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When It Comes to Politics, Corruption Is Subtler Than You Think

Trevor Burrus

In the now infamous case of Citizens United v. FEC, the Supreme Court corrected a 20-year-old mistake that, if allowed to continue, threatened to consume the First Amendment. The mistake was made in Austin v. Michigan Chamber of Commerce in 1990, when the Supreme Court upheld a Michigan restriction on corporate spending to independently run ads supporting or opposing a candidates for state office.

In Austin, the court endorsed a stunningly broad theory of corruption. In the words of Justice Thurgood Marshall, corruption was expanded to include “the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.”

Trust people to make honest, respectable choices even in the face of political ads. Distrust politicians who believe you’re incapable of doing that.

To Marshall, there was apparently something natural or proper about the level of “public support” for a given political idea at a given time. “Corruption” entered when corporations use “immense aggregations of wealth” to try to get people to deviate from that baseline. If not a lot of people already agree with something, then corporations shouldn’t be allowed to speak too much about it. Presumably, however, it would be okay for a corporation to use its wealth to speak about subjects that already enjoyed broad support.

But Marshall didn’t mean that all corporations should be restricted. There are several corporations that have been given special permission by the government to “corrupt,” in Marshall’s definition, the marketplace of ideas: The New York Times, the Wall Street Journal, NBC, ABC and all other news corporations, as well as corporations like Michael Moore’s “Dog Eat Dog” films. Moore’s films are, of course, designed to change how people think and to build support for ideas. In other words, they’re designed to “corrupt.”

Marshall’s broad theory of corruption knows few limits and produces many bizarre idiosyncrasies. Yet many people want not only to return to that theory, but also to expand it even further. In the name of eliminating “corruption,” they hope to give the government terrifyingly broad powers to determine who can speak, how loud they can speak and what they can say. Ultimately, corporations aren’t allowed to speak — or at least, some corporations aren’t allowed to speak — because you might believe them.

This type of anti-democratic paternalism cannot be allowed to consume the First Amendment. Democrats and others pushing for “campaign finance reform” are prone to asking “what’s the matter with Kansas?” They’ve tried to persuade regular Americans to vote for policies in their “self-interest” — i.e. Democratic policies — but they continually vote otherwise. Thus the minds of some Americans (e.g. Republicans, libertarians and probably some Hillary Clinton supporters) must be “corrupted.” By what? Corporations, of course. The solution? Shut the corporations up. After all, it’s for those citizens’ own good.

From this perspective, corruption is often a personal concept based on anecdotal reasoning and personal biases. Why hasn’t America passed single-payer health care? Corruption. Why haven’t we fixed public schools? Corruption. It’s quite self-gratifying to believe that no honest, uncorrupted person can disagree with us, but these personal biases can become weapons against free speech if broad theories of corruption like Marshall’s are allowed to return.

A functional legal theory of corruption must protect our First Amendment rights and prevent rampant misuse, by voters or politicians. For the purposes of much campaign finance regulation, the “quid pro quo” test, which confines corruption to the actual trading of money for favors, should suffice. Courts must continue to heavily scrutinize finance regulation laws that are not related to preventing quid pro quo corruption.

If we seek to rein in corruption in Washington, we shouldn’t confine our focus exclusively to campaign finance law. Much of the corruption in D.C. is subtle, more insidious but less invidious: It’s two old friends — one from the Securities and Exchange Commission and one from the Hill — having drinks and making a deal; it’s a former member of Congress, now at a lobbying firm, reaching out to his connections and old friends to influence policy; it’s lobbying firms being used as a de facto research arm of Congress.

Some of these things can be moderated. We can raise the pay for members of Congress so they are less likely to leave to earn more lobbying. We can raise the pay and increase the size of congressional staff. Staff members are underpaid and overworked, and they are expected to have some amount of expertise in too many subjects. Thus, when a bill comes up that subtly changes how concrete is regulated, whom do they call to get up to speed? The only people who are already up to speed: those in the relevant industry.

Finally, we should liberalize existing campaign finance rules. Ever since the Federal Election Campaign Act was amended in 1974 to limit contributions to federal candidates and political parties, it has become harder to dethrone incumbents. Challenging incumbents takes money, and current laws make acquiring money difficult, especially money a candidate can control. In 2014, about 95 percent of congressional incumbents were reelected.

By raising contribution limits, we’ll cut down on “outside” spending by super PACs and other groups to be redirected to candidates; we’ll lower the amount of time candidates spend fundraising; and, most important, hopefully kick some incumbents out of office. If sitting politicians were really in favor of “fair” elections, they would triple the contribution limits for challengers — but I won’t hold my breath.

A static political class is inherently corrupting. When our representatives don’t fear losing their jobs, all types of mischief can result. Long-term, reciprocal back-scratching relationships form, and more corruption happens at the bar or at dinner parties.

Democracy is messy, but theories of corruption like Marshall’s try to fix corruption by undermining democracy. Trust people to make honest, respectable choices even in the face of political ads. Distrust politicians who believe you’re incapable of doing that.

Trevor Burrus is a research fellow at the Cato Institute’s Center for Constitutional Studies.

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The Bitcoin Ecosystem’s Communications Deficits

Jim Harper

If triumphalism drove adoption, Bitcoin use would already be widespread, and its price against other currencies would be stratospheric. But the existence of a genius protocol does not guarantee its success. For Bitcoin to thrive, there must be a great deal of social and economic change. To foster such change, the Bitcoin ecosystem needs better and more mature communications. It’s a deficit that is costing the Bitcoin ecosystem in lost potential each day it persists.

Bitcoin and the blockchain are brilliant and fascinating technologies. But Bitcoin’s social capital needs are manifold. To deliver on its promises of global financial inclusion, user-defined privacy, enhanced liberty and a stable money supply for all the world’s people, the Bitcoin ecosystem needs a larger and more sophisticated community of software and protocol developers, greater assurance against mining centralization, and a thriving community of node operators. The embrace of the financial services community would speed adoption. Bitcoin needs the reality and perception of low volatility; it needs protocols and practices that assure privacy, flourishing marketplaces, a congenial regulatory environment and a positive reputation. (This list of social capital needs is drawn from this author’s 2014 study of impediments to Bitcoin’s success.)

Efforts are going into developing Bitcoin’s social capital. The Open Bitcoin Privacy Project is doing salutary work on the privacy piece. Coin Center is demystifying Bitcoin for regulators. But the dominant theme in Bitcoin-land remains the “block size debate,” which will determine how Bitcoin adds capacity, as it must. Perhaps it helps to frame the debate as politics in a “non-political” money system and governance by competition. Whatever the case, there is an ongoing failure to communicate and persuade.

Communicating about Bitcoin will help foster growth in use and demand, raising the price of Bitcoin while serving human needs that are still dire in many parts of the world.

The drawn-out block size debate does not undermine Bitcoin’s essential genius. It just means that community members are burning a lot of energy on one dimension of the Bitcoin ecosystem, energy that is not available for other dimensions. The result is delay in achieving widely agreed-upon goals. Bitcoin will fail to achieve both its social potential and its potential value against major currencies while community members use their energies this way.

It’s one thing to say that communications should improve, quite another to say how to improve them. But in a 2011 study of government data transparency — which is harder to deliver than it sounds — I identified four key practices, two of which might be applied to the block size debate. Transparency improves if an authoritative source of information exists. Information sources should also be complete (a subset of “availability” in the government data study). Information flows and uptakes work better if everyone knows where to look, and comes to rely on being fully informed by looking there.

