Leveling the Playing Field for U.S. Manufacturers

Daniel R. Pearson

The Senate Finance Committee added Sen. Sherrod Brown’s (D-Ohio) poorly named “Leveling the Playing Field Act” to the customs reauthorization bill it passed on April 22. The stated purpose of Brown’s provisions is to “restore strength to antidumping and countervailing duty laws” via a “crack down on unfair foreign competition.” Among other things, Brown’s proposal seeks to change procedures used by the U.S. International Trade Commission (ITC) in deciding whether domestic industries have been “materially injured” by imports. The intent of this legislation is to take a playing field that already is slanted in favor of domestic firms and tilt it even further toward protectionism. It should be rejected.

The existing antidumping and countervailing duty (AD/CVD) statutes instruct the ITC to “evaluate all relevant economic factors” that relate to the effects of imports on the domestic industry under consideration. A number of those factors are specifically mentioned, including the industry’s profits. Not being satisfied with that, the Brown bill adds, “gross profits, operating profits, net profits, [and] ability to service debt.” As a practical matter, the Commission already looks in detail at an industry’s profitability and its ability to repay debts, so this additional wording contributes nothing of substance. The bill also makes other technical and arcane modifications to the statute, none of which grants the ITC authority beyond what it already has.

Although the changes proposed by Sen. Sherrod Brown seem relatively modest, they should not be adopted for a simple reason: litigation risk.”

Although the changes proposed by Brown seem relatively modest, they should not be adopted for a simple reason: litigation risk. The skilled and creative attorneys who represent domestic industries in AD/CVD cases (and who likely drafted Brown’s bill) would be only too happy to have another basis on which to appeal Commission decisions with which they disagree. A claim that the ITC had not adequately considered the newly crafted provisions would provide a wonderful justification for an appeal. Why invite such mischief?

If members of Congress actually are interested in modifying the AD/CVD statutes to make them better serve the interests of the U.S. manufacturing economy, they should propose legislation that would balance the interests of domestic producers that are petitioning for import restrictions against the interests of downstream consumers. Currently the ITC injury determination is limited to the effect of imports “on domestic producers of domestic like products.” In essence, the Commission must disregard any costs that would be imposed on users of the product once imports are restricted. Those costs can be very large – well in excess of the potential benefits that might flow to domestic producers. (For more on this issue, see this thoughtful analysis by Daniel Ikenson.)

As an example, the United States now imposes antidumping or countervailing duties (or both) on imports of hot-rolled steel from China, India, Indonesia, Russia, Taiwan, Thailand, and Ukraine. Hot-rolled is a basic form of steel coil that is further manufactured into products such as cold-rolled steel, corrosion-resistant steel, tin-coated steel, and welded steel pipe. In turn, those steel products are used to make automobiles, farm machinery, appliances, ventilation ducts, and a wide range of other products too numerous to mention. Manufacturing those value-added products employs far more people and contributes far more to the U.S. economy than is the case for hot-rolled steel.

The AD/CVD duties very likely cause hot-rolled steel to be higher priced in the United States than in many other countries. Thus, protection for hot-rolled producers raises costs for all other U.S. firms that utilize flat-rolled steel products. The spread between the cost of steel in the United States relative to other countries doesn’t have to be very wide before it can become more economical to import steel-containing manufactured products from other countries rather than producing them here.

If the Leveling the Playing Field Act achieves its intended purpose of providing an even greater level of protection to firms producing basic products, it certainly will have the unintended consequence of weakening the U.S. economy and reducing employment overall. Artificially increasing the costs borne by the wide swath of U.S. manufacturers that depend on steel as an input will make them more vulnerable to competition from overseas.

Supporters of Brown’s bill instead should consider adjusting the AD/CVD statutes to ensure that interests of downstream users are taken into account. The ITC’s injury determination should be changed so that the Commission is required to assess not only the effects of imports on producers, but also the costs that import restrictions impose on users. This would be an important first step toward ensuring that AD/CVD measures actually level the playing field among U.S. firms rather than inadvertently damaging the broad U.S. economy.

Dan Pearson is a senior fellow in the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies and a former chairman of the U.S. International Trade Commission.

Killing the Unborn Is Never a Good Option

Doug Bandow

Even as social conservatives find themselves in retreat on many issues, such as gay marriage, public opposition to abortion remains high. Americans are conflicted, but recognize that the procedure involves more than just hurting oneself. There’s another life involved. Abortion can never be a simple case of personal “choice.”

In fact, most abortion advocates nervously proclaim themselves to be pro-choice, not pro-abortion. Leading “pro-choice” politicians even argue that the procedure should be rare. Most supporters want to focus on the mother, whether her right to make decisions about herself or the difficult circumstances facing her, while downplaying the consequence of a dead baby.

This attitude was reflected by the recent Daily Kos post by “GypsyPhoenix” which observed: “I don’t think anyone, save the sickest, most twisted and perverse among us, wants women to have abortions.” The writer added that “I don’t think that I, personally, could ever do it,” yet went on to argue that “Abortion is going to happen. So reality must be faced, and common sense and safety need to prevail.” Meaning the availability of legal abortion.

Abortion can never be a simple case of personal ‘choice.’”

It’s a powerful, though ultimately unsatisfactory, argument for allowing a procedure that results in death. Forcing a mother to carry to term is not a good option. However, abortion is not just another choice. No argument over when life begins can change the fact that there is something special, and morally important, about a potential life irrespective of its state of development. Moreover, except in the important but thankfully rare case of rape, pregnancy results from the exercise of choice, to have sex. While that liberty should be well-nigh absolute, freedom entails responsibility, including for the consequences of choosing sex—such as the arrival of a baby. We can argue over what those responsibilities should be. But responsibilities there should be.

However, the Washington Post recently wrote of some activists’ “new push to destigmatize the nation’s most controversial medical procedure by talking about it openly and unapologetically,” giving it “in some cases, even a positive spin.” In that spirit Salon’s Valeri Tarico responded to GypsyPhoenix.

Tarico cheerfully took up the challenge of endorsing abortion: “I believe that abortion care is a positive social good.” Most striking about her argument is the almost complete dismissal of the other life involved. Indeed, she began her essay with the declaration: “I am pro-abortion like I’m pro-knee-replacement and pro-chemotherapy and pro-cataract surgery.” That fits with the Carafem abortion clinic in the Washington, D.C. area, which, explained one employee, was trying “to present an upgraded, almost spa-like feel.” Some people take mud baths. Others get abortions.

Of course, there’s a reason that no one, at least that I am aware of, is campaigning to ban knee replacements, chemotherapy, and cataract surgery because knees, cancer cells, and cataracts have a right to life. And I doubt many people imagine an abortion to be equivalent to a spa treatment. Indeed, I had a knee replacement and never thought of it as similar to ending a baby’s life. Without a knee replacement I would still be here, though I might hobble around painfully. Without an abortion a baby would be born. They are not the same.

Tarico also argued that “choice is about who gets to make the decision.” Bringing another person into the world “is too big a decision for us to make for each other.” Yet the freedom to have sex ensures that the decision remains with the mother. It is very different to contend that having brought a new life into being, whether advertently or inadvertently, the decision to end it remains private. Virtually everyone believes, rightly, that we cannot decide that a child is a mistake and terminate him or her. A baby merely months or weeks away from childhood has a strong claim to similar consideration.

