Who Is in Charge at Obama’s Justice Department?

Nat Hentoff

In the first two parts of our series on criminal justice reform, we wrote about the efforts of U.S. District Court Judge John Gleeson, a former career federal prosecutor who has been on a crusade against the systemic abuse of power by federal prosecutors.

We’ve found that Obama and Holder failed to take Gleeson’s recommendations seriously, or take the steps necessary to reform the abusive charging policies he repeatedly criticized.

Gleeson has been a fierce critic of a practice used frequently by prosecutors to coerce defendants to plead guilty and waive their constitutional right to a jury trial. It involves the imposition of a “trial penalty” by adding statutory enhancements to an indictment, which dramatically increase the prison sentence a judge is forced to impose if a defendant is convicted at trial.

For example, someone charged with selling drugs over a certain threshold must receive a 5- to 10-year mandatory sentence, depending solely on the amount of drugs involved. The prosecutor’s addition of two non-violent drug convictions to the indictment as a prior felony information (or, notice of filing an enhancement) can turn a minimum mandatory 5-year sentence into a 40-year sentence, and a minimum 10-year sentence into a life sentence.

In United States v. Kupa, Gleeson described the prosecutor’s threat of a life sentence to coerce a guilty plea out of a non-violent drug offender as “brutally unfair” and “the sentencing equivalent of a two-by-four to the forehead.”

Gleeson wrote, “Prior felony informations have played a key role in helping to place the federal criminal trial on the endangered species list,” noting that only 3 percent of all criminal cases charged in federal courts today results in a trial by jury.

From 2010 to 2014, Holder issued a series of memoranda to all U.S. attorneys that purported to modify Department of Justice (DOJ) charging policies in drug cases — which comprise only one-third of all U.S. criminal cases — to eliminate many of the abuses criticized by Gleeson.

An Aug. 12, 2013, memorandum directed that “severe mandatory minimum penalties (must be) reserved for serious, high-level, or violent drug traffickers.” The memorandum also required prosecutors to look for specific criteria in each case before deciding to charge a defendant for mandatory minimums, and to consider specific factors before filing for sentencing enhancements based on the defendant’s prior “felony drug offense” convictions.

Holder’s memoranda are, to one degree or another, either confusing or downright misleading. They have all failed to modify the plain language of the U.S. Attorneys’ Manual that requires assigned prosecutors to “charge … the most serious offense that is consistent with the nature of the defendant’s conduct, and that is likely to result in a sustainable conviction.”

Responding to a question by email, Gleeson said that “the prosecutors in this district appear to have complied fully with the August 2013 policy,” and acknowledged that fewer drug trafficking defendants are being charged with offenses that trigger mandatory minimums. He also said that he had not seen the use of a prior felony enhancement as egregious as the one he wrote about in the Kupa case since Holder’s final memorandum was issued in September 2014.

Considering the drubbing Gleeson gave the assigned U.S. attorney in that case, we have to wonder if prosecutors just lack the nerve to file sentencing enhancements in his court.

Federal criminal defense lawyers across the country are reporting the failure of U.S. attorneys to comply with Holder’s policy. According to Gleeson, a March survey of federal defenders found some level of non-compliance in nearly 60 percent of district offices that responded to the survey.

“In 23.9 percent of reporting districts (22 of 92), all or most prosecutors still do not comply with the Holder charging policy regarding drug quantity and/or (U.S. Code) 851 enhancements,” he wrote in an email. “In 35.8 percent of reporting districts (33 of 92), a minority or substantial minority of prosecutors still (and it may only be sometimes, rarely, or in only one case) do not comply with the Holder charging policy…”

The U.S. Sentencing Commission’s 2014 Sourcebook of Federal Sentencing Statistics support the survey’s findings. While only 6 to 7 percent of drug offenders charged in U.S. courts qualify for a mandatory minimum under Holder’s 2013 policy, more than 50 percent of drug offenders were charged with a mandatory minimum the year after the policy was enacted. That means Holder’s policy is being ignored in a majority of the cases where it should be followed.

Before stepping down from his position, Holder delivered a speech in February at the National Press Club in which he celebrated a 20 percent reduction in the number of drug trafficking offenders charged with mandatory minimums, a victory he attributed to his 2013 policy.

“Put another way,” Holder crowed, “we have gone from seeking a mandatory minimum penalty in two out of every three drug trafficking cases, to doing so in one out of two.”

He failed to mention that only 6 to 7 percent of those charged with drug trafficking offenses actually qualify for a mandatory minimum under his policy.

Incredibly, Holder bragged that his 2013 policy had increased the percentage of cases that are resolved by a plea agreement to 97.5 percent. Now just 2.5 percent of defendants in federal drug cases exercise their constitutional right to a trial by jury.

Holder’s apparent contentment with what amounts to a mutiny by federal prosecutors raises a question Obama should ask the current Attorney General Loretta Lynch and her chief deputies: “Who is in charge at the Justice Department?” It’s clearly not the attorney general if such a large number of federal prosecutors can disobey a mandatory charging policy without fear of disciplinary sanction.

Changing a written policy is easy, but it is also meaningless if you take no action to enforce that policy in its practical application. The seriousness of this problem deserves a better response from Obama during 2016.

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.

Bringing Aid and Hope to Syrian Refugees — Americans Should Do More to Help

Doug Bandow

“Syrians are everywhere,” an aid worker told me. “Everybody is poor now.” Well over a million Syrians are scattered across Lebanon, many in small “tented settlements.” Almost half live in sub-standard housing; many lack fuel and warm clothes for winter. The government spends upwards of $1 billion annually to care for refugees and local residents are losing patience with the influx. Nearly a third of the country’s population is made up of people fleeing one conflict (Syria) or another (Iraq, Palestine).

Jordan hosts even more Syrians at greater cost. (So does Turkey, though it is much larger and wealthier.) Six of every seven refugees live in poverty. Large camps hold only 15 percent of refugees; the rest are spread throughout the country.

Almost five years of civil war have killed a quarter of million Syrians, wrecked the country, created economic catastrophe, displaced millions, and left virtually no one unaffected. Earlier this year UN Secretary General Ban Ki-moon said: “Four out of five Syrians live in poverty, misery and deprivation. The country has lost nearly four decades of human development. Unemployment is over 50 percent. Life expectancy has been cut by an astounding 20 years.” Children are at special risk, with horrific pasts and dubious futures. As many as five million people have fled to surrounding countries.

Thus, the stampede of Syrian migrants to Europe should not surprise. Even those who already have escaped the fighting are desperate to provide for their families and start a new future. Many see little appeal in Syria after peace eventually returns. “Before the conflict Syria was a most diverse and tolerant society. Now that is down the drain. Syrians are doing what people did in Lebanon,” observed a Syrian working for International Orthodox Christian Charities (IOCC).

Americans traditionally have offered sanctuary to those fleeing repression and war. However, so far the U.S. has taken in only about 2300 Syrians. Administration plans to accept another 10,000 have generated rising political opposition. Although fears of a refugee fifth column are overwrought, placing Syrians into recalcitrant communities is problematic for residents and refugees alike.

NGOs offer the best means for Americans to help Syrians in need.

But Americans can contribute financially. Earlier this year Kuwait hosted a donors’ conference for Syria. Some $3.8 billion was pledged, topped by donations from the U.S. and Kuwait, long the Middle East’s leader in such humanitarian efforts. However, the total was less than half what aid agencies were seeking, and in both 2013 and 2014 actual contributions significantly lagged original promises.

Which places greater responsibility on private relief groups. Yet they also have suffered financially as people’s attention has wandered. Journalist Thanassis Cambanis explained: “Money problems are now afflicting every organization trying to help Syrians. Interest in the grinding conflict has flagged; sporadic political attention and media coverage mostly focus on the Islamic State, while fewer and fewer governments respond to the United Nations’ ‘urgent appeals’ for aid.”

Nevertheless, NGOs offer the best means for Americans to help Syrians in need. There are many worthy organizations. Earlier this year I traveled with IOCC to Lebanon and Jordan to view several aid projects. IOCC is an agency of the Orthodox Churches of North America and helps anyone in need. Widely respected by Muslims as well as Christians for its work, since 2012 the charity has helped more than 3.2 million Syrians throughout the Middle East. Its efforts demonstrate that the key to meeting vast humanitarian needs is not to focus on the seemingly hopeless whole but to address discrete problems facing individuals and families. Much good then can be done.

Based in Baltimore, Maryland, IOCC sees its mission as aiding those in need “in the spirit of Christ’s love,” who commanded that we feed the hungry and aid others in distress. Indeed, what more powerful way to fulfill the Apostle Paul’s admonition to “do good to all people” (Galatians 6:10) than to enter a war zone to help?

Much of IOCC’s work is conducted in Syria. The organization provides a form of “boots” on the ground and works with the Greek Orthodox Church in Syria. Even though the group seeks to send staff only into safe areas, fighting can shift suddenly. (This is one reason why IOCC didn’t want to bring an outside scrivener there.)

More than half Syria’s population now is estimated to require outside aid. One of IOCC’s staffers from Syria, in Beirut for a workshop, told me that “Everyone in Syria is in need but there is no budget to help everyone.” Nevertheless, IOCC attempts “to help the host population as well as” those displaced by the fighting, she explained, since “the host population is so poor.”

