their constitutional oaths did not constrain them, there would be “very real personal consequences for both civilian and military administrators should they go along” with such an unlawful proposal, Olson noted, as career bureaucrats and officers undoubtedly realize. (The Army statement is an indicator of this very understanding.)

Martial law has been ordered in some dozens of other instances, typically of brief and localized effect, as in quelling riots. Following the attack on Pearl Harbor, federal officials placed the territory of Hawaii under martial law through much of the war, but the Supreme Court in the 1946 case of Duncan v. Kahanamoku struck down the authority of military tribunals over civilians, ruling that even the very real perils arising from World War Two did not deprive Americans of the protections of the Constitution. “Our system of government is the antithesis of total military rule, and its founders are not likely to have contemplated complete military dominance within the limits of a territory made a part of this country and not recently taken from an enemy.”

More from Bonnie Kristian’s article:

The Insurrection Act gives Trump no additional leeway here. It does provide an exception to the general prohibition (under the Posse Comitatus Act) on using federal troops to enforce domestic law. But those exceptions — which typically involve violent insurrection — aren’t applicable in this scenario. Furthermore, Olson told me, “there is a separate set of laws in which Congress has not only disallowed, but even chosen to make a crime, actions by federal troops or officers that interfere with the right to vote.”

The “thing to remember about the Insurrection Act,” Olson added, “is that it doesn’t allow federal troops to enforce anything but already‐​prevailing federal, state, and local law. It does not authorize martial law in the sense of deprivation of ordinary civil liberties, special tribunals, irregular punishment, street justice, cutting off resort to the courts, etc.” (In 2006, the annual National Defense Authorization Act included a provision which changed that, allowing the president to impose martial law via the Insurrection Act. Uproar was widespread, however, and in early 2008, Congress repealed the change.) So even if the Insurrection Act were applicable (which it isn’t), and even if there weren’t additional legal protections against federal military meddling in state‐​administrated elections (which there are), deploying troops under this authority still wouldn’t result in martial law.

Both Ex Parte Milligan and Duncan v. Kahanamoku are full of the sort of ringing language about liberty that should inspire every patriot and constitutionalist. Writing for the majority in Duncan, Justice Hugo Black quoted the words of the earlier (1879) case of Dow v. Johnson in noting that “the military should always be kept in subjection to the laws of the country to which it belongs, and that he is no friend to the Republic who advocates the contrary. The established principle of every free people is that the law shall alone govern, and to it the military must always yield.”

December 29, 2020 12:38PM

A Proposal to Pay for the Modernization of Congress

Earlier this month in the Washington Post, George Will took aim at the Congress’s institutional weakness. In his first two paragraphs, he empties both barrels:

On Jan 3, the 111th Congress will convene. It’s not clear why.

Presidents make war without congressional involvement. The declare “emergencies” with Congress’s permission, “repurposing” monies for projects did not authorize. The Constitution vests in Congress the power “to regulate commerce with foreign nations,” but Congress has vested presidents with the power to utter “national security,” thereby justifying, on metal imports from Canada, a military ally. And on washing machines. Really. And the power to disburse billions to compensate farmers for injuries a president inflicts by initiating a trade war. Congress thinks it is setting immigration policy, but presidents can substantially alter it by invoking “enforcement discretion.” The Congressional Budget and Impoundment Control Act of 1974 requires Congress to pass a budget resolution by April 15, but it rarely does … Sixty‐​four percent of members of the 116th Congress have never served under a regular budget and appropriations process.

Hear, hear! These are the same criticisms we’ve been leveling at Congress. In The Case for Congressional Regulatory Review, I elaborate on our legislature’s decline, the causes of which are too involved to broach in this post.

Turning back to Will’s column, his ultimate point was to endorse the recommendations rendered by the bipartisan Select Committee on the Modernization of Congress:

Fortunately, the 116th Congress created the 12‐​member bipartisan Select Committee on the Modernization of Congress. Under Chair Derek Kilmer (D‐​Wash.) and Vice Chair Tom Graves (R‐​Ga.) it produced recommendations that could help Congress attract and retain serious members not given to delegating to the executive branch essentially legislative powers.

Will then singles out certain suggestions, including the Select Committee’s recommendation for Congress to invest in itself:

The size of congressional staff has not kept pace with the growth of congressional business.… . Congress’s parsimony with itself—the cost of Congress is 0.08 percent of the federal budget—has costs. Staff pay has declined relative to the private sector, so institutional memory suffers as the typical staffer leaves after four or five years. House committee staff declined about 50 percent between 1991 and 2015.

Libertarians might give pause to a call for more (and better compensated) congressional staff. As a general matter, we’re suspicious of growing government. But I think such skepticism is misplaced. There is a hidden cost to an underfunded Congress—namely, our constitutional system loses a check on growing executive power. As Zach Graves explained as part of the Federalist Society’s Article I Initiative,

Over the past quarter century, committees have lost over 1,000 staff positions, and support agencies have lost over 2,500. Reflecting this capacity loss, sometimes referred to as the “big lobotomy,” Members of Congress can be seen routinely struggling with complex technical issues, and offices have trouble staying on top of their legislative and oversight responsibilities. The end result is that more policy decision making is outsourced to the administrative state, where it is less responsive to democratic forces, and has limited oversight.