Most of Tarico’s ten reasons “why we must support” abortion are similarly flawed. First, “being able to delay and limit childbearing is fundamental to female empowerment and equality.” True. Which is why everyone should decide when to have sex and have access to contraception. But that doesn’t justify ending a life once created. Second, “well-timed pregnancies give children a healthier start in life.” Sure, which is a reason to treat the decision to have children seriously. But ending a baby’s life is an odd response to the fact that he or she might have been healthier if conceived later.

Third, “I take motherhood seriously.” Certainly someone who does not, as Tarico suggests, feel up to “twenty dedicated years of focus, attention, patience, persistence, social support, mental health, money, and a whole lot more” should not pursue childhood to term. In contrast, carrying the baby to term for nine months, while still a huge burden, is different. That’s why adoption exists, and I am glad for that, since my sister was adopted.

Fourth, “intentional childbearing helps couples, families and communities to get out of poverty.” Yes, but that’s another argument for contraception and adoption, not abortion. Surely no one would justify infanticide as long as it raised per capita income. Fifth, “reproduction is a highly imperfect process.” Yes, but how does that warrant terminating lives that nevertheless emerge?

Sixth, “morality is about the well-being of sentient beings.” Thus, “real people count more than potential people.” That is why when the lives of both mother and baby conflict that of the mother takes precedence. And why a woman should not be forced to carry a baby to term as a result of a rape, despite the innocence of the fetus. But the person in being is not so superior to the person a few months away from being “real” as to have a right to kill the latter for any reason. Especially after having knowingly engaged in the act that created the “potential person.”

Seventh, “contraceptives are imperfect, and people are too.” Right, but the fact that imperfect people sometimes make mistakes and use imperfect products that sometimes don’t work doesn’t mean there are no consequences to the choices voluntarily made. If one engages in behavior known to create babies, one shouldn’t possess an absolute right to kill one that inconveniently shows up. Eighth, one should “believe in mercy, grace, compassion, and the power of fresh starts.” Certainly, but that doesn’t mean anything goes and all consequences to others disappear. A baby cannot be simply wished away.

Ninth, “the future is always in motion, and we have the power and responsibility to shape it.” Even small changes mean a different life is created. Tenth, “I love my daughter” who was conceived after termination of an unhealthy pregnancy. No doubt, good can come out of unfortunate decisions, necessary or not. But babies are not interchangeable. One cannot justify eliminating one by bringing another one into existence, just as one cannot justify eliminating an existing child by having another one.

Abortion is not a social good. That doesn’t mean it is never justified. That doesn’t mean that a pregnancy doesn’t pose extraordinary challenges for many women. That doesn’t mean that finding the balance between life and liberty is easy.

But unlike so many other social issues, abortion involves another life. No amount rhetorical legerdemain can change this reality. Call the baby potential life if you wish. He or she still has moral claims that one’s knee does not.

No one is obligated to bring a baby into existence. Having done so voluntarily, however, by exercising free choice, a person must bear at least some responsibility for the life created. No one doubts our right to choose sex. The debate is over responsibility when we choose badly. In which case abortion is never a social positive, but sometimes is an unfortunate necessity, a necessary evil.

Abortion will never be an easy issue. But we should not delude ourselves by ignoring the moral complexities of the issue

Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, including The Politics of Plunder: Misgovernment in Washington (Transaction).

Gay Marriage: a Victory for ‘Radical’ Libertarians

Trevor Burrus

Yesterday, the Supreme Court heard arguments over whether the Fourteenth Amendment of the Constitution requires states to recognize same-sex marriages. The challenge will almost certainly succeed, and, by late June, same-sex couples will likely be able to marry everywhere in the country.

Gay rights have seen incredible expansion in the 46 years since the Stonewall riots. Until 1973, homosexuality was considered a mental disorder by the American Psychiatric Association, and only 12 years ago the Supreme Court ruled that laws criminalizing homosexual conduct were unconstitutional.

Libertarians, however, have been there all along. In 1972, while homosexuality was still classified as a mental disorder, the first Libertarian party platform advocated the “repeal of all criminal laws in which there is no victim.” This view, simultaneously radical and commonsensical, is a cornerstone of libertarian beliefs. Private sexual conduct between consenting adults should never be criminalized. But libertarians went even further, advocating for allowing homosexuals in the military and for repealing bans on gay marriage.

Libertarians were not just at the forefront of the gay liberation movement, they were also at the forefront of the abolitionism and the struggle for women’s rights.”

How did those “radical” libertarians get it right 40 years ago? Is there something about libertarianism that puts it in the vanguard of important civil rights movements?

The “simple system of natural liberty,” to use Adam Smith’s phrase, is a powerful tool. Governments, when they’re doing it right, are supposed to facilitate the interactions of free people by respecting and protecting the rights of each and every person regardless of race, sex, or sexual orientation. It is a cornerstone principle of our nation, yet it has been more honored in the breach than in the observance.

Unfortunately, too often government is taken over by those who want to construct society in a certain way, and who are willing to use force to try to mold people to fit their ideals. For those who are against drug use, it is not enough that they themselves avoid drugs and counsel others to do likewise — no, they want to use force on those with a different lifestyle choice. Similarly, for those who oppose homosexuality.

For over a thousand years, most governments in the Western world oppressed and marginalized homosexuals. Shortly after Constantine’s conversion to Christianity, the Church and the state struck a deal: the Church would glorify the state and the state would use force for the Church’s purposes, including and especially to punish victimless crimes. In the wake of that agreement, the church/state alliance brought the hammer down on homosexuals, from burnings at the stake to imprisonment.

Out of this milieu of state-sponsored oppression and marginalization rose “traditional” marriage, and now conservatives argue that that history underscores their view that heterosexual marriage is somehow “natural.”

In the ‘70s, and even before, libertarians recognized that the church/state alliance had rarely been a friend to homosexuals. Loitering laws and entrapment were used to harass homosexuals. Medical and legal licenses were denied on the basis of sexual orientation. Other laws prohibited cross-dressing, adoption by gay couples, and homosexual parents from having custody of their children.

None of these laws are part of the “simple system of natural liberty” espoused by libertarians. These ideas are rooted in the classical liberal tradition that animated the Enlightenment, and when taken to their logical extreme, they are radical, wonderfully radical, and they countenance no exceptions to protecting the life, liberty, and dignity of those who have been historically oppressed by whoever happens to hold state power. For this reason, libertarians were not just at the forefront of the gay liberation movement, they were also at the forefront of the abolitionism and the struggle for women’s rights.

Many people believe that liberation takes political action, raising awareness, and get out the vote campaigns. While those things can serve important purposes, particularly in a world turned upside down by state-sponsored oppression, it’s heartening to know that liberation can come not only by looking forward but also by looking back and recapturing the fundamental principles of a free society.

Trevor Burrus is a Research Fellow in the Cato Institute’s Center for Constitutional Studies.

Ambivalence about a More Assertive Japan

Ted Galen Carpenter

A key component of Washington’s military rebalancing strategy, with its shift of emphasis to East Asia, is a robust relationship with major allies. During his recent visit to the region, Secretary of Defense, Ashton Carter, highlighted that aspect. At the top of the list of vital security partnerships is the bilateral alliance with Japan.

