Early Results From Canada’s Recreational Cannabis Legalization

Statistics Canada released the National Cannabis Survey results for the fourth quarter of 2018 yesterday. Despite comedic predictions that Canada will become “the stoner living in America’s attic” after it legalized cannabis for recreational use, the early results suggest nothing much has changed. The survey found: 

“About 4.6 million or 15% of Canadians aged 15 and older reported using cannabis in the last three months. That was a similar percentage to what was reported before legalization. In addition, nearly one in five Canadians think they will use cannabis in the next three months.”

Survey respondents stated that quality and safety were the primary factors influencing their decision as to where to purchase the cannabis, with price and accessibility secondary factors. Slightly over half the respondents stated they used cannabis for medical as opposed to recreational purposes. The overwhelming majority of documented medical users were daily users. A large majority of medical users preferred methods other than smoking as their means of consumption.

Recreational marijuana legalization took effect only recently, in October 2018, so this report represents an early snap shot. But based upon what we have seen so far, those who fear that Canada’s economy will collapse as it transformed into a nation of non-working stoners can “mellow out.”

Obama Tripled Migrant Processing at Legal Ports—Trump Halved It

The Department of Homeland Security (DHS) has been turning away asylum seekers, families, and other migrants without paperwork as they attempt to apply for entry at legal ports along the U.S-Mexico border. Migrants are then forced to wait days, weeks, or months homeless in Mexico. The policy clearly violates U.S. asylum law, which has no limit on asylum applications, and according to the DHS Office of the Inspector General, the practice results in many choosing to enter illegally.

DHS Secretary Kirstjen Nielsen told Congress in December 2018 that the turnback policy—which she refers to as “metering” or “queuing”—was due to a lack of “capacity” at ports. She also denied that the agency had instituted any policies that would intentionally reduce processing migrants at ports. However, Jud Murdock, Customs and Border Protection’s acting assistant commissioner, told members of Congress in a closed meeting that same month that “the more we process, the more will come,” implying that the administration does not want to increase processing.

Murdock’s version is more plausible based on the data on port processing of “inadmissible aliens” along the southwest border—generally those without documents proving pre-approval to enter. Monthly arrivals of undocumented migrants at ports steadily rose under the Obama administration. The port arrivals more than tripled from a monthly average of 5,788 in fiscal year (FY) 2012 to a peak of 20,524 in October 2016 (Figure 1). However, since that peak, the numbers have fallen 51 percent to 10,029 in December 2018—the month when Nielsen told Congress that ports could handle no more.

Figure 1: Undocumented Arrivals at Ports of Entry By Southwest Field Office

While October 2016 was an outlier, several other months—both before and after it—also significantly exceeded December 2018. Every field office along the border has seen major reductions in processing numbers of inadmissible migrants. Since October 2016, Tucson, Arizona is down 37 percent; El Paso is down 41 percent; San Diego is down 49 percent; and Laredo—where the most migrants arrived in October 2016—is down 60 percent.

A steep reduction in overall arrivals of undocumented immigrants—both at and between ports—explains the initial drop-off in undocumented immigrants at ports in early 2017. But despite rising apprehensions between ports in 2018, the share at legal ports of entry has steadily declined. Under President Obama, the share of undocumented migrants processed in the southwest at legal ports doubled from average of 16 percent in FY 2012 to 31 percent in October 2016. The share then halved under President Trump from 31 percent in October 2016 to 16 percent in December 2018.

Figure 2: Southwest Undocumented Arrivals at and Between Ports of Entry

Indeed, even as DHS Sec. Nielsen repeatedly urged migrants to cross at legal ports of entry, her department had done nothing to increase processing at ports. One potential explanation is that the undocumented arrivals at ports changed in type since October 2016—in particular, more parents and children who might require more attention from personnel. In fact, December 2018 also saw 43 percent fewer families and unaccompanied children being permitted to enter at ports than in October 2016 (monthly data by type at ports of entry is unavailable before then). In October 2016, ports processed 8,330 parents and children compared to just 4,738 in December 2018.

Figure 3: Undocumented Arrivals at Ports of Entry By Southwest Field Office By Type

Another explanation is that total arrivals—at and between ports of entry—were so significant nationwide (i.e. not just at the southwest border) that the system simply cannot handle the overall flow. But this was not the case. Both port arrivals and apprehensions between ports were lower than in FY 2016, down 9 percent overall (Figure 4). The overall nationwide numbers are simply insufficient to explain why southwest port “capacity” as Sec. Nielsen has described it has suddenly dropped.

