Top 10 Ways Obama Violated the Constitution during His Presidency

Ilya Shapiro

The Obama administration has been the most lawless in U.S. history. I don’t mean that in the Nixonian sense of personal corruption, whereby the president is personally above the law, although the idea that Barack Obama’s tenure has been ethically pure is laughable.

No, my accusation rests on the 44th president’s seeing himself as professionally above the law, ignoring the executive branch’s legal limits and disrespecting constitutional bounds like federalism and the separation of powers.

But don’t just take it from me. Liberal law professor Garrett Epps (a professional acquaintance) admits that “even for those like me who admire Barack Obama, the constitutional record is disturbingly mixed. Obama leaves the Constitution weaker than at the beginning of his terms.” Epps labels Obama’s posture to be one of “aggressive compliance,” torturing statutory language as far as it can go in order to avoid constitutional claims.

Obama Only Furthered the Imperial Presidency

He points first to the 2011 Libya intervention. It involved neither a congressional authorization of the use of force, nor compliance with the 1973 War Powers Act, which requires at least congressional notification of troop commitments and affirmative permission after 60 days. Every president since the WPA’s enactment has claimed that it’s an unconstitutional limit on inherent executive authority over military power. Obama instead claimed that hundreds of missile strikes and dozens of air missions didn’t trigger the WPA because they only constituted “kinetic military action” rather than war.

It just doesn’t pass the smell test. Neither does at least some of the National Security Agency’s robust program of domestic surveillance, about which Director of National Intelligence James Clapper has lied to Congress. And then there’s the aggressive posture towards and persecution of journalists. It’s as if the goal was to show Donald Trump how it’s done.

The Obama administration has been the most lawless in U.S. history. Here are just a few examples to prove it.

This is all a world away from candidate Obama, who said this on the campaign trail in 2008: “The biggest problems that we’re facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all. And that’s what I intend to reverse when I’m president.” As George Mason law professor David Bernstein quipped, foolish voters thought that Obama was taking issue with the imperial presidency, when really he was only complaining that the wrong man occupied the throne.

How Obama Ignored Constitutional Checks and Balances

Indeed, once he lost the congressional majority that allowed him to sign breathtakingly unconstitutional legislation like Obamacare and Dodd-Frank, Obama began using his pen in other ways. Hearkening to Woodrow Wilson’s progressive view of the administrative state, President Obama steadily took out his frustrations with the checks and balances that inhibited his ability to “fundamentally transform” the country.

A lack of congressional acquiescence didn’t stop this president. Even in Obama’s 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 said that “I will not allow gridlock, or inaction, or willful indifference to get in our way.”

But no matter how much you hold it up to the light—and no matter what textual penumbras you induce—there’s no “gridlock clause” in the Constitution by which the president’s power increases to the extent Congress doesn’t support him. Indeed, gridlock is a feature of our system, not a bug, meant to check executive abuse and majoritarian populism both.

As we mark another peaceful transfer of power, let’s pause to note the 10 most significant ways in which Barack Obama violated the Constitution, in rough chronological order.

1. The Chrysler Bailout

Building on the Bush administration’s illegal use of TARP funds to bail out the auto industry, the Obama administration in 2009 bullied Chrysler’s secured creditors—who were entitled to “absolute priority”—into accepting 30 cents on the dollar, while junior creditors such as labor unions received much more. This subversion of creditor rights violates not just bankruptcy law, but also the Constitution’s Takings and Due Process Clauses.

This blatant crony capitalism—government-directed industrial policy to help political insiders—discourages investors and generally undermines confidence in American rule of law. The Supreme Court ultimately vacated the Second Circuit ruling that allowed this farce to proceed; Chrysler’s creditors are still out of luck, but there’s no legal precedent.

2. Obamacare Implementation

One can, and many have, written whole articles about how the Affordable Care Act is such an affront to the rule of law that its individual mandate and Medicaid coercion—both of which Chief Justice John Roberts rewrote—are just the tip of the lawless iceberg. On implementation, we can’t blame Congress or courts. Here’s a sample:

  • The Labor Department announced in February 2013 that it was delaying for a year the part of the law that limits how much people have to spend on their own insurance. This may have been sensible, but changing a law requires actual legislation.
  • Later that year, the administration announced via blogpost on the eve of the July 4 holiday that it was delaying the requirement that employers of at least 50 people provide complying insurance or pay a fine. This time it cited statutory authority, but the cited provisions allow the delay of reporting requirements, not the mandate itself.
  • The famous pledge that “if you like your plan, you can keep it” backfired when insurers started cancelling millions of plans that didn’t comply with Obamacare. So Obama called a press conference to proclaim that people could continue buying non-complying plans for another year—despite the ACA’s language to the contrary. He then refused to consider a House-passed bill that would’ve made this action legal.
  • A little-known part of Obamacare requires congressional staff to get insurance from health exchanges, rather than a taxpayer-funded program. Obama directed the Office of Personnel Management to interpret the law to maintain the generous benefits.
  • Obamacare grants tax credits to people whose employers don’t provide coverage if they buy a plan “through an Exchange established by the State”—and then fines employers for each employee receiving such a subsidy. No tax credits are authorized for residents of states where the exchanges are established by the federal government, as an incentive for states to create exchanges themselves. Because so few (16) states did, however, the IRS issued a rule allowing subsidies (and fines) for plans coming from “a State Exchange, regional Exchange, subsidiary Exchange, and federally-facilitated Exchange.” Yes, we can also blame the Supreme Court for upholding this.
  • The Department of Health and Human Services granted more than 2,000 waivers to employers seeking relief from Obamacare’s regulations. Nearly 20 percent of them went to gourmet restaurants and other businesses in former Speaker Nancy Pelosi’s San Francisco district. Nevada, home to former Senate Majority Leader Harry Reid, got a blanket waiver, while GOP-controlled states like Indiana and Louisiana were denied. Beyond political favoritism, such dispensations violate a host of constitutional and administrative law provisions like equal protection and the “intelligible principle” needed for congressional delegation of authority to cabinet agencies.
  • HHS also continues paying insurance companies to compensate them for losses caused by Obamacare’s ignorance of basic economics. Alas, Congress never appropriated these funds, so the House of Representatives is suing the administration and won in the district court. Now on appeal, House v. Burwell is stayed until the D.C. Circuit hears from the incoming Trump administration. (Full disclosure: My wife joined the House general counsel’s office last month and is litigating the appeal.)

3. Political Profiling by the IRS

After seeing a rise in the number of applications for tax-exempt status, the IRS in 2010 compiled a “be on the lookout” (“BOLO”) list to identify organizations engaged in political activities. The list included words such as “Tea Party,” “Patriots,” and “Israel”; subjects such as government spending, debt, or taxes; and activities such as criticizing the government, educating about the Constitution, or challenging Obamacare. The targeting continued through May 2013, with no consequences other than Lois Lerner, the chief of the exempt-organizations unit, being held in contempt of Congress—and then being allowed to peacefully retire despite erased records and other cover-ups. Okay, this one qualifies as Nixonian.

4. Recess Appointments

In January 2012, President Obama appointed three members of the National Labor Relations Board, as well as the head of the Consumer Financial Protection Bureau, during what he considered to be a Senate recess. But the Senate was still holding “pro forma” sessions every three days—a technique developed by Sen. Harry Reid to thwart Bush recess appointments. (Meanwhile, the Dodd-Frank Act, which created the CFPB, provides that authority remains with the Treasury Secretary until a director is “confirmed by the Senate.”) In 2014, Supreme Court unanimously ruled that the NLRB appointments were illegal, while last year the D.C. Circuit found the CFPB’s structure to be unconstitutional. 

5. DACA and DAPA

Congress has shamelessly failed to pass any sort of immigration reform, including for the most sympathetic victims of the current non-system, young people who were brought into the country illegally as children. Nonetheless, during his 2012 reelection campaign, President Obama directed the Department of Homeland Security to issue work and residence permits (Deferred Action to Childhood Arrivals) to the so-called Dreamers.