Simply put, Congress doesn’t have the tools to oversee the administrative state. This capacity deficit, in turn, facilitates the rise of presidential lawmaking. Without effective congressional oversight, presidents have an easier time pushing the boundaries of executive authority, which is a major reason why our separated powers are so imbalanced at present. And, as Madison explained in Federalist 47, the concentration of power “may justly be pronounced the very definition of tyranny.” The upshot is that building Congress’s oversight capacity can serve the ends of classical liberalism, by balancing power.

Having reflected on the matter, I came up with an idea for how to pay for more and better staff in Congress. Why not fund congressional staff by repurposing fat cut from the budgets of the agencies that lawmakers are supposed to be overseeing? 

Based on my cursory investigation, it would seem there are plenty of easy “savings” that could be reinvested in Congress. The EPA, for example, employs 165 public relations specialists, according to a report by the Government Accountability Office. In comparison, the Senate Environment and Public Works Committee—which has jurisdiction over the EPA—employs 34 staffers in all, according to data compiled by the Brookings Institute. This amazing statistic bears repeating: By itself, the EPA’s PR shop employs about five times as many people as the Senate committee charged with overseeing the entire EPA. This allocation of resources makes no sense! Keep in mind that the Senate Committee has other agencies in its jurisdiction, too, so these 34 staffers aren’t dedicated to the EPA. 

Beyond the EPA, federal agencies spend billions of dollars on public relations every year. To pay for the modernization of Congress, lawmakers should start with the president’s marketing budget.

December 29, 2020 12:02PM

What Increases Public Support for Immigration? Results from a New Experiment

By Emily Ekins and David Kemp

America has a rich history of immigration—a longstanding tradition most Americans embrace. Earlier this year Gallup found that 77% of Americans say immigration is a “good thing” for the country. This belief crosses partisan lines: majorities of both Republicans (62%) and Democrats (89%) agree. However, despite overwhelming favorability toward immigration, only about a third of Americans want to increase it above current levels. Furthermore, when surveys offer respondents an opportunity to express if they think immigration has both benefits and costs to society, nearly half of Americans take it. A Washington Post/Schar School poll found that while 48% of Americans think that immigration has been “mainly good,” another 40% think it’s been both “equally good and bad” (and 11% said “mostly bad”). This shows that few Americans are outright anti-immigration. Rather, many have mixed emotions about the benefits and costs they associate with it.

Those skeptical of more immigration often raise concerns about jobs and wages, crime, and welfare when explaining their opposition. In response, immigration advocates argue that immigrants do not significantly reduce jobs or wages, increase crime, or disproportionately use welfare.

But can we always trust what people just explicitly tell us concerns them? Social psychology research indicates that we as human beings may often have trouble articulating why we think what we do—especially on emotionally charged topics. We often think up rationalizations for deeply felt gut instincts in real time. But sometimes those rationalizations don’t line up with what’s really motivating us. It’s not that people are being dishonest, but that often these motivations operate at a more subconscious level. When someone asks us to explain our beliefs, we may reach for explanations that ostensibly make sense to us in the moment, but may not be a clear reflection of what drives us.

In his book Whiteshift, political scientist Eric Kaufmann argues that ethnocultural concerns may be at the root of immigration restrictionism. If immigration concerns are more about culture and assimilation, then immigration advocates may find they are talking past people when they cite statistics about economic impact, jobs, crime, and welfare. It may also imply that emphasizing differences between Americans rather than what all Americans have in common, may not be particularly productive either.

Social science experiments can serve as a tool to better understand what’s truly motivating people. For this reason, we set out to conduct a series of experiments to investigate what improves public attitudes toward immigration. Today, we’ll report preliminary results from one new experiment, based on Kaufmann’s research.

We recruited 499 respondents on Amazon mTurk between December 11-27 and randomly assigned them to read one of three different newspaper clips. Afterwards, all respondents answered survey questions. Participants were told the researchers were investigating news recall and that they would be asked what they remembered about the article as well as a few other questions about their opinions. One treatment emphasized immigration and difference, the second one instead emphasized immigration and cultural assimilation, and the third (control) group was about…gardening!

We selected real news articles from the Washington Post and New York Times, shortened them, and then combined them with Kaufmann’s original treatments (that he fielded in the context of Brexit). (Full treatment text can be found in the Appendix below.)

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December 29, 2020 9:26AM

Creaking Jones Act Ships Turn to Chinese Shipyards for Maintenance Needs

Jones Act supporters, including the owners of ships operating in the domestic fleet, often claim the law is necessary to thwart China’s maritime ambitions. But it’s unclear how many of them actually believe such rhetoric. Despite professed concerns about China and the need to avoid foreign reliance for U.S. maritime needs, Jones Act shipping companies regularly make use of shipyards outside the United States for repairs, maintenance, and upgrades of their vessels. Including facilities in China.

