The Simon Abundance Index ® 2019

“Is it OK to still have children?” That’s a question that bothers the environmental consciousness of Congresswoman Alexandria Ocasio-Cortez (D-NY). Comedian Bill Maher thinks that he has the answer. “The great under-discussed factor in the climate crisis is there are just too many of us and we use too much s*#t. Climate deniers like to say, ‘There’s no population problem, just look out the window of an airplane. So much open space down there.’ But it’s not about space, it’s about resources. Humans are already using 1.7 times the resources the planet can support,” he recently noted. There are plenty of legitimate topics in the debate about the health of the planet, but overuse of resources is not one of them.

Humanity’s impact on the planet is deep, but that does not mean that Earth’s future is hopeless. The loss of biodiversity, as the U.N. report recently found, could become a problem, but that can be mitigated by greater urbanization and higher yield crops, thus enabling people to leave an ever-increasing portion of the countryside to flora and fauna. Pollution of rivers, lakes and oceans, which is partly driven by overuse of fertilizer and pesticide in agriculture, could be mitigated by genetically-modified crops that require little of either. Overabundance of carbon dioxide in the atmosphere and the threat of global warming could be mitigated through nuclear power production.

The one concern that we believe people do not have to worry about is the overuse of resources. Late last year, we co-authored a study titled, The Simon Abundance Index: A New Way to Measure Availability of Resources. In that paper we looked at the prices of 50 foundational commodities covering energy, food, materials and metals. Between 1980 and 2017, our findings showed, resources have become substantially more abundant. Our calculations confirmed the insights of the University of Maryland economist Julian Simon who observed in his 1981 book The Ultimate Resource that humans are intelligent beings, capable of innovating their way out of shortages through greater efficiency, increased supply, and the development of substitutes.

To arrive at our conclusions, we have come up with four new concepts: Time Price, Price Elasticity of Population, the Simon Abundance Framework and Simon Abundance Index ®. Today marks the second installment in what we hope will become an annual update of the relationship between population growth and resource availability. As was the case last year, we have looked at the prices of 50 basic commodities tracked by the World Bank and the International Monetary Fund (see Figure 1). The Simon Abundance Index ® 2019 covers the time period between 1980 and 2018.

Federal Subsidies Spur Massive Fraud

One of the problems with federal hand-out programs is that individuals take advantage of them and scam artists outright loot them. You see this in programs such as Medicaid, Medicare, school lunches, earned income tax credits, housing aid, student loans, and farm subsidies.

Daily Beast writer Evan Wright has the appalling story of Christopher Bathum, who looted addiction-treatment funds made available by the Obamacare law. The law required addiction-treatment funding by Medicare, Medicaid, and private insurance companies.

Addiction is, of course, a huge problem, but to me Wright’s article indicates that the wrong solution is throwing federal money and mandates at it. The costly Americans with Disabilities Act also played a role in Bathum’s scam.

Here are excerpts from Wright’s excellent story:

He’s a convicted sexual predator who targeted women in his care. Soon he’ll be tried for an alleged $176 million insurance fraud. He’s an exceptionally bad person, but as a businessman he was fairly typical of rehab operators in America’s $42 billion-a-year treatment industry.

His name is Christopher Bathum. Until his arrest in 2016 he ran Los Angeles-based Community Recovery, among the fastest growing rehab chains in the nation. Starting with a single treatment center in 2012, Bathum grew Community Recovery into two dozen facilities in California and Colorado, with 400 beds, medical clinics, a testing lab and a Hollywood art center and café, where patients could work and express themselves creatively.

… The most astounding aspect of Community Recovery was its price. It was free, sort of. Some were charged ten or twenty thousand dollars to enter. Many others were given scholarships. Though it turned out Community Recovery bought insurance policies for patients without telling them. To those desperate for help or a place to sleep, the details of how they got in hardly mattered. It was free enough.