The communications of Bitcoin Core advocates do not follow this model. The creation of the website and other communications have been good faith efforts, but there has yet to emerge a source where the point of view and plans represented by Core can be found and digested. Instead, nuggets of information distribute themselves like Easter eggs across various forums and listservs.

A non-technical expert should be able to look in on Bitcoin development and relatively easily learn what is happening: where we’ve come from and where we’re going; the risk management philosophy that animates Core; and other essentials. This information should be available in non-jargon to people of ordinary sophistication and experience. In the absence of such communication, scaling debates and others will probably be more intense and longer lasting. Investment won’t flow and involvement in Bitcoin won’t grow as it could.

Value is a product of subjective belief. Communicating about Bitcoin will help foster growth in use and demand, raising the price of Bitcoin while serving human needs that are still dire in many parts of the world.

Core is a disconnected group of people who may differ even with each other about important priorities and details in their vision. A cost of that form of organization is paid in greater misunderstanding, more time spent on debate and slower progress. It’s a cost that can be mitigated.

The communications problem is particularly acute, though, when the block size debate undercuts other dimensions of the Bitcoin ecosystem. When debaters exhibit personal animosity toward others, make churlish comments and foment derision for the other side, they are signaling to observers of Bitcoin in important segments of society that Bitcoin is not an attractive thing to be involved in. They undercut Bitcoin acceptance among potential adopters.

Particularly dismaying are the communications of a C-level executive at a prominent Chinese mining firm whose Twitter feed is often tart and disrespectful toward others. These public communications are available for anyone’s perusal, of course, and they help fuel online chat that it is less than collegial and productive. His CEO cited to me no particular policy about company communications, saying that he prefers not to censor people and that he is not the “father” or “master” of his employees. Rather, this executive’s communications are consistent with “an understanding” among them.

There is a belief among Bitcoin’s “triumphal” community that miners can be relied on to behave well because of their interests in profits. Markets may be perfect in the aggregate, but individual actors are not, and some may not recognize that insolence might be bad for business. Just like Core, Bitcoin companies can improve their communications and message control for the benefit of the ecosystem and themselves.

A winnowing process is underway to determine who are the good businesspeople, technologists, pool operators and other Bitcoin ecosystem participants. The technologies that best scale Bitcoin will continue to be debated. The social capital Bitcoin needs will develop, including more and more mature communications. But it’s a slow, human process, and the longer it takes, the slower Bitcoin’s promises of global development, liberty, progress and profit will take to deliver.

Jim Harper is a senior fellow at the Cato Institute, working to adapt law and policy to the information age. A former counsel to committees in both the US House and the US Senate, he served as Global Policy Counsel for the Bitcoin Foundation in 2014.

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Trump’s Trade Wall Will Make Americans Poorer

Simon Lester

Donald Trump’s call for trade protectionism has him doing well in Indiana, where primary voters will hit the polls on Tuesday.

The Donald wants to build a literal wall across the U.S. border with Mexico, which would be as offensive as it is ineffective.

Just as bad is the figurative wall he advocates for cross-border trade and investment flows: He wants trade to stop trade coming into the United States and investment going out, through high tariffs on imports and penalties for U.S. companies who decide to operate abroad.

The effect would be to harm the economic interests of all Americans, through reduced competition, higher prices and lower economic growth.

Whether Trump could achieve any of these goals as president is unclear. But what is clear is that if he could, his “de-globalization” and “re-nationalization” of the world economy would make everyone worse off.

Trump’s position seems to be driven mainly by a handful of anecdotes about Ford, Carrier and Nabisco having operations in Mexico. Something about these traditional American brands being in Mexico bothers him.

But in taking this position, Trump is pretending not to know how modern companies operate. He could learn a lesson from his own companies, who regularly invest money in places other than the United States.

For example, Trump has invested in a number of U.K. golf courses. Should he have invested in the United States instead? If national pride were his only goal, then perhaps yes. But if what he cared about is running a good business, then no.

Like all companies, Trump should invest wherever it makes the most economic sense. And if other U.S. companies want to stay competitive, that’s what they need to do as well. Don’t build a golf course in America simply because you are an American if there is a better opportunity in Scotland.

The same goes for other products and services, including cars, air conditioners and cookies. Companies should operate and sell where it makes economic sense to do so.

To illustrate this point, one only needs to look at Ford, one of the companies Trump frequently mentions. Ford is a global company, making and selling cars in countries all over the world. Opening a new factory in Mexico is not a sign of abandoning its “homeland.” Rather, Ford is trying to serve the whole world. When Ford produces and sells in Mexico, that is good for American workers back home, who benefit when Ford grows and who would like to see Ford stay competitive.

Furthermore, flows of foreign investment in the other direction demonstrate the absurdity of Trump’s objections to free trade and investment flows. In the past several decades, many foreign-owned companies have opened factories in the United States. BMW in South CarolinaAirbus in Alabama, to name just a couple.

In theory, Trump could shut down the flow of U.S. investment that goes abroad. In doing so, however, he would almost certainly aggravate our trading partners and trigger limits on foreign investors setting up shop in the United States.

So yes, it is technically possible to build an economic wall around the United States, through various regulatory and trade interventions. But such a wall is a terrible idea. The effect would be to harm the economic interests of all Americans, through reduced competition, higher prices and lower economic growth.

We could have a world where the U.S. produces for Americans, and Koreans produce for Koreans, and Germany produces for Germans, and so on. But why would we want that?

In fact, a wall may not even be the best metaphor here. In Trump’s world, Americans would be cowering in an economic bunker. The rest of the world is increasingly open to trade and investment flows.

China, which is subject to so much criticism for its trade practices, is pushing new free trade agreements with many of its trading partners. Perhaps because of the size of the United States, there is a tendency among some to believe we can and should produce every product and service here, and not trade with others.

But even if we can do this, we definitely should not. With the 6.8 billion person global market (excluding the United States), the rest of the world is poised for an efficiency surge, as countries enhance their economic ties.

If the United States, by contrast, retreats to a bunker, trying to pretend that the rest the world does not exist, we will miss those economic gains, and instead face a future of economic stagnation. That is the direction Trump would take us.

Simon Lester is a trade policy analyst with the Cato Institute.

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The ACLU’s Cynical Attack on Criminal Justice Reform

Nat Hentoff and Nick Hentoff

Under the leadership of Anthony Romero, the American Civil Liberties Union (ACLU) is a diminished shadow of its former self. The ACLU is now led by cafeteria civil libertarians who choose the liberties they deem worthy of protection based on a narrow ideological agenda.

The latest incarnation of this betrayal of the Bill of Rights is the ACLU’s refusal to support criminal justice reform legislation that strengthens the mens rea requirement for most federal criminal statutes. Translated from the Latin as “guilty mind,” mens rea is a legal phrase that describes the mental state of mind formed prior to the commission of a crime. Traditionally, the law requires the government to prove that a defendant was aware of and intended to break the law before he can be punished for doing so.