Figure 4: Nationwide Undocumented Arrivals at Ports and Between Ports of Entry

Another potential issue is that CBP passes off undocumented migrants at ports to Immigration and Customs Enforcement (ICE), and ICE may not have enough detention beds to handle the arrivals. But ICE has increased its available bed space by nearly 5,000 beds (Figure 5). In other words, the capacity for ICE to receive undocumented immigrants has not diminished relative to the flow.

Figure 5: ICE Detention Beds and Monthly Undocumented Arrivals At and Between Ports

Development of the Metering Policy

Thanks to a lawsuit, we now know that turning back asylum seekers at ports of entry actually started in 2016 under the Obama administration. Customs and Border Protection (CBP) officers at ports of entry had already developed a policy in May 2016 of forcing asylum seekers to wait in Mexico. The Watch Commander at the San Ysidro port in San Diego told officers on May 29, 2016 “to ensure that groups that may be seeking asylum are directed to remain in the waiting area on the Mexican side.”

In July 2016, the policy in San Diego appears to have formalized with the Mexican government. Asylum seekers could only enter at either 8am or 4pm, and the CBP would only admit an undisclosed number per period. CBP’s memo of July 15, 2016 detailed the process:

In order to control the flow of asylees in their area, [Mexico] has instituted a numerical process by giving asylum applicants numbers with intake dates in the order of their arrival. The applicants are also given the locations of humanitarian shelters in Tijuana where they receive food and shelter until their intake date.

Mexican officials have since stated that their policies developed under U.S. pressure. Even still, the policy did not prevent further significant increases in port processing (Figure 1 above). In November 2016—just after the record-breaking month of October—CBP appears to have instituted the policy across all ports of entry for the first time.  “If [Mexican immigration authorities] cannot or will not control the flow, your staff is to provide the alien with a piece of paper identifying a date and time for an appointment and return [them] to Mexico,” the Assistant Director Field Operations for the Laredo Field Office instructed his officers.

Whatever the case, the Trump administration restricted entries further in mid-2018. It was during this time that President Trump tweeted repeatedly about the caravan from Central America. In April 2018, Trump wrote that Mexico “must stop them at their Northern border” and “not allow them to pass through into our country, which has no effective border laws.” In June 2018, Trump tweeted, “When people come into our Country illegally, we must IMMEDIATELY escort them back out without going through years of legal maneuvering.” Throughout the year, the administration’s share of undocumented migrants processed at ports of entry fell almost continuously from 28 percent to 16 percent (Figure 2 above).

Reports Dispute Capacity Issues 

There is a strange tension between the purported “capacity” complaint from the superiors and the need to instruct line officers on the ground to turn asylum seekers away. If the ports literally could not process the flow—to the point where it would require breaking U.S. asylum law by turning away asylum seekers—why would the instruction have even been necessary? The Department of Homeland Security Office of Inspector General (OIG) reported in September 2018:

CBP reported that overcrowding at the ports of entry caused them to limit the flow of people that could enter. This may have led asylum-seekers at ports of entry to attempt illegal border crossings instead… . [and] the OIG team did not observe severe overcrowding at the ports of entry it visited.

Human Rights First researchers concluded in July 2018:

The processing rooms visible in the ports of entry visited by Human Rights First appeared to be largely empty. For example, the processing room at the Hidalgo-Reynosa Bridge has nearly 100 chairs and when Human Rights First researchers and other attorneys passed through, the vast majority of the chairs were empty.

Amnesty International found in October 2018:

At the San Ysidro Port-of-Entry (POE), which is the busiest land border in the Western Hemisphere and the site of frequent illegal pushbacks, senior CBP and ICE officials informed Amnesty International that CBP has only actually reached its detention capacity a couple of times per year [Interview with ICE’s Assistant Field Office Director at Otay Mesa Detention Center, 1 May 2018.] and during “a very short period” in 2017 [Interview with CBP Field Office Director in San Diego, 5 January 2018].

In December 2018, southwest Border Patrol sectors processed five times as many undocumented migrants as CBP processed at southwest ports. It is simply inconceivable that—even if the port capacity issues were real—the agencies could not work together to bring in more at ports by having CBP turn them over to Border Patrol for processing through its apparently more robust procedures.