The Affordable Care Act made sweeping changes to the recovery industry, which went into effect in 2012. After decades of denying coverage, insurance companies were required to pay for treatment, and at rates comparable to coverage for major illnesses. The net effect for addicts was that virtually anyone could get a policy, and it would cover up to about $3,000 per day for the first 30 days of treatment, or roughly $100,000 a month. To rehab owners, addicts, no matter how broke or hopeless, suddenly were gold mines, potentially worth up to $100,000 if they could wrangle them into treatment.

The recovery boom was on. Community Recovery was one of hundreds of new rehabs that opened in Southern California. So many popped up that the hundred-mile stretch of coastline from Orange County to Malibu was nicknamed “Rehab Riviera.” Similar booms took place in Florida and in the more ski-friendly parts of Utah. While Affordable Care made it possible to get treatment in any state, apparently many addicts when given the choice would rather try to get sober in scenic areas than in fly-over places like Pittsburgh or Omaha.

… Community Recovery was a luxury rehab for the people. Many patients lived in hilltop mansions with pools and spas. It abounded with fun activities—surfing, hiking, yoga, paintball fights, go-kart racing, zip-line adventures, and (pseudo) Native American healing sessions that Bathum led in smoke-filled teepees.

… In late 2015 LA Weekly reporter Hillel Aron published an astonishing exposé. It revealed that Bathum never finished college and faked his persona as a psychotherapist. Prior to running rehabs, Bathum had been a pool-cleaner. He had four felony convictions for committing fraud on eBay. He had a major drug problem, meth and heroin. A few weeks before Aron’s story ran, Bathum had overdosed in a Malibu motel while shooting drugs with patients. There was a photograph of Bathum being loaded into an ambulance during his overdose. Aron unearthed a lawsuit filed by a former patient from Seasons in Malibu who claimed Bathum offered her drugs in exchange for sex. Patients from Community Recovery stepped forward to say Bathum had sexually assaulted them. Some told their stories on 20/20. Bathum went on 20/20, too, and gave an absurd, seemingly methed-out interview in which he denied their allegations and claimed the photo him overdosing at the motel was a simple case of identity theft.

All of it should have led to the immediate shut-down of his rehab. Hundreds of patients remained in his care. Authorities did nothing.

… Bathum’s rehabs operated under a perverse legal loophole: he ran them as unlicensed “sober living homes.” As such, they were protected by the Americans with Disabilities Act, which included an obscure provision that gave recovering addicts status as a protected class. Their inclusion as a protected class was done to prevent neighborhoods from discriminating against recovering addicts who wanted to live together in “sober living homes.” Such homes were defined as places where no medical treatment or therapy could be offered. But since the Americans with Disabilities Act prevents state agencies from inspecting sober living homes, it’s nearly impossible to know what’s going on inside them.

… His behavior was outrageous, yet Bathum exemplified a unregulated industry. The Affordable Care Act poured money into an already broken system. Industry revenues jumped from slightly more than $20 billion to about $42 billion today.

 

More Breakfast Science to Sink Your Teeth Into

A newly-published study on 5,000 British children reveals that those from higher socioeconomic groups or from white backgrounds perform more exercise than do children from lower socioeconomic groups or from certain ethnic backgrounds including Indian, Pakistani, Bangladeshi and Black Caribbean/African. The amount of exercise correlated inversely with levels of overweight and obesity (i.e., the more exercise a child took, the slimmer they were likely to be).

Not mentioned by the authors of the study is that their data also correlate inversely with the consumption of breakfast (children from lower socioeconomic groups tend to skip breakfast more than do children from higher socioeconomic groups).

The cereal companies like to claim that the association of breakfast-skipping with overweight and obesity means that eating breakfast makes a person slim. That is a false claim. Indeed, experiments show repeatedly that eating breakfast increases the numbers of calories a person ingests.