Assistance runs the gamut, starting with emergency food, infant care, clothing, and bedding. IOCC repairs sanitation and water systems and teaches about proper hygiene. Health aid includes paying for medicine and surgical procedures. IOCC provides pre-natal and post-natal care, birth assistance, and nutrition programs. Money is used to repair shelter and pay rent assistance. Various measures support continued education of children. Psychological support programs are offered. In conjunction with its local partner IOCC deploys “rapid action teams” to address the consequences of new outbreaks and escalations of fighting.

One major challenge is to help people care for themselves. IOCC runs a “cash-for-work” program for Syrian women. They are trained to knit and provided with needles and wool. The dual benefit is warm clothes and outside income. Beneficiaries include widows and mothers with small children.

Aid work takes a toll. I spoke with Sama Laham of the Greek Orthodox Patriarchates of Antioch and All the East, in Beirut for an IOCC meeting. “We are facing daily challenges, daily problems,” he said. “Sometimes it is hard to face. But life goes on.” The longer the war rages, the greater the destruction. He lamented: “Buildings can be rebuilt. You cannot rebuild human beings.”

IOCC has been active in Lebanon since 2001, when it began aiding Lebanese still recovering from their civil war, which ended only in 1990. For instance, the group began supporting education in Lebanon, providing school equipment, underwriting school repairs, and providing school meals. The charity also promotes hygiene in public schools.

The massive influx of Syrian refugees has created new challenges. One IOCC official told me that “Lebanon faces a lot of problems, so we want to help the host country.” Tensions between residents and refugees have risen along with the increased job competition, pressure on infrastructure and services, and living costs. People “started out very sympathetic,” another IOCC official told me, especially since there had been “a lot of trans-border trade and families on both sides.” However, residents are poor people who “became even poorer, and they felt the government was not taking care of them, but only the refugees.” Aid projects providing community support help moderate such antagonisms.

One program which I visited focused on mother-child nutrition, from conception up to five years. The “public health system was overwhelmed by refugees,” explained Rana Hage of IOCC. The program is operated in conjunction with the Ministry of Public Health and seeks to provide training and equipment for scores of local public health centers (PHCs). It is open to all, though refugee families predominate. Children are screened and then regularly measured and weighed, with nutritional supplements, high-protein foods, and milk provided.

Pregnant and lactating women also receive nutritional aids. While I was visiting a 20-year-old pregnant woman came in, looking malnourished. She was provided with nutritional aids and directed to a PHC closer to her home. IOCC also trains Lebanese workers and empowers Lebanese agencies to educate mothers and provide emergency assistance. Tens of thousands of children have been screened and hundreds have been rescued from malnutrition. The program also emphasizes education and counseling.

IOCC covers the country. I went to the Makarem al-Akhiak PHC in Tripoli to the north. Three-quarters of those served are Syrians, who are spread throughout the community and “can come from anywhere,” said one of the local health care workers. “Tripoli is very central and easy to reach,” she added, and contains seven PHCs. Staff members reach out by “going to shelters and informal settlements and talking to women.” Unfortunately, “it sometimes is very dangerous to be here,” noted our security escort. Some 70 percent of population is Sunni and most oppose Syria’s Assad, in contrast to the Shia Hezbollah movement. Christians have only a small presence in the city. Sporadic sectarian violence has resulted.

Another community-oriented program provides meals to those in need. I visited a community kitchen in the West Bekaa District of the Bekaa governorate, one of two which helps feed 1750 people. IOCC underwrote a large, efficient cooking facility and hired local women to cook. Pots of food are distributed to needy families—both refugee and resident. The program hires both Syrians and Lebanese; the kitchen manager said that “we choose the most vulnerable women to work here.” A dietician designs the menu, so the meals “are healthy but not very expensive,” a staffer told me. The program helps reduces local resentment of refugees since needy residents also receive assistance. IOCC hopes to add another two kitchens.

The charity also runs the WASH program at two refugee encampments with more than 7500 people. I went to the Bar Elias Settlement, also in Bekaa. The initiative seeks to develop an efficient and safe water and waste systems, no easy task for expanding yet theoretically temporary encampments. The agency also seeks to establish water/wash facilities while providing hygiene education involving food preparation, hand-washing, and latrine use to reduce disease. Here as elsewhere IOCC hires staff from areas being served. Camp residents are more likely to accept instruction from those they know—the hygienist was a personable young lady who appeared at ease chatting with residents as we walked through the camp. She said she tries “to be sensitive with women and kids,” and plays educational games with the latter. Unfortunately, the job is never done. Said another aid worker, tents are “everywhere, everywhere,” and the camp is “constantly changing as more people come.”

Syria surrounds Lebanon to the east and north: things “can turn very dangerous very quickly,” one IOCC staff told me as we passed along the border. Nevertheless, Lebanon provides IOCC with a reasonably safe base for regional operations. While I visited the group brought staff in from Syria—a drive through territory still controlled by the Assad government—for a two-day workshop. People were able to relax and briefly set aside the war. The final dinner delivered much food, laughter, dancing, and karaoke, both in English and Arabic. The next morning came the return trip to Syria.

Jordan may be less fragile than Lebanon, but suffers greatly as well. Some 80,000 people are crowded into Jordan’s Zaatari Refugee Camp, well-organized but with very basic conditions, sitting only a few miles from Syria. Twenty-two-year-old Abdul al-Jabbar said his family of nine came from Daraa to the camp three years ago. Life was difficult, “but at least we are alive. We must adapt.”

IOCC runs a program to prevent and treat lice, especially affecting children. The charity has distributed anti-lice kits to more than 20,000 kids. There’s nothing glamorous about this sort of work, but it meets a critical need. The camp has nine medical clinics emphasizing the practical. The one I visited typically served about 700 people daily. “Every day we face challenges,” said clinic health coordinator, Samer Makahleh. “To fill gaps we go to outside partners like IOCC for head lice,” he explained. The program, which began some three years ago, emphasizes accountability and follows individual patients.

The most serious medical cases are sent outside the camp. Some needs still go unmet. Al-Jabbar, who works in security, said scores of other people were waiting for expensive procedures, hoping for a “special donor.” I was approached by a 64-year-old seeking support for a heart operation.

With most refugees living outside the camps, IOCC works outside as well, even making home visits for those unable to travel. The group provides everything from school uniforms—required to attend Jordanian schools—to infant supplies and household items. Many refugees may be unable to return to their earlier livelihoods once the war ends; some are entering adulthood without being able to develop work skills; others, largely women, have lost the family breadwinner. So IOCC provides vocational training, including in computer and phone maintenance, cosmetology, and graphic design, and English instruction.

There are Iraqi and Palestinian refugees in Jordan as well, and IOCC serves them all. In fact, said Felomain Nassar-Batshone, IOCC program manager in Jordan, “we began in anticipation of the Iraq war” years ago. Then the charity “started to meet the needs of the local population,” and today aids Jordanian families harmed by the refugee influx.

As needs have grown IOCC has expanded its activities. For instance, the group stepped in a couple months ago to provide meals and water for Syrian (and other) refugees arriving at three Greek islands and support immigration centers elsewhere in Europe. There is no geographic limit to human hardship.

IOCC’s identity is Christian. But it sees its calling as serving the needy without discrimination. In the Middle East the charity mostly serves Muslims. IOCC seeks to moderate the immediate crisis while preparing people for a better future. Many of its staffers know conflict, having suffered in Syria or grown up during Lebanon’s civil war.

Of course, even the best humanitarian efforts can only do so much. One top IOCC official told me he “sees no end of the conflict.” Every day more people are displaced. But he opposed Western military intervention, which would exacerbate the crisis. Only a “credible political process” which “gives people hope it will get better” can stem the refugee flow, he argued. But that political process appears to be barely beginning. Which means the need for aid will continue to increase. Yet he worried: “Funding is going to diminish next year. Donors are not going to be there.”

Unless more Americans and other people of good will around the world step up to address Syria’s humanitarian disaster. Centuries ago Christ called on his listeners to help the “least among us.” We should meet that challenge today.

Doug Bandow is a senior fellow at the Cato Institute, specializing in foreign policy and civil liberties.

Mideast Christians Are Being Killed — as a Result of Republican Party Policies

Doug Bandow

As in years past at this time of the year Christmas trees filled homes and nativity scenes sprouted on lawns across America. Despite annoyance with sometimes ham-handed attempts to subsume Christmas in generic “holiday” celebrations, Christians were free to celebrate their faith as in the past.

Not so tens and perhaps hundreds of millions of believers abroad. Murder by such groups as the Islamic State and Boko Haram topped pervasive persecution and discrimination in many nations. The Pew Research Center figured that Christians are harassed and harmed in more than 100 countries, the most of any religious group. Christians are particularly vulnerable to government abuse, especially in Muslim-majority states.

On Christmas Eve Senator and presidential contender Marco Rubio penned an article decrying the lack of “attention paid to the plight of these Christian communities in peril.” He criticized the Obama administration (naturally) and promoted the U.S. Commission on Religious Freedom (appropriately). Rubio also called for diplomatic, financial, and military support for Christians abroad.