Then, after the 2014 midterms, the president decided that he had been wrong 22 times in saying he couldn’t give temporary legal status to illegal immigrants. The administration engineered this Deferred Action for Parents of Americans in the wake of Congress’s rejection of the same policies, in violation of the Administrative Procedure Act, immigration law, and the Constitution’s Take Care Clause. A district court enjoined DAPA in February 2015, which action the Fifth Circuit twice affirmed, as did the Supreme Court by a 4-4 vote.

6. Assault On Free Speech and Due Process On College Campuses

In 2013 the Department of Education’s Office of Civil Rights, in conjunction with the Justice Department, sent the University of Montana a letter that became a national “blueprint” for tackling sexual harassment. The letter urged a crackdown on “unwelcome” speech and requires complaints to be heard in quasi-judicial procedures that deny legal representation, encourage punishment before trial, and convict based on a mere “more likely than not” standard.

As noted civil libertarian Harvey Silverglate explained this week, the administration construed Title IX—the federal law barring sex discrimination by federally funded schools—as a mandate to punish students and faculty accused of sexual misconduct using procedures that make it extraordinarily difficult for innocent people to defend themselves.

7. The Clean Power Plan

In June 2014, the Environmental Protection Agency proposed a new rule for regulating power-plant emissions. Despite significant criticism, it finalized the rule in August 2015, giving states until 2018 to develop plans to reduce carbon dioxide emissions, with mandatory compliance beginning in 2022.

The EPA cites Section 111 of the Clean Air Act as justification for this Clean Power Plan, but that section can’t give the agency such authority. Section 111 doesn’t permit the government to require states to regulate pollutants from existing sources when those pollutants are already being regulated under Section 112, like those deriving from coal-fired plants. The late Justice Scalia’s last public act was to join an order staying the rule pending further litigation (or, as is likely, a rescinding of the rule).

8. The WOTUS Rule

In May 2015, the 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” (WOTUS).

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 word’s definition. Litigation is ongoing.

9. Net Neutrality

In the works throughout the Obama presidency, the Open Internet Rule was adopted in February 2015 and went into effect that June, forbidding internet-service providers (ISPs) from prioritizing different kinds of internet traffic.

The real issue, beyond this “net neutrality,” is the Federal Communications Commission’s manufacture of authority to regulate the internet despite clear congressional instruction that the internet remain unregulated. In 2014, courts struck down the FCC’s 2010 self-aggrandizement under the 1934 Communications Act and 1996 Telecommunications Act, so the agency doubled down by writing a new rule that equated the internet with telephony.

That creative interpretation allowed the FCC to claim the sweeping discretion it had used to manage the AT&T phone monopoly throughout the 20th century. Moreover, while the FCC touts the regulation as ensuring that the internet remains free of censorship, the rule impinges on the First Amendment rights of internet-service providers.

10. EPA’s Cap-And-Trade

In October 2015, the 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. 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 lying in some zone of statutory ambiguity, this massive new regulatory scheme contradicts the express will of Congress.

That’s Only The Beginning

It was obviously difficult to narrow that enumeration to just 10—and I cheated by putting all the Obamacare shenanigans under one item. Some may complain that I should’ve prioritized other kinds of executive actions, whether regarding guns or transgender bathroom access or electricity regulation. Others may prefer to invoke President Obama’s decision not to subject the Iran nuclear treaty to a Senate vote—aided by Foreign Relations Committee Chairman Bob Corker’s naïve complicity—or engaging in the Bowe Bergdahl prisoner swap without notifying Congress. Sadly, the possibilities for this parlor game are nearly endless.

Then, of course, there’s the administration’s abysmal performance before the Supreme Court, where its win percentage hovers around 45 percent (as against a historical norm of 60-70 percent). The Justice Department has even suffered nearly 50 unanimous losses, half again as many as under George W. Bush or Bill Clinton. These cases have come in such disparate areas as criminal procedure, religious liberty, property rights, immigration, securities regulation, tax law, and the separation of powers. They have nothing in common other than incredible assertions of federal power. The government’s arguments across this wide variety of cases would essentially allow the executive branch to do whatever it wants without constitutional restraint.

Are these really the kind of powers President Obama and his progressive enablers would want their worst enemies to have? As my colleague Gene Healy writes in the latest issue of Reason, “the very idea of ‘President Trump’ seemed like a thought experiment a libertarian might have invented to get a liberal friend to focus on the dangers of concentrated power. Now it’s an experiment we’re going to run in real life, starting January 20, 2017.”

If you live by executive action, you die by executive action—whether that means reversing President Obama’s policies or pocketing his constitutional excesses for future use.

Ilya Shapiro is a senior contributor to The Federalist. He is a senior fellow in Constitutional Studies at the Cato Institute and Editor-in-Chief of the Cato Supreme Court Review.

If UK Didn’t Leave the Single Market, What Was the Point of Brexit?

Ryan Bourne

United Kingdom Prime Minister Theresa May could not have been clearer in her major speech on Brexit Tuesday — Britain is leaving the EU single market.

Nobody who understood the implications of the Brexit vote was surprised.

The EU single market is really a “single regulatory zone”, combining free movement of workers, capital, goods and services with harmonized rules and restrictions on standards, employment, the environment and more.

The development of the market has centralized economic power under the EU and this loss of sovereignty is exactly what Britons rankled against in the June Brexit vote.

Through Brexit, the British believed they were voting to “take back control”. Continued single market membership (a la Norway or Iceland) was therefore a political non-starter.

Whether you believe exiting the single market will be good for Britain in the long term really hinges on whether you think British institutions would tend to regulate economic policy toward a pro-growth agenda better than EU ones.

By remaining in the single market, Britain would be bound by regulations emanating from Brussels with no formal vote on them.

Laws would be subject to the jurisdiction of the European Court of Justice. British taxpayers would still make significant net contributions to the EU budget and the U.K. would not have control over EU migration.

What would have been the actual point of the referendum had they stayed in the single market?

Realizing the single market was off the table, May instead made the case for a more detached future relationship, as she outlined her ambitions for the outcome of the U.K.’s “EU exit” negotiations.

Her vision combines political realism with the desire to make the most of Brexit economic opportunities.

She desires a comprehensive free trade agreement with the EU, while simultaneously pushing for more free trade deals with the rest of the world.

She wants to exit the EU’s common external tariff, but to agree to a customs deal to minimize the cost of administrative product checks at borders.

She wants to repatriate control of economic and migration policy, but with transition arrangements and guarantees for existing EU workers in the U.K.

Ruling out the single market option will annoy many who saw it as a way to effectively keep the U.K. inside the EU.

During the referendum campaign, the U.K. Treasury estimated a significant long-term economic cost from leaving it — up to 6 percent of GDP.

The logic behind its calculation was that a large, integrated, barrier-free trade zone enables economic specialization, which boosts productivity. Leaving this “free market” was therefore seen as an act of economic self-harm.

The theory is credible, but these supposed huge gains from membership looked less so. In fact, the study was biased.

The European Commission itself believes the single market has only raised EU-wide GDP by 2.1 percent. For the U.K., this would be less significant.

The U.K. trades less with other EU members than the EU average and specializes in services, where the single market is far from complete.

In the future, trade trends also mean U.K.-EU trade will become relatively less important. Yet, single market membership would see 100 percent of businesses under the EU’s regulatory ratchet.

Just as opportunities to sell more insurance, banking and other services expand to emerging markets, London would have been regulated by an EU (and voted against by a more closely integrated Eurozone block) often hostile to “Anglo-Saxon” finance.

This would hinder its ability to sign trade deals too — Britain could not credibly offer opening up its service sectors to the U.S. and others without regulating these industries itself.

It is not just finance where EU regulation could be harmful, however.

In areas such as the sharing economy, energy, the environment, clinical trials, agriculture and more, single-market membership would have resulted in regulation ceded to an often slow and bureaucratic EU.

The Treasury’s report ignored this and failed to model any scenario where the U.K. saw gains through better independent regulation, better use of public funds and new trade deals with non-EU countries.

In the short term, businesses are looking for a smooth transition to Brexit. This is something the U.K. government is seeking to provide.

Its proposed “Great Repeal Bill”, despite its name, will actually transcribe all existing EU law and regulation onto British statutes, meaning there’s no cliff-edge in regulatory compliance for business.