Socioeconomic status is the great determinant of weight in children, and children from higher socioeconomic groups tend to take more exercise and eat healthier food and lead more ordered lives (which includes eating breakfast), while children from lower socioeconomic groups tend to take less exercise, eat unhealthier food, and lead more chaotic lives (which promotes breakfast-skipping). The association of breakfast-skipping with overweight and obesity, therefore, is only an association, and children from higher socioeconomic groups are slimmer despite their ingestion of breakfast, and children from lower socioeconomic groups are larger despite skipping breakfast.

The cereal companies exploit this paradox to promote the consumption of an unhealthy meal. Which is regrettable.

E-Verify Errors Harmed 760,000 Legal Workers Since 2006

Last week, President Trump announced that his immigration plan would not mandate that employers use E-Verify, the employment verification system that checks new employees against government databases. While the president felt it was too “tough” on illegal workers, he is wrong. Nearly all illegal workers passed the system last year. In reality, E-Verify is tough on legal workers who have had nearly 760,000 jobs held up by the system since 2006.

How many legal workers E-Verify has harmed

Employers who use E-Verify enter the names, dates of birth, and Social Security Numbers (or alien ID numbers) that employees provide on their Form I-9 into the system. E-Verify then checks this information against government databases at the Department of Homeland Security (DHS) and the Social Security Administration (SSA). If the information the employer entered fails to match the government’s information, the system issues a “Tentative Non-Confirmation” (TNC).

Legal workers can contest a TNC at an SSA or DHS office within eight business days of receiving the error. If they fail to contest, cannot do so in time, or are unable to provide adequate evidence of their identity and U.S. citizenship, E-Verify will send their employer a “Final Non-Confirmation” (FNC). FNCs require the business to fire the employee or face civil or criminal penalties for hiring someone without authorization to work in the United States.

Figure 1 shows the number of TNCs and FNCs that legal workers have received from FY 2006 to FY 2019 (annualized based on 6 months). As it shows, the error rate has improved dramatically since 2006—falling from 1.9 percent to less than 0.2 percent—but because far more employers are using the system, the number of errors has increased. Overall, from October 2005 to March 2019, E-Verify has returned TNCs to an estimated 759,615 legal workers, including an estimated 179,103 who received FNCs that cost them a job.

Figure 1: E-Verify Erroneous Tentative Non-Confirmations (TNCs) and Erroneous Final Non-Confirmations (FNCs)

The government reports the share of TNCs that legal workers successfully challenge each year. In a government-commissioned report, the organization Westat estimated that 6.3 percent of all FNCs in 2009 went to legal workers. It has not estimated the share for other years, but this analysis assumes that the FNC error rate tracks the TNC rate such that FNC accuracy will reflect changes in TNC accuracy. This assumption makes sense because a legal worker must first receive a TNC to then receive an FNC.

Why E-Verify errors happen

According to Westat, legal workers can receive TNCs for a variety of reasons. Most commonly, it is as simple as the employer or the government entering their names incorrectly into the databases. People who change their names or have hyphenated names are much more likely to be victims of typos from employers or government agencies, triggering wrongful TNCs in E-Verify.

FNC errors mainly come from employers not informing their employees about the negative result. Some businesses might not fully understand the system and confuse a TNC for an FNC, firing the worker based on a preliminary result, or they might just not want to deal with the hassle of potentially having to lay off a worker after a months-long challenge. Westat concluded about 83 percent of FNC errors came from employers sitting on the TNC info.

The other 17 percent came from employees choosing not to come into DHS or SSA offices to contest. The problem for the employee is that even if they find out about the TNC from their employer, they must challenge the error within eight days without knowing exactly what the problem might be. In many cases, it can take months and many trips to the DHS or SSA offices to sort out.

Ken Nagel, a business owner in Arizona, explained that E-Verify actually flunked his own daughter. Another Arizona resident, Juan Carlos, was flagged because no one told the Social Security Administration he became a U.S. citizen. He paid $400 to get a new naturalization certificate to prove his innocence and keep the job that E-Verify was ready to fire him from. Numerous other cases of U.S. citizens who have lost their jobs or had to fight the government to keep them are known.