Rubio’s concern no doubt is genuine. However, the policies implemented by his party and advocated by him and his fellow GOP presidential contenders have hurt and will continue to hurt Christians around the world. The best that can be said for Rubio is that he may be ostentatiously oblivious rather than calculatingly malicious. In contrast is former Arkansas Gov. Mike Huckabee, who actively aids Israeli settlers in the West Bank, harming Christian and Muslim Palestinians alike. And Texas Sen. Ted Cruz, who last year used a conference of persecuted Christians as a campaign prop to proclaim his everlasting fealty to Israel.

No single policy was as injurious to Middle Eastern Christians as the invasion of Iraq. In this repressive but secular dictatorship, Christians were free to worship and work. The ruling Baath Party was formed by a Christian; under Saddam Hussein a nominal Christian, Tariq Aziz, was foreign minister and deputy prime minister. However, U.S. intervention triggered a sectarian conflict which drove out hundreds of thousands of Christians (many to Syria), spawned a new al-Qaeda organization which morphed into the Islamic State (now killing Christians in Iraq and Syria), and tolerated ruthless Shia rule which encouraged Baathists and Sunni tribes to support ISIL (enabling its unexpected victories). Absent George W. Bush’s Iraq folly, backed by Rubio and most of his competitors, the “murderous terrorist organization,” as Rubio termed the Islamic State, wouldn’t even exist.

Thank you, Sen. Rubio and Republican Party.

The result, as the Department of State explained in its latest religious liberty report: “The security situation in the country deteriorated sharply during the year and the government lost effective control of significant terrain to the Islamic State in Iraq and the Levant (ISIL). This resulted in increased levels of violence and lawlessness in that territory, as well as a destabilization of security throughout the country. Freedom of belief and practice was severely limited in areas beyond the government’s control, where ISIL targeted religious groups it considered heretical in a systematic campaign of atrocities and forced expulsion.”

Thank you, Sen. Rubio and fellow Republicans.

Most of the usual GOP suspects, starting with Rubio, also backed the Obama administration’s decision to intervene in the Libyan civil war. This misbegotten policy left two competing governments, multiple armed militias, loose weapons permeating the region, and a geopolitical vacuum partly filled by the Islamic State, which publicly murdered Egyptian Copts who were working in Libya.

In its religious liberty report admitted State: “While the constitution bans discrimination based on religion, the government did not prevent violent extremist groups from taking advantage of the post-revolution security vacuum to attack religious minorities, and did not investigate crimes against religious minorities or religious sites.” Moreover, “Coptic Christians were targeted in several incidents.”

Thank you, Sen. Rubio and GOP neoconservatives.

Then there is Syria, engulfed by a hideous civil war. Bashar al-Assad is another secular dictator, coming from the minority Alawite sect. While he uses fear of potential religious persecution for his political benefit, Christians and other religious minorities have good reason to be terrified about Syria après Assad. After all, many of them fled Iraq, where they’ve seen the ending of the movie: it isn’t pretty. Opposing Assad are unashamed extremists and jihadists and largely nonexistent and ineffective “moderates,” who upon losing surrender personnel and weapons to unashamed extremists and jihadists. Yet Rubio and most of the other Republican contenders want to oust Assad, who possesses the most effective force opposing ISIL. Several of them also want to confront Moscow, even shoot down Russian planes, over its support for the Assad government.

Should Rubio & Co. succeed, the likely fate of Christians is grim. Noted State: “With the worsening conflict, the government did not control significant terrain within the country, rendering it incapable of governing those portions of the country.” What happened there? “Extremists groups targeted Shia, Alawites, and religious minorities with killings, kidnappings, torture, and arrests in the areas of the country under their control.” More specifically, “ISIL required Christians to convert, flee, pay a special tax, or face execution in territory it controls, and systematically destroyed churches, Shia shrines, and other religious sites.”

On a recent trip to Jordan and Lebanon I met with several Christian aid workers active in Syria. Most complained about U.S. policy targeting Assad. One said to me: “You Americans don’t know what you are doing.” Christians must fear more than jihadists. Joseph Khourieh, a Syrian Christian whose family fled to Lebanon, told the Washington Post: “They were targeting Christians because they thought we had more money to pay ransom.”

Thank you, Sen. Rubio and Republican hawks.

Almost as bad is Washington’s reflexive support, endorsed by Rubio and the rest of the GOP presidential gaggle, for ruthlessly Islamic regimes throughout the Middle East and beyond. For instance, though Afghanistan has fallen off the political radar screen, Rubio sees no end to Washington’s Quixotic, 14-year attempt to create a democratic, centralized state in this inhospitable nation. He insisted the administration leave 10,000 troops there to allow the next president to “set a responsible long-term policy,” likely a permanent garrison to defend the corrupt, incompetent government in Kabul. After all, he declared, Afghanistan — despite the quick defeat of al-Qaeda, which relocated elsewhere, and irrelevance of the Taliban, which wants to rule locally, not strike overseas — “is our problem.”

Yet Afghanistan is one of the worst states for Christians. Explained State: “Governmental practice and laws, however, limited freedom of religion, particularly for religious minorities. According to the courts’ interpretation of Islamic law, Muslims can be punished for converting from Islam to other religions.” Moreover, “Public opinion continued to be openly hostile toward converts to Christianity and to organizations that proselytized.”

Thank you, Sen. Rubio and Republican Party.

More broadly, despite complaining about foreign blasphemy laws, Rubio declared that the U.S. must “reinforce our alliances.” Some of his competitors are worse. Jeb Bush was particularly insistent about rebuilding “our relationships with allies and key relationships in the Middle East, including the Persian Gulf states and of course Egypt.” New Jersey Gov. Chris Christie worried about the Obama administration having hurt the feelings of Saudi Arabia’s king. Most GOP candidates back Riyadh’s foolish war in Yemen. It’s bad enough to subsidize prosperous, populous, and democratic nations in and Europe which don’t feel like paying to protect themselves. But in the Middle East Washington’s posse is filled with bad actors which mistreat Christians.

Saudi Arabia is essentially a totalitarian state, without a single operating church (or synagogue or temple) for non-Muslims. Noted State: “The government detained individuals on charges of violating sharia, committing blasphemy, sowing discord in society, and insulting Islam.” Moreover, “the government harassed, detained, arrested, and occasionally deported some foreign residents who participated in private non-Muslim religious activities.”

Egypt has the largest Christian population by proportion outside of Lebanon, yet Coptic Christians remain victims of persecution, discrimination, and violence. This after the military ouster of the Muslim Brotherhood-dominated government of Mohamed Morsi. The Obama administration ended up embracing the country’s new pharaoh, General-President Abdel Fata al-Sisi, who is more repressive than Hosni Mubarak. The GOP wants an even closer relationship.

State identified many problems in Egypt: people were prosecuted for religious defamation and blasphemy; “police and security officials reportedly failed to respond in cases of kidnapping and extortion of Christians”; “accountability for previous sectarian crimes was uneven”; so-called “reconciliation” sessions were used to insulate violent Muslims from responsibility for attacks on Copts; “Christians in Upper Egypt, however, were targeted for kidnapping and extortion disproportionately”; and “Building and re-building churches in the absence of anticipated legislation was sometimes met with societal resistance, occasionally turning violent.”

Other allied/friendly Islamic states with high government restrictions or social hostilities toward Christians include the Central Asian “stans,” Indonesia, Pakistan, and Turkey. The more support lavished on such “allies,” the less credibility and clout the U.S. has in advocating religious liberty.

Thank you, Sen. Rubio and fellow GOP presidential wannabes.

Finally, Rubio’s slavish political commitment to the Israeli government hurts Christians there. “We need to stand strong with Israel,” he declared, mimicking every other GOP presidential candidate, all of whom have shamelessly claimed to love Israel more than everyone else ever has and ever will. Worst may have been New Jersey Gov. Chris Christie, who declared “Our commitment to Israel must be absolute.” Although he professed to be a tough guy, he groveled before billionaire Sheldon Adelson, apologizing for accurately describing the West Bank as “occupied territory.”

Israel welcomes Western Christians for their political support, not religious convictions. Arab Christians don’t even receive that benefit. Vandalism and harassment of Christian property and clergy, respectively, by ultra-Orthodox activists is common. Benzion Goptstein, head of the extremist group Lehava, recently called Christians “vampires and blood suckers” who should be expelled.

Christians in the West Bank, who live and worship openly, complain far more about the impact of the Israeli occupation than activities of the Palestinian Authority. On one trip to Israel I had dinner with several Arab Christians in Bethlehem — located in the occupied West Bank — and they talked of inconvenience, hardship, harassment, and discrimination. An American who left his job as a policeman in Minnesota to marry a Palestinian woman told how he came to fear the police, that is, the Israeli security forces. Melkite Catholic Archbishop Abuna Elias Chacour asked why, for U.S. Christians, “does friendship with Jews mean enmity with Palestinians?”