As a result, at the point of exit, U.K. firms will still be fully compliant with EU rules. Leaving the single market merely allows for the updating and amending of regulations according to Britain’s own wants and needs going forward.

Single market exit, like Brexit itself, is therefore full of long-term risks and opportunities because it is really a repatriation of policy levers.

Whether you believe exiting the single market will be good for Britain in the long term really hinges on whether you think British institutions would tend to regulate economic policy toward a pro-growth agenda better than EU ones.  

In June the British people gave their clear answer. Now Theresa May has too.

Ryan Bourne occupies the R. Evan Scharf chair at the Cato Institute and was a founding member of Economists for Brexit.

End To “Wet Feet, Dry Feet” Is Good for Communist Cuba, Bad for Freedom.

Alex Nowrasteh

President Obama just ended a decades old policy that allowed escapees from Communist Cuba to enter the United States without a visa. Known as “wet feet, dry feet,” it allowed Cubans who showed up at America’s borders to enter lawfully and earn an expedited green card. Cuba’s brutal Communist dictatorship, proximity to the United States, and history were the reasons for this relative openness. Now he sends a clear message to Cubans seeking freedom: stay away.

And everybody thought Donald Trump was going to be the anti-immigrant president.

Cubans can still apply for asylum but that backlogged system is a bureaucratic mess. Asylum seekers who filed in August 2011 in Southern California didn’t get a scheduled interview until November 2016. D.C. immigration attorney Ava Benach told me that this will annually add tens of thousands of asylum-deserving Cubans to that crowded system. She hastened to add that ending “wet feet, dry feet” is a big step toward “achieving the Cuban government’s goal of stopping Cuban emigration.”

And everybody thought Donald Trump was going to be the anti-immigrant president.

The one bright spot is that Obama’s action did not repeal the Cuban Adjustment Act which still allows Cubans to get a green card after being present in the United States for one year. Thus, many who enter seeking asylum will still be able to get a green card until the law is changed by Congress.

But the message sent by this policy shift is clear.

Virtually all of the people with Cuban ancestry who are free and prosperous today either left Cuba or are descended from those who did. Freedom House’s 2016 report ranks Cuba as the only “not free” country in the Western hemisphere with the lowest possible scores for political rights. In 2016, almost 10,000 Cubans were arbitrarily arrested while there is no free speech or independent media. About 176,000 Cubans recognized those problems and came to the United States during Obama’s Presidency — 60,000 in 2016. Almost ten percent of all Cuba born people in the world live in the United States.

According to the 2015 American Community Survey, there are 2.1 million people with Cuban ancestry in the United States who enjoy civil, economic, and political rights that are denied in Cuba. The economic results of that freedom have been spectacular for Cubans and for Americans. According to surveys, average annual income in Cuba is $300. American workers of Cuban descent earned about 171 times as much in 2015, with average earnings of $51,329. The 737,000 full time Cuban-American workers earned more than 11 times as much as the 11.2 million Cubans still on that island. Cuban-American workers even earn more than native-born Americans.

Cuban-Americans have a proud tradition of entrepreneurship that is partly responsible for reversing Miami’s 1970s urban decline. In the 1980s, about half of the 40 largest Hispanic-owned industrial and commercial firms in the country were in Miami even though only 5 percent of America’s Spanish-origin population resided there. To this day, Cuban-Americans are still 5 percent more entrepreneurial than native-born Americans.

Even the supposed worst outcome of Cuban immigration wasn’t so bad. Recent research by Harvard economist George Borjas, himself a Cuban immigrant, showed that the 1980 Mariel Boatlift initially lowered the wages of native dropouts in Miami. Follow-up research showed that wages for Americans with only a high school degree rose and likely compensated for the decline in dropout wages. Borjas’ even shows that the wages of Miami dropouts recovered by the late 1980s.

The “wet feet, dry feet” policy had problems. Cubans had immediate access to welfare benefits that other immigrants didn’t. Miami Representative Carlos Curbelo (R-FL) introduced a bill last year to end those special benefits which the CBO found would save taxpayers about $250 million a year. Rep. Curbelo’s bill was a fine way of reducing the bad effects of Cuban immigration.

Diverting Cubans into the backlogged asylum system and letting the Cuban Adjustment Act grant them green cards in due course is not the end of the world for Cubans. But ending “wet foot, dry foot” makes the process less predictable, more intimidating, and can result in some Cuban asylum seekers waiting in detention facilities or treated as criminals for fleeing Communism. Now they must make an asylum claim instead of merely being Cuban — a status we all know means they have a well-founded fear of persecution. Worse, some may be deterred from seeking their freedom by the imposing bureaucratic barriers of the asylum system.

America’s open door to Cuba was an exception based on the Cuban government’s breathtaking inhumanity and brutality. In an unfair world populated by evil governments such as Cuba’s, “wet feet, dry feet” was an unfair policy that righted some wrong and diminished suffering while benefiting the United States. It’s a shame that one of President Obama’s last moves in the Oval Office dims our beacon of liberty and makes it more difficult for Cubans to seek their freedom.

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

The Right Way to Cut Wasteful Defense Spending

Christopher A. Preble

President-elect Donald Trump has made cutting wasteful defense spending a top priority, specifically targeting federal defense contracts. He called defense industry leaders to the proverbial woodshed to protest costly projects, including threatening on Twitter to cancel Lockheed Martin’s F-35 Joint Strike Fighter and Boeing’s contract to build two new Air Force Ones.

These tweets send a strong message, and both Boeing and Lockheed have said they intend to work with Trump to reduce program costs. But significantly reducing bloat in the defense budget will require much more than tweets.

It’s a huge challenge, but Trump can draw on a set of policy proposals that enjoy broad, bipartisan support within the think tank community, including two letters signed by respected scholars from 16 institutions. They include eliminating excess overhead, modernizing the military’s pay and benefits system and overhauling its weapons acquisitions process.

Such reforms will require support from Congress, no guarantee since most proposed changes target entrenched interests. But in just the few months since his election, Trump has shown how to use the bully pulpit against major defense contractors. If he uses the same tactics against wavering lawmakers, he could create a robust coalition that finally trims waste in the defense budget and modernizes the military.

Instead of threatening defense contractors on Twitter, Trump should adopt a comprehensive plan to cut bloat at the Pentagon. Here’s how.

Trump made a smart choice in selecting South Carolina Congressman Mick Mulvaney to be the next director of the Office of Management and Budget. From that position, Mulvaney could impose the sort of budget discipline that he could only advocate as a member of Congress. Mulvaney knows about waste at DOD, and railed against the Overseas Contingency Operations slush fund that Congress created to evade the budget caps set by the bipartisan Budget Control Act. He should also be skeptical of claims that the Pentagon needs bigger budgets to fulfill current missions. After all, American taxpayers spent over $600 billion on the military in 2016, more than was spent, in inflation-adjusted dollars, during a typical year during the Cold War.

What would a smart plan to eliminate wasteful and unnecessary military spending look like? A number of think tanks, including Cato, where I work, have put forward proposals, and they have a few consistent recommendations. First, Congress should close unneeded bases. Despite broad support from the most senior military officers for such a move, lawmakers have refused to allow it. Members focus on parochial concerns, such as jobs lost, and the negative economic impact on surrounding communities. They should consider the many cases in which former military facilities were converted to more productive uses, such as Philadelphia’s Navy Yard or the Brunswick Naval Air Station in Maine, not to mention the national interest in a more effective defense.

Base closures will help the Pentagon tackle another vexing problem: A civilian workforce that has grown too large relative to the number of men and women serving on active duty. The Pentagon now employs some 60 civilians for every 100 uniformed personnel, the highest ratio ever. And the civilian contractor workforce is nearly as large and obscures the extent of the Pentagon’s back-office bloat.

Reforming the military’s pay and benefits system would also reap long-term savings and bring a woefully out-of-date system into the 21st century. The Military Compensation and Retirement Modernization Commission noted that today’s young people have different expectations than earlier generations accustomed to long-term employment and private-sector pensions. The commission focused mostly on maximizing value for the troops, but the Trump administration should also take exploding costs — up 76 percent per service member in inflation-adjusted dollars from 1998 to 2014 –into account when it crafts an alternative.