Conclusion

Congress needs to demand answers on why the Trump administration is processing half as many asylum seekers and undocumented immigrants at ports of entry than the Obama administration did in October 2018. The administration’s normal responses simply don’t explain it. The processing is far below what it was two years ago, but given that CBP has been turning back migrants since at least May 2016, it needs to explain how it has not found solutions to this problem in the meantime. The agency cannot simply suspend U.S. immigration law for years on end.

The anecdotal evidence and the statistics point in a single direction: that the government is intentionally inflating “capacity” issues in order to justify turning away asylum seekers.  The culmination of this political stance is the “Remain in Mexico” policy that the administration has started to implement in San Diego, under which nearly all asylum seekers will be sent back to Mexico even after waiting under the turnback policy. This administration’s goal is what White House adviser Stephen Miller reportedly said, “I would be happy if not a single refugee foot ever again touched American soil.” Its policies are moving America closer and closer to that goal.

Other “Channels Of Adjustment” To Minimum Wage Hikes

The “Fight for $15” scored a victory Monday as New Jersey Governor Phil Murphy signed legislation for the state to hit a $15 per hour minimum wage target by 2024. Vermont is considering similar legislation, and I testified to their Senate Economic Committee about the proposal on Tuesday.

Earlier this week I wrote on the bad arguments used to justify such policies. But in my written evidence for Vermont I also discussed the consequences.

There’s been a long back-and-forth about the impacts of minimum wages on jobs and hours, which I shan’t repeat here. But I also tried to address advocates’ insistence that other “channels of adjustment” exist, meaning employment levels or hours might not fall.

This is true – every business affected will react differently, depending on their industry, business model, staffing practices or ability to pass increased costs onto consumers.

But the key point is this: unless we presume there is currently monopsony power wielded by companies, or firms are passing up profit-enhancing opportunities that would come from boosting pay,  these other adjustments are not costless.

It’s tempting when advocating policy to engage in motivated reasoning, claiming there are no trade-offs from minimum wage hikes and imagining everyone will benefit. In the case of increasing the minimum wage to $15, this is wishful thinking.

1)   Improved productivity

It’s sometimes said businesses can cope by taking steps to improve productivity to maintain their profitability. But improving worker productivity itself is costly.

Boosting productivity might require replacing inexperienced low-skilled employees with more experienced, higher productivity employees. This comes with search and turnover costs in the short-term and reduces opportunities for low-skilled workers in the longer-term. We know this can have a scarring effect on young workers, who lose entry-level job opportunities that provide basic skills and habits, including punctuality, and dealing with customers and colleagues. David Neumark and Olena Nizalova found that, even their late 20s, workers who had been exposed to high minimum wages when they were younger worked less and earned less. This effect was especially strong for blacks.

“Improving productivity” might instead entail putting pressure on workers to produce more, cutting their hours so they are more productive in hours they do work, or cutting back on side perks and benefits. These amount to a worsening of the work environment for employees, offsetting some of the gains from the wage increase.

Higher minimum wages might also deliver higher productivity by encouraging the automation of low-skilled jobs. In the past decade we have seen the proliferation of supermarket checkout machines, iPads to order food in restaurants or fast-food outlets, and the use of apps to replace human employees for checking in for flights, ordering tickets and other activities. Shake Shack in New York, preempting the minimum wage hike, trialed a largely staff-free restaurant. Some fast-food outlets are even exploring the possibility of burger-making machines.

Of course, some of these trends represent pure, cost-effective free-market innovation. But continually raising the minimum wage incentivizes labor-saving capital investments, acting like a subsidy to automation. Based on data from 1980-2015, economists Grace Lordan and David Neumark found “that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become nonemployed or employed in worse jobs.” The effects were particularly damaging for older workers previously in manufacturing jobs.

2)   Firms taking the hit to profits

Some claim companies will just have to take a hit to profits. No doubt some firms will accept a worse bottom line in the short-term, and perhaps adjust their hiring plans on a forward-looking basis. Others might see a permanent fall in profitability if they are in more concentrated markets. But lower profit rates discourage firms from entering markets, or cause some existing firms to close, especially those with razor thin margins. If you do not believe this, it is difficult to claim you believe in capitalism.