However, the U.S. attitude toward Japan playing a more vigorous security role has always reflected a degree of ambivalence. The original draft of the Pentagon’s infamous 1991 planning guidance document stressed the need to prevent any country from even aspiring to challenge America’s dominant position. Although some observers concluded that China was the principal target of such concern, Beijing’s relative weakness at the time and the overall language in the document seemed directed more at what was then the fast-rising, second largest economic power in the world—Japan. Moreover, the Pentagon document was not the only example of U.S. uneasiness about Tokyo playing the role of a great power in the security arena. Just a year earlier, General Henry Stackpole, commander of U.S. Marines in Okinawa, opined that the United States was the “cork in the bottle” preventing a resurgence of Japanese militarism and the fears that such a development would spawn throughout East Asia.

Because of bitter historical memories, China has long been even more wary about a Japanese military revival. Indeed, even during the chilliest days of the Cold War, Beijing provided mixed signals about the U.S. military presence in East Asia. Although Washington’s motive to contain communist (including Chinese communist) influence was evident, and therefore resented, Chinese leaders also seemed to believe that America’s supervision restrained Tokyo and prevented Japan’s rise as a strong, independent military power.

: For good or ill, Japan is emerging as a complete great power, not merely an economic great power. ”

In recent years, U.S. leaders have gradually become increasingly receptive to Japan playing a more active security role. The previous ambivalence faded noticeably during George W. Bush’s administration, and that trend has continued throughout the Obama years. The implicit focus of the rebalancing strategy and other elements of U.S. policy in East Asia is to contain Beijing’s growing power and influence. Washington has looked on benignly as Japanese Prime Minister Shinzo Abe’s government has developed military systems with power projection capabilities, such as the new helicopter carrier; begun to sign arms sale agreements with other countries; and “reinterpreted” article 9 of Japan’s pacifist constitution to permit military missions beyond situations of strict self defense.

The American public, however, remains decidedly ambivalent about Japan playing a more extensive security role. A recent Pew Institute survey found that 47 percent would welcome such a change, in part to alleviate the financial and logistical burdens on the United States, but 43 percent believed that, given Japan’s history of aggression in the twentieth century, Tokyo should strictly limit its military role.

The Abe government’s recent behavior is not likely to reduce the uneasiness in the United States, China, or other countries. Tokyo has adopted an uncompromising stance regarding two contentious territorial issues. One is the dispute between Japan and South Korea over the Dokdo/Takeshima islands. The other controversy is an even more bitter disagreement with China concerning the Diaoyu/Senkaku islands. Japan has now escalated ill feelings with the publication of textbooks that assert the alleged Japanese historical and legal claim to those territories in an especially abrasive fashion. Both Seoul and Beijing have expressed sharp complaints about the way those textbooks handle the territorial disputes and other issues. Chinese and South Korean officials warn that the books seem to reflect an attempt to legitimize Japan’s imperial era and its many abuses.

Actions by Abe and some close associates reinforce such suspicions. Measures that have been especially unhelpful include the prime minister’s visits to the Yasukuni Shrine (even though individuals honored there include World War II war criminals); continued reluctance to accept historical responsibility for “comfort women”—young girls from South Korea and other areas, who were forced into sexual slavery to Japanese military personnel during that conflict; and Abe’s indiscreet comments suggesting that Japan was something other than a blatant aggressor in World War II. Some of those incidents have dismayed even usually supportive U.S. officials.

Although there is virtually no danger that Japan will embark on another aggressively expansionist binge, these actions taken together indicate that Tokyo is pursuing an increasingly bold, nationalist agenda. That development is likely to make China, South Korea, and other neighbors nervous. It also may cause mixed emotions in Washington. U.S. leaders no doubt like the concept of a more robust and capable ally in East Asia. However, Japan’s assertiveness can also entangle the United States in problems it would prefer to avoid. For example, Tokyo’s uncompromising attitude on the Diaoyu/Senkaku issue places Washington in an uncomfortable position. Japanese pressure virtually forced the Obama administration to confirm that the bilateral mutual defense treaty covers those islands—even though their legal status remains very much in dispute. Any armed incident between China and Japan over that issue would create an immediate crisis for the United States.

The regional strategic dynamic has changed in a fundamental fashion. Japan is becoming a far more capable military ally than in previous decades, but U.S. leaders must accept the corresponding reality that Japan also will be a much more independent-minded power with its own policy agenda. Tokyo’s goals may sometimes conflict with U.S. policy preferences or even important U.S. interests. China and other East Asian powers likewise need to realize that Washington’s ability to control Japan’s behavior in the security arena has already diminished and is likely to fade further in the coming years. For good or ill, Japan is emerging as a complete great power, not merely an economic great power. Learning to live with that change will be a challenge for both the United States and the countries of East Asia.

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

Japan: The Ultimate Free Rider?

Justin Logan

Japanese prime minister Shinzo Abe is in town, so naturally you’ve been hearing an array of U.S. foreign-policy elites fawning over the PM and telling Americans how vital the U.S.-Japanese relationship is to the United States. Unfortunately, none of them so much as mention the more important point: However valuable the relationship is to the United States, it’s an order of magnitude more important to Japan. If our officials and pundits would emphasize America’s importance to Japan, rather than the other way around, there might be some hope of winding down Japan’s decades of free riding on the backs of the U.S. taxpayer.

Consider the deliverables announced from this highly touted visit: The United States gets to work more closely with Japan’s military in countering China, plus it promises (again) to defend some worthless rocks claimed by both China and Japan that hold the best chance of starting World War III. In return for these multibillion-dollar favors, Japan will sing in the chorus of support for the Trans-Pacific Partnership (TPP), a militarized trade agreement that is designed to bind Asian states to the United States and distance them from China. Tokyo also agreed to cooperate with U.S. efforts on humanitarian relief, cyber threats and intelligence issues.

In order to change the arc of U.S. relationships in the region, some shock therapy appears necessary.”

The two sides issued a dry joint “vision statement” that ambitiously promised to “update our respective roles and missions within the Alliance and enable Japan to expand its contributions to regional and global security.” Except it’s far from clear that Japan will choose to, or even be able to, expand its contribution to regional (to say nothing of global) security. And the reasons have a lot to do with U.S. policy.

The best argument for U.S. policy in Asia—the “pivot,” or “rebalance,” or whatever one wants to call it—was that it was built on a sounder foundation than U.S. Middle East policy, which is damning it with faint praise. But the essential facts that the most dangerous troublemakers in international politics are big, powerful states and that China is becoming a big, powerful state are irrefutable. The question lies in how to make states with more at stake bear an at-least-proportional share of the burden of ensuring that China doesn’t attempt to bully and coerce its way to hegemony in Asia.

And both the United States and its Asian allies have made a hash of things. In fairness, they’re carrying on a long tradition of encouraging free riding on the part of U.S. allies. But in the context of China, things are particularly problematic. American economic policies are helping the Chinese economy grow, while our military policies are aimed at preventing it from gaining more influence. All the while, major Asian powers like Japan are both declining and garnering promises of closer cooperation from the United States. The longer this goes on, if we assume anything close to steady 7-percent growth in China, the harder it will be to sustain for the United States.

Put differently, “we agree to defend to [Japan] and they agree to let us.” One can see why this is a great deal for Japan, but it’s harder to see why this arrangement serves the U.S. national interest.

To be sure, some of the movement in Japan has been salutary on this front. And Abe’s defenders will point out that the political traditions and obstacles he has overcome already were tough in and of themselves. All of this is true. To take one example, Japan’s defense spending has risen trivially—more than 1 percent per year from 2008 to 2013, according to IISS—while its economy has continued to disappoint. But not only is Japan’s current defense spending inadequate, its ability to increase defense expenditures is going to be hampered going forward if, as seems likely, its economy continues to sputter and its demographic profile continues to appall.