Lastly, if reforming procurement turns out to be Trump’s hobby horse, he shouldn’t expect a Congress full of yes men. Very few people dispute that the Pentagon spends a lot of money on hardware, but everyone disagrees on how to get more bang for the buck. Congress often forces the Pentagon to buy weapon systems it doesn’t need or want. Then, on top of that, the process used to determine the requirements for new weapons, and the regulations imposed on delivering them, leads to rampant cost growth. Trump should look into easing regulations and, as his tweets imply, demand strict accountability on costs.

Tackling waste when budgets are rising is hard and may be impossible. This is true of any enterprise, but it’s especially true at the Pentagon, which doesn’t have to balance — or even audit — its books. For all his talk of streamlining military spending and despite his threats to defense industry executives to do better, Trump will not dislodge the status quo through bluster alone.

If he is truly committed to improving the Pentagon’s business practices, he should embrace necessary but politically difficult reforms and reconsider his pledge to boost Pentagon spending. These actions will be far more effective at driving change than his many tweets could be.

Christopher Preble is the vice president for defense and foreign-policy studies at the Cato Institute.

Liberals and Libertarians Should Unite to Block Trump’s Extremism

Brink Lindsey

Ten years ago, in an article for the New Republic, I proposed that liberal-minded people across the political spectrum should unite to create a “liberaltarian” alternative to the populist right of the George W. Bush years. Since the governing conservatism of that time no longer reflected any serious attachment to libertarian principles, it was time to explore the possibility of a new kind of center-left infused with libertarian insights.

Building on their shared cosmopolitan outlook and deep belief in individual autonomy, liberals and libertarians could develop a new public philosophy that highlighted their extensive common ground while compromising constructively on differences over fiscal and regulatory policy. The piece concluded with the following lines: “Can liberals and libertarians really learn to work together? I don’t know, but their alternative is most probably to languish separately.”

Back then the argument fell on deaf ears. Liberals thought they were strong enough to go it alone and get what they want, while libertarians still feared the left enough to convince themselves that the populist right remained their friend. And now here we are: A right-wing populist demagogue has swept into the White House, and the Republican Party he seeks to remake in his image (and which seems none too resistant to the makeover) controls both houses of Congress.

With the threat of war crimes and trade wars abroad combined with border walls, religious registries, and crony capitalism at home, liberals and libertarians are indeed languishing separately, although putting it that way today sounds absurdly understated. Not only are they out of power, but their most fundamental political commitments — to liberal democracy and the rule of law —are now threatened in a way none of us could have imagined possible just a few years ago.

In this dark and menacing environment, the liberaltarian idea is relevant again — with an entirely new sense of urgency. The first, immediate task is to forge a liberaltarian alliance that can defend American democracy from the depredations of Donald Trump. This ad hoc project requires no rethinking or blurring of existing ideological boundaries. Rather, it asks only that committed small-d democrats from the left, right, and center put aside their usual differences to stand together for basic liberal norms and institutions.

Over the longer term, though, there remains a pressing need for a new and vital synthesis of liberal and libertarian ideas. The antidote to today’s populism and us-versus-them tribalism is a policy vision that focuses on what unites us — in particular, our common interest in reviving growth and brighter economic prospects for all, which is not going to be accomplished either by Trump’s protectionism or by Bernie Sanders’s socialism.

The great stagnation of the 21st century, a product of slowing growth and high inequality, has been a breeding ground for frustrations and resentments and has sapped faith in the legitimacy of our governing institutions — making us vulnerable to a populist demagogue who proclaims, “I alone can fix it.” But there is only one viable path back to dynamism and broadly shared prosperity, and its outlines are distinctly liberaltarian.

In this hour of crisis for liberalism, not only in this country but around the world, intellectual flexibility is necessary to develop a new, revitalized conception of the liberal ideal.

Republican commitment to libertarianism waned in the Bush years

I made my original liberaltarian pitch back in late 2006. In those waning years of the Bush administration, I argued that the old Goldwater-Reagan brand of conservative “fusionism” — the alliance of free-market libertarianism and cultural traditionalism — was washed up. Rote rhetorical appeals to limited government and the free market remained, but the substance was exhausted. Social Security privatization was to have been the administration’s signature libertarian initiative, but it fizzled once it became clear that even Republican voters had no stomach for it. Virtually the only holdover from the Reagan days was support for tax cuts, now divorced from any accompanying concern for spending restraint — a caricature of free-market economics.

All the energy and passion in the movement had shifted to nationalism, culture-war agitation, and a proudly anti-intellectual populism — think hostility to immigration, opposition to same-sex marriage, the Terri Schiavo affair, and the ascendance of strident, divisive voices like Rush Limbaugh and Ann Coulter.

Libertarian ideas, and libertarian-leaning voters, were thus in need of a new home. Meanwhile, liberalism needed intellectual rejuvenation. At the time, the last two Democratic presidents had won office only by running away from the “L-word.” Liberalism had given ground to the right on a host of issues (tax rates, national security, crime, welfare); it was unable to advance social democracy when it tried (see Hillarycare); and it was resolute and effective only in defending past gains (Roe v. Wade, Social Security, and Medicare). As an alternative to that dreary status quo, I proposed a new liberal fusionism — a liberalism with libertarian characteristics.

Regarding social issues and foreign affairs, the hybrid I had in mind would maintain the commitments of contemporary liberals (if not always contemporary Democrats) —defense of civil liberties and personal freedoms at home, suspicion of military adventures abroad, relative openness to immigration, a spirit of cosmopolitan inclusiveness, and an ongoing orientation toward the welfare and aspirations of society’s least advantaged members. With respect to economic issues, the liberaltarian proposition would look more libertarian on regulation and more liberal on redistribution. It would proceed from the understanding that private-sector-led economic growth is the engine that makes social progress possible, yet at the same time it would accept that efficient economic markets have losers, and it would seek policies to cushion the blows on people who fall short.

It was a clever, provocative idea — and one went absolutely nowhere. Fred Smith, then the president of the libertarian Competitive Enterprise Institute, complained that I was basically proposing “acceptable surrender terms” to the left. And Jonathan Chait, then with the New Republic, flatly dismissed the idea that liberals needed to make any more concessions to free-market ideology than they already willingly did. Speaking of a liberal-libertarian compromise, Chait jeeringly quoted Michael Corleone: “My offer is this: nothing.”

Libertarian overconfidence, and Democratic faith in Obama, delayed the rapprochement

The reaction had to do with the historical moment. This debate was taking place shortly after the 2006 elections, in which Democrats took back both houses of Congress — a heady moment in which liberals were understandably resistant to the idea that they needed to reformulate their creed. Subsequent events, especially the emergence of the charismatic figure of Barack Obama and a financial crisis that put free-market economics on the intellectual defensive, further bolstered liberal self-confidence.

Meanwhile, libertarians and their conservative sympathizers reacted with horror to the election of Barack Obama and unified Democratic control of Congress. Some libertarians also looked with hope and enthusiasm the emergence of the Tea Party phenomenon, whose anti-government rhetoric, they believed, could be harnessed to libertarian ends. With excitement about the presidential candidacy of Rand Paul, there was even talk of a “libertarian moment.”

After the 2016 election cycle, things look oh so different. After Rand Paul couldn’t even make it out of Iowa, it was clear that the libertarian moment would have to wait. Even more disillusioning, what remained of the Tea Party movement merged seamlessly into the Trumpenproletariat, and the Republican Party, far from becoming the vessel of a libertarian renaissance, embraced a nakedly authoritarian standard bearer.

Liberals, on the other hand, remained confident that history was on their side — despite losing Congress in 2010 — until the late hours of November 8. Hillary Clinton had been poised to defeat a spectacularly incompetent opponent, and maybe take back the Senate. But not only had Donald Trump won a shocking victory, but the GOP retained both houses of Congress, held 33 governorships, and controlled the legislature in 32 states.

Standing together to defend norms and institutions

The election results mean more than a setback for liberals’ and libertarians’ policy ambitions. Indeed, worrying about mere policy defeats seems like almost quaint amid the grim exigencies of the Age of Trump. In a way that nobody alive today can remember, the basic integrity of American democracy now seems at risk.