State acknowledged numerous problems. Jewish settlers made more “price tag” attacks on Palestinian Christian than Muslim sites in the West Bank. Arrests and prosecutions are rare. Lehava is one group perpetrating attacks on non-Jews. “Societal attitudes toward missionary activities and conversion to other religions were generally negative.” Israel’s visa issuance process “significantly impeded the work of Christian institutions.” Arab clergy “faced long delays in receiving visas, and sometimes authorities denied their visa applications.” Israeli security barriers, built on Palestinian, not Israeli, land, impeded activities by clergy and congregants. In contrast, “Relations between Palestinian Christians and Muslims were generally good, with both groups focusing more on ethnic and political similarities than religious differences.”

Overall, when it comes to religious liberty Israel is not as supportive as most American Christians probably imagine. The singular determination of Rubio and the other GOP candidates to win votes from Christian Zionists, irrespective of the basic rights and liberties of Palestinians, would preclude any Republican president from pushing to improve the status of Christians living in Israel or under Israeli occupation in the West Bank.

Thank you, Sen. Rubio and fellow Republicans.

As Rubio noted in the Washington Post, Americans should remember that in the Middle East, “due to the scourge of radical Islam, some churches that have existed since the Book of Acts are on the brink of ruin.” At the same time, American voters should remember that Republican support for promiscuous military intervention and Islamic dictators is what loosed this scourge upon Middle Eastern Christians.

Unfortunately, doing more of the same in the Mideast, as Rubio proposed, would only yield the same result. Is he more interested in promoting misbegotten neoconservative crusades or helping persecuted Christians? As candidates, his and his fellow Republican contestants’ answer is clear. We can only hope and pray that they might answer differently as president.

Doug Bandow is a senior fellow at the Cato Institute, specializing in foreign policy and civil liberties.

Hillary Should Let Big Banks Go Bust

Thaya Brook Knight

Presidential hopeful Hillary Clinton recently penned an op-ed in The New York Times titled “How I’d Rein in Wall Street.” The lengthy article includes 14 proposed reforms intended to “rein in major financial institutions,” improve regulator independence and hold executives “more accountable.”

According to Mrs. Clinton, the 2,300 pages of Dodd-Frank are not enough and we need “new rules… and more accountability that go well beyond Dodd-Frank.”

But none of Mrs. Clinton’s new rules — from imposing a “risk fee” on banks with more than $50 billion in assets to authorizing the federal government to “break up any financial institution that is too large and risky to be managed effectively” — addresses the real problem.

The real problem is that financial institutions have not internalized the risks they create. The promise of a government backstop in the form of another bailout still exists, and the FDIC remains poised to insure deposits.

The political reaction to the 2008-2009 recession, which has taken the form of writing ever more rules for banks to follow, has been understandable if not wise.  Recessions hurt, and it’s a natural reaction to try to stop painful events from reoccurring. Dodd-Frank and proposals such as Mrs. Clinton’s seek to defang the financial sector, making it clunky and less frightening.

The best way to prevent banks from gambling with taxpayer money is to stop giving them taxpayer money.

Under Mrs. Clinton’s plan, broker-dealers would be weighted down with increased leverage and liquidity requirements, large banks would carry a risk fee and high frequency traders would counterbalance their speed with a new tax. These proposals would sit on top of the increased regulation already provided by Dodd-Frank. The problem, the theory goes, is that we have a runaway financial sector that needs a sure horsewoman to call, “Whoa!”

But the theory is flawed. The problem is not where the banks were headed, but the guarantee bringing up the rear.

To a certain extent, Mrs. Clinton recognizes this. The driving force behind her proposal is resentment toward banks that “make speculative gambles with taxpayer-backed deposits.” This resentment is justified. To the extent that any institution — whether it be a financial institution or an auto manufacturer — takes a risk, it should bear the consequences.

I agree wholeheartedly with Mrs. Clinton on that point. And the best way to prevent banks from gambling with taxpayer money is to stop giving them taxpayer money.

Under the current model, financial institutions are backstopped by an implicit guarantee (or, in the case of FDIC insured deposits, a very explicit guarantee). This backstop creates moral hazard that prevents the banks from properly assessing risk and from calibrating their strategy to align with this assessment. It would, in fact, be irrational for the banks to limit certain risk if they are likely to be bailed out.

There is therefore a mismatch between the risk financial institutions are likely to take on and the risk that taxpayers, as their guarantors, would want them to take. To fix the mismatch, we have regulation: an implicit guarantee provides an incentive for banks to do X, but the banks are then yanked back from X by regulatory hurdles.

What a clunky system. And then there’s the fact that regulation, because it must apply to all actors within a certain industry, cannot be calibrated to the particular needs of any one institution nor can it shift swiftly when the environment changes. A financial sector hamstrung by regulation is unlikely to be nimble enough to meet changes in the marketplace and to exploit opportunities for innovation.

While the recession itself was painful, even more agonizing has been the sluggishness of the recovery. Clunkiness does not promote resiliency nor does it lead to vibrant growth.

Preventing another Great Recession does not require 2,300 pages of new legislation or a list of 14 new proposals. It requires simply the discipline to let companies feel the sting of their own bad choices, and to let them learn from, and internalize the harms from their own mistakes.

Thaya Brook Knight is associate director of financial regulation studies at the Cato Institute.

Austerity by Any Other Name

Alberto Mingardi

What is austerity? We in Europe hear this term almost every day, yet we do not really know what it means. Some may argue that we now call “austerity” what we used to call “fiscal consolidation.” However, the only thing we can be pretty sure of is that austerity is bad.

Mark Blyth’s Austerity: The History of a Dangerous Idea attempts to demonstrate just how bad it is, and how fiscal consolidation policies are more a product of ideology than of necessity. His polemical targets are economists who maintain that bringing budget deficits down does not necessarily depress demand and, more generally, thinkers who hold that some version of “peace, easy taxes, and a tolerable administration of justice” are the main prerequisites of economic growth.

Professor Blyth argues his case with passion. He considers himself the product of welfare subsidies and governmental intervention, and he sets out to defend the welfare state status quo from what he considers unwarranted attack.

His defense may be palatable, in the current context, in light of his assumption that “the notion of a middle class” is made possible by transfers across income distribution groups. The debate over income inequality is fueled by the well-developed impression that the middle rankings of society are being squeezed into a steadily shrinking space. Blyth’s basic idea that the middle class developed due to governmental support, not efforts in the marketplace, requires serious examination from those who disagree with him, precisely because classical liberals tended to see in the thriving middle classes their natural constituency.

Austerity treats economic and political ideas more than economic and political facts. Consider its author’s definition of the word:

Austerity is a form of voluntary deflation in which the economy adjusts through the reduction of wages, prices, and public spending to restore competitiveness, which is (supposedly) best achieved by cutting the state’s budget, debts, and deficits. Doing so, its advocates believe, will inspire “business confidence” since the government will neither be “crowding-out” the market for investment by sucking up all the available capital through the issuance of debt, nor adding to the nation’s already “too big” debt.

Were we to take this ideas-rich definition of austerity at face value, we would think the so-called “troika” — the group of international lenders that forces austerity upon peripheral European Union member states — traveled with Adam Smith at hand.

Such a definition tends to overlook the fact that the austerity packages imposed by the European Commission, the International Monetary Fund, and the European Central Bank are, shall we say, less than linear from an intellectual standpoint. The case for “expansionary fiscal austerity” developed, actually, in studies that aimed precisely at discriminating between different kind of fiscal consolidation. In the Euro-crisis, austerity measures have been at best a mix of some spending cuts and tax increases. To be sure, Keynes would disapprove of both, but Hayek wouldn’t agree with the latter.

Professor Blyth rails against a more coherent set of ideas, those typically associated with a “classical liberal” (or sometimes “conservative” in the American sense) position. These ideas are “dangerous,” according to him, because they ignore the externalities they generate. That is, spending cuts reduce the disposable income of the middle and lower middle classes.

The book opens with a succinct narrative of the U.S. financial crisis but quickly moves to the migration of that crisis to Europe. Blyth argues that, although European countries typically sit “left of the U.S.” politically, they acted “right of the U.S.” economically, in the crisis, because they built a banking system “too big to bail, which is the real reason why a bunch of putative lefties are squeezing the life out of their welfare states.” The hypothesis that “too big to bail” systems might be the result of mistaken policies, stemming from regulators’ off-kilter assumptions and lack of accurate information, escapes consideration here.

That European governments are “squeezing the life out of their welfare states,” moreover, seems a bit exaggerated. In 2013, public spending as percentage of GDP was on average 49.4 percent in the Eurozone.

Still, the overwhelming fear for the stability of the banking system could well explain the behavior of the European elites in the crisis. Such an explanation would require a cool-headed investigation of the tangle of interests and incentives involved, and a closer look into the European banking system, which is largely, in countries like Italy, Spain, Germany and France, directly or indirectly controlled by politics — and heavily regulated everywhere. Alas, Professor Blyth prefers to immerse himself in the more exciting history of economic and political thought. For him, austerity becomes an all-purpose political explanation of the evils of the world.

He sees “austerity at work” in the 1920s and 1930s all over Europe, and blames on it the emergence of National Socialism. Hitler, he believes, won Germans’ minds and hearts with stimulus policies. “The fact that this turn against austerity took a particularly murderous direction in Germany,” he writes, “does not invalidate the basic point that austerity didn’t work.”

Such a one-dimensional explanation of very complex political phenomena can hardly be taken seriously.