3)   Boosts to consumer spending

$15 minimum wage proponents sometimes claim that low-paid workers’ propensity to spend additional earnings means minimum wage hikes boost demand and raise the level of GDP, benefiting the broader economy. But this ignores contractionary impacts from lower profits reducing investment, higher prices reducing other spending or reduced employment opportunities cutting some people’s incomes. Standard economic theories suggest that, overall, increasing a price floor brings more distortions to the economy. An overwhelming majority of economists (69% to 4%) disagree with the idea that a $15 minimum wage would substantially boost aggregate economic output.

4)  Reduced turnover

By raising the minimum wage rate, it is claimed, firms will benefit from reduced staff turnover, with happier and more productive employees. But if this were a net benefit to the firm, wouldn’t they be raising wage rates already? That some firms do, and observe benefits, does not mean you can generalize that effect to the whole economy. It is also unclear why it is assumed reduced turnover would be good for productivity at an economy-wide level. The higher wage for low-skilled workers might reduce the incentive, on the margin, to leave the company for better positions or to seek promotion or invest in human capital, especially if there is wage compression. This could reduce economy-wide measured productivity over time.

In short, not all firms will adjust to higher minimum wages by cutting back the number of jobs or hours of employment. But other reactions to minimum wage hikes are not costless. Absent monopsony power or employers misestimating the best wage to incentivize workers, there is no free lunch.

DEFENSE DOWNLOAD: Week of 2/7/19

Welcome to the Defense Download! This new round-up is intended to highlight what we at the Cato Institute are keeping tabs on in the world of defense politics every week. The three-to-five trending stories will vary depending on the news cycle, what policymakers are talking about, and will pull from all sides of the political spectrum. If you would like to receive more frequent updates on what I’m reading, writing, and listening to—you can follow me on Twitter via @CDDorminey.  

  1. Sold to an ally, lost to an enemy,” Nima Elbagir, Salma Abdelaziz, Mohamed Abo El Gheit, and Laura Smith-Spark. CNN broke a story this week revealing that Saudi Arabia and the United Arab Emirates transferred American-made weapons to al Qaeda-linked fighters, hardline Salafi militias, and other factions waging war in Yemen. 
  2. Inside the Secretive US Air Campaign In Somalia,” Amanda Serber. “Since Donald Trump took office, the US military has approximately tripled the number of strikes that it conducts each year in Somalia, according to figures confirmed by the Pentagon, while such actions—and the reasons behind them—have become increasingly opaque.” 
  3. Little Sparta: The United States-United Arab Emirates Alliance and the War in Yemen,” William Hartung. When talking about Yemen, the United Arab Emirates’ role in the conflict has been minimized and underreported. 

The Indian Child Welfare Act Infringes on Parents’ and Children’s Rights

The Indian Child Welfare Act (ICWA) gives tribal governments exceptional power over the fate of children who are “eligible” for tribal membership and have a member as a parent, whether or not they are themselves tribal members. Although the law was originally intended to prevent the breakup of intact Native American families at the hands of state officials, ICWA now operates to make it harder for non-Native adults to adopt such children even in circumstances in which approval would otherwise be routine, while sometimes forcing child welfare officials to place abused and neglected children in households in which they are at serious risk of further harm.

Although tribes are legally permitted to use genetic criteria as qualifications for membership, the Fifth Amendment’s Due Process Clause forbids the federal government from discriminating on the basis of race or lineage. Yet ICWA explicitly imposes race-based restrictions on foster care and adoption. If Native children cannot be placed with relatives or members of the same tribe, it directs that placement be sought with “other Indian families” or in “Indian” institutions, regardless of tribe. It thus enforces a further racial classification that is both unusual and suspect, that of the “generic Indian,” one that disregards significant differences between tribes as well as the interests of individual children.

While engaging in this improper racial classification, ICWA also removes Native children from the benefit of protections deemed important through much of existing law. For example, many states employ a “best interests of the child” standard, but the federal Bureau of Indian Affairs (BIA) and several state courts have declared that ICWA overrides it. But Congress does not have the constitutional authority to dictate what is in the best interests of the children in a single racial class, let alone to do so in a way that itself promotes racialized outcomes.