From its scandalous opening announcement in June 2015, the candidacy of Donald Trump represented a continuous, sustained assault on the norms and institutions of liberal democracy. Since his election, the assault has gone on unabated. Trump has continued to browbeat reporters and has denounced peaceful protests. He has claimed, without a whiff of evidence, that millions of illegal ballots cast by undocumented aliens cost him the popular vote. His refusal to liquidate his business interests means no end to conflicts of interest and opportunities for corruption. The Carrier deal offers the first possible glimpse of crony capitalism to come — while his Twitter callouts of the Boeing CEO and a union official send a clear warning to all economic actors that the alternatives to being a Trump crony are dire. And his blithe dismissal of evidence that Russians interfered in the election, together with his tweeted call for a new strategic arms race, deepen fears about his judgment.

In these ominous circumstances, it is urgently necessary for liberals and libertarians to recognize the heightened stakes and act accordingly. The long-running family argument within the house of liberalism — which includes libertarianism — is all well and good, but not while the house is on fire. Far deeper than the real policy differences that divide us are the fundamental commitments to liberal democracy that we share, commitments that make it possible for us to fight it out on policy and then, win or lose, live to fight another day.

Rising to the challenge requires stout resistance against the usual partisan impulses. Already it’s clear enough that most congressional Republicans will not stand up to Trump, regardless of their private views: The lure of possible conservative policy victories, mixed with the fear of Trump’s popularity with the GOP base, will suffice to keep them in line. Democrats’ opposition can be counted on — but if early signs are any indication, much of that opposition will just end up making matters worse.

Using the fact of Russian interference to question the legitimacy of the election, hatching harebrained schemes to rob Trump of victory in the Electoral College — such trashing of democratic institutions from the left only serves to further roil the chaos within which Trump’s demagoguery thrives. And opposition that conflates the risks of conservative policies with those of democratic breakdown — say, by reacting to Betsy DeVos (who embraces vouchers for private schools) and Michael Flynn (who embraces insane conspiracy theories) as equivalent threats — trivializes constitutional concerns and makes it easier to dismiss complaints as losers’ sour grapes.

It is thus all but inevitable that a principled liberaltarian alliance in defense of liberal democracy will be a minority affair. Fortunately, when playing defense, a determined minority is often all it takes in America’s gridlock-prone political system. (In many crucial instances, persuading a handful of Republican senators to join Democrats will suffice.) In shaping and sustaining a “coalition of all democratic forces,” libertarian and liberal opinion leaders have a vital role to play. It is our job to rise above the passions of the electorate, and the calculations of politicians, and uphold democratic norms and institutions even, and especially, when doing so cuts against partisan interest.

Offering an alternative to populism

But beyond the current, pressing task of resisting Trump looms the larger, longer-term project of presenting a viable alternative to Trumpism. And by alternative I mean antithesis, not mirror image. In response to the white identity politics of the right, a focus on broadly shared interests, not a doubling down on left-wing identity politics. In response to Trump’s right-wing populism, a reform agenda centered on policies that will actually work as promised, not left-wing populist snake oil à la Sanders.

The liberaltarian alternative I have in mind should not be thought of as a political alliance between liberal and libertarian voting blocs. There aren’t enough self-identifying libertarians to matter as a potential alliance partner — and I’m sure that, even now, some members of that tiny group still regard the left as the bigger threat to liberty. What libertarians have to offer liberals isn’t votes, but ideas about how to reform the modern regulatory and welfare state to make it more effective in advancing liberal values.

What would this new liberal fusionism look like? Compared to today’s center-left, its primary distinguishing feature would be the emphasis it places on innovation and economic growth — and the degree to which it recognizes private-sector entrepreneurship and market competition as the irreplaceable engines of innovation and growth. This characteristically libertarian perspective would then be leavened by the traditional liberal reliance on social policy to ensure that the benefits of growth are widely shared.

The one great, compelling interest that unites Americans across race and class lines is a restoration of economic dynamism and broadly shared prosperity after years of slowing growth and rising inequality. Since 2000, the economy has been growing at only half the rate that prevailed over the course of the 20th century. Meanwhile, the median household income last year was lower than it was back in 2000, as the benefits of growth (such as it is) are skewed toward a relatively narrow elite.

To revive economic growth, the low-hanging fruit we need to grab is policy reform that removes regulatory obstacles to entrepreneurship and competition. Specifically, the main target of reform should be the web of regressive, special-interest privileges that stifle dynamism while redistributing wealth and income up the socioeconomic scale.

Here are a few of the more inviting targets for liberaltarian regulatory reform:

  • Low capital requirements that allow financial institutions to abuse explicit and implicit federal safety nets to engage in excessive risk-taking
  • Tight restrictions on high-skill immigration that deprive the country of valuable human capital while shielding high-end domestic professionals from competition
  • Excessive protection of patents and copyrights, which hinders innovation while delivering windfall gains for Hollywood, Big Pharma, and elements of Silicon Valley
  • Occupational licensing, which shuts off economic opportunities for the less advantaged while inflating salaries of well-to-do professionals like doctors, dentists, and lawyers
  • Highly restrictive land-use regulations, especially in big coastal cities, whose effect on housing prices has distorted the distribution of America’s population at a staggering cost to economic growth

Taking on these targets provides a bold agenda for deregulation — but one that looks very different from traditional conservative efforts along these lines. The conservative approach to deregulation looks to cut regulatory costs for existing businesses by paring back health, safety, and environmental rules. Here the main object is to remove regulatory subsidies that shield existing businesses from competition.

But a comprehensive pro-growth reform agenda will also recognize that, even where regulations serve valuable social objectives, pruning of outmoded and overgrown regulations may still sometimes be necessary. Some regulations never work as intended; others outlive their usefulness; and the steady accretion of regulations that individually make sense can add up to an ungainly whole in which costs far outweigh benefits. Those costs burden existing businesses, dampening investment and growth.

What’s more, many regulatory compliance costs are fixed — they don’t vary with the size of the enterprise. Consequently, the denser and more complex a particular regulatory regime is, the more it advantages large, established firms at the expense of new, upstart rivals, thus deterring entrepreneurship and innovation. To chip away at these ever-growing entry barriers, an aggressive mechanism to review existing regulations for growth-inhibiting overkill is needed.

None of the economic reforms I’ve discussed here represents a sharp departure from current liberal orthodoxy (at least of the Jonathan Chait variety; the story on the Sanders left is somewhat different). What is new is to gather all these reforms together into a unified agenda and to elevate their visibility and priority.

The distinctive liberaltarian approach to public policy would go beyond this new strategy for unlocking economic growth. To ensure that renewed growth translates into widely shared prosperity, sweeping reforms of social policy are also needed. These reforms would reflect the traditional liberal commitment to using government to combat poverty and expand opportunity, but they would update that commitment with libertarian ideas.

Reflecting libertarian hostility to paternalism, one guiding theme of liberaltarian safety-net reform would be to substitute simple cash transfers for in-kind benefits — liberating the poor from confusing and sometimes degrading eligibility requirements and shifting resources from poverty bureaucracies to the men, women, and children who actually need help. Reflecting the libertarian recognition of the private marketplace’s central role in advancing social progress, another guiding theme of reform would be to encourage and support employment — by ending the conditioning of benefits on joblessness (as is already the case with Social Security Disability Insurance), and by preferring work-promoting wage subsides (such as an expanded Earned Income Tax Credit) to employment-inhibiting hikes in the minimum wage.

Room for disagreement within the intellectual alliance

Although I have sketched out some specific policy ideas that I personally support, I fully expect other would-be liberaltarians to disagree here or there. Within the general framework of pro-growth economic policy and pro-work, pro-mobility social policy, there is plenty of room for rival approaches and differing priorities. And outside this common ground — on issues of foreign policy, health care financing, Social Security reform, and many others — the scope for diversity of opinion is even broader. But think of previous movements of new ideas, whether on the left or the right: supply siders, say, or New Democrats. Members of these groups didn’t agree on everything; what brought them together was a shared commitment to a few core ideas. At the heart of the liberaltarian idea is a vision of market-led growth combined with social policies that spread the benefits of growth more broadly.