An employer mandate would make the situation much worse

In 2018, only about 37.6 million of the more than 100 million new hires went through the E-Verify system. If every employer used E-Verify, the number of legal workers receiving errors would explode to a projected 200,000 annually or 2 million over a decade based on E-Verify’s current error rate. This would include more than 32,000 legal workers who would receive FNCs and lose out on their jobs completely each and every year.

Even on its own measure of success—ending illegal employment—E-Verify fails miserably. In 2018, E-Verify confirmed 86 percent of illegal hires. While proponents see the 14 percent who don’t get confirmed as worth it, they ignore entirely the cost: the tens of thousands of legal workers who suffer. Americans should not need to “prove their innocence” to get a job. The government has the responsibility to prove guilt. E-Verify cuts against this fundamental principle, and it undermines the rights of every American. Trump was right to reject the system, even if he did so for the wrong reasons.

Table 1: E-Verify Cases, Final and Tentative Non-Confirmation Errors, and Error Rates

Why Is Economic Populism Supported By Those Who Loathe Political Populism?

The Economist, perhaps more than any other magazine or newspaper, has outlined the dangers of populism in recent years.

In the past month alone, headlines on its website have included: “Why cosying up to populists rarely ends well for moderates,” “Populists fall short of expectations in the European election,” and “Populism and polarization threaten Latin America.” The populist style of politics, which seeks to pit “ordinary people” against “elites,” is rightly anathema to a magazine rooted historically in a classical liberal worldview.

It’s therefore surprising that the magazine’s Charlemagne column has endorsed a populist as the next president of the European Commission. On Tuesday, a piece entitled “Why Margrethe Vestager ticks all the boxes,” backed the current competition commissioner for the presidential role. It described her as having “applied both a liberal sense of consumer rights and an interventionist commitment to defending the little guy to the task of regulating technology giants.”

Make no mistake: on economic issues, Vestager is a populist in the truest sense of the word. A new paper, Antitrust Without Romance by Dr. Thibault Schrepel (an assistant professor of antitrust at Utrecht University), documents this by analyzing her speeches and comparing them with previous commissioners. He shows clearly how populism and the moralization of antitrust and competition policy has accelerated in recent years in the EU, with Vestager in the vanguard.

Rather than explaining antitrust as a sort of technocratic pursuit, the study finds Vestager’s discourse “emotional.” She seeks to pit the people against the elites in the form of big digital companies. In terms of populist rhetoric, Vestager refers to “the people” in 91 percent of her speeches, to companies as “them” in 81 percent, and puts herself in the “us” camp – as part of “the people” - in 85 percent of speeches. She has ramped up talk about “fairness” in competition policy since 2016.

Her ire has been wrought most obviously on the digital giants, who she pitches as elites undermining the interests of the people. They are said to “distort or fabricate information, manipulate people’s views and degrade public debate,” or help “harmful, untrue information spread faster than ever, unleashing violence and undermining democracy.” She has drawn analogies between digital technologies and products that cause death, and at various times has talked up public “fears” about companies.

This kind of rhetoric is a complete break from her predecessors. Dr. Schrepel finds that while previous Competition Commissioner Joaquin Almunia talked about the “people” often, he did not tend to pitch them against the companies, sometimes referring to the latter as “our firms.” Neelie Kroes, Competition Commissioner from November 2004 to February 2010, made very few references to “us” and “them.” When she did, she always described converging rather than diverging interests between the public and companies. Mario Monti, Commissioner from 1999 to 2004, scored lower still on all metrics of populism and moralism, only using “us” to refer to “the people” twice, instead using it regularly to refer to the European Commission or his competition team.

Dr. Schrepel’s work warns of the dangers of this populist rhetoric manifesting itself as a moralizing and highly politicized approach to antitrust, rather than a policy framework seeking to keep open and competitive markets with high levels of consumer welfare.