But in order to change the arc of U.S. relationships in the region, some shock therapy appears necessary. Citizens of U.S. allies and clients should be told that Americans will not shoulder their burdens of defense indefinitely. In a country like Japan, whose foreign-policy mindset seems to have two speeds, shrugging pacifism and manic nationalism, threading the needle will be difficult. But the alternative is to try to contain China mostly on our own, while both our allies and our economic policies make that task harder.

Justin Logan is director of foreign policy studies at the Cato Institute and the author of “China, America, and the Pivot to Asia.”

Betrayed: Why Reagan Would Be Ashamed of the Neocons

Doug Bandow

Alzheimer’s robbed Ronald Reagan of his memory. Now Republican neocons are trying to steal his foreign-policy legacy. A de facto peacenik who was horrified by the prospect of needless war, Reagan likely would have been appalled by the aggressive posturing of most of the Republicans currently seeking the White House.

Ronald Reagan took office at a dangerous time. The Cold War raged, with the Soviet Union suffering through the Brezhnev era of stagnant authoritarianism. Moscow’s weaknesses, though eventually exposed, were not so evident at the time and Washington faced challenges around the world. Reagan sacrificed much of his political capital to increase U.S. military outlays. But he barely utilized the new capabilities that were created.

Reagan’s mantra was “peace through strength.” Peace was the end, strength the means. He focused his attention on the Soviet Union and its advanced outposts, especially in the Western Hemisphere. One could disagree with his specific policies, but not his characterization of the U.S.S.R. as an “evil empire.” Moscow had to be contained.

Restraining the hegemonic threat posed by an aggressive, ideological Soviet Union led to Reagan’s tough policy toward Soviet Communist Party General Secretary Leonid Brezhnev and his immediate successors. Still, Reagan avoided military confrontation—there was no attempt at “roll back,” as it was called during the Cold War. He wanted the U.S.S.R. to “lose,” but not in a shooting war. Indeed, he routinely employed what neocons today deride as “appeasement.”

Reagan wanted to negotiate from a position of strength, but he wanted to negotiate.”

For instance, during the 1980 campaign, Reagan opposed the Carter administration’s insistence on an Olympic boycott—which required acting like the Soviets by threatening to seize the passports of individual athletes who might be tempted to travel to Moscow. Reagan also dropped the Carter grain embargo against Moscow. Reagan recognized the obvious economic and political benefits of allowing trade; he also explained that he desired to encourage “meaningful and constructive dialogue.”

Worse from the standpoint of today’s Republican war lobby was Reagan’s response to the Polish crisis. Lech Walesa and the Solidarity movement were a global inspiration but the Polish military, fearing Soviet intervention, imposed martial law in 1981. Again, Reagan’s response was, well, appeasement. No bombers flew, no invasion threatened, no soldiers marched. He continued to contain Moscow and challenge its moral foundation. But like Dwight Eisenhower in 1953 and 1956 and Lyndon Johnson in 1968, Reagan did not risk a general war to help liberate Eastern Europeans when they opposed Soviet troops. Indeed, from Reagan came no military moves, no aggressive threats, no economic sanctions. Reagan did little other than wait for the Evil Empire to further deteriorate from within.

Little other than talk, that is. Reagan wanted to negotiate from a position of strength, but he wanted to negotiate. And despite his image as a crazed cowboy and mad Cold Warrior, he negotiated over arms reduction with … the Soviet Union. For example, he used the deployment of intermediate-range nuclear missiles to win the withdrawal of both nations’ weapons.

Moreover, as my late White House boss, Martin Anderson, and his wife, Annelise, documented, Reagan was horrified by the prospect of nuclear war, which drove him to propose creation of missile defense and abolition of nuclear weapons. Reagan’s concern was evident early. In their book on foreign-policy, analysts Stefan Halper and Jonathan Clarke observed: “from 1983 onward, Reagan devoted more of his foreign policy time to arms control than to any other subject.” Reagan spoke of peace when he addressed Soviet students in Moscow in 1988. Norman Podhoretz, the neocon godfather, denounced Reagan for “appeasement by any other name.”

Reagan was willing to switch rhetoric and policy when circumstances changed, in this case, the nature of the Soviet regime. He had no illusions, unlike some observers, that enjoying jazz made former KGB chief Yuri Andropov, who replaced Brezhnev, into a closet liberal. In contrast, Reagan understood that Mikhail Gorbachev was different. A reform Communist, Gorbachev nevertheless humanized the system and kept the military in its barracks. Reagan worked with the Soviet leader, despite heartfelt criticism from his own staffers and fevered denunciations from activists—dissention that Reagan acknowledged in his diary. Gorbachev later wrote that Reagan “was looking for negotiations and cooperation.” Or, in a word, appeasement.

Of course, Reagan was not a pacifist. But he was cautious in using the military. He usually intervened through proxies to counter Soviet or allied Communist influence—Nicaragua, Angola, Afghanistan. It was an important but limited agenda, and disappeared along with the Cold War.

Reagan used the military in combat only three times, and not to impose democracy, rebuild failed states or overthrow dictators. The first instance was Grenada, after murderous Communists ousted their slightly less hardline colleagues. Reagan defenestrated the new regime, simultaneously protecting American medical students and eliminating a nearby Soviet outpost. Most important, when the job was done, Reagan brought home the U.S. forces and allowed the locals to produce nutmegs—and govern themselves.

The second case was against Libya in response to evidence that Tripoli had staged the bombing of a Berlin nightclub favored by Americans. It was a simple retaliatory strike. There was no extended bombing, ground invasion or lengthy occupation highlighted by regime change and nation building. Reagan sent the simple message to Libya and other governments: do not attack Americans.

The third, and sadly disastrous, intervention was Lebanon. The United States had few measurable interests at stake in that tragic nation’s civil war, but sought to strengthen the nominal national government—in truth, but one of some twenty-five armed factions—and support Israel, which had invaded its northern neighbor. Washington trained the Lebanese military and allied militias and introduced U.S. combat forces. John H. Kelly of Rand observed: “In Lebanon it looked very much as if the United States had taken up arms in behalf of the Christians.” Indeed, the United States took an active role in the fighting; officials were forced to admit that heavy naval bombardments resulted in civilian casualties. Washington’s intervention triggered attacks on both the U.S. embassy and Marine Corps barracks.

Reagan recognized that he’d erred. After briefly emphasizing retaliation, he decided not to double down and “redeployed” existing troops to naval vessels, which then sailed home without fanfare. He consciously rejected a policy of Iraq-lite: invasion, occupation and transformation. We all should be thankful that he had the courage to back down. Otherwise, thousands of Americans could have died fighting in another meaningless Mideast war. More enemies would have been created and terrorists would have been activated.

Yet neoconservatives denounced him sharply for refusing to invade and occupy Lebanon. Their criticism continues to this day. Philip Klein of the American Spectator said the withdrawal “sent the message to terrorists that they could attack us and we wouldn’t have the appetite to respond.” Podhoretz charged Reagan with “having cut and run.” President George W. Bush argued that Reagan’s withdrawal was one reason terrorists “concluded that we lacked the courage and character to defend ourselves, and so they attacked us.” Former CIA Director James Woolsey claimed that Iran and Syria saw America as cowards, since “[t]hey saw us leave Lebanon after the ’83 Marine Corps bombing.”