In addition, subjecting American citizens living far from Indian country — both children and adoptive parents — to tribal courts, absent some indicia of consent to be thus governed, imperils their rights to due process and disregards the longstanding “minimum contacts” rule that forbids judges from reaching across borders to impose binding judgments on parties that have no real contact with their jurisdiction.

Together with the Goldwater Institute and the Texas Public Policy Foundation, Cato has filed an amicus brief in the Fifth Circuit on behalf of parent plaintiffs frustrated in a wish to adopt children of Native descent. We argue that the government may not treat American citizens differently based on whether their lineage would qualify them for tribal membership. Put simply, Native families are entitled to the same legal protections as families of all other races and lineages. For Congress to impose a racialized and non-neutral regime on parents and children is not only unwise and unfair, but unconstitutional.

 

Fewer than Half of Employment-Based Green Cards Are for Workers

In this week’s State of the Union address, President Trump said that he wanted to allow in more legal immigrants and to improve the system.  The United States’ immigration system favors family reunification, even in the so-called employment-based categories.  The family members of immigrant workers must use employment-based green cards despite the text of the actual statute and other evidence that strongly suggests that this was not Congress’ intent.  Instead of a separate green card category for spouses and children, they get a green card that would otherwise go to a skilled worker.  Fixing this would increase skilled immigration, which is one of President Trump’s goals. 

In 2017, 59 percent of all supposed employment-based green cards went to the family members of workers (Chart 1).  The other 41 percent went to the workers themselves.  This is an even worse ratio than in earlier years, such as 2015 when 56 percent of the beneficiaries were workers.  Some of those family members who receive employment-based green cards are workers, but they should have a separate green card category or be exempted from the employment green card quota altogether. 

Figure 1: Employment-Based Green Cards by Recipient Types

If family members were exempted from the quota or there was a separate green card category for them, an additional 87,256 highly skilled immigrant workers could have earned a green card in 2017 without increasing the numerical quota. 

About 82 percent of those who received an employment-based green card in 2017 were already legally living in the United States (Chart 2).  They were able to adjust their immigration status from another type of visa, like an H-1B or F visa, to an employment-based green card.  Exempting some or all of the adjustments of status from the green card cap would almost double the number of highly skilled workers who could enter. 

Figure 2: Adjustment of Status vs. New Arrivals

Here are some other exemption options for increasing the number of employment-based green cards issued annually without raising the overall cap of 140,000:

  • Workers could be exempted from the cap if they have a higher level of education, like a graduate degree or a Ph.D.
  • A certain number of workers who adjust their status could be exempted in the way the H-1B visa exempts 20,000 graduates of American universities from the cap.
  • Workers could be exempted if they show five or more years of legal employment in the United States prior to obtaining their green card.
  • Workers could be exempted based on the occupation they intend to enter.  This is a problem because it involves the government choosing which occupations are deserving, but so long as it leads to a general increase in the potential numbers of skilled immigrant workers without decreasing them elsewhere, the benefits will outweigh the costs.

A Bad Fact-Check On Economic Growth

Fact-checking blogs are currently facing a backlash. Criticisms are sometimes unfair, but the worst “factcheckers” clearly stray into assessing subjective statements or else rule that people are being misleading based on tiny oral deviations. As such, they confuse debate, rather than clarifying it.

Usually, the Washington Post’s fact-checker is much better and truly assesses verifiable claims. That’s what makes this statement from last night’s State of the Union fact-check blog noticeable.

As part of its assessment of Trump’s claims on growth, the WaPo team wrote:

GDP growth has averaged 2.8 percent per quarter so far in Trump’s presidency, not much higher than Obama’s average of 2.1 percent for his two terms in office.

Though both numbers look similar, no economist would claim that 2.8 percent annual GDP growth is “not much higher” than 2.1 percent. It’s a third higher!

And the point about economic growth is that it compounds over time. If we had growth of 2.1 percent over a 10-year period, real GDP would be 23 percent higher by the end of the decade. If we enjoyed 2.8 percent growth over a 10-year period, it would be 32 percent higher.

With a 2.1 percent growth rate, GDP would double after 33 years; with 2.8 percent growth it would double in just 25 years.

You get the point.

There’s of course a big question as to whether the higher growth the economy has experienced under President Trump is sustainable. That is, whether it represents an increase in the underlying potential growth rate of the economy or is a cyclical phenomenon driven by changes in fiscal policy.

But the improvement has been marked and should not be downplayed.

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