The two sides of the liberaltarian policy model, pro-growth regulatory reform and pro-mobility social policy reform, are complementary and mutually reinforcing: Neither works without the other. There is no way to make current levels of social protection, much less improvements in the safety net, economically sustainable without unclogging the engines of growth through deregulation. And there is no way to make such unclogging politically sustainable without providing adequate social protection against downside risks.

In addition to achieving greater policy coherence and effectiveness, executing the liberaltarian turn would also bring clear political benefits. At present, liberalism’s besetting political weakness is its inability to offer an overarching vision of the public interest instead of just peddling a grab bag of specific benefits for specific interest-group constituencies. Liberal fusionism, with its focus on the unifying values of growth and work, would correct that shortcoming.

Many on the farther reaches of the left will never embrace this model, as hostility to corporations and commercial motives is too central to their political identity. But for those of a more pragmatic bent, the recognition that persistent slow growth makes fiscal austerity inevitable ought to provide sufficient motive for shifting to a more pro-growth, pro-market orientation. And this shift should come more easily when the nature of the regulatory reform needed to spur growth is more broadly understood. Specifically, many of the most important moves involve reducing inequality even as they unlock growth. (And if the name “liberaltarian” itself is an unmellifluous turn-off, that is certainly open for negotiation.)

Meanwhile, many contemporary libertarians will reject any acceptance of redistribution as heresy — notwithstanding the fact that the two greatest champions of libertarian ideas during the past century, Friedrich Hayek and Milton Friedman, both supported a social safety net and even a guaranteed minimum income. Insistence on ideological purity is self-defeating when the overwhelming majority of your fellow Americans reject your ideology. A strong public demand for a government backstop against economic insecurity is not going away; the campaign to roll back social spending merely pushes response to that demand underground —into the growing kludgeocracy of corporate welfare, mistargeted tax incentives, and protection of existing businesses against competition.

Is there sufficient intellectual flexibility in America today to break out of existing ideological boxes? In this hour of crisis for liberalism, not only in this country but around the world, such flexibility is necessary to develop a new, revitalized conception of the liberal ideal. Without such an effort, we will be forced to rely on conservatism-as-usual and liberalism-as-usual to fend off and beat back the temptation of authoritarian populism. Yes, we may well muddle through — but then again we may not. For those not content with such dangerous drift, working to articulate and defend a new liberaltarian synthesis offers the most promising path forward.

Brink Lindsey is vice president for research at the Cato Institute and the author, with Steven Teles, of the upcoming book The Captured Economy: How the Powerful Become Richer, Slow Down Growth, and Increase Inequality (Oxford University Press).

Rex Tillerson’s South China Sea Proposal Won’t Work

John Glaser

Secretary of State-to-be Rex Tillerson testified to Congress on Wednesday that America needs to take a harder line against China in the South China Sea. “We’re going to have to send China a clear signal that, first, the island-building stops,” Tillerson said. “And second, your access to those islands also is not going to be allowed.” This tougher stance is necessary, he says, to deter China from further “pushing the envelope.”

James Kraska, Professor in the Stockton Center for the Study of International Law at the U.S. Naval War College, agrees with Tillerson, even while admitting that this could be a dangerous policy: “Wouldn’t this raise tension in the region? It surely would, but anything other than acquiescence to China’s unlawful claims will have to take on additional risk in the short term.”

There are several strategic justifications for why America must stand up to China’s expansive territorial and maritime claims in the South China Sea. One involves defending our allies in the region and making sure China’s activities don’t threaten their security. Another is about upholding international order and freedom of the seas.

The current debate about America’s posture in the South China Sea reflects a very narrow conception of the strategic options at hand.

The first justification is weak. In this context, America’s security guarantees in the region could be more trouble than they are worth, especially if, as Kraska says, it requires the U.S. to take on additional risks with a nuclear-armed rising power. Moreover, it’s not obvious that China’s territorial and maritime claims per se threaten the security of neighbors like Japan and the Philippines. The competing claims in the South China Sea have gained considerable symbolic importance on all sides, but do not seriously undermine anyone’s security and while some view China as a regional bully, few describe it as an aggressor state. Indeed, as Thomas Christensen explains, Beijing has a “hedging strategy” that calls for avoiding “direct confrontation [with] the United States and its allies.” M. Taylor Fravel similarly argues that China “has compromised more frequently than it has used force” and “has been less belligerent than leading theories of international relations might have predicted for a state with its characteristics.”

China’s neighbors, although certainly eager to let the United States take the lead in defending their regional interests, seem to have a more sober and realistic view of China than Tillerson. They cooperate diplomatically and trade with China when it suits them, and make a fuss when China seems to push the envelope. The Philippines has recently pivoted towards better relations with China, despite the fallout over the ruling, in the Philippines’ favor, of the Permanent Court of Arbitration (PCA) at The Hague. And Japan still spends only 1 percent of its GDP on defense, less than half the global average, hardly an indication that Tokyo expects a military clash with China over the Senkaku/Diayu islands.

The second justification, that America needs to uphold international law and order, is even more dubious. First of all, as a great power, China is in good company in ignoring the precepts of international law. As the Harvard political scientist Graham Allison recently made clear: “no permanent member of the UN Security Council has ever complied with a ruling by the PCA on an issue involving the Law of the Sea. In fact, none of the five permanent members of the UN Security Council have ever accepted any international court’s ruling when (in their view) it infringed their sovereignty or national security interests.” No state has sued the United States under the UN Law of the Sea because Washington refuses to ratify it in the first place. When the PCA ruled in 2015 that the United Kingdom violated the Law of the Sea over the Chagos Islands, Britain disregarded it. And in 2013, when the PCA ruled against Russia on the Law of the Sea over its seizure of a Dutch vessel off the coast of Russia, Moscow ignored it. So when U.S. officials say military action in the South China Sea is necessary to uphold international law, they’re applying the traditional “for thee but not for me” rule.

There is a longer term question about whether the South China Sea will serve as a precedent for China’s rise to superpower status, overtaking the United States and revising the international order. China’s surpassing of the United States in relative international power is a very long way off, but even if it were more imminent, it’s not clear that China intends to upend the order that it has spent the past three decades conforming to. After all, China has gotten rich and powerful under this system. Ryan D. Griffiths, in an article in the journal Security Studies (gated) has gone so far as to argue that a Chinese-led world order wouldn’t differ fundamentally from a U.S.-led world order, though in the realm of territorial integrity it may actually be more stable.

The current debate about America’s posture in the South China Sea reflects a very narrow conception of the strategic options at hand. It shouldn’t be relegated to either (1) drawing a red line against China over remote islands of negligible strategic importance to the United States, or (2) ceding regional hegemony to Beijing. It is clearly in the interest of the nations in the region to come to a mutually beneficial agreement that establishes norms of behavior with regard to military presence, resource extraction, access to shipping lanes, and other activities in the South China Sea. And such a diplomatic achievement is perhaps possible. But by focusing solely on a crude deterrence model in which powerful adversaries meekly back down in the face of U.S. threats, we not only forgo those other peaceful diplomatic options, we make them less plausible.

John Glaser is Associate Director of Foreign Policy Studies at the Cato Institute.

As Systems Erode, User Fees Are the Key to Infrastructure Reform

Randal O’Toole

The nation’s infrastructure is being widely discussed this week, with incoming Transportation Secretary Elaine Chao’s confirmation hearing. But President-elect Trump’s infrastructure plan, which Ms. Chao and other officials will be tasked with implementing, is nothing particularly groundbreaking. Instead, it’s merely a new way of borrowing money, while offering no clear way to repay that money or to insure that it is spent on the most important projects. 

Members of Congress have their own ideas. Some are proposing a variety of new, hidden taxes to fund infrastructure construction.

Taxes, however, are the wrong way to fund infrastructure. Instead, infrastructure should be funded exclusively out of user fees for four reasons.

First, user fees are fair and equitable. Why should corporate overseas profits fund American highways? Why should toll road users pay for rail transit? Such unfair funding mechanisms encourage government waste as agencies gold plate their projects to get the most money out of taxpayers.

Infrastructure should be funded exclusively out of user fees for four reasons.

