Our Right to Trial by Jury Is under Attack, the Supreme Court Can Affirm and Protect It

Tim Lynch

Today, the Supreme Court will be hearing oral arguments in a
case that raises important questions regarding both the right to
counsel and trial by jury.

Jae Lee came to the United States from South Korea in 1982. At
the time, he was just a boy in the care of his parents. Now 48
years old, Lee has lived in the U.S. as a lawful permanent resident
for decades. He went to school in New York, but eventually moved to
Memphis and got into the restaurant business. According to federal
prosecutors, Lee also became a small time drug dealer and, after
his arrest, he was facing serious criminal charges.

Like many persons who are accused of a crime, the prosecution
offered Lee some leniency in prison time if he would agree to
surrender his constitutional right to trial by jury. Naturally, Lee
wanted to know all of the legal consequences of accepting the
government’s plea offer — so he asked his attorney
whether he would be subject to deportation to South Korea.
Lee’s attorney assured him that deportation would not be a
problem and advised him to accept the plea bargain.

The Constitution is
supposed to guarantee the right to trial by jury. We will soon see
whether the Supreme Court will come to the defense of that
guarantee.

On that recommendation, Lee pled guilty.

As it turned out, Lee received bad legal advice. His conviction
meant he was now subject to deportation under federal law. After
serving several years in prison, he would eventually be deported to
South Korea and essentially banished from the U.S.

On appeal, Lee argues that he only pled guilty because of the
recommendation from his lawyer. He wants to take his case before a
jury. Prosecutors agree that Lee received lousy legal advice, but
they say his conviction should still stand because the evidence
against him is so strong that a jury trial will not change his
legal predicament. They say a jury would find Lee guilty and, as a
result, he would still be facing deportation.

The Supreme Court should reject the government’s argument
that there doesn’t have to be a trial because everyone
already knows what the outcome would be. The Constitution
guarantees our right to a jury trial in “all criminal
prosecutions.” Our commitment to this constitutional
safeguard is tested when the government haughtily claims a trial
isn’t necessary.

Some appellate courts have rejected pleas for new trials by
persons in similar circumstances as Lee’s. Why order a new
trial, they say, when the accused can only succeed by “jury
nullification,” which is the doctrine that says a jury can
return a “not guilty” verdict even after it has
concluded that the person on trial violated the law?

Well, for one thing, there’s nothing wrong with jury
nullification. The Framers of our Constitution believed that jury
nullification was part and parcel of what a jury trial was all
about. Our second president, John Adams, wrote that it was not only
a juror’s right, but his duty to “find the verdict
according to his own best understanding, judgment, and conscience,
though in direct opposition to the direction of the
court.”

The Supreme Court itself has noted that the jury is supposed to
be the “conscience of the community” and should check
the government when necessary to protect individuals from injustice
or oppression. The jury cannot perform that function if it is told
that it must always apply the law mechanically, without regard to
justice.

Take the case of John David Mooney. In 2002, Mooney’s wife
pulled a gun on him during a heated argument. He took the gun away
from her and he went to a nearby police station to turn in the
weapon because, as an ex-felon, he was not allowed to possess
firearms. Unbelievably, prosecutors turned around and filed charges
against Mooney for unlawful possession of a firearm!

Mooney’s attorney advised him to accept a plea bargain
because the case against him was open and shut. His status as an
ex-felon was an undeniable fact and he had already admitted to
possessing the firearm. Very reluctantly, Mooney pled guilty to a
crime.

However, like Lee, Mooney got bad legal advice. Had he gone to
trial, he could have made a “justification” defense to
a jury. Upon learning this, Mooney appealed his case with the
complaint that he received bad legal advice, and that had he
received correct legal advice he would have insisted on his right
to a jury trial. When an appeals court overturned Mooney’s
conviction, the prosecutors dropped the case entirely instead of
going to trial.

Jae Lee is facing prison time and banishment from the United
States. Before that happens, Lee wants to have his day in court.
The Constitution is supposed to guarantee his right to trial by
jury. We will soon see whether the Supreme Court will come to the
defense of that guarantee.

Tim Lynch is the
director of the Cato Institute’s Project on Criminal Justice.

Fixing the Endangered Species Act

Randal O’Toole

Though written with the best of intentions, the Endangered
Species Act has a fatal flaw that makes it both expensive and
ineffective. To date, efforts to improve the law have tinkered
around the edges without addressing this flaw.