Writing in The New York Times, Yale Law professor Gideon Yaffe warned that liberal opposition to the mens rea provision threatens the passage of the criminal justice reform legislation currently pending in Congress:

“The provision is part of a sweeping criminal justice bill that includes important reforms sought by liberals, including reduced sentences for minor crimes. Democrats, however, oppose the mens rea provision on the ground that it would weaken efforts to prosecute corporate executives whose companies have caused harm. Their opposition is a major stumbling block to passage of the larger bill. But suspicions about Republican motivations should not turn liberals against these changes, because strengthening mens rea requirements will also help poor and minority people.”

The ACLU’s Romero responded to Yaffe with a letter to the editor in which he argued that the passage of mens rea reform “will do little to help the vast majority of the 2.2 million people behind bars in America and those soon to be incarcerated.”

George Mason University Law professor David E. Bernstein criticized Romero’s majoritarian approach to civil liberties advocacy, writing that “the executive director of the ACLU doesn’t care about the rights of a certain class of accused criminals.” Professor Bernstein’s claim of ACLU selectivity has merit when you consider that the organization has, in some cases, called for strengthening the mens rea requirement in proposed federal legislation.

In 2007 the ACLU vigorously opposed changes to the Keeping the Internet Devoid of Sexual Predators (“KIDS”) Act on the grounds that “the amendment’s proposed mens rea is overly broad and vague and could result in innocent people being prosecuted for this offense.”

Progressive groups have badly mischaracterized the mens rea reform movement as a Republican-inspired effort to shield corporate special interests from much deserved prosecutions. A recent op-ed by Thomas B. Edsall in The New York Times parroted the progressive line on mens rea reforms, which he compared to partisan “pro-corporate stealth provisions attached to unrelated sentencing reform legislation.”

Yet one of the leading voices in the mens rea reform movement is Harvey Silverglate, a noted criminal defense and civil liberties lawyer who has a five-decade record of courageously defending progressive causes. Silverglate served for 30 years as a board member of the ACLU of Massachusetts and remains a member of the organization.

The need for mens rea reform was first brought to light in Silverglate’s 2007 book Three Felonies a Day: How the Feds Target the Innocent. According to Silverglate, the average U.S. citizen innocently commits an average of three felonies a day without realizing they have broken the law. His book describes how overzealous prosecutors use vague laws with lax mens rea requirements to prosecute innocent people from all walks of life under a wide variety of federal criminal statutes.

“There has arisen a cynical effort by some to defeat the adoption of mens rea legislation by claiming … that it will aid corporate and ‘white collar’ defendants, ignoring that in fact it would apply across-the-board to all defendants,” Silverglate wrote in an email responding to our request for his comments.

“This attempted injection of a form of class warfare into the struggle to achieve long-overdue fundamental criminal justice reform is a betrayal of the civil liberties of all Americans,” Silverglate warned. “We need both sentencing reform for those convicted, and mens rea reform in order to prevent the innocent from being convicted in the first place.”

Silverglate concluded his comments with a stern rebuke: “Romero and the ACLU should know better. Liberty is indivisible. Equal justice is not achieved by cynically pitting one group of citizens against another. That is how we ended up with by far the largest prison population in the world.”

In 2009 Silverglate called for coordinated action to solve the problems described in his book. “(R)ecognition that this movement has no ideological allegiances other than the preservation of liberty is a pivotal first step,” he wrote in a guest essay for the Volokh Conspiracy blog.

Conservative groups answered Silverglate’s bipartisan call to action while the ACLU and other progressive groups turned tail and ran in the opposite direction. Their opposition to the mens rea legislation now threatens to kill the last best hope for meaningful criminal justice reform for years to come.

Authors’ disclosure: Nat Hentoff is a former board member of both the national ACLU and the New York Civil Liberties Union. Nick Hentoff, a former board member of the Arizona chapter of the ACLU, represented the Arizona ACLU in the First Amendment court case Children of the Rosary v. City of Phoenix (9th Cir. 1998).

Nat Hentoff is a nationally renowned authority on the First Amendment and the Bill of Rights. He is a member of the Reporters Committee for Freedom of the Press, and the Cato Institute, where he is a senior fellow. Nick Hentoff is a criminal defense and civil liberties attorney in New York City.

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Donald Trump Offers Foreign Policy Vision: Contradictory, but Still Best of a Bad Lot

Doug Bandow

Yesterday Donald Trump offered his foreign policy vision. It was the sort of mishmash one might expect, given what he’s said on the stump. He seemed to be starting the traditional march toward the center for November, but he is no Neoconservative and broke with pro-war Republican orthodoxy in important ways.

Trump’s views suggest the good, the bad and the ugly. Thankfully not as ugly as the positions taken by most of the Republican Party presidential contenders and congressional leaders as well as Democrat Hillary Clinton. Nor as bad as policies implemented by President Barack Obama over the last seven years. But not as good as the provocative thinking of Rand and especially Ron Paul.

The speech, delivered in Washington, D.C., was standard campaign fare, intended to demonstrate that the candidate was serious, or at least knew the names of a couple foreign nations. For Republicans these addresses almost always mean flaunting hawkish views: decrying the exceedingly dangerous state of the world, denouncing the irresponsible Obama administration for withdrawing from that world, demanding a massive increase in military outlays, and promising to bomb at least one and perhaps several dangerous nations or organizations bent on global murder and mayhem.

Unsurprisingly, Trump offered some of the usual bland generalities. For instance, he explained, he would “always put the interest of the American people and American security above all else.” Moreover, he sought “to develop a new foreign policy direction for our country, one that replaces randomness with purpose, ideology with strategy, and chaos with peace.” Who in U.S. politics advocates placing American interests last and following a policy of chaos?

Still, there was considerable good in the talk.

If he wins the GOP nomination, for the first time in years the presidential race might yield a genuine debate over foreign policy.

After the Cold War, he noted, America’s foreign policy veered off course: “Logic replaced with foolishness and arrogance, which led to one foreign policy disaster after another.” Hard to argue with that, though many Republicans do. Moreover, said Trump, it was a mistake to believe that the U.S. could impose Western-style democracy on countries “that had no experience or interests” in the process. Things certainly haven’t worked out well in Afghanistan, Iraq, Libya, or Somalia.

Indeed, he noted that “the legacy of the Obama-Clinton interventions will be weakness, confusion and disarray, a mess. We’ve made the Middle East more unstable and chaotic than ever before. We left Christians subject to intense persecution and even genocide.” It actually is the Bush-Obama-Clinton interventions and the region always has been a mess, but point taken. “Our actions in Iraq, Libya and Syria have helped unleash ISIS,” especially the invasion of Iraq by you-know-who. Indeed, Trump added, “After losing thousands of lives and spending trillions of dollars, we are in far worse shape in the Middle East than ever, ever before.” True.

Trump was particularly critical of unnecessary war-making: “unlike other candidates for the presidency, war and aggression will not be my first instinct.” War and aggression. Those are words not often spoken by Republican presidential candidates. Moreover, “a superpower understands that caution and restraint are really truly signs of strength.”

Almost alone among the GOP contenders he criticized the Iraq debacle, whose “biggest beneficiary has been Iran.” And which yielded ISIS. Trump even paraphrased John Quincy Adams: “The world must know that we do not go abroad in search of enemies.” That would be a dramatic change from the Clinton-Bush-Obama years.

Unsurprisingly, given how much Washington does around the world, he argued that “our resources are totally over extended.” Trump confused “wasteful spending” and “massive debt” with trade deficits, considering the last to be costs. But the latter result when we give little pieces of paper to foreigners for real goods which they ship to us. That’s actually not a bad deal.