Lebanon was a terrible mistake, but, in contrast to the perpetual war lobby, Reagan learned from his errors. More important, Reagan was no global social engineer. He stood on behalf of individual liberty, but saw America’s role as the famed “city on a hill.” He advocated increased military outlays for defense of this country, not international social work. Even where he acted militarily, he had a narrow objective. He was willing to adapt his policies to changed circumstances.

It’s presumptuous to claim to know what Reagan would think today. But the world is a lot different than when he was in office. He undoubtedly would recognize that the end of the Cold War terminated the most serious threat against the United States. He likely would have been horrified at the self-delusion that went into the disastrous decision to invade Iraq. He probably wouldn’t be happy with how Washington’s defense policy has kept rich allies as welfare dependents more than a quarter century after he left office. An opponent of social engineering at home, it’s hard to imagine him wasting American lives and money for more than a dozen years attempting to turn Afghanistan into a liberal democracy. An advocate of aid to insurgents fighting outside oppressors, he likely would have recognized the risk that local insurgents would take up arms against American occupiers. He certainly would have worried about Washington’s lost credibility, but likely would have recognized that the answer was to make fewer foolish promises in the future, rather than to make good on dumb ones in the past, such as to bomb Syria over its apparent use of chemical weapons.

Finally, he would be angry at the attempt to use his legacy to justify a failed foreign policy. When Ronald Reagan left office, the United States truly stood tall. George W. Bush more than any of Reagan’s other successors squandered the Reagan legacy. And the former did so with a recklessly aggressive policy that ran counter to Ronald Reagan’s far more nuanced approach in a far more difficult time. In contrast to Reagan, most of today’s leading Republicans appear to want strength, but not peace.

Doug Bandow is a Senior Fellow at the Cato Institute and a former Special Assistant to President Ronald Reagan. Bandow also is the author of Foreign Follies: America’s New Global Empire.

The Climate Courage of Pope Francis

Patrick J. Michaels

Kudos to Pope Francis for calling a conference, scheduled for tomorrow, emphasizing the moral dimensions of climate change. It’s about time we took a clear and sober look at an issue that can cause so much harm to so many, especially the poor and downtrodden.

The core problem for the conference is to balance the costs and benefits imposed by climate change against the costs and benefits of a major reduction in the use of fossil fuels, with the understanding that there are only two other sources of dense energy that can effectively replace them, nuclear power and large hydroelectric dams.

Abundant and dependable energy frees mankind from a menial existence, allowing us to use our given talents for the greater good. The mental capital of the poor in the underdeveloped world is untapped without dense energy. The burning of dung for cooking is a major cause of early death from pulmonary disease. The massive deforestation that must occur without dense energy amplifies floods from ubiquitous tropical downpours. Solar power simply cannot run a city from late afternoon through early morning. Wind is far too intermittent, especially over tropical lands, and would require backup from either coal or natural gas to keep the electrical grid stable.

It’s about time we took a clear and sober look at an issue that can cause so much harm to so many, especially the poor and downtrodden.”

The conference has a moral duty to the poor, namely to help them find ways to not be poor. There is no debate that depriving them of the technological means that are required to lift their societies is immoral.

The conference also has a moral duty to examine the issue of climate change itself. Is it moral for scientists and policymakers to use computer models for climate change that are clearly predicting far too much warming? What kind of climate would God want for us — the one we have today, the cooler one at the beginning of the Industrial Revolution, the much warmer one that accompanied the rise of agriculture and civilization, or thousands of feet of ice over what is now Chicago? Homo sapiens has lived through all of these.

The conference has a moral duty to seek and follow the truth, wherever it may lead, even through the thorniest of dilemmas. If crop-based biofuels reduce carbon-dioxide emissions, is it moral for the United States — the world’s largest producer — to burn up half of its corn crop every year? If these fuels indeed result in more carbon dioxide emissions than simply powering automobiles with gasoline would, is it moral to put thousands and thousands of people out of work — and gravely harm the state of Iowa — by shutting down the massive infrastructure that now serves the corn-ethanol industry?

The conference also has a moral duty to examine the corruption of science that can be caused by massive amounts of money. The United States has disbursed tens of billions of dollars to climate scientists who would not have received those funds had their research shown climate change to be beneficial or even modest in its effects. Are these scientists being tempted by money? And are the very, very few climate scientists whose research is supported by industry somehow less virtuous?

Then there is the all-important question of what our authority should be. Should it be the constructs of the human mind as expressed by interacting differential equations in a computerized simulation of climate change? Or should it be how God and nature express that climate, having placed us in what is now the 21st consecutive year without a statistically significant lower-atmospheric warming trend? I would think that Christians should be humble before God. “The heavens declare the glory of God; and the firmament proclaims his handiwork” (Psalm 19:1).

Pope Francis has done the world a wonderful favor. It is now time to examine all the moral aspects of climate change, the way we power our society, and the need to protect and help the least among us. Anything less would be a waste of the pontiff’s calling.

Patrick J. Michaels is the director of the Center for the Study of Science at the Cato Institute.

Rebel Farmers and Government Cartels: How the New Deal Cartelized U.S. Agriculture

Trevor Burrus

Marvin Horne doesn’t look like a man in open rebellion against the United States government, but the 70-year-old raisin farmer and his wife Laura have had enough. If they get their way, they’re not going to let the U.S. Raisin Administrative Committee take their raisins anymore.

Yes, there’s a Raisin Administrative Committee.

This week, the Supreme Court heard arguments in Horne’s case challenging the Raisin Administrative Committee. It’s the New-Deal case that took 80 years to bring.

Like an agency pulled from the pages of an Ayn Rand novel, the Raisin Administrative Committee (RAC) oversees many parts of U.S. raisin production. The 47-member committee consists of different representatives from the raisin industry, including “handlers,” those who pack the raisins and prepare them for sale, and “growers,” those who grow and dry grapes. They meet in an office in Fresno and issue “marketing orders,” which decide, among other things, how many raisins should be diverted into the National Raisin Reserve each year. By taking raisins off the open market, the RAC maintains an artificially high price for raisins and keeps many, but obviously not all, raisin farmers happy. Think of it as a raisin cartel, a raisin OPEC.

Under federal law—the Agricultural Marketing Agreement Act of 1937 (AMAA), amended in 1949 to include raisins—raisin handlers are obligated to divert whatever percentage of raisins the RAC demands, and then take whatever compensation the committee offers, which is often nothing.

Marvin Horne is one of the unhappy raisin farmers who feels that the RAC has outlived its usefulness, if it ever had any to begin with. More than ten years ago, Horne refused to hand over his raisins to the RAC. In response, the RAC fought back, including hiring private investigators to stake out the Hornes’ farm. Now Marvin Horne stands on the precipice of dealing the RAC a near-fatal blow—a Supreme Court opinion ruling that, under the Fifth Amendment’s Takings Clause, the RAC has to pay just compensation whenever it takes a farmer’s raisins.

The Hornes, who currently owe the government about 1.2 million pounds of raisins and approximately $700,000 in fines, have few options left except for a Supreme Court victory. Their fight against the RAC, however, is part of a proud tradition of individuals fighting against government-created cartels, especially in agriculture. Those cartels collude against consumers in ways that would be blatantly illegal in industries that don’t enjoy government sanction. Occasionally, someone will fight back against the cartel, and the industry will circle the wagons to protect its unique, anti-competitive privilege.