No operator of Jones Act ships is a more enthusiastic patron of Chinese dry docks than shipping firm Matson, whose vessels have paid more than 50 visits to the state‐​owned COSCO (China Ocean and Shipping Company) shipyard in Nantong for needed work. Indeed, Matson has been such a loyal customer that COSCO hosted senior executives from the U.S. firm last year to celebrate the two companies’ 20‐​year relationship.

And Matson isn’t alone. A vessel owned by Jones Act shipping firm Pasha Hawaii, the Horizon Spirit, recently departed Nantong after nearly 50 days in a local shipyard, suggesting its stay was for more than a mere paint job.

According to maritime attorney Wayne Parker, who served for nearly eight years as in‐​house counsel to Matson and now‐​defunct Horizon Lines, “I never heard of any of our Jones Act‐​qualified container vessels being dry‐​docked, surveyed, or undergoing routine maintenance in U.S. shipyards. This was always done in foreign, usually mainland Chinese, shipyards.”

Although there is nothing objectionable about this from a free trade perspective, the irony and hypocrisy are inescapable. Both Matson and Pasha Hawaii have board of directors positions with the American Maritime Partnership, a leading Jones Act lobbying and advocacy group that frequently asserts the 100‐​year‐​old law serves as a bulwark against China. Yet these same Jones Act companies regularly send ships to the country to save on repair and maintenance costs.

Incredibly, the Jones Act actually helps keep Chinese repair yards humming. While ships plying the world’s oceans are typically scrapped at 15–20 years of age, Jones Act vessels—thanks to a U.S.-build requirement that dramatically raises the cost of buying new ships—are often kept in service until age 40 or beyond. An old fleet means more maintenance—and more business for Chinese shipyards. 

Let’s review what’s going on here. By massively increasing vessel replacement costs through its U.S.-build mandate, the Jones Act promotes the use of older ships requiring more maintenance. Some of this maintenance is then hypocritically performed in Chinese state‐​owned shipyards, a portion of the cost savings from which is then spent on lobbying and advocacy work urging the Jones Act’s retention as a vital tool against China.

You can’t make this up.

Beyond the rankling hypocrisy, this use of Chinese shipyards further illustrates the gaping chasm between the Jones Act’s intended results and reality. The Jones Act has not fostered a vibrant domestic maritime industry or freed the United States from foreign reliance to meet its maritime needs. What it has produced is economic harm, a domestic fleet insufficient to meet U.S. national security needs, and shipyards so uncompetitive that vessels are dispatched to the far side of the Pacific Ocean for repair and maintenance.

This is a case study in the failure of protectionism, and one that should no longer be tolerated.

December 28, 2020 7:01PM

Cut Regulation to Reduce Marijuana Corruption

Mona Zhang has a good piece on marijuana and political corruption at Politico. She writes:

In the past decade, 15 states have legalized a regulated marijuana market for adults over 21, and another 17 have legalized medical marijuana. But in their rush to limit the numbers of licensed vendors and give local municipalities control of where to locate dispensaries, they created something else: A market for local corruption.

Zhang describes how the mayor of Fall River, Massachusetts, allegedly tried to extort $600,000 from cannabis companies in exchange for granting them sales licenses. She discusses numerous other cases in a “rash of cannabis‐​related corruption across the nation, from Massachusetts to California to Arkansas and beyond.

The problem is not marijuana, but rather that politicians are overregulating and micromanaging the market. Zhang notes:

Almost all the states that legalized pot either require the approval of local officials — as in Massachusetts — or impose a statewide limit on the number of licenses, chosen by a politically appointed oversight board, or both. These practices effectively put million‐​dollar decisions in the hands of relatively small‐​time political figures — the mayors and councilors of small towns and cities, along with the friends and supporters of politicians who appoint them to boards … They have also created a culture in which would‐​be cannabis entrepreneurs feel obliged to make large campaign contributions or hire politically connected lobbyists.

It is sickening that people in “public service” are not satisfied with their fat salaries and pensions and seek illegal ways to further line their pockets. But that is what excess regulation often leads to, particularly when governments put artificial limits on valuable items and then dole out access in a discretionary manner. Chicago has been plagued by corruption partly because the government requires businesses to obtain masses of permits, licenses, and other approvals, and then gives individual city council members discretionary power over whether to grant them.

A similar problem exists with the Low‐​Income Housing Tax Credit (LIHTC), as discussed here. The federal government assigns each state a fixed amount of valuable tax credits, which the states dole out to local governments who distribute them to their favored developers. That setup has led to LIHTC corruption scandals in Dallas, Los Angeles, and other cities.

For the marijuana market, Zhang finishes her piece touching on the solution to the corruption problem:

States that have largely avoided corruption controversies either do not have license caps — like Colorado or Oklahoma — or dole out a limited number of licenses through a lottery rather than scoring the applicants by merit — like Arizona. Many entrepreneurs, particularly those who lost out on license applications, believe the government shouldn’t be in the business of picking winners and losers and should just let the free market do its job.