Further, said Trump, “our allies are not paying their fair share.” Thus, he contended, “the whole world will be safer if our allies do their part to support our common defense and security.” This is obviously true. However, the problem is not that they aren’t paying their fair share, but that they aren’t defending themselves. Whatever they want to spend is “fair” so long as they are responsible for their own security.

He promised to get out “of the nation-building business.” That would be a welcome change. But in the same sentence he pledged instead to focus on “creating stability in the world.” Of course, that is one justification for nation-building. Create a stable Afghanistan, Iraq, and Somalia. One reason America shouldn’t nation-build is because stability so rarely is attainable, at least at reasonable cost in lives and money.

After declaring that “we must develop a foreign policy based on American interests,” he made the sensible point that Washington should cooperate with Russia. That doesn’t mean whitewashing Vladimir Putin but recognizing that fighting a mini-Cold War over a problem partly of Washington’s making — spending years dismissing Moscow’s security concerns — is not in America’s interest. And recognizing that the U.S. and Russia have shared interests around the world.

But there was the bad in the talk as well.

Trump correctly observed that America had “spent trillions of dollars over time on planes, missiles, ships, equipment, building up our military to provide a strong defense for Europe and Asia.” Alas, he drew the wrong conclusion: “The countries we are defending must pay for the cost of this defense, and if not, the U.S. must be prepared to let these countries defend themselves.”

Having prosperous, populous allies defend themselves should be the objective, not the punishment. Washington should not hire out its military. And there’s no way other nations can reimburse the U.S. for the blood Americans shed. Foreign peoples should defend their own homelands.

In a speech intended to highlight his unconventional thinking, he spouted the standard but nonsensical Republican claim that “our friends are beginning to think they can’t depend on us.” Does he mean all those nations in Asia, Europe and the Middle East that Washington continues to defend at such high cost?

As an example he cited the “disastrous deal with Iran” without offering an alternative. Yet the agreement has pushed back Tehran’s ability to create nuclear weapons and intensified the internal struggle over Iran’s future. He also complained that the Obama administration had “snubbed and criticized” Israel. However, U.S. officials pointed out the genuinely “disastrous” impact of decades of occupation and intensified settlement construction in the West Bank, which have harmed America as well as Israel. He confused “supporting” that nation’s security with promising its most extreme leaders all that they want, a mistake made by most of the vote-minded Republican contenders.

In promising a “coherent foreign policy” (who ever says they favor incoherence?), he stated: “To our friends and allies … America is going to be reliable again. It’s going to be a great and reliable ally again.” Which they will interpret as Washington continuing to subsidize their every move and fulfill their every wish.

“Our rivals no longer respect us,” complained Trump. Cuban and Saudi officials didn’t greet the president at the airport. Well, Riyadh is supposed to be an ally: They are upset because President Obama no longer is letting them set U.S. policy, an approach Trump should applaud. The Castros are worried that American influence will grow — because the administration made a long overdue opening which virtually no Republican politician would do. “President Obama watches helplessly as North Korea” continues its nuclear developments, complained Trump. As did Presidents Bill Clinton and George W. Bush. President Trump likely would find himself in the same situation.

Finally, there was more than a little ugly.

No surprise, given the bombast of his campaign proclamations, Trump overestimated Washington’s ability to force other nations to do its will: “We have the power over China, economic power, and people don’t understand it.” Actually, they do, but they also recognize that the relationship runs both ways. Nor does Beijing only depend on America: China dominates commerce in Asia, is playing a bigger role in Africa, and is receiving constant entreaties from Europe.

The present administration did not “allow” Beijing to steal government and industrial secrets: Washington threatened retaliation. Maybe President Trump could do better, but the candidate has yet to demonstrate that he understands the difference between diplomatic and commercial negotiation.

Further, he claimed that with America’s “economic power, we can rein in and we can get them to do what they have to do with North Korea.” The Chinese government acts the way it does toward the North because the former views the consequences of a North Korean collapse, including Korean unification resulting in U.S. troops on its border, as worse than a nuclear North Korea. It would make more sense to use diplomacy, which Trump elsewhere lauds, to address China’s concerns than to threaten to wreck the relationship between the world’s two most important states. After all, Trump as populist tribune should recognize the likely reaction of a proud, nationalistic people whose country only recently escaped centuries of humiliation to an attempt by arrogant foreigners to dictate policy. “Not good,” he might quip.

After criticizing unnecessary wars and subsidies for allies, Trump made the standard claim regarding the Islamic State: “ISIS will be gone if I’m elected president. And they’ll be gone quickly. They will be gone very, very quickly.” Ironically, this is another instance of Washington doing someone else’s job: America’s allies and friends are the countries threatened by ISIS, so they should do the heavy lifting, rather than off-loading it, as always, on Washington.

Moreover, Trump insisted that “we have to rebuild our military.” This is standard GOP rhetoric which cuts against much else that he talked about. Trump complained that President Obama cut outlays — only after greatly increasing them, which Trump did not mention. In fact, even after adjusting for inflation Obama’s cumulative military expenditures will exceed those of his predecessor. America accounts for roughly 40% of the globe’s military outlays, stands far above both China and Russia, neither of which threatens the U.S. militarily, and is allied with every major industrialized power, save the latter two. One reason to allow Washington’s Asian, European, and Middle Eastern friends to finally defend themselves is so the U.S. no longer has to create — and pay for — the expensive, oversize force structure necessary to protect them.

Although America has grown prosperous as a trading nation, free trade continues to be Trump’s bete noire. “We have to find a way quickly, and I mean quickly, to balance” the trade deficit with China. Why? The trade deficit is an accounting fiction. Would he insist on balance where today the U.S. runs a surplus? Should Americans stop selling overseas in such cases?

Trump also blamed NAFTA for emptying “our states of our manufacturing and our jobs.” Actually, increasing productivity has resulted in lower manufacturing employment all over the world, and those job losses started well before NAFTA. Surely he does not believe America would be better off if Mexico was poorer. The right strategy, which he touches on elsewhere, is to reform U.S. government economic policies to improve Americans’ competitiveness.

Trump closed his talk with a promise to view “the world through the clear lens of American interests. I will be America’s greatest defender and most loyal champion.” No doubt his competitors would claim the same, but actually doing so would be a useful change. With the bulk of the “defense” budget devoted to protecting other nations, most American lives lost in attempting to build other countries, and most terrorist attacks growing out of promiscuous meddling in other states’ conflicts, a focus on U.S. interests is long overdue.

Of course, those backing a policy of constant war were not impressed with Trump’s effort. For instance, Hillary Clinton — who backed war in the Balkans, voted for the Iraq invasion, and was architect of the misbegotten Libya disaster — denounced “the long list of dangerous national security proposals” that Trump had put forth. How they could be worse than her own she left unexplained.

Sen. Lindsey Graham (R-S.C.), who never misses a chance to push for military intervention somewhere, complained: “Ronald Reagan must be rolling over in his grave.” Yet Trump’s perspective on foreign policy is far closer than Graham’s to that of Reagan. The latter used the military only three times and toward modest ends. Reagan recognized that he’d made a mistake entering the Lebanese civil war and pulled out after the suicide bombings rather than launch a multi-year nation-building mission. Moreover, despite his hawkish reputation, Reagan genuinely abhorred the prospect of war, which motivated his cooperation with the Soviet Union’s Mikhail Gorbachev and support for missile defense. I knew Ronald Reagan and he was no Neoconservative.