The New Deal

Over 200 years ago, famed economics sage Adam Smith understood the dangers of allowing competitors to collude. In The Wealth of Nations, Smith wrote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Most importantly, wrote Smith, the law should not encourage such collusive, anti-competitive behavior: “But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”

During the New Deal, Smith’s wise words were wholly forgotten. From the moment President Franklin D. Roosevelt arrived in office, he had cartels on his mind. Competition, he thought, was too fierce, and it was causing prices and wages to fall too low. While competition could be good, “destructive competition” was bad. The answer, thought FDR and his famed brain trust, was to use the law to promote cooperation between members of the same industry in order to ensure that competition was “fair.”

The result was the National Industrial Recovery Act (NIRA), signed by FDR on June 16, 1933. In essence, the NIRA tried to cartelize the entire economy. Businesses were encouraged to meet together in “a conspiracy against the public,” in Adam Smith’s words. But their agreements, rather than being mere handshake deals carried out in smoke-filled backrooms, were to have the force of law. An industry’s agreed-upon “code of fair competition” would be signed by the president himself, and violators could be fined or even jailed for violating the code. Just a few decades previously the federal government had passed anti-monopoly “trust busting” laws like the Sherman Anti-Trust Act in order to combat anti-competitive collusion. During the New Deal, however, the government entirely changed course. What was once an unmitigated evil was seen as a necessary step on the road to recovery.

Without the force of government backing up the rules, cartels are notoriously difficult to maintain. Voluntary collusion always presents opportunities for someone to shirk the agreement in order to make extra cash while his competitors hold their prices steady. In the worst situations, shirkers are countered with mob-like tactics, from slashing tires, to breaking kneecaps, to burning down stores. When the government gets involved in enforcing cartels they essentially take-over the job of busting kneecaps. Cronies with lead pipes are replaced by bureaucrats and police officers.

But often their tactics are similar. After the “code of fair competition” for Ohio’s tire companies was passed under the NIRA, smaller tire companies found that the government’s enforcers were hardly better than the mob’s. F.H. Mills, president of Master Tire and Service, Inc. out of Youngstown, wrote to Senator William Borah, an opponent of the NIRA, of his plight. He complained in particular about a Mr. Frank Blodgett, an administrator from the National Recovery Administration. Mills “explained my conditions” to Mr. Blodgett, “and showed where it would be impossible to stay in business and comply with his request.” In response, Mr. Blodgett “demanded that he be given the right to go over my books and run my business according to his ideas.” When Mills refused, the “furious Mr. Blodgett then stated that he would put his heel upon the neck of our little company and twist it with all the force at his command.”

The little companies had it the worst. Businesses are hardly uniform, and each company faces different pressures depending on its brand name, geographic location, and other variables. The “codes of fair competition” under the NIRA did not countenance such variation. The Ohio tire code, for example, was largely written by Goodyear, Firestone, and Goodrich, and it thus primarily benefited those large companies. Before the NIRA, small manufacturers like Master Tire and Service could only survive by undercutting the nationally recognized brands in price. After the NIRA, they were compelled to raise their prices to the large manufacturers’ level. Large companies had advantages in economies of scale and service, and the NIRA stripped small companies of their only competitive advantage. And of course Goodyear, Firestone, and Goodrich wanted it that way.

Mongrel-agencies like the RAC are cave dwellers, they hate to be brought into the light.”

Bringing Down the NIRA

All of this is important backdrop to the case that brought down the NIRA, which, like the Hornes, featured businessmen who were fed-up with government-enforced cartels.

The four Schechter brothers ran two fairly large butcher shops in Brooklyn. As Jewish immigrants, they ran a kosher shop, mostly selling poultry to retailers. They slaughtered their chickens ritualistically, in compliance with Jewish dietary law.

Their specialized company and unique clientele were the type of aberrant business that the NYC chicken cartel was ill equipped to deal with. Under the “Code of Fair Competition for the Live Poultry Industry” for NYC, the Schechter brothers’ business model was basically illegal. In order to prevent “destructive price cutting” the code prohibited “killing on the basis of grade.” In other words, customers did not have the right to “make any selection of particular birds.” As silly as it sounds, the code required the butcher to reach into the chicken coop and grab the first chicken that touched his hand, any specific selection was prohibited. If a customer wanted to buy a half coop, the butcher could only break the coop in half. Because kosher rules require that unhealthy birds be discarded, the code essentially made kosher butchery illegal.

Although the brothers tried to follow the rules, it proved nearly impossible to run their business. And neither the code enforcers nor the U.S. attorneys had much sympathy for the brothers’ situation. The government charged them with selling “unfit chickens” to two men, and they went to trial. The trial was a confusing ordeal of strange questions posed to the Schechter brothers, who spoke halting English—at one point, brother Martin was ominously asked “There is a lot of competition between you and your competition, is there not?”—and attacks on the brothers’ education levels. In the end, the judge fined them $7,425—over $100,000 today—and sentenced all four brothers to between one and three months in jail.

The chicken cartel’s mob-like enforcers seemed to have done their job.

But the Schechters refused to back down, and they took their case to the Supreme Court. They argued that Congress’s power regulate interstate commerce did not reach the local NYC poultry industry. They also argued that the NIRA delegated too much legislative power to the executive branch.

During oral arguments at the Supreme Court, the justices struggled to understand that bizarre provisions of the code of fair competition. Just explaining the code elicited laughter from the courtroom audience and jokes from the justices. While the Schechters’ attorney, Joseph Heller, explained the prohibition on customer selection of chickens, Justice Harlan Fiske Stone asked “Do you mean that there can be a selection if he buys one-half the coop?” “No. You just break the box into two halves,” Mr. Heller responded. The laughter in the courtroom was amplified by Justice George Sutherland’s jape “Well, suppose, however, that all the chickens have gone over to one end of the coop?”

The Schechters won, and with their victory came the end of the National Industrial Recovery Act. It was not the end, however, of Roosevelt’s scheme to cartelize the U.S. economy.

Agricultural Cartelization

The Supreme Court may have temporarily halted Roosevelt’s plan for large-scale cartelization in business and industry, but he next set his sights on agriculture. In many ways, and certainly in the case of the Hornes, New Deal agricultural reforms are still with us today. The perseverance of bizarre things like the RAC are a testament to the permanence of even the silliest government programs.

The Hornes work under the Agricultural Marketing Agreement Act of 1937. Raisins weren’t included in the act, however, until 1949, when there was a pronounced post-war drop in demand for raisins. The government had been buying tons of raisins to send to the troops, and, after the war, raisin farmers felt somehow cheated by the return to normal levels of raisin demand. This is a recurring story in U.S. agricultural policy—farmers feeling that high, stable prices achieved during some time past were actually the “just” prices and that government should work to guarantee that price. In the New Deal, for example, the “fair” price for many agricultural commodities was determined to be the one achieved during 1910-14, a time of prosperity for farmers.

The dairy industry, in particular, was transformed by New Deal agricultural policies. As a result, the industry exists within a convoluted system of managed competition, a tangled web of subsidies and regulations where playing politics can be more important than being a good businessman who serves his customers well.