More interestingly, echoing Barry Eichengreen’s work, Blyth sees any monetary “straightjacket” as inherently incompatible with democracy. That democratic polities, in the last century, showed a certain tendency toward fiscal profligacy is a point often made and certainly worth exploring. But I found rather bizarre the idea that this should be seen as a simple natural fact to be accepted, rather than a problem that deserves to be addressed at the level of constitutional design. Pace Blyth, not seeing democracy “as an end in itself” doesn’t necessarily mean considering it “an inflation-causing pathology from which only rules, not discretion, can save us.”

Also, whatever friction may exist between fiscal responsibility and democracy, it is not immediately clear why fiscal profligacy should be a positive catalyst in democratic life. Latin American politics, for example, abound in examples showing exactly the opposite.

For all that he cares about ideas, Blyth surprisingly lacks the precision that one should expect from a student of the history of thought. I will provide just two examples.

He maintains that the Italian classical liberal economist Luigi Einaudi embodied the very essence of the Euro-austere spirit. Indeed, Einaudi argued for a version of European federalism, believed in sound money, and was a champion of fiscal responsibility. He was briefly treasury minister and then governor of the Italian central bank, after World War II, before being elected president of the Republic. His legacy didn’t seem to hold in Italy, at least if you consider the country’s dismal record of fiscal profligacy and inflationism in the second half of the 20th century.

Blyth argues that

Einaudi and his ideas matter because of the school of economics that he founded at the Bocconi University of Milan, which produced two generations of economists reared in these ordo-liberal views.

This is an odd statement. As a matter of fact, Einaudi was evicted from Bocconi as early as 1925 because he dissented from Benito Mussolini’s fascism. Moreover, at the time, Bocconi was far from being a center of dissemination of political ideas. It aimed to be, to put it roughly, an equivalent of the polytechnic school for accountants: a very practical university that eschewed high theory.

Einaudi never thought of leaving the then-more prestigious University of Turin, where he nurtured many students who left their mark in the social sciences (including the certainly not austerity-friendly Piero Sraffa). Also, Einaudi was an empirical economist who wrote in prose. Contemporary Bocconi economists are instead trained in sophisticated, contemporary mathematical economics.

It may well be that two of Blyth’s favorite polemical targets, Alberto Alesina (landed at Harvard) and Francesco Giavazzi (who teaches at Bocconi and MIT), admire Luigi Einaudi. Any Italian of good sense should. But is that enough to argue that Einaudi’s ideas determined their research paths?

Similarly, considerable attention is devoted to the German Ordoliberals, whom the author credits for having inspired the institutional arrangements behind the Eurozone. He considers their liberalism “different” because it “embraces the state and transforms it.” True, Ordoliberals paid considerable attention to the rules of the game and cherished competition. But Blyth doesn’t really explain how Ordoliberals have “modernized liberalism” and ends up noting that their economics “in many ways remain [sic] as classical as Smith and Hume.” In his account of Ordoliberalism Blyth relies exclusively on secondary sources.

The author assumes that the “Ordo” thinkers exterted great influence on how European institutions were shaped but, for all that he values the world of ideas, he is notably unwilling to explain how ideas may translate into politics.

He lambasts public choice for its purported cynicism. He writes that public choice

has become, as Daniel Dennett said about evolution in Darwin’s Dangerous Idea, that “universal acid” that eats away everything it touches by turning everything into a principal-agent/rent-seeking problem. Think that countries in a currency union might actually come to each other’s aide out of a sense of solidarity? Don’t be so naive. Moral hazard is ever present.

Like it or not, though, public choice provides a way to understand politics. Dreary as its tenets might look, they can explain political behavior in a way that probes beneath politicians’ words.

Ideas have consequences — but books, papers and conferences do not shape the world on their own. Blyth is, at best, ambiguous on the point. He cites as damning evidence, for example, Harvard economist Alberto Alesina delivering an updated version of his paper “Tales of Fiscal Adjustment” to an ECOFIN (the group that brings together EU members’ economic and finance ministers) meeting in Madrid in April 2010.

Let me confess that I would gladly enroll in Alberto Alesina’s fan club, but even I seriously doubt that Alesina’s eloquence was enough to convince these officials, by definition among the toughest political players in their respective countries, to adopt his desired policy strategy irrespective of any political calculations. The ideas of economists and political philosophers are indeed more powerful than is commonly understood — but perhaps, not quite this much.

Of course, pointing to Alesina as the power behind the throne is key to blaming, as Blyth does, “austerity in practice” on the set of ideas that he identifies with “austerity in theory.” The latter is associated with the empirically based work of economists such as Alesina, his coauthors Silvia Ardagna and Roberto Perotti, and also Francesco Giavazzi and Marco Pagano, who introduced the idea of an “expansionary fiscal contraction” in a 1990 paper precisely to discriminate between different kinds of fiscal consolidation.

This book criticizes the evidence they provide. It mentions competing evidence, and also points out that smaller economies such as Denmark or, more recently the REBLL economies (Romania, Estonia, Bulgaria, Latvia, Lithuania) can’t taken as role models. Yet inconsistently, Blyth considers the Eurozone to be an extraordinary experiment from which sounder conclusions can be drawn.

That “austerity” in some European countries has mostly been made of tax increases, with scant reliance on “expansionary” spending cuts, is something he seems stubbornly determined to overlook. I’m not sure higher taxes will get us out of recession and debt, either, but this does not justify only defining austerity that way.

When it comes to spending cuts, moreover, Blyth tends to assume that all of them are created equal — but they are not. Government spending can be cut by privatization; by the outsourcing of once-untouchable public services; by reducing waste and political intermediation; by cutting entitlements and freezing the wages of government employees, among other means. Be it noted, too, that most species of spending cuts could be better described as “slower increases in public spending” rather than outright cuts that “squeeze the life out of welfare states.”

On top of that, measures to allow for the “voluntary deflation” that Blyth equates with austerity may have a different origin than spending cuts. For example, European labor markets tend to be rather rigid, and thus some kind of liberalization would typically be needed to restore the proper functioning of the price mechanism.

Blyth shows some sympathy for the Austrian business cycle theory. He writes that “the broad sweep of an asset bubble’s inflation and deflation is well described by the basic Austrian model.” This is why “the Austrians came back in” at the beginning of the crisis: “Their writings from the 1930s seemed to describe the 2008 financial crisis perfectly.” He sees, therefore, what kind of demand a revival in Austrian theory may have answered.

However, he strongly disagrees with Austrian prescriptions. His intellectual bête noire is the idea of economic self-healing, which he associates with “liquidationism.” In his perspective, there is no use in enduring some pain, as it will not cure wounds.

We may do well here to remember here an earlier debate. Hayek (and Arnold Plant, Lionel Robbins, and others) and Keynes (and A.C. Pigou and others) had an exchange in the pages of the Times of London in 1932. It is worth mentioning a short passage from Hayek’s letter:

If the Government wish to help revival, the right way for them to proceed is, not to revert to their old habits of lavish expenditure, but to abolish those restrictions on trade and the free movement of capital…which are at present impeding even the beginning of recovery.

Freeing the movement of capital, then or, abolishing measures that hinder the reallocation of factors of production, now, is as much a political program as printing money. The free-market response to financial crises was never “don’t do anything” but always stressed how a fuller recovery could be brought about by removing barriers that hinder the workings of the price system. Such a response might be tremendously expensive, insofar as political consensus is concerned, in any democratic state.

This is what Blyth may argue. “Laissez faire,” he writes, was the policy of the Belle Epoque (in itself a statement that could be questioned) because the Belle Epoque was “not all that democratic.” But indeed, if something is too unpopular to be attempted, it is difficult to blame it for the consequences of the measures that were actually enacted.

The austerity that “has been applied with exceptional rigor during the ongoing European financial crisis” was not a homogeneous political approach — and in some countries very little was accomplished, especially when it came to the reduction of public spending that so terrifies Professor Blyth.

Unsurprisingly, then, he omits the case of Italy, which may be the best example of stagnant austerity he could hope for. The country is mired in a never-ending recession. And yet Italy provides no illustration of the evils of what were once called structural reforms and now go by the name of austerity. Italy enjoyed consistent primary surpluses for years, and in the crisis succeeded in cutting pension entitlements. At the same time, virtually no supply-side reforms have been undertaken since the crisis erupted. Italy continues to suffer from negative growth rates and appears unable to achieve fiscal consolidation. Whatever the cause of this situation, it is not certainly the reforms that never happened. Expansionary austerity hasn’t been tried here. Instead, a patchwork strategy of tax increases and closing fiscal loopholes was put in place. Once again Keynes would not have approved, and neither would Hayek.

In contrast, if we look at the latest data from the IMF, we may see that countries like Portugal, Ireland and even Greece have eventually reached positive growth again. Ireland’s GDP increased by 3.6 percent in 2014 and is forecast to increase by 3 percent in 2015. Greece grew by 0.6 percent in 2014 and is forecast to grow by 2.8 percent in 2015. Portugal grew by 0.9 percent this year, and Spain by 1.3 percent.

To be sure, none of these feeble signs of hope proves conclusively that austerity works. But they should alert us to the fact that austerity was not a uniform set of policies, nor a coherent set of ideas all of which “have been tried and failed.”