No one knows how President Trump would actually govern. But his foreign policy sounds a lot like his domestic policy: inconsistent, contradictory, ill-formed, incomplete. But still far better than those of his main rivals. If he wins the GOP nomination, for the first time in years the presidential race might yield a genuine debate over foreign policy.

Doug Bandow is a Senior Fellow at the Cato Institute, former Special Assistant to President Ronald Reagan and a Senior Fellow in International Religious Persecution with the Institute on Religion and Public Policy.

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Monetary Policies Misunderstood

Steve H. Hanke

Ever since the U.S. Federal Reserve (Fed) began to consider raising the federal funds rate, which it eventually did in December 2015, a cottage industry has grown up around taper talk. Will the Fed raise rates, or won’t it? Each time a consensus congeals around the answer to that question, all the world’s markets either soar or dive.

This obsession with taper talk — the interest rate story — is simple, but strange. Indeed, it is misguided — wrongheaded. So, why the obsession? It is, in part, the result of a Keynesian hangover. The Keynesians focus on interest rates. The mainstream macro model that is widely in use today is referred to as a “New Keynesian” model. The thrust of monetary policy in this model is entirely captured by changes in current and expected interest rates (the price of money). Money is nowhere to be found, however.

The misguided focus on interest rates not only poses a problem for those who are observing the current economic environment and formulating expectations, but also for those who are interpreting important economic and market events of the past. For example, Nobelist and Keynesian Robert Shiller, in his famous book, Irrational Exuberance, comes to the conclusion that the stock market crash in 1929 was caused by the Fed’s excessively restrictive monetary policy. That’s because Shiller focuses on interest rates and thinks that the Fed’s increase in the discount rate in August 1929 signaled monetary tightening. But, as Elmus Wicker carefully documents in Wall Street, the Federal Reserve and Stock Market Speculation: A Retrospective, which was recently published by the Center for Financial Stability in New York, the Fed was accommodative, not restrictive, prior to the 1929 stock market crash.

This interest rate obsession is amazing, particularly since Keynes dedicates quite a few pages in A Tract on Monetary Reform (1923) to money and its role in national income determination. Then, in his two-volume 1930 work, A Treatise on Money, Keynes devotes a great deal of space to banks and their important role in creating money. In particular, Keynes separates money into two classes: state money and bank money. State money is the high-powered money that is produced by central banks. Bank money is produced by commercial banks through deposit creation.

Keynes spends many pages in The Treatise dealing with bank money. This isn’t surprising because, as Keynes makes clear, bank money was much larger than state money in 1930. Well, not much has changed since then. Today, bank money accounts for almost 82 percent of the broad money supply (M4) in the United Kingdom.

We should keep our eyes on money broadly measured (state, plus bank money), and money properly measured (when available, Divisia, not simple sum measures). A monetary approach to national income determination is what counts over the medium term. The link between growth in the money supply and nominal GDP is unambiguous and overwhelming. Never mind. There remain plenty of deniers of basic principles and centuries of clear evidence.

Since the collapse of Lehman Brothers in 2008, there has been a dramatic change in monetary policies in most parts of the world. Bank regulations have been tightened and supervision has become much more severe. Large-scale bank recapitalizations and deleveraging have become the order of the day. These policies, which impact the production of bank money, have been ultra-tight and procyclical.

In an attempt to expand the total supply of broad money, many central banks have had to engage in quantitative easing (QE). This state money policy is ultra-loose and countercyclical. But, given that state money accounts for a relatively small portion of broad money, broad money in many countries has been growing relatively slowly. So, overall monetary conditions have been relatively tight and modestly procyclical. In consequence, real GDP growth and inflation, which constitute nominal GDP growth, have come in below their trend rates.

The accompanying table shows the changes in state money, bank money, and broad money for the ten largest economic regions in the world. The U.S., Japan, the Eurozone, the U.K., and Korea lead the field in terms of QE. All have ramped up their production of state money. This can be observed by noting that the proportion of state money to broad money jumps up from September 2008 to January 2016 in these countries. For China, Canada, Brazil, India, and Russia, the picture is different. The share of state money to broad money declined, indicating that they did not engage in QE. When we look at bank money, the situation in the U.S., Japan, and the U.K. has been stunning. For these countries, the amount of bank money in the economy was lower in January 2016 than in September 2008. Talk about tight bank money policies. It’s not surprising that the U.S., Japan, and the U.K. embraced QE early in the game. If they had not done so, the growth in broad money would have been much more anemic than it was, and deep recessions would have ensued.


The Eurozone arrived at the QE party a bit late. But, it arrived nevertheless. Now, European Central Bank (ECB) President Mario Draghi and QE face a wave of criticism. Many in Germany, for example, oppose QE. Many even argue that the ECB (and other central banks) are out of ammunition. This is nonsense.

Let’s take a look at one QE operation that would directly boost the money supply without increasing the government’s net debt. The process begins with the government borrowing from commercial banks. Short-dated government paper is transferred to banks. In exchange, the deposit balance of the government is credited.

This new government deposit is not counted as a part of the money supply. The government then uses its bank deposits (which are not considered money) to purchase long-dated government bonds from the non-bank private sector. These transactions add to the non-bank private sector’s bank deposits and directly to the money supply, because bank deposits in the name of private persons and entities are money. So, the quantity of money is directly increased by this debt market operation, and an equivalent amount of long-dated government debt is reduced — literally eliminated.

Of course, the amount of short-dated government debt increases when the government initially borrows from the commercial banks. Accordingly, these debt market operations leave the government’s total net debt unchanged, but it does change the composition of the government’s debt, leaving it with a shorter average duration.

So, forget claims that central banks are out of ammunition. Again, the reason that most come to that incorrect conclusion is that they focus on interest rates.

Moving from the broad picture to the U.S., we see in the accompanying table that there have been three QEs. Their impact on state, bank, and broad money is shown in the table. Each QE was associated with a significant increase in state money, which offset, to some degree, the negative “contributions” of bank money to the total supply of broad money.


The accompanying chart traces out the monetary liabilities of the Fed and profiles the course of state money since the Lehman Brothers bankruptcy. By the summer of 2014, QE 3 had run its course, and the level of state money has remained stable.


The last chart depicts the huge expansion of state money. That’s shown by the widening of the green area since the Lehman Brothers collapse. Although expansive, the QE has hardly been enough to offset the tightness in bank money. In consequence, broad money has only been growing at a 1.72 percent annual growth rate since October 2008. So, it’s not surprising that nominal GDP has grown relatively slowly and that we have not witnessed the inflation surge predicted by many who were only watching the Fed’s balance sheet balloon.


To say that money and monetary policies are misunderstood is an understatement. What’s worrying is that the political class does not have the faintest understanding of the importance of bank money. Their populist bank-bashing rhetoric and regulations are putting a drag on the growth of bank money and economic activity.

Steve H. Hanke is a professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute in Washington, D.C.

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Dump Our Double-Dealing, Thuggish ‘Allies’

Ted Galen Carpenter

It is questionable enough for the United States to maintain its network of alliances in a world without a superpower threat to its security. Indeed, one could argue that even during the Cold War, the United States was the most secure great power in history. How many other great powers ever enjoyed the luxury of two oceanic moats on its flanks and nothing more than weak and friendly neighbors on its other borders? Most confronted geostrategic situations that did not even faintly resemble such a benign environment. Moreover, although the Soviet Union was a credible military challenger, in the end, it proved to be a much weaker and more fragile great power than the image that members of America’s national-security bureaucracy had created.