In the early 2000’s, another “agricultural outlaw” like Marvin Horne found himself fighting the dairy industry for the right to run his business as he saw fit. Hein Hettinga was a prosperous Western dairy farmer who decided to restructure his business around New Deal-era constraints. Like raisins, dairy farmers can be either “producers,” those who gather raw milk, and “handlers,” those who bottle and package milk products. Under the AMAA, farmers who only bottle milk from their own cows, so-called “producer-handlers,” can avoid paying into some of the government-imposed programs. Hettinga did just this, and he soon was undercutting the competition by up to 20 cents per gallon.

Drawing on the kind of spunky, can-do American spirit that made this country great, the dairy industry went whining to Congress. Hettinga should not be allowed to exploit that “loophole” in the law, they complained. “Loophole” is of course just cartel-speak for what would be normal business practices in a less-regulated industry.

The dairy industry has powerful lobbyists and the ears of many members of Congress. One was Harry Reid, the then minority whip, who had once snuck an amendment into a spending bill that exempted Las Vegas-area dairy farmers from some federal pricing rules. Despite the amendment, Reid’s precious Las Vegas dairy industry was still facing competition from a large milk plant that was under construction outside of town.

The horse trading went into full gear, and the patchwork of federal rules for Arizona (where Hettinga’s main plant was located), California, and Nevada presented many trading opportunities. Reid wanted exemptions for all Nevada producers, Arizona producers wanted to be protected from the threat of lower-cost Nevada milk, and California producers wanted Hettinga’s business throttled.

Lobbying money and campaign cash flowed. In the end, Hettinga was outmatched. Without even a committee hearing, the new milk bill was brought up by Reid to a nearly empty Senate chamber and passed by “unanimous consent,” which is Senate-speak for rubber-stamping backroom deals. The bill closed the Hettinga “loophole” but, ironically, or perhaps expectedly, opened up the exact same loophole for Reid’s Nevada producers.

Hein Hettinga tried to bring a legal case, but he was quickly shot down by the D.C. Circuit Court of Appeals. The courts of appeals are bound by Supreme Court precedent, which wasn’t on Hettinga’s side. Judges Janice Rogers Brown and David Sentelle, however, added a stem-winder opinion explaining how silly they thought the law was. “Given the long-standing precedents in this area no other result is possible,” they wrote, but there was a larger lesson to be learned:

The Hettingas’ collision with the MREA [Milk Regulatory Equity Act]—the latest iteration of the venerable AMAA—reveals an ugly truth: America’s cowboy capitalism was long ago disarmed by a democratic process increasingly dominated by powerful groups with economic interests antithetical to competitors and consumers. And the courts, from which the victims of burdensome regulation sought protection, have been negotiating the terms of surrender since the 1930s.

***

And that’s how America produces milk, grows its raisins, and, once, slaughtered its chickens. Actually, it is how nearly all American agriculture is done. Silly policies that originated in failed New Deal ideas—policies that the justices themselves couldn’t help making fun of—became the law of the land. Now, the RAC exists because it exists, and, like all artificial government agencies, its first instinct is survival.

Of the two amicus briefs filed in support of the government, one was tellingly written by Sun-Maid, the largest raisin marketer in the world. The brief is a shameless defense of the RAC, of which Sun-Maid producers or handlers hold 13 of the 47 seats. The RAC, the brief explains, allows “industry participants to collectively decide whether to regulate their respective industries.” It “benefits the entire raisin industry, including petitioners, by avoiding price volatility.” In other words, let us regulate ourselves because we benefit from it. Hettinga’s big dairy competitors or the Schechters’ big poultry opponents couldn’t have said it better.

Occasionally people like the Hornes, the Schechters, or the Hettingas help expose agricultural cartels and crony capitalists for what they are—government agencies that help big businesses and hurt consumers. This happens rarely, however, because it is usually easier to work with the government than to work against it, and cartelization is usually agreeable to those in the cartel.

Mongrel-agencies like the RAC are cave dwellers, they hate to be brought into the light. They prefer to hide behind a prolix U.S. agricultural code that is essentially printed chloroform, to borrow a phrase from Mark Twain. Like bacteria specially adapted to live in harsh environments, the code is their sustenance. Only a few industry specialists really understand how the code works, and they want to keep it that way.

Trevor Burrus is a Research Fellow in the Cato Institute’s Center for Constitutional Studies.

Raisin a Laugh at the Supreme Court

Trevor Burrus

It’s not a good sign when Supreme Court justices laugh at the law the government is trying to defend.

When it comes to defending the Raisin Administrative Committee, however, it’s hard not to laugh.

On April 22, the Supreme Court heard a challenge to the Raisin Administrative Committee’s despotic power over U.S. raisin farmers. What is the Raisin Administrative Committee (RAC)? Think of it as Raisin OPEC, a cartel maintained by the Department of Agriculture that has the power to take raisins from farmers and offer nothing in return.

Like OPEC, it does this to keep the price of raisins artificially high. Unlike OPEC, however, the RAC has an enforcement division, the U.S. government, and if you cross the RAC, they can come after you in court.

When it comes to defending the Raisin Administrative Committee, it’s hard not to laugh.”

That’s what happened to Marvin Horne, who, a little over 10 years ago, decided he’d had enough of the RAC’s shenanigans and refused to turn over his crop. In response, the RAC came after him, going so far as to hire private investigators to stake out the Horne’s farm.

When you cross the RAC, you better be prepared to pay the price. For Marvin Horne, the price is $700,000—a steep fine for refusing to give the government what belongs to him.

Collusion like this usually takes place in a smoke-filled backroom, away from the prying eyes of the SEC or the Federal Trade Commission. If any other business colluded like the RAC, they would be prosecuted for blatant violations of the Sherman Anti-Trust Act. Yet, on Wednesday, the government stood before the Supreme Court and defended the RAC because it works for the benefit of the farmers.

That is, of course, the point of a cartel—to benefit the colluders and hurt consumers.

Horne is arguing to the Supreme Court that, under the Fifth Amendment’s Takings Clause, which says private property can’t be taken for public use without just compensation, the RAC owes him something for his raisins. Judging by yesterday’s argument, he will probably win his case.

In addition to asking pointed and probing questions of the unfortunate government attorney charged with defending the case, the justices couldn’t resist making fun of the program entirely.

Chief Justice John Roberts joked that the government probably comes and takes the raisins “in the dark of night.” Justice Antonin Scalia joked that, while maybe the government could prohibit dangerous things from entering into commerce, these would have to be some “dangerous raisins.” Justice Elena Kagan simply asked, “We could think that this is a ridiculous program?” after which Justice Scalia said, “It doesn’t help your case that it’s ridiculous, though. You acknowledge that.”

This wasn’t the first time a group of Supreme Court justices laughed at silly government-created cartels. Eighty years ago, a different set of Supreme Court justices were laughing at the live poultry cartel for the city of New York. The poultry cartel was a product of the National Industrial Recovery Act (NIRA), which was the cornerstone of President Franklin Roosevelt’s New Deal.

Roosevelt was obsessed with cartels as the solution to the nation’s economic woes. While the Court struck down the NIRA, cartelization policies continued to be enacted, especially in agriculture.

The RAC began in 1949 as an amendment to a New Deal-era law called theAgricultural Marketing Agreement Act of 1937. The New Deal was the genesis of our modern agricultural policies which, to put it mildly, are insane.

And although no reputable economist believes that U.S. agricultural policy makes any sense whatsoever, we seem to be stuck with organizations like the RAC, as well as hundreds more that few people have heard of—a testament to perseverance of government-granted privileges.