It is striking that The Economist and others are alive to the dangers of political populism, which pitches “the people” against political classes, the media or government institutions, but ignores the same techniques and rhetoric when it comes to business competition.

Trump’s “Trade Aid” Takes Road to Serfdom Paved by Congress

In early 2018, President Trump imposed duties on steel and aluminum imports under patently false pretenses. Despite overwhelming evidence to the contrary, Trump declared that the tariffs were required to ensure commodity supplies “necessary for critical industries and national defense.” In fact, military demand for steel and aluminum represents only a small fraction of U.S. production. Furthermore, our top source for these imports—by a significant margin—is Canada, a country whose industrial base is legally incorporated into U.S. defense planning.

Predictably, our trade partners retaliated with tariffs on almost 800 agricultural goods exported by the U.S., worth roughly $26 billion. To assist agricultural producers harmed by the president’s trade war, the Trump administration last week announced that it would distribute up to $14.5 billion in direct payments to “great patriot” farmers. Last week’s announcement occasioned the second round of so-called “Market Facilitation Program” payments—in 2018, the administration made available $10 billion for the same purpose.

Trump, therefore, regulated domestic agricultural producers out of $26 billion, and then he gave them $24.5 billion in direct payments as compensation (among other announced measures). Big Brother’s right hand gives what his left hand takes.

In achieving this gross inefficiency, Trump’s policymaking tools were the phone and pen, which he wielded with obvious insincerity. Indeed, this is the sort of untruthful central planning typically associated with authoritarian leaders in banana republics, albeit on a far lesser scale. Yet it is occurring here in America, renowned the world over as a beacon of freedom and economic liberty.

How did this happen?

Though the Constitution accords the legislative branch plenary power to impose tariffs and spend public money, Congress possesses wide latititude to delegate these functions to the president and his subordinates. Regarding President Trump’s “national security” tariffs, I previously observed in The Hill:

Although Article I of the Constitution grants the legislature the exclusive authority “to lay and collect” tariffs, Section 232 of the Trade Expansion Act of 1962 gives this power to the president to protect “national security.”

Congress failed to define the term “national security,” however, leaving that determination to the president. Nor did Congress confine the available remedies, merely calling for such decisions to be made “in the judgment of the President.”

Why would Congress give away the farm? The 1962 law was passed at the height of the Cold War, when national security issues were paramount in national politics. Relative to now, lawmakers also harbored greater faith in presidential self-restraint.

In line with these expectations, previous presidents rarely tapped their Section 232 powers to impose import restrictions and never for a product other than petroleum.

Well, the Cold War ended, but the law remained on the books. Then Trump came along…

All Trump had to do was dust off the 1962 statute and, ultimately, issue a proclamation announcing the tariffs.

Federal law, moreover, long has given the Secretary of Agriculture unfettered discretion to support virtually any farm commodity by tapping the Commodity Credit Corporation’s permanent, indefinite authority to borrow up to $30 billion from the U.S. Treasury. It’s essentially a revolving credit line: Congress annually replenishes this borrowing authority by appropriating funding to cover the Corporation’s net realized losses. While a portion of the $30 billion is dedicated by the Farm Bill, the remainder is available for discretionary use. During the Trump administration, the availability of these discretionary funds has averaged about $15 billion annually. All Trump had to do was order the Agriculture Secretary to start distributing money to “great patriot” farmers.

At the time it relinquished these powers, many decades ago, Congress was an entirely different institution. Back then, Congress tempered its delegations by competing with the president over how laws were implemented. That is, lawmakers from yesteryear jealously guarded the legislature’s institutional prerogatives. Over the last forty years, however, Congress has changed, such that party loyalty now trumps institutional pride. So long as “their guy” occupies the White House, one political party—roughly half the legislature—loses interest in oversight. Neither party caucus in Congress seeks to claw back power from the presidency, because each wants its side to exercise executive authority.