It was a logical and moral stretch to justify some of the alliances that Washington forged with repulsive, autocratic regimes to wage the struggle against the Soviet Union. Decent Americans had to restrain their gag reflexes to see their government  support the likes of the Shah of Iran, Egypt’s Hosni Mubarak, South Korea’s Chun Doo-hwan, or the Saudi royal family, given the massive human-rights abuses those regimes committed. With the dissolution of the USSR at the end of 1991, and the disappearance of even an arguable existential threat to America’s security, maintaining close relationships with corrupt, murderous autocrats became harder and harder to justify.

Today, two such relationships should have especially become acute embarrassments for Washington. One is the decades-old strategic and economic partnership with Saudi Arabia (and indirectly with Riyadh’s smaller Gulf client states). The other is the multilayered partnership with fellow NATO member Turkey. From both the standpoint of American interests and American values, those associations cry out for termination.

I’ve written previously about Saudi Arabia’s appalling human-rights record (including the imprisonment, torture and execution of peaceful critics) and the support that members of the Saudi elite have given to Sunni extremist movements throughout the greater Middle East. Either factor alone should be enough to disqualify Riyadh as a friend and ally of the United States. Taken together, that behavior should easily put the Saudis on the U.S. policy blacklist. Although it would be an overstatement to say that Saudi Arabia created the Sunni branch of the current terrorist threat, Riyadh’s behavior certainly has exacerbated the problem. As my colleague Emma Ashford  points out, the Saudis are pursuing the interests of their country as they see them, whatever the impact on America’s security. At one time, it was possible to make the argument that U.S. and Saudi interests greatly overlapped. But it is getting ever harder to make that argument. Indeed, American and Saudi interests (and well as values) seemingly now conflict far more often than they coincide.

Saudi Arabia may be America’s most odious ally in the neighborhood, but Turkey seems determined to be an increasingly close second.

The Saudi alliance is utterly contrary to basic American values. There is also growing doubt whether it serves legitimate American security interests in any meaningful fashion. That is especially true as Washington’s Middle East policy has moved from its Cold War focus of keeping its superpower rival from dominating the world’s oil supply to the amorphous goal of promoting regional stability. What the latter phrase has come to mean is America’s entanglement in the vicious Sunni-Shiite blood feud between Saudi Arabia and its clients and Iran and its clients for regional preeminence. To be blunt, we do not have a dog in that fight, but the long-standing alliance with Riyadh drags us into that ugly conflict to our detriment. Terminating the alliance is part of an essential exit strategy.

Saudi Arabia may be America’s most odious ally in the neighborhood, but Turkey seems determined to be an increasingly close second. I’ve written previously about the mounting abuses being committed by the government of President Recep Tayyip Erdogan. Those abuses are characterized by a shocking authoritarianism at home, which has included the harassment and imprisonment of political opponents and the evisceration of a once free press. Nor has Ankara’s external behavior been what one should expect from a prudent, reliable ally. From the flirtation of Turkish security personnel with ISIS and other Islamic extremist groups to the reckless decision to shoot down a Russian military aircraft that had strayed into Turkish airspace for all of seventeen seconds, Turkey has shown itself to be an irresponsible and untrustworthy ally.

In a previous National Interest article, I asked whether the time had come to expel Turkey from NATO. Developments since the publication of that article indicate that the time definitely has arrived. Not only has Erdogan’s domestic authoritarianism grown even worse, he is now  demanding that fellow European members of NATO crack down on their citizens if they dare mock the Turkish tyrant.

Enough is enough. NATO is supposed to be more than an amoral security alliance, especially in the post-Cold War world. It is supposed to be (and portrays itself as) an alliance of enlightened democracies. Linking America’s identity to that of an increasingly corrupt, opportunistic, and thuggish Turkey, absent an utterly dire threat to our security, betrays this country’s most basic values. It is time to give the other NATO members a stark choice: either Ankara goes, or we go.

The American people face the necessity for similar soul searching regarding both the Saudi and Turkish alliances. It is one thing to put up with an odious ally when America’s vital interests are in mortal danger and the ally in question is crucial to the defense of those interests. America even allied itself with the genocidal monster Josef Stalin to deal with the threat that Adolf Hitler posed to the republic’s freedom and independence. But when only secondary or peripheral interests are at stake, it is shameful to forge or sustain such relationships. Washington’s alliances with Ankara and Riyadh were questionable even during earlier eras. They have long outlived whatever usefulness they may once have had.

Ted Galen Carpenter, a senior fellow at the Cato Institute and a contributing editor at The National Interest, is the author of ten books and more than 600 articles on international affairs.

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Ending Welfare as We Know It

Michael D. Tanner

On June 5, Swiss voters will go to the polls to decide whether to eliminate many of the nation’s social-welfare programs and replace them with a guaranteed national income for all citizens. Not long after the Swiss vote, Finland will embark on a similar though partial experiment, replacing welfare benefits with a guaranteed income for both national and regional sample populations. In the Netherlands, at least four cities, Utrecht, Tilberg, Groningen, and Wageningen, are in the process of designing their own experiments. And in Canada, the latest provincial budget in Ontario promised to work with researchers this year to come up with a design for a pilot program. Great Britain is also actively debating the concept.

Most conservatives and libertarians in the United States would dismiss the idea of a guaranteed national income (GNI) out of hand. Typical European socialism, would be the reaction. The fevered brainchild of Bernie Sanders.

Actually, though, free-market thinkers from F. A. Hayek and Robert Nozick to Milton Friedman and Charles Murray have long been open to some form of GNI.

Americans need to watch closely some promising experiments in Europe and Canada.

Instead of tinkering around the edges of the welfare state, trimming a billion dollars here, adding a work requirement there, why not simply abolish the entire thing? Get rid of welfare, food stamps, Medicaid, housing assistance, unemployment insurance, and all the rest. Murray would even throw in Medicare and Social Security. Replace it all with a simple cash grant to every American whose income falls below the stipulated level, and then leave the recipients alone to manage their own lives free from government interference.

Such a program would be simpler and far more transparent than the hodgepodge of existing anti-poverty programs. The federal government alone, for instance, currently funds more than 100 separate anti-poverty programs, overseen by nine different cabinet departments and six independent agencies. With different, often contradictory, eligibility levels, work requirements, and other restrictions, our current welfare system is a nightmare of unaccountability that fails to effectively help people transition out of these programs and escape poverty.

A GNI would also treat poor people as adults, expecting them to budget and manage their money like everyone else. Currently, most welfare programs parcel out payments, not to the poor themselves, but to those who provide services to the poor, such as landlords or health-care providers. But shouldn’t the poor decide for themselves how much of their income should be allocated to rent or food or education or transportation? Perhaps they may even choose to save more or invest in learning new skills that will help them earn more in the future. You can’t expect the poor to behave responsibly if they are never given any responsibility.

Moreover, giving the poor responsibility for managing their own lives will mean more choices and opportunities. That, in turn, will break up geographic concentrations of poverty that can isolate the poor from the rest of society and reinforce the worst aspects of the poverty culture. And, by taking the money away from the special interests that support the welfare industry, it would break up the coalitions that inevitably push for greater spending.