I won’t argue that austerity deserves a do-over. The point is rather that discussion of the history of ideas, and of public policy, must be precise to be useful. The very word “austerity” is used to drive precision and clarity away, as Professor Blyth unintentionally demonstrates in his book.

Alberto Mingardi is the Director General of the Italian free-market think tank, Istituto Bruno Leoni. He is also an Adjunct Fellow at the Cato Institute and a guest blogger at EconLog.

How Is Obamacare Doing?

Michael D. Tanner

You know that Obamacare is having a really bad year when Paul Krugman starts to concede that it “has hit a few rough patches lately.” To be sure, Krugman still believes that Obamacare is working, but even he must acknowledge that it is “an imperfect system” and that “the run of unexpectedly good news for Obamacare has come to an end.”

That’s one way to spin it.

For example, one of the few positive claims that Obamacare could make was that it had expanded coverage. And it is true that the number of Americans without insurance has fallen by about 12.6 million since 2010. However, a new study cited by Health Affairs suggests that the number of uninsured in 2010 was artificially inflated by the financial meltdown. Many people who lost their jobs (unemployment, you will recall, reached 9.6 percent) also lost their health insurance. While it is impossible to judge a counterfactual for certain, it is likely that many of those temporarily uninsured workers would have regained coverage as the unemployment rate dropped — even without Obamacare. The Health Affairs article shows that insurance coverage today is just 2.6 percentage points better than the pre-recession baseline. That means it is reasonable to presume that we’ve spent hundreds of billions of dollars and disrupted the entire health-care system to expand insurance coverage to surprisingly few people.

Any way you look at it, it’s not a pretty sight.

Essentially, the people signing up for an Obamacare plan are the people getting it for free. A recent report from the Robert Wood Johnson Foundation and the Urban Institute looking at enrollment so far found that almost all Americans with incomes of between 100 and 150 percent of the poverty line (who receive the biggest subsidy) sign up for exchange plans, but less than a third of those with incomes between 200 and 300 percent of the poverty line do, and just 13 percent of those with incomes above 300 percent of the poverty line (who receive little or no subsidy).

I guess even lousy health insurance is okay if it’s free. If you have to pay for it, however, you might think twice.

There’s bad news on the cost front as well. Obamacare has benefited from a general slowdown in the growth of health-care costs that started in 2003. Lower overall health-care costs have helped keep both subsidy costs and premiums lower than they would otherwise be. Americans have complained about rising premiums, but it could have been worse.

And it might yet be. Last year, national health-care expenditures rose by 5.8 percent (4.5 percent per capita), the fastest rate of increase since 2008. That’s certainly not good news for something called the Affordable Care Act. (It’s also very bad news for the federal budget deficit, since it means higher costs for Medicare and Medicaid.)

Insurance premiums are already headed higher. Exchange-based premiums are expected to rise by about 13 percent on a weighted-average basis, although some states are likely to see much higher increases — as much as 41 percent in Minnesota, for example, 39 percent in Alaska, 28 percent in Tennessee, and 28 percent in North Carolina. In more than a dozen states, rate hikes will exceed 20 percent. According to a report from McKinsey & Company, which tracks premiums, 38 percent of consumers will see an increase of greater than 10 percent in the net premium of the lowest-priced plan. Krugman calls this “disappointing.” Most Americans would call it predictable.

Another reason for rising health-care costs and insurance premiums is the growing lack of competition in the health-care marketplace. Anyone with a rudimentary understanding of economics realizes that increased competition is good for consumers. Providers must offer better quality or lower prices to increase their customer base. That’s why monopolies are generally a bad thing.

But Obamacare has spurred a rash of mergers and consolidations among health-care providers. The number of hospital mergers and acquisitions, for example, has roughly doubled since Obamacare went into operation, with almost 100 last year alone. This is more bad news for consumers. Two thorough reviews of the literature on the subject have found that hospital consolidation generally results in higher prices, with increases often exceeding 20 percent in the most concentrated markets.

Competition in the insurance market is disappearing as well. For instance, with the announcement by Maine’s Community Health Options this month that it was losing money, every single Obamacare co-op is now running in the red. More than half of them have been forced to shut their doors, leaving hundreds of thousands scrambling to find new insurance.

Even more ominously, the United Health group has announced that it may stop offering insurance on the Obamacare exchanges. In 2013, United Health had a 46 percent market share in Nevada and 30 percent in New York; it was one of the three biggest sellers of exchange-based plans in 29 states. It has been suggested that United Health’s threat is simply an attempt to extort continued bailouts from the federal government, but, if it does pull out, it will dramatically reduce choice in the exchanges.

Already, 13 states have three or fewer insurers offering plans on their exchanges. Five states have just two insurers offering plans, and Wyoming has just one. That’s a recipe for high prices and poor quality.

Also driving premium increases is the fact that those signing up for Obamacare policies have generally been older and sicker than the population at large. As a result, according to the left-leaning Urban Institute, minimum loss ratios (the ratio of payouts to premiums) in eleven states exceed 100 percent. That is, insurers are paying more in benefits than they charge for policies. Losing money on every transaction is not a good business model, but insurers were hoping for a federal bailout to offset those losses. Taxpayers would have had to pony up nearly $2.5 billion to cover just last year’s losses. (Total losses have exceeded $2.9 trillion, but successful insurers were hit with a $400 million assessment to cover a portion of the losses.) Unfortunately for the insurers, an amendment pushed by Senator Marco Rubio successfully blocked this assault on taxpayers, one of the few substantive victories against Obamacare so far.

So as the year draws to a close, health-care costs are rising, premiums are skyrocketing, choice and competition are shrinking, adverse selection is taking hold, and coverage is not nearly as good as hoped. If only someone had been able to predict these things …

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

President Obama’s Top Ten Constitutional Violations of 2015

Ilya Shapiro

As we approach the final year of Barack Obama’s presidency, there isn’t much that the president can do to change people’s opinion of him, for better or worse. His legacy, barring some extraordinary occurrence — including an extraterrestrial one, as the holiday advertising blitz for the new Independence Day movie reminds us — is baked into history.

Setting aside legislation and executive action (on which more imminently), we note that one of President Obama’s chief accomplishments has been to return the Constitution to a central place in our public discourse.

Unfortunately, the president fomented this upswing in civic interest not by talking up federalism or the separation of powers but by blatantly violating the strictures of our founding document. With his pen and his phone, and hearkening to Woodrow Wilson’s progressive view of government, he’s been taking out his frustrations with the checks and balances that inhibit his ability to “fundamentally transform” the country.

But a lack of congressional acquiescence hasn’t stopped this president. Even in his first term, the administration launched a “We Can’t Wait” initiative, with senior aide Dan Pfeiffer explaining that “when Congress won’t act, this president will.” And when the reelected President Obama announced his second-term economic plans, he explained that “I will not allow gridlock, or inaction, or willful indifference to get in our way.”

As the nation limps into Barack Obama’s lame-duck year, Americans have much to ponder regarding the example this president has set for his successor – and what powers that successor will abuse.

Accordingly, it hasn’t been difficult to point to constitutional abuses; the hard part is narrowing them down to a top-ten list. I did so in 2011 and 2013 (and once for Eric Holder when he resigned as attorney general), and now it’s time to do so again. Obamacare alone is a never-ending bonanza of lawlessness, so I’m limiting myself to five entries there.

In any case, herewith is my best stab at the list of President Obama’s top ten constitutional violations of the year (including actions taken in 2014 whose effects continued into 2015):

1. Obamacare’s Bay State bailout and Commonwealth kickback. To bail out Massachusetts’s malfunctioning health-care exchange, President Obama and Governor Deval Patrick (before he left office) arranged for more than 300,000 state residents to receive temporary Medicaid coverage without any verification of eligibility, and for the state to get the most generous taxpayer-funded premium subsidies in the entire country.

2. Further delays of Obamacare’s employer mandate. On February 10, 2014, the administration announced that it would again be delaying the employer mandate. This particular delay gives mid-sized employers (those with 50 to 100 full-time employees, a category that doesn’t exist in the text of the law) until 2016 to provide coverage and relaxed some of the requirements for larger employers.

3. Extending Obamacare subsidies to non-exchange plans. The administration found in February 2014 that some exchanges were having difficulty determining people’s eligibility. And so now, owing to this “exceptional circumstance,” exchanges can grant retroactive coverage based on the application date rather than on the date of acceptance. Also, those enrolled in plans outside the exchanges who were then determined to be eligible for coverage could receive the subsidies granted to those in an exchange plan.

4. Delay of Obamacare’s transparency requirements. In October 2014, the administration announced that it would not be enforcing the Obamacare’s “transparency in coverage” provisions, which require insurers to disclose data on enrollment, denied claims, and the costs to consumers for certain services.

5. Obamacare’s hidden tax on states. The Affordable Care Act imposed a health-insurance providers’ fee on insurance companies, for the purpose of taxing the windfall they were expected to receive from increased enrollment. In March 2015, states were notified that they too would be assessed this fee, because they use managed-care organizations to provide Medicaid services. Nothing in the ACA allows the federal government to force states to pay the fee, so the administration left it to the “private” Actuarial Standards Board to determine what makes a state’s payments to managed-care organizations “actuarially sound,” as required by law. The board then interpreted that “actuarially sound” standard to require states to pay the taxes assessed on their managed-care organizations. For Texas, that means an unanticipated annual budget hit of $120 million. This assessment raises serious coercion issues, as the states have no choice but to pay the tax or lose their federal Medicaid funds. Texas, joined by Kansas and Louisiana, sued the government in October.