Thus, Trump was free to break the mold. Prior administrations had exercised these statutory powers intermittently, but on a drastically reduced scope and scale. As noted above, past presidents imposed “national security” tariffs six times since 1962, and only for petroleum imports. Historically, discretionary farm aid addressed natural disasters; here, it’s being used as a palliative for a Trump-made disaster.

You’d imagine that Congress would be outraged, right? Lawmakers are the clear losers. The president is issuing sweeping economic policies that, in practice, are indistinguishable from laws passed by Congress pursuant to the legislature’s core constitutional powers. And Trump is doing so in a manner that clearly conflicts with Congress’s intent. After all, if there’s no “national security” threat, then the president’s tariffs are beyond the law, and the “trade aid” is superfluous. Countenanced with so many affronts, Congress should be steamed. In prior posts, I explained how Congresses from the mid-Twentieth Century never would have stood for these sorts of shenanigans.

And yet, powerbrokers in the contemporary Congress have responded by … joining in!

For example, Senate Finance Committee Chair Chuck Grassley told reporters he would apply for “trade aid” to help his Iowa farm. And Rep. Jim Costa, Chair of the House Agriculture Livestock and Foreign Agriculture Subcommittee, issued a press release bemoaning “the troubling possibility that … the fruit and vegetable crops produced in Central California will receive a different and possibly reduced level of aid.” From the looks of this release, Rep. Costa’s primary concern seems to be whether his constituents would get enough room at the trough.

If lawmakers bothered to care, there would be plenty for Congress to oversee. The tariffs, for example, are a mess, apart from their false justification. Trump reserved for his administration the power to exempt businesses from the import duties, but the process is shrouded in secrecy. The program was simply announced, and then the Commerce Department started accepting petitions. No one knows if these variances have been used to reward political allies and punish foes.

The farmer bailout is no less opaque, which is troubling given the results of the Commodity Credit Corporation’s most recent audit. Just before the Trump administration announced the first round of trade aid, government contractors found that the Corporation’s accounting for budgetary transactions suffered from a “material weakness,” or “a deficiency … in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Notwithstanding this bright red flag, President Trump effectively doubled the Corporation’s fiscal responsibilities in each of the past two years.

Instead of focusing on these disconcerting regimes, the current Congress has bigger fish to fry—such as inspecting Trump’s tax returns, or investigating Hilary Clinton’s server (still!). You know, the really important stuff.

To be sure, Trump is faithlessly executing the law, in violation of his constitutional oath. At the same time, he is acting ambitiously, just as the Framers would have expected. Today’s passive Congress, by contrast, would be unrecognizable to the Founders, who had feared that “[t]he legislative department is everywhere extending the sphere of its activity, and drawing all power into its impetuous vortex.” Far from accreting power as expected by constitutional drafters, the contemporary Congress delegates away its authority and then loses interest. Rather than compete with the president, Congress abets the president’s ambition. Therein rests the root of our present problem.

Of Dogs and Men Screening at Cato

The U.S. Department of Justice estimates that American police shoot and kill 10,000 pet dogs per year. Perhaps many of these shootings are justified, but certainly many of them are not. Several years ago, Cato hosted a policy forum featuring Cheye Calvo, a mayor of a D.C. suburb in Maryland, whose dogs were killed by police during a drug raid on his home. (Calvo was innocent. Drug couriers were working for the delivery company and the package was mistakenly delivered to the Calvo residence.) There are many problems with what happened to Calvo and his family, but the unnecessary killings of his two beloved dogs may have been the most painful part of the ordeal.

Next Thursday, June 6, Cato will host a film screening for Of Dogs and Men, a documentary that chronicles the stories of several dog owners whose pets were needlessly killed by police officers. The film also documents police agencies who responded to these incidents and changed policy as a result.

You can check out the preview here:

The film will be shown in its entirety, starting at 6 P.M., and afterwards Cato’s Clark Neily will lead a discussion with the filmmakers Michael Ozias and Patrick Reasonover. You can find more information about the film and register for the event here