A GNI would also provide far better incentives when it comes to work, marriage, and savings. Because current welfare benefits are phased out as income increases, they in effect create high marginal tax rates that can discourage work or marriage. Studies have shown that a person on welfare who takes a job can lose as much as 95 cents out of every dollar he earns, through taxes and forgone benefits. Poor people, by and large, are not lazy, but they also aren’t stupid. If they can’t earn more through work than from welfare, many will choose to remain on welfare. In contrast, a guaranteed national income would not penalize someone who left welfare for work.

And a guaranteed national income would also do away with much of the government’s excuse for regulating the economy. Minimum-wage laws would instantly become obsolete, to cite just one example. Moreover, a GNI could minimize the economic disruptions that occur from automation and free trade. There would be less opportunity for demagoguery on the American political scene and less resistance to liberalizing the economy.

A no-brainer, right? Well, maybe not.

As with most government programs, what sounds good in theory tends to break down when one looks at practical questions of implementation. There are serious trade-offs among cost, simplicity, and incentive structure. Attempts to solve problems in one area would raise questions in others.

If everyone in the United States were to receive a benefit sufficient to bring him above the poverty threshold, it would cost roughly $4 trillion, more than our entire current federal budget. Clearly that’s not affordable, so some limit would have to be put on who could receive the benefit. And it would likely be distributed through some form of negative income tax, as Friedman advocated.

But that would re-create many of the same incentive problems we see in the current welfare systems. Phasing out the benefit would, as in the current system, impose high effective marginal tax rates, which discourage work. A negative income tax would also import all the complexity, fraud, and abuse of the current U.S. tax code. Say goodbye to simple and transparent.

Once we’ve established the principle of guaranteeing people money, we will still be constantly haggling over the amount.

Moreover, as with other government programs, there would be constant pressure to expand benefits. How long would it be before we heard that no one can live on whatever benefit the GNI provides? Once we’ve established the principle of guaranteeing people money, we will still be constantly haggling over the amount. Already many on the left call for a GNI, not to replace the welfare state, but as an additional benefit on top of existing programs. Grafting a guaranteed income on top of the current failed system would simply double down on welfare dependency.

Those things which make the GNI look so good on the drawing board fade away when you consider how to put it into practice.

Still, advocates of free markets and welfare reform should not dismiss the idea out of hand. Rather, we should watch the experiments in Europe and Canada with a wary but open mind. In the meantime, there are small steps that can move welfare policy in the right direction. Programs should be consolidated, in-kind benefits should be de-emphasized, and outcome measures should focus more squarely on whether this system actually helps people attain some level of prosperity through hard work.

The current welfare state is a clear failure. A guaranteed national income may or may not provide a better alternative. Either way, it’s a debate whose time should be coming.

Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis.

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North Korea Threatens Fifth Nuclear Test: U.S. Should Offer to Swap Military Exercises for Nuke Halt

Doug Bandow

Whatever the issue and occasion, North Korean ambitions loom large. Foreign Minister Ri Su-yong recently opined that the confrontation between America and his nation “will lead to very catastrophic results, not only for the two countries but for the whole entire world as well.” Actually, most of the world doesn’t much notice the North and wouldn’t be particularly affected by conflict there.

Nevertheless, confrontation would be bad for the two countries and those nations neighboring the peninsula. Everyone would benefit if international relationships involving the Democratic People’s Republic of Korea became more normal.

With the backdrop of a claimed submarine-launched missile test and threatened fifth nuclear test, Ri was interviewed by the Associated Press. He defended the right of his nation to possess nukes and blamed American hostility for forcing the DPRK to create a nuclear deterrent in self-defense. The latest missile test, he said, gives the North “one more means for powerful nuclear attack.”

Foreign Minister Ri’s remarks suggest the possibility of at least reducing the threat posed by North Korea. The administration should take up the challenge.

While expressing his purported concern for the “whole entire world,” Ri suggested a potential deal between North Korea and America: “Stop the nuclear war exercises in the Korean Peninsula, then we should also cease our nuclear tests.” It’s an idea worth pursuing.

Pyongyang is unlikely to ever agree to fully disarm. It has spent too much developing nuclear weapons. They are the only reason other nations pay attention to the otherwise small, impoverished nation. Nukes also offer security against the world’s greatest military power, which has demonstrated a propensity for ousting the regimes of largely defenseless antagonists.

Nevertheless, there are more limited steps which Pyongyang might be willing to take, having already established its nuclear bona fides. Halting additional nuclear tests is one. Perhaps other restrictions on nuclear production and development.

Ending military exercises with South Korea would be a small price for Washington to pay. In fact, America’s conventional military presence on the peninsula is superfluous, a relic of the past. The Republic of Korea long ago surpassed the North on every measure of power save military. And the latter failure is merely a matter of choice.

The ROK began to take off economically during the 1960s, under the current president’s father, Park Chung-hee. Today the South possesses around 40 times the GDP of the DPRK. South Korea also has twice the population, a vast technological edge, and far greater international reach and support.

Although Seoul’s forces are outnumbered by those of the North, the ROK possesses newer equipment, larger reserves, superior naval and air forces, and a much bigger industrial base. If the South wanted to match North Korea man for man and tank for tank, it could do so. But it doesn’t need to, with the U.S. treating South Korea as a defense dependent. From Seoul’s standpoint, why not let Washington do the job?

It is not, however, in America’s interest to do so.

Of course, the ROK is not alone. The U.S. is surrounded by “allies” constantly demanding additional support and reassurance. The Europeans possess a larger collective GDP and population than America but still expect to be subsidized and coddled. Only now, 70 years after the end of World War II, has Japan authorized its forces to aid those of America if the latter are attacked. The Saudis are irritated that the Obama administration has engaged Iran, the most important Mideast state. And so it goes.

Washington’s security guarantee is a bad deal for the U.S. Which creates the opportunity for a win-win agreement with North Korea. America should bring home its conventional forces. Then South Korean forces would be on call in the event of war. Thus, military exercises on the peninsula would serve no useful purpose.

So offer to trade away the maneuvers. Start by proposing to end exercises in exchange for the North dropping nuclear tests. Then suggest troop withdrawals. In return the DPRK might end missile tests, back its conventional units away from the border, and freeze nuclear activities. It is impossible to know what is possible without pursuing talks.

If Pyongyang was willing to deal, America could add a little extra incentive: diplomatic relations. There is no good reason not to have regular contact between the two nations. For the North it would be gaining a measure of respect from the global superpower. For the U.S. it would be opening a small window into a mysterious system, allowing policymakers to at least see through a glass darkly. A bonus would be providing the DPRK with a way to contact Washington without having to arrest another errant American for one alleged crime or another.

Of course, Ri might have been speaking out of turn, though that seems unlikely in such a centralized system. The gambit might turn out to be a propaganda ploy, with the Kim regime unwilling to follow through. Pyongyang might quickly violate any agreement that it reached.

All possible. But unknowable without taking up Ri’s challenge.

And no one has a better solution. Preventive war is, or at least should be, unthinkable. The latest sanctions have bitten more deeply than before, but remain inadequate to force change in Pyongyang. And nothing suggests that Beijing is prepared to jettison its unpleasant ally. At the moment, all Washington can do is watch as the DPRK continues to test nuclear weapons and missiles.