6. Deferred Action for Parents of Americans. Speaking of Texas suing the government: After President Obama decided in November 2014 that he had been wrong 22 times in saying he couldn’t give temporary legal status to illegal immigrants, a majority of the states took him to court. The administration engineered DAPA in the wake of Congress’s rejection of the very policies the program sets forth, in violation of the Administrative Procedure Act, immigration law, and the Constitution’s take-care clause. A district court temporarily enjoined DAPA in February 2015, which action the Fifth Circuit twice affirmed. Stay tuned for the Supreme Court’s resolution this coming June.

7. EPA’s Clean Power Plan. In June 2014, the Environmental Protection Agency proposed a new rule for regulating power-plant emissions. Despite significant criticism, on August 3, 2015, it announced a final rule. It gives states until 2018 — it “encourages” September 2016 — to develop final plans to reduce carbon dioxide emissions, with mandatory compliance beginning in 2022. EPA cites Section 111 of the Clean Air Act as justification for the Clean Power Plan, but that section can’t give the agency such authority. Section 111(d) doesn’t permit the government to require states to regulate pollutants from existing sources when those pollutants are already being regulated under Section 112, as those deriving from coal-fired plants are.

8. EPA’s Clean Water Rule. On May 27, 2015, EPA announced its new Clean Water Rule, which aims to protect streams and wetlands from pollution. The agency insists that the rule doesn’t affect bodies of water not previously regulated, but several groups have sued on the basis that the rule’s definitions of regulated waters greatly exceed the EPA’s authority under the Clean Water Act to regulate “waters of the United States.” The Supreme Court has thrice addressed the meaning of that phrase, making clear that, for the EPA to have regulatory authority, a sufficient nexus must exist between the location regulated and “navigable waters.” The Clean Water Rule, however, purports to give EPA power far beyond waters that are “navigable” by any stretch of the definition of that word.

9. EPA’s cap-and-trade. On October 23, 2015, EPA issued a carbon-emissions cap-and-trade regulation, establishing for each state limits on carbon dioxide emission, with four interim steps on the way to the final goal. The focus is on cap-and-trade as the means to meet the limits. EPA says that this rule, too, is authorized by Section 111 of the Clean Air Act, but Congress considered and rejected such a cap-and-trade program in 2009. Far from being authorized by the Clean Air Act or from lying in some zone of statutory ambiguity, this new regulation contradicts the express will of Congress.

10. Net neutrality. In the works throughout the Obama presidency, the Open Internet Rule was adopted in February and went into effect on June 12, 2015. Although the Federal Communications Commission touts the regulation as a means to ensure that the Internet remains free of censorship, the rule impinges on the First Amendment rights of Internet-service providers, which are forbidden to prioritize any Internet traffic.

As I said, it was hard to narrow the list to ten examples of lawlessness. Among the other candidates for inclusion are the failure to prosecute the IRS scandal; the infringement, by the Federal Energy Regulatory Commission, on the exclusive authority of states to regulate the retail energy market (this measure is awaiting the Supreme Court’s ruling); the White House’s exemption of its Office of Administration from the Freedom of Information Act; the expansion of loan guarantees for clean-energy development; and, of course, other changes to Obamacare.

A major item that’s technically not a constitutional violation: The National Labor Relations Board has taken several steps, culminating in the Browning-Ferris ruling, to redefine “joint employer” such that franchisors can be held responsible for the labor-law violations of franchisees. That term “joint employer” does not appear in the National Labor Relations Act, and the board’s new rule goes beyond standard agency law to impose liability on companies with “indirect control” over their subsidiaries. This redefinition could destroy the franchise model as well as hasten the automation trend at service outlets.

And note that I’ve kept this discussion entirely to domestic affairs, in part because the scope of executive power over foreign affairs is less clearly defined. Otherwise, one could debate certain military engagements, the Iran nuclear (non-)treaty, and the swap for Bowe Bergdahl — not to mention whatever executive actions come out of the Paris climate talks.

In sum, as the nation limps into Barack Obama’s lame-duck year, Americans have much to ponder regarding the example this president has set for his successor — and what powers that successor will abuse. Hillary Clinton has already pledged to take executive action on gun control, campaign finance, immigration (because apparently President Obama is too timid here), corporate inversions, and who knows what else. And imagine what Donald Trump would do — or don’t, lest it spoil your holiday.

Happy New Year!

Ilya Shapiro is a senior fellow in constitutional studies at the Cato Institute and editor-in-chief of the Cato Supreme Court Review.

U.S. Secular Stagnation?

Steve H. Hanke

Stagnationists have been around for centuries. They have embraced many economic theories about what causes economic stagnation. That’s a situation in which total output, or output per capita, is constant, falling slightly, or rising sluggishly. Stagnation can also be characterized by a situation in which unemployment is chronic and growing.

Before we delve into the secular stagnation debate — a debate that has become a hot topic — a few words about current economic developments in the U.S. are in order. What was recently noticed was the Federal Reserve’s increase, for the first time in nearly a decade, of the fed funds interest rate by 0.25 percent. What went unnoticed, but was perhaps more important, was that the money supply, broadly measured by the Center for Financial Stability’s Divisia M4, jumped to a 4.6 percent year-over-year growth rate. This was the largest increase since May 2013.

Since changes in the money supply, broadly determined, cause changes in nominal GDP, which contain real and inflation components, we can anticipate a pick-up in nominal aggregate demand in the U.S. Indeed, if M4 keeps growing at its current rate, nominal aggregate demand, measured by final sales to domestic purchasers, will probably reach its long-run average annual rate of 4.8 percent by mid-2016 (see the accompanying chart). This rate of nominal aggregate demand growth was last reached in 2006, almost ten years ago. So, the current economic news from the U.S. is encouraging.

image

But what about the secular stagnation debate? The secular stagnation thesis in a Keynesian form was popularized by Harvard University economist Alvin Hansen. In his presidential address to the American Economic Association in 1938, he asserted that the U.S. was a mature economy that was stuck in a rut that it could not escape from. Hansen reasoned that technological innovations had come to an end; that the great American frontier (read: natural resources) was closed; and that population growth was stagnating. So, according to Hansen, investment opportunities would be scarce, and there would be nothing ahead except secular economic stagnation; unless, fiscal policy was used to boost investment via public works projects.

Hansen’s economics were taken apart and discredited by many non-Keynesian economists. But, the scholarly death blow was dealt by George Terborgh in his 1945 classic The Bogey of Economic Maturity. In the real world, talk of stagnation in the U.S. ended abruptly with the post-World War II boom.

Secular stagnation in the U.S. is nothing more than a phony rationale for more government waste.

It is worth noting that many Keynesians were caught up, at least temporarily, in the secular stagnation fad. Even Paul Samuelson, a leader of the Keynesians — thanks, in part, to his popular textbook — was temporarily entrapped. But, like Houdini, he miraculously escaped. That said, there were things in Economics that Samuelson probably wished he had thrown overboard, too. My favorite from the 13th edition (1989) is: “The Soviet economy is proof that contrary to what many sceptics had earlier believed, a socialist command economy can function and even thrive.”

Today, another Harvard University economist, Larry Summers, is beating the drums for secular stagnation. And Summers isn’t just any Harvard economist. He was formerly the president of Harvard and a U.S. Treasury Secretary. Summers, like Hansen before him, argues that the government must step up to the plate and invest more to fill the gap left by deficiencies in private investment, so that the economy can be pulled out of its stagnation rut. He is preaching the stagnation gospel beyond the ivy-covered halls at Harvard. And, he is picking up followers. For example, Canada’s new Prime Minister, Justin Trudeau, has latched onto Summers and the stagnation thesis. What better way to justify expanding government investments, or should we say white elephants?

For evidence to support Summers’ secular stagnation argument and his calls for more government investment, he points to the anemic private domestic capital expenditures in the U.S. As the accompanying chart shows, gross private domestic business investment, which does not include residential housing investment, has rebounded modestly since the great recession. But, most of this gross investment has been eaten up in the course of replacing capital that has been used up or became obsolete. Indeed, the private capital consumption allowances shown in the chart are huge. While these capital consumption figures are approximate, they are large enough to suggest that there is little left for net private business investment. This means that the total capital stock, after actually shrinking in 2009, has grown very little since then.

image

If we take a longer look, one starting in 1960, it appears that net private domestic investment as a percent of GDP has trended downward (see the accompanying chart). This is due to the fact that private capital consumption allowances as a percentage of GDP have trended upward. This shouldn’t surprise us. With the increasingly rapid rate of innovation, obsolescence and, therefore, capital consumption have increased. On the surface, these facts appear to give the stagnationists a reed to lean on. But, it’s a weak one.

image

To understand the troubling net investment picture, we must ask why businesses are so reluctant to invest. After all, it’s investment that fuels productivity and real economic growth. Are the stagnationists on to something? Have we really run out of attractive investment opportunities that require the government to step in and fill the void?