With user fees, everyone pays for the highways, transit lines, water and sewage facilities, and other infrastructure that they use. No one has to subsidize someone else and no one has an incentive to overuse a resource because the cost is shifted to someone else.

Second, user fees provide essential feedback to both infrastructure providers and users. User fees help providers set priorities for spending money. If a piece of infrastructure is highly profitable, it means we need more of it; if it loses money because users aren’t willing to pay for it, it means we shouldn’t build more.

Similarly, user fees inform consumers about the best infrastructure to meet their needs. Shall I go to work by driving on a highway, local streets, by transit bus, rail transit, or by bicycle? Correctly priced infrastructure will help people find the combination of speed, convenience, and cost that is best for them.

Third, user fees solve resource shortages such as congested highways and droughts. Traffic congestion, which is a $200 billion a year drain on our economy, is nothing more than a pricing problem. California, Oregon, and other states are experimenting with new mileage-based user fee systems that could eliminate congestion and raise revenues to expand capacity where it is needed

Droughts are also a pricing problem. Even the arid West has plenty of water, but it is currently allocated to some of the least valuable uses without regard to what users are willing to pay. User fees for water would effectively end any worries of shortages during dry years.

Finally, user fees solve the problems with crumbling infrastructure. Despite alarmist cries from those who seek to make profits from infrastructure spending, much of our infrastructure is actually in pretty good shape. In general, the infrastructure that is crumbling, such as the Washington DC Metro rail system, is infrastructure that was paid for out of tax dollars, while infrastructure paid for through user fees, such as state highways, are in better condition every year.

The reason is simple: when politicians fund infrastructure out of user fees, they direct the money to glitzy new projects that will get their names in the media rather than to maintenance of existing projects. As I recall a Department of Transportation official once saying, political leaders would rather “fund ribbons, not brooms.” Transportation agencies funded out of user fees, however, know they have to keep their infrastructure in good shape or users will stop paying.

For example, the number of bridges that are structurally deficient has declined by nearly 60 percent since 1990. Most of the decline is among bridges owned by state highway agencies funded out of gas taxes, tolls, and other user fees, while most of the remaining deficient bridges are owned by city and county road departments that are typically funded out of property taxes. 

The Washington, D.C. Metro rail system is a perfect example of how tax-funded infrastructure fails. The system has been declining for more than a decade. Yet rather than fund repairs and rehabilitation, politicians decided to build the Silver and Purple lines, both of which create more problems than they solve.

There may be a few kinds of infrastructure, such as schools, that might not be easily funded out of user fees. But these are the exceptions.

For everything else, including transportation, water, sewage, telecommunications, and the electrical grid, taxes aren’t the answer. For the sake of fairness, feedback, congestion relief, and adequate maintenance, these things can and should be funded exclusively out of user fees. Members of Congress, incoming Secretary Chao, and other officials with purview over infrastructure should look to user fees as the way forward.

Randal O’Toole is a senior fellow with the Cato Institute and author of Gridlock: Why We’re Stuck in Traffic and What to Do About It.

Dear Pound Sterling Investors, Keep Calm and Carry On

Tom Clougherty

The pound fell to a 30-year low against the dollar on Monday, after British Prime Minister Theresa May said she had no intention of keeping “bits of membership of the EU” after Brexit.

The comment was widely interpreted as meaning that Britain would leave the European Single Market as part of Brexit negotiations, and the pound’s sharp fall suggests investors see this as an economic blunder.

However, while the British electorate voted for Brexit in June 2016, nothing has actually changed yet. What’s more, the British economy has consistently defied expert predictions of post-referendum gloom — services, manufacturing, and construction sectors are all growing strongly, and the benchmark FTSE-100 share index is hitting record highs.

Britain and the EU both have a strong interest in continued trade.

In light of this, currency speculators’ pessimism seems somewhat premature. The unhappy Brexit their sterling sell-off implies is certainly a possibility, but it’s not the most likely one. So let’s step back and look at how things might play out over the months and years ahead.

The British government is awaiting a Supreme Court decision on whether it can unilaterally trigger Article 50 — the legislative clause formally signaling Britain’s intention to leave the EU, which would begin the two-year period of UK-EU negotiation — or whether parliament must have a vote. The Court is expected to rule in favor of a parliamentary vote sometime in January.

At that point, the British government will quickly bring forward Brexit legislation, aiming to trigger Article 50 before the end of March. That legislation ought to pass the House of Commons without too much trouble — not least because Theresa May could use any legislative intransigence to engineer an early general election that her party would win handsomely.

The unelected House of Lords could be a different matter, however. While the upper chamber cannot realistically block Brexit, they may seek to delay it, or else use their influence to reshape the government’s negotiating principles.

What of those principles? The government has yet to fully articulate its Brexit strategy, but the broad outline of its approach is easy enough to discern. First, the government is determined to restore national control of immigration and to end the supremacy of European Court of Justice rulings over British law.

That rules out continued membership of the Single Market, which requires free movement of people and imposes a unified regulatory regime across the European Economic Area.

Second, the government wants the freedom to negotiate new trade deals with non-EU countries. That rules out continued membership of the EU customs union, which puts a common tariff on all imports from outside the bloc.

Third, the government wants UK-EU trade in goods and services to be as free as possible after Brexit. Taken together with the preceding points, that suggests Britain will pursue an extensive bilateral trade agreement with the EU.

There’s no reason why such an agreement should not be reached. Britain and the EU both have a strong interest in continued trade. Moreover, they are starting from a position in which free trade already exists to a very large degree.

There are no significant regulatory differences to iron out and no subsidy-hungry special interest groups to placate. In other words, few of the policy issues that bedevil most trade agreements apply.

Politics may be the biggest challenge. For one thing, any bilateral agreement could require the assent of numerous national (and even regional) electorates across Europe — approval that cannot be taken for granted.

EU negotiators may also attempt to discourage other EU member states from following in Britain’s footsteps. This suggests Britain may have to suffer some form of punishment for leaving the EU, with London’s lucrative financial services sector the most likely target for continental ire.

For its part, the British government will face significant pressure from its own MPs — as well the media and the general public — not to back down easily; many would prefer that Britain walk away with no deal, rather than settle for a humiliating one.

That raises the specter of a truly “hard” Brexit — a clean break after which Britain would trade with the EU like any other country, in accordance with World Trade Organization rules.

That scenario is still unlikely to come to pass. In the short term, it would be extremely disruptive (not to mention economically damaging) for both sides; negotiators will surely work hard to avoid it.

In the long run, though, even a hard Brexit need not be disastrous for Britain — any losses it generated could be balanced out by a genuine commitment to radical policy reform at home, coupled with a concerted effort to liberalize trade overseas.

It remains to be seen whether the British government has what it takes to make necessity the mother of invention. In the meantime, however, investors would be wise to remember the old adage about keeping calm and carrying on.

Tom Clougherty is managing editor of the Cato Journal.

President-Elect Donald Trump Joins South Korea’s Left in Pushing New Korea Policy

Doug Bandow

South Korea’s political convulsions seem likely to deliver a new president sooner rather than later. Elections are scheduled for December, but if the Constitutional Court ratifies the National Assembly’s impeachment of President  the poll will come months sooner.

What remains of the devastated ruling party hopes for salvation through the candidacy of former UN Secretary General Ban Ki-moon. After massive rallies against Park even some ruling party parliamentarians voted for her impeachment. However, the opposition has the advantage, especially the sooner the vote is held.

There are plenty of contenders on the left. On the rise is Seongnam Mayor Lee Jae-myung, who has gained notoriety pushing for Park’s ouster. Lee styles himself as the Korean Bernie Sanders, railing against economic inequality and corporate privilege.

Of greater interest to Washington, however, is Lee’s perspective on security issues. The Republic of Korea’s left long has had a love/hate relationship with America. Washington’s support for the military dictatorships of Park’s father, Park Chung-hee, and Chun Doo-hwan, who emerged after Park pere’s assassination, soured many South Koreans on the alliance. Nevertheless, fear of North Korea and desire to avoid having to bear the full cost of defending against the North led even Presidents Kim Dae-jung and Roh Moo-hyun to preserve the relationship. Similarly, the main opposition party’s formal leader and current presumptive presidential nominee Moon Jae-in supports the status quo with the U.S.