Explaining New Deal policies is a risible endeavor. Contrary to what schoolchildren learn, the New Deal didn’t save the country. Instead it forced the economy into a Keystone-Cops movie of regulatory madness. The Benny Hill theme is the best soundtrack for the New Deal, not “Brother Can You Spare a Dime?

Of course, Roosevelt’s failed and laughable policies had very unfunny repercussions on the poorest Americans. They also have repercussions today, such as the Raisin Administrative Committee.

Organizations like the RAC hide behind a prolix agricultural code that, to borrow a phrase from Mark Twain, is like reading printed chloroform. But those with a stake in the game understand that the code supports them. Like bacteria that feed off of sulphur vents, it is their unique form of sustenance.

They’d prefer to keep their existence a secret, but thankfully cases like Horne’s help drag them into the light.

Trevor Burrus is Research Fellow in Constitutional Studies at the Cato Institute.

The Economics of Scott Walker’s Immigration Reversal

Alex Nowrasteh

A curious thing happened to Wisconsin Gov. Scott Walker on his way to Republican primary: he confused everybody with a statement on immigration. The essence of Walker’s statement is that he talked to Sen. Jeff Sessions (R-Alabama), the chief opponent of legal immigration, and said that the “next president and the next congress need to make decisions about a legal immigration system that’s based on, first and foremost, on protecting American workers and American wages.” Understandably, people on every side of the immigration issue assumed Walker’s statement indicated opposition to increased immigration.

In 2013 Walker supported legal immigration, stating that “[i]f people want to come here and work hard and benefit, I don’t care whether they come from Mexico or Ireland or Germany or Canada or South Africa or anywhere else.” Now, by adopting some of Sessions’ talking points on immigration, Walker has seemingly moved to the polar opposite of his 2013 position. After all of the abuse heaped on him by liberals and Democrats, for Walker to buckle almost immediately to the Know-Nothing wing of his party is rather startling.

But did Walker actually change his mind? He said he did and gave a reason why: He “talked to Senator Sessions and others out there” on the immigration issue. So he did actually switch to opposing legal immigration.

The Immigration Research Says

Walker should have stuck with the opinion of economists and, increasingly, that of the American people.”

Now that Walker has consulted with the Senate’s most entrenched opponent of immigration, it’s only fair that he should now investigate the vast economic literature that overwhelmingly finds immigration to be beneficial to the economy. Now it’s time to ask some economists and chat with some Gallup pollsters.

Walker’s statement about protecting the economic prospects of Americans shouldn’t translate to opposing immigration. The economic research is fairly one-sided. Immigration of lower-skilled workers has very little effect on American wages. The most negative finding in the peer-reviewed academic literature is from Harvard University economist George Borjas. His 2003 paper finds that the wages of high-school dropouts fell by 8.9 percent, relative to workers in other skill levels, from 1980 to 2000. Overall, he found that the wage of the average American worker declined by 3.2 percent due to immigration at that time. Borjas’ paper is ground-breaking theoretically but it assumes a fixed supply of capital in the economy—a condition that limits its usefulness for policy analysis.

But even holding the supply of capital as fixed, extending Borjas’ time period of analysis to 2010 essentially voids his findings. This recent paper used Borjas’ methods but includes the wage data up through 2010, finding effects so small that they are insignificant. That is a serious rebuttal to Borjas’ findings. Furthermore, Borjas admits that immigration does help Americans more than it harms them, but with some distributional consequences. The results from Borjas’ research are far more positive than his most enthusiastic supporters care to admit.

Economists Gianmarco Ottaviano and Giovanni Peri take up Borjas’ challenge and assume that capital adjusts in response to immigrant inflows. They find that immigrants have a very small effect on the wages of native-born Americans without a high school degree (-0.1 percent to +0.6 percent) and an average positive effect on all native workers of about +0.6 percent.

About that Supposed Negative Wage Effect

The negative wage effects of new immigrants are concentrated on older immigrants who have skills, language abilities, and other characteristics that are substitutable with those of newer immigrants. The negative wage effect for older immigrants was -6.7 percent. Unsurprisingly, new immigrants compete with older immigrants who both share similar skills while native-born Americans benefit from a larger supply of lower-skilled workers.

The editors at National Review cherry-pick statistics from these two very different studies. They are fond of pointing out that new immigrants lower the wages of older immigrants by 6.7 percent but neglect the positive wage impacts on native-born American workers from the very same academic paper. Instead, they get their more pessimistic data from the different Borjas study that holds the supply of capital as constant. Both academic papers need to be considered in the immigration debate, but cherry-picking of this sort obscures the evidence rather than illuminating it.

How can it be that an increase in the supply of workers also increases wages? Research by Giovanni Peri and Chad Sparber sheds light on that. They find that increases in lower-skilled immigration induce lower-skilled natives to specialize in jobs that require communication in English, a skill they have, while the immigrants specialize in jobs that are more manual-labor intensive.

Communication jobs are more highly compensated than manual-labor jobs. This more efficient division of labor by skill, called complementary task specialization by economists, reduces the downward wage pressure because natives react by adapting and specializing in more highly paid occupations, not by dropping out of the job market. This effect decreases wage competition between lower-skilled natives and immigrants by around 75 percent. Related to those findings, Peter Henry found that low-skilled immigrants to an area induced natives to improve their school performance so that they wouldn’t have to compete with lower skilled immigrants. Instead of forcing Americans out of the labor market, immigrants push Americans up the skills ladder.

And the Immigration Surveys Say

Aside from the academic evidence, economists have a more positive view of immigration than the general public. In an older poll, 96 percent of labor economists believe the economic gains from immigration exceed the costs. A more recent poll found that only 17 percent of economists believe that current U.S. immigration levels are too high and 30 percent are neutral on the matter.

Another survey reported by economist Bryan Caplan asked economists whether various factors can explain why the economy is not doing better. A score of 0 means “no reason at all,” 1 means a “minor reason,” and 2 means a “major reason.” Economists on average rated immigration as a 0.20 compared to Americans who rated it as a 1.22. Those who are informed about immigration and who study its economic effects for a living do not think it is a problem.

Of those three groups, polls of the general public reveal the most hostility—but they are not as negative as portrayed. John Hinderaker uncritically pasted a press release or email from Sessions’ staff about public polling on the issue. According to a recent Gallup poll, 60 percent of Americans are dissatisfied with the current immigration system, while 33 percent are satisfied. Of those dissatisfied, 39 percent wanted less immigration and 7 percent wanted more. However, that 39 percent figure is down from 65 percent in 1995—a remarkable decrease in just 20 years.

Rather than the U.S. public opinion swinging against immigration as the number of green cards grows, the opposite is happening. Below is the historical Gallup polling data versus the number of green cards issued.

image

image

In a recent Washington Post op-ed, Sessions wrote that the pro-legal immigration “elite consensus is crumbling.” Before writing that op-ed, Sessions should have looked at the numbers. Economists and, more importantly, the American people have a far more positive view of immigration than he does.

Walker bravely stood up to the bad economic ideas Democrats have put forward. But a successful Republican presidential candidate also needs to stand up to the lousy economic ideas put forward by members of his own party. Although Walker’s statements do not necessarily mean that he now opposes legal immigration, it’s more probable than not that he’s shifted toward the anti-immigration caucus in the GOP. Walker should have stuck with the opinion of economists and, increasingly, that of the American people.

Alex Nowrasteh is an immigration policy analyst at the Cato Institute’s Center for Global Liberty and Prosperity.