A recent book by Robert Higgs, Taking a Stand: Reflections on Life, Liberty, and the Economy, helps answer these questions. In 1997, Higgs first introduced the concept of “regime uncertainty” to explain the extraordinary duration of the Great Depression of the 1930s. Higgs’ regime uncertainty is, in short, uncertainty about the course of economic policy — the rules of the game concerning taxes and regulations, for example. These rules of the game affect the net benefits and free cash flows investors derived from their property. Indeed, the rules affect the security of their property rights. So, when the degree of regime uncertainty increases, investors’ risk-adjusted discount rates increase and their appetites for making investments diminish.

Since the Great Recession of 2009, regime uncertainty has been elevated. This has been measured by Scott R. Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago. Their “Economic Policy Uncertainty Index for the U.S.,” which was published by the Cato Institute in Washington, D.C., measures, in one index number, Higgs’ regime uncertainty. In addition, there is a mountain of other evidence that confirms the ratcheting up of regime uncertainty during the tenure of the George W. Bush and Barack Obama administrations. For example, a recent Pew Research Center survey finds that the percent of the public that trusts Washington, D.C. to do the right thing has fallen to all-time lows of around 20 percent.

So, contrary to the stagnationists’ assertions, the government is the problem, not the solution. Secular stagnation in the U.S. is just what it was when Alvin Hansen popularized it in the 1930s: Its bunk. Nothing more than a phony rationale for more government waste.

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.

Obama’s DOJ Fights Judge on Actual Justice Reform

Nat Hentoff

In a July 30 Huffington Post op-ed, U.S. Attorney General Loretta Lynch argued that “in order to truly make our communities safer, we must make sure that people who have served their time are able to fully and productively engage in our society … and lead law-abiding lives.”

Lynch echoed these sentiments last week at a Second Chance Act conference, speaking before providers who run programs to ease the reintegration of newly released prisoners back into their communities. Valerie Jarrett, Obama’s point person on criminal justice reform, was in the audience as Lynch announced the creation of a National Clean Slate Clearinghouse to assist local jurisdictions in helping former inmates to clean their criminal records.

But the lofty rhetoric of the attorney general on second chances for convicted felons doesn’t match the actual practice of Department of Justice (DOJ) prosecutors. Exhibit A is a brief filed by the DOJ earlier this year in the case of Jane Doe v. United States, which opposed a woman’s petition to have her criminal record sealed because her nonviolent insurance fraud conviction prevented her from keeping steady employment.

Judge John Gleeson’s lengthy memorandum in the case painted a poignant portrait of a single mother struggling to raise four children by herself on wages that did not even cover the family’s rent. His description of the plight of the working poor, hobbled by the disabilities imposed by ancient criminal convictions, was worthy of Dickens.

But it was not a work of fiction. Gleeson’s arguments were based on a painstaking review of the facts of Jane Doe’s case, peppered with references to scholarly articles and studies on the collateral consequences (penalties, disabilities and disadvantages) imposed upon people as a result of a criminal conviction.

“Doe’s criminal record has prevented her from working, paying taxes, and caring for her family, and it poses a constant threat to her ability to remain a law-abiding member of society,” Gleeson wrote in his decision ordering that Doe’s criminal conviction be expunged and sealed from public view. “It has forced her to rely on public assistance when she has the desire and the ability to work.”

Gleeson’s 16-page memorandum even quoted a 2011 letter from former Attorney General Eric Holder that asked states to eliminate the collateral consequences of criminal convictions that do nothing to increase public safety. Ironically, Holder’s arguments that “the public safety is better served when people with criminal convictions are able to participate as productive members of society by working and paying taxes” failed to persuade the federal prosecutor assigned to Doe’s case.

“Her case highlights the need to take a fresh look at policies that shut people out from the social, economic, and educational opportunities they desperately need in order to reenter society successfully,” Gleeson wrote. “There is an increasing awareness that continuing to marginalize people like Doe does much more harm than good to our communities.”

Gleeson swatted away the DOJ’s objections to Doe’s petition, arguing that “automatic refusals … to expunge convictions when the inability to find employment is the ‘only’ ground for the application have undervalued the critical role employment plays in re-entry. …”

“There is no justification for continuing to impose this disability on her,” the judge continued. “I sentenced her to five years of probation supervision, not to a lifetime of unemployment.”

On Oct. 19, a New York Times editorial praised Gleeson’s innovative ruling, noting that his bold decision to expunge and seal Doe’s criminal record in the face of DOJ opposition “was significant because there is no federal law that allows for expungement. … In fact it appears to be the first time that a federal judge has expunged a conviction for this reason. It should not be the last.”

The DOJ’s opposition to the expungement and sealing of Jane Doe’s criminal record reflects a schizophrenic disconnect between the public statements of Obama administration officials and the everyday actions of federal prosecutors throughout the U.S. The pattern has been for top White House and DOJ officials to pay lip service to justice reform in speeches, op-eds, letters and memorandum, while the prosecutors ignore these directives in the courtroom. Rather than opposing petitions filed in federal courts by people seeking expungements, and the sealing of criminal records, the DOJ should be encouraging the filing of these petitions.

Actual criminal justice reform will continue to elude Obama until he stops enabling a carceral culture of punitive prosecutions that evaluates success by win-loss records and the length of convictions obtained.

“We talk about numbers, but at the end of the process it’s not a number that’s getting the sentence,” Judge Gleeson told NPR in December 2014. “It’s a person, a person with a family from a community.” 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.

Christmas Works

Richard W. Rahn

Why do billions of people, Christians and non-Christians alike, look forward to Christmas? It is a holiday that makes almost all children, and most adults, happy. Globally, it has evolved into a non-threatening holiday that non-Christians can embrace with good cheer. Merchants of all faiths love it because it means more sales. And it is a joyful holiday that promotes peace and good will toward others.

There are, of course, those who dislike Christmas — severe sorts — like some atheistic socialists who hate anything to do with religion and commercial activity, certain fundamentalist Muslims, and those who are openly hostile to even the origins of Christianity. Some Christians are, and have been for the last two centuries, unhappy about the way Christmas is celebrated as it has moved away from its religious roots — perhaps without fully realizing that the secular Christmas celebrations around the globe, for the most part, also carry the indirect message of helping others, along with peaceful and happy coexistence.

Many economists, including myself, have studied the differences that religion and culture play in economic success. A simple example is the concept of interest. Economic progress depends on capital investment. Capital comes from saving and investment, and a way to encourage more saving is to pay interest. Historically, both Islam and Christianity had prohibitions on paying interest. Up to the time of the Protestant Reformation, the Jews became the moneylenders because their religion did not prohibit the payment of interest. John Calvin and other Reformation leaders changed the rules so that their Christian followers were allowed to charge interest on loans, which, like the Jews, gave them a competitive advantage. The popes, seeing the results, soon changed the rules for Catholics, also allowing them to charge interest. The fact that Islam failed to change its rules to the now global standard has been one of its many growth inhibitors.

Peace and prosperity reign where there is tolerance.

Religions that focus on the hereafter, rather than on individual self-betterment and accomplishment, partially deny their adherents the ability to improve their positions. The Protestant Reformation and then the Enlightenment in Europe, known as the Age of Reason, which stretched roughly from the mid-17th through the 18th century, gave us the modern world. The old order of monarchs and the political power of the Catholic Church were destroyed. The ideas of individual freedom and legal equality for all became widespread, as well as separation of church and state. It provided the foundation for a scientific, economic, and political revolution, of which the creation of the United States became the premier result of the new thinking. There was much diversity in Enlightenment thought, and the founding fathers of the United States were much more influenced (thankfully) by the Scottish Enlightenment than they were by the French or German Enlightenments.

Many of the ideas, culture, and institutions of the Enlightenment were carried, particularly, by the British to their colonies around the world — where they were picked up by the locals. The now very prosperous states in Asia trace their political and economic reforms back to the Enlightenment as spread by Europeans. These ideas included the rule of law over that of the rule by men, the protection of private property (including intellectual property), and free markets — all of which were critical in creating for the first time in human history sustained increases in the well-being of most.

The modern Christmas celebration (which is only about 200 years old in the United States) not only evolved from celebrating the birth of Jesus, but from incorporating pagan winter festivals, some stemming from Roman times and including the German and Scandinavian use of the Yule log and Christmas tree. Many nations which only have very small Christian populations, like Japan, have added their unique twists to the Christmas celebration.

Much of the present-day tension in the world stems from the fact that Islam never had a reformation and enlightenment. There is no room for questioning and tolerance toward other religions among large segments of the Muslim population. Where most Christian majority countries are now accepting and tolerant towards other faiths, virtually all Muslim majority countries treat other faiths less well, and some engage in outright oppression.

The result — because of the ability to question scientific, religious, and political authority — the overwhelming number of advances in science, medicine, engineering, business, legal and financial systems have occurred in non-Muslim majority countries since the time of the Enlightenment. There is little doubt that human life spans and material well-being would be much less if Islam were the religion of the world.

A world where Christmas could be legally celebrated everywhere, by both believers and non-believers, is also likely to be a world of tolerance where both peace and prosperity reign.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.