Not Lee, however. He has a very different perspective on security issues, and sharply antagonistic opinions as to America’s role. He recently complained that U.S.-ROK ties had “degenerated into a subordinate relationship where we give whatever amounts of money they ask us to give.” Instead, he argued, “The U.S. should be begging us for the defense of East Asia.” He suggested defenestrating America’s nearly 29,000 troops, renegotiating the bilateral free trade agreement, and talking with North Korea’s Kim Jong-un.

Ironically, the incoming Trump administration might be sympathetic to all of these policies, though perhaps for different reasons than Lee. President-elect Donald Trump appears to be a committed protectionist and views virtually any agreement reducing any U.S. trade barriers as unfair to America; presumably he believes this applies to South Korea. He might be happy to tear up the FTA, even though Americans would pay more for imports and sell fewer exports, an economically painful combination.

Washington should bring its forces home, allowing South Koreans to do whatever they believe necessary to safeguard their own nation.

Candidate Trump also indicated his willingness to talk with Kim. The president-elect did not indicate whether he meant personally meet or governments engage, but broadly speaking it’s a sensible idea. Refusing to have diplomatic relations or other sustained contact for the last 69 years has achieved nothing. Isolation has not convinced Pyongyang to give up its nuclear and missile programs.

Engagement offers no sure path to success, of course. But regular contact might discover limited areas where agreement was possible, encourage modest confidence-building measures, reduce tensions and perceived threats, and provide a small window into an almost uniquely opaque system. Negotiations should not be seen as a reward with the North, but the best means to salvage something from years of U.S. failure in dealing with the Democratic People’s Republic of Korea.

Finally, Trump criticized America’s troop presence: “We have 28,000 soldiers on the line in South Korea between the madman and them,” yet “We get practically nothing compared to the cost of this.” His solution: “They have to protect themselves or they have to pay us.” However, he seemed to instinctively recognize that U.S. military personnel should not be hired out like mercenaries: “We are better off frankly if South Korea is going to start protecting itself.” Which should mean bringing the garrison home.

The fighting stopped more than 63 years ago. The South has raced past the DPRK in virtually every measure of national power. The former’s economy is about 40 times that of the North. The ROK overwhelmingly wins the two nations’ technology race. Pyongyang’s old allies, China and Russia, would not back the North in a war.

Indeed, U.S. policy has succeeded, providing a defense shield behind which South Korea could develop. Seoul is now capable of doing what nation states normally are expected to do: protect themselves against foreign threats. There’s no longer any reason for Americans to defend the South. Washington should bring its forces home, allowing South Koreans to do whatever they believe necessary to safeguard their own nation.

Thus, rather than wait for President Lee, or whoever else wins the South Korean election, to send the U.S. home, President Trump should begin the process as soon as he takes office. He should announce that his objective is to turn over the ROK’s conventional defense to Seoul, indicate that he will negotiate the withdrawal period for American troops with the new South Korean president, and offer to talk with Pyongyang.

However, there is one place where Trump should disagree with Lee. And that is on the defense of East Asia. Unless Lee has discovered a new way of thinking about geography, he will come to realize that the ROK actually is in the region. Thus, regional stability and security matter to his nation.

In contrast, America is thousands of miles away, on the other side of the world’s largest ocean. A total regional meltdown would cost the U.S. economically by disrupting commerce, but would not threaten America’s safety. There would be no North Korean or Chinese expeditionary force headed toward the U.S. No civil war on America’s borders. Not even a flood of refugees seeking sanctuary in the U.S.

Thus, even when it comes to East Asia the U.S. presence serves the ROK (as well as Japan and other friendly states) far more than it does America. If anyone should be paying anyone, the South should be writing Washington a check. Better, however, would be for Seoul to do more with its own resources to protect its own interests. No more relying on the U.S. for protection.

If Lee is elected and decides that the region doesn’t matter, President Trump should wave a hearty good bye as he orders America’s troops home. Washington officials should stop allowing other nations to manipulate them into serving other nations’ interests.

Indeed, it shouldn’t matter to the U.S. who ends up as South Korea’s president. The Trump administration should improve American security by pulling the U.S. out of the Korean imbroglio. It would be especially easy to do so if Lee Jae-myung is elected. Then all the Trump administration would need do is implement Lee’s election program.

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

What to Expect from ObamaCare’s Replacement

Michael D. Tanner

Republicans have officially begun the long and complex road to repealing and “replacing” ObamaCare. And if you believe congressional Democrats, various special-interest groups and much of the media, the Four Horsemen of the Apocalypse are about to be unleashed.

Former Senate Minority Leader Harry Reid paused on his way out the door to warn, “People are going to die” if the health-care law is repealed. His successor, New York Sen. Chuck Schumer, was only slightly less gloomy, warning of “chaos” and claiming ObamaCare repeal would “make America sick again.” New York Times columnist Paul Krugman suggested Republicans were preparing to “snatch insurance away from millions,” while a CNN report claimed that repeal would lead to the loss of 3 million jobs.

Let’s all get a grip.

In general, most consumers will find themselves with more and better insurance choices after ObamaCare is repealed.

Initially, any changes will be very small and incremental. Repeal won’t happen overnight, or all at once. Rather, Republicans are likely to establish a sunset date, three or four years from now, allowing time to craft a replacement. Still, sooner or later, we’ll be living under a very different health-care system. Therefore, over the next few days, we’ll take a look at what it’s really going to mean for health-care consumers, patients, doctors, hospitals, insurers, businesses and taxpayers.

One of the first things most Americans are likely to find is that they’ll have more choices when it comes to buying insurance. You may have to pay more for insurance that covers some providers and conditions, but you’ll also be able to buy cheaper, less-comprehensive insurance if you want to.

ObamaCare required all insurance to cover a wide-ranging — and expensive — “essential benefits package.” Repeal will mean more of an a la carte approach to insurance, based on individual consumer preference.

In fact, this is likely to be one of the first changes to ObamaCare. While the law requires that there be an essential-benefits package, it gives the president a great deal of discretion in determining what that package should be. President Trump can take action by executive order to repeal some of the requirements that President Obama included.

People will even have the choice not to buy insurance at all, since the much-reviled individual mandate will be gone. Going without insurance may not necessarily be a wise choice, but it does re-establish a fundamental limit to state power over the individual. And it allows young and healthy people to purchase low-cost catastrophic coverage that makes much more sense for them.

Most people will find more choice to be a good thing, but there’s a downside. If people opt out of services that they won’t use — such as men choosing not to buy maternity coverage — it will drive up the price for those who do use those services.

Consumers won’t just find more options in the types of plans; there should also be more insurers to choose from. Recently, insurers have been abandoning ObamaCare exchanges in droves. Roughly a third of US counties have only one insurer participating in their exchange. Repeal will lure insurers back into the market.

Finally, a replacement plan will almost certainly let you shop for insurance out of state. Today, it’s illegal for someone living in New York to buy insurance in, say, Pennsylvania even if a plan there is cheaper. This gives a near monopoly to a small cartel of New York insurers. Allowing consumers to shop across state lines will force some much-needed competition into the insurance market. It will also help prevent New York regulators from recreating the failures of ObamaCare at the state level.

Those changes will mostly affect the individual insurance market, but the majority of Americans who get their insurance through their employer are also likely to see more choice. That’s because any ObamaCare replacement is expected to significantly expand Health Savings Accounts.

HSAs shift control of health-care spending from employers to employees. An expansion of HSAs will most likely allow much larger tax-free contributions to these accounts, and allow them to be used for more health-related expenses, including insurance premiums. That would mean that you — not your boss — would be able to choose your insurance plan.

Expanded HSAs would also mean increased portability for health insurance. Because you could use your HSA to pay your premium, you wouldn’t be as likely to lose your insurance if you changed or lost your job.

In general, then, most consumers will find themselves with more and better insurance choices after ObamaCare is repealed. Still, there are likely to be some people who face challenges, including those with low incomes and those with pre-existing conditions. Tomorrow, we’ll look at what repealing ObamaCare means for them.

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