Three presidents have struggled mightily over what to do about a potentially nuclear North. So far, Pyongyang has been an insoluble problem. But Foreign Minister Ri’s remarks suggest the possibility of at least reducing the threat posed by North Korea. The administration should take up the challenge.

Doug Bandow is a Senior Fellow at the Cato Institute and a former Special Assistant to President Ronald Reagan.

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Saudi Arabia Is a Good Ally? Get Real

Emma Ashford

President Obama’s awkward recent visit to Saudi Arabia reopened debate over whether the Kingdom is a good U.S. ally or not. Certainly, there is no shortage of commentators arguing in favor of a stronger U.S.-Saudi partnership, calling for Obama to reassure the Saudis and arguing that the alliance is vital to U.S. national security.

Unfortunately, such arguments ignore the many problems in the relationship, which has become extremely fraught. Congressional criticism of Saudi Arabia, once almost unthinkable, occurs with increasing frequency. Recent moves by Congress to pass legislation that would permit relatives of victims of the 9/11 attacks to sue the Saudi government have been met with fierce criticism from the Gulf, and an explicit threat by the Saudis to sell more than $750 million in U.S. assets if the bill passes. Nor is the White House immune to this trend. The Obama administration opposes the 9/11 bill, the president’s reservations about the U.S.-Saudi alliance are well-known, describing it in a recent foreign policy interview as “complicated.”

These tensions reflect a basic reality: Saudi Arabia may once have been a good ally, but today the relationship is toxic. Saudi actions are more often negative for U.S. policy objectives than positive. Rather than repairing the relationship, U.S. policymakers should reduce support for Saudi Arabia’s regional agenda.

It may be a cliché, but like many people in deteriorating relationships, supporters of the Saudi alliance too often focus on the good times while ignoring the bad ones.

In fact, even the use of the term “ally” to describe Saudi Arabia is inaccurate. Despite a long history of U.S. military support — including U.S. defense of the Kingdom during the first Gulf War — and cooperation on a variety of issues, there is no formal treaty alliance between the United States and Saudi Arabia.

Yet, the use of the word “ally” is commonplace among those who argue that the Kingdom is a helpful, often indispensable partner for America’s Middle East policies. Indeed, historically, this was often true. The Saudis were staunchly anti-communist and partnered with the United States on various occasions to push back Soviet influence in the region, most prominently during the Soviet invasion of Afghanistan, which was interpreted (incorrectly) in Washington at the time as the beginning of a Soviet drive toward warm water ports in the Persian Gulf.

Saudi Arabia’s influential position in OPEC as the world’s swing producer of oil has also been beneficial to the United States in the past, though recent advances in shale drilling technology and continued low oil prices are reducing this influence. And in more recent years, Saudi Arabia has indeed been a helpful resource in the fight against terrorism.

But that isn’t the whole story. Despite the Saudi government’s participation in anti-terrorism, Saudi citizens remain a major source of terror financing. As U.S. Deputy National Security Advisor Ben Rhodes recently noted, the Saudi government has too often paid “insufficient attention” to preventing the flow of funds to extremist groups. At the same time, the Saudi government itself spends billions of dollars exporting the fundamentalist form of Sunni Islam known as Wahabbism. Saudi-funded madrassas in Pakistan, Afghanistan, and elsewhere have helped to produce the foot soldiers of violent jihadi movements from Al Qaeda to ISIL. Saudi Arabia may not be a direct sponsor of terror, but its citizens and policies indirectly provide the fuel for terrorist groups.

These problems have persisted in recent years: Over the last five years the Saudi government, focused on the overthrow of the Assad regime, did little to stop citizens from funding extremist groups inside Syria. Nor are they — despite claims to be the lynchpin of an anti-ISIL movement — contributing much to that fight. Though Gulf Cooperation Council countries initially participated in airstrikes against ISIL, military contributions largely ceased following the Saudi and U.A.E. intervention in Yemen’s civil war.

Proponents of a stronger partnership often obscure these issues by arguing that Iran remains the major threat to American interests in the region, necessitating continued U.S. support for Saudi Arabia. And it’s certainly true that Iran is a state sponsor of terror, and often a destabilizing force in the region. Yet this focus on Iran results in a form of “whataboutism,” a way to excuse the fact that Saudi Arabia is also, at times, destabilizing. In effect, we are told that Saudi Arabia may be bad, but Iran is worse!

This argument cannot actually excuse Saudi actions. In just the last few years, extensive Saudi involvement in Syria has worsened that conflict, as they provided arms and financing to a variety of rebel groups. A Saudi-led campaign has transformed the war in Yemen from a civil conflict into a major humanitarian crisis, one which has strengthened Al Qaeda in the Arabian Peninsula.

Meanwhile, the recent Saudi decision to withdraw aid from the government of Lebanon may be excellent public relations material in the state’s ongoing campaign against Iranian influence, but the practical effectwill be to strengthen Hezbollah and weaken the ability of the Lebanese government to respond to the refugee crisis. On almost every front, Saudi Arabia is helping not to mend the post-Arab Spring Middle East, but to destabilize it.

Another argument for stronger partnership — that America’s support for Saudi Arabia is necessary because, otherwise, Iran is poised to dominate the region — is similarly misleading. The main basis for this narrative is Baghdad’s improved relationship with Tehran, itself less a result of Iranian aggression than of the 2003 U.S. invasion of Iraq. Meanwhile, Saudi Arabia’s military spending is almost double that of Iran — $632 billion to $397 billion in 2015– and the Kingdom can claim friendship or common cause with the vast majority of the states in the region. Iran’s only major regional allies are war-torn Iraq, portions of tiny Lebanon and the besieged Assad regime in Syria.

Rather than strengthening the relationship with Saudi Arabia, therefore, U.S. policymakers should work with the Saudis where it is appropriate and avoid entanglement on other issues. This doesn’t necessarily imply closer cooperation with Iran. While the nuclear deal improved U.S.-Iranian relations, and there is potential for cooperation on issues like Syria, Iran has a long way to go before Washington considers it a viable partner.

Yet supporting Saudi Arabia’s quest for regional dominance, as many supporters of a stronger relationship have advocated, is likely to undermine many of America’s goals in the region. In encouraging the Saudi government to overextend itself — at the same time as it faces continued low oil prices, economic turmoil and sectarian tensions both domestically and abroad — Washington may be hastening domestic instability in the Kingdom, an outcome that is good for no one.

By providing arms sales, diplomatic and technical services for Saudi Arabia’s conflicts, the United States enables the very behavior which is so detrimental to regional stability. This is the rationale behind the bill advanced by Senators Rand Paul and Chris Murphy, which aims to limit munitions transfers to Saudi Arabia in protest of the humanitarian costs of the war in Yemen. In this and similar cases, officials should seriously consider whether our provision of arms or aid to Saudi Arabia is good for American interests or just Saudi ones.

Despite the negative press, Obama’s ambivalence towards Riyadh is the right approach. If Saudi Arabia has at times been a good ally, it has also often been a bad one. It may be a cliché, but like many people in deteriorating relationships, supporters of the Saudi alliance too often focus on the good times while ignoring the bad ones. Today, Saudi Arabia is not a good ally. U.S. policymakers would be wise to acknowledge this, and to focus on creating a less entangled, more transactional relationship with Saudi Arabia.

Emma Ashford is a Research Fellow in Defense and Foreign Policy Studies at the Cato Institute. She specializes in the foreign policy of petrostates, in particular Russia and Saudi Arabia.