Most people, including many critics of the law, agree that
biodiversity protection benefits everyone. Yet the flaw in the law
is that it often imposes all the costs of protection on a few
people. Those forced to pay the cost end up resenting wildlife,
while many of those who benefit without paying the costs themselves
accuse the law’s critics of being selfish and short-sighted.

Imagine that we tried to use the same system to build the
Interstate Highway System. The Bureau of Public Roads would draw
lines on a map indicating where the roads would go. All private
owners of the land crossed by the lines would be required to tear
down any improvements and replace them, at their own expense, with
a road meeting federal standards.

Though written with the
best of intentions, the Endangered Species Act has a fatal flaw
that makes it both expensive and ineffective.

Just as very few miles of interstate highways would ever be
built under such a system, few endangered species will easily be
saved under the same type of system. Even where the roads (or
endangered species) are on public lands, public land managers would
resist the road construction mandate if it was unfunded, just as
many resist the mandate to protect biodiversity.

There are two ways to fix this flaw. One is to create a
multi-billion-dollar fund to pay people to protect endangered
species and biodiversity. One way to raise money for this fund is
to charge recreation fees at fair-market value on public lands and
dedicate a share of those fees to biodiversity.

The second solution is to allow people to own fish and wildlife.
This is not as radical an idea as it sounds: under British common
law, wildlife were owned by the owners of the land on which the
wildlife resided. Fisheries could also be privately owned. Owners
of fish and wildlife had incentives to protect their property from
those who would overhunt or overfish them or harm their
habitat.

This law created resentments because a handful of aristocrats
owned nearly all the land in Britain. So Americans — not
realizing that landownership here would end up being more evenly
distributed — changed the common law in this country because
they felt wildlife should belong to everyone and not just the
landowners.

This change in the common law doomed such species as the eastern
elk, Merriam’s elk, and the passenger pigeon, all of which would
probably survive today if landowners had an incentive to protect
them. With the change, no one had any incentive to try to protect
wildlife or fish from habitat destruction or overharvesting, and
while the states had the authority to do so, they didn’t begin to
exercise this authority until around 1900, and then only for
huntable wildlife and fish.

We know private involvement can work because private groups
greatly assisted in the recovery of the peregrine falcon. Despite
this, the Fish and Wildlife Service has resisted the idea of
private ownership to help recover other species. Yet private
ownership of various strains of salmon and such rare species as the
black-footed ferret and Utah prairie dog would significantly
increase their chances of survival.

Private ownership would work even for species that don’t have a
direct economic value, as anyone who has been to a dog show should
realize. Dog breed enthusiasts put enormous efforts into protecting
their breeds even though it earns them nothing but a blue ribbon
and the admiration of their peers. Offering, say, a ribbon to
anyone who successfully raises a black-footed ferret and releases
it into wild where it survives long enough to breed would harness
that energy for endangered species and go far toward restoring
biodiversity.

Private ownership might not work for every species, so the best
solution would be a combination of the two: Use private ownership
as much as possible, then a biodiversity fund out of recreation
user fees as a fallback measure. Any changes to the Endangered
Species Act that fail to address the fundamental flaw in the law
will fail, and the best way to fix that flaw is to give people
incentives and rewards for protecting species.

Randal
O’Toole
is a senior fellow with the Cato Institute. He wrote
this for InsideSources.com.

Washington’s Princes of Paperwork Are Crushing Physicians and Bankrupting, If Not Killing, Patients

Steve H. Hanke

In the rancorous to and fro over the repeal of ObamaCare and its possible replacement with the American Health Care Act, an elephant in the room has remained unnoticed. It’s that giant bundle of burdensome regulations that is crushing physicians, their staffs, and sending the costs of healthcare soaring.

A recent, detailed study published by the American Medical Association (AMA) sheds a common-sense light on what Washington chooses to ignore. For every hour physicians spent with patients, almost two additional hours are spent pushing papers. Even when face-to-face with patients, doctors spent 37% of their time filling out forms.

{pullquote]It’s time for Washington to wake up and cut the needless medical red tape.

Burdened with the weight of regulatory paperwork, doctors are becoming increasingly unhappy — more paperwork, less time with patients. Indeed, in a typical day, during office hours, doctors spent only 27% of their time attending to patients face-to-face and 49.2% on electronic health records (EHR) and desk work. Even during after-hours work, doctors spent a whopping 59% of this time dealing with electronic health records.

In the rancorous to and fro over the repeal of ObamaCare and its possible replacement with the American Health Care Act, an elephant in the room has remained unnoticed. It’s that giant bundle of burdensome regulations that is crushing physicians, their staffs, and sending the costs of healthcare soaring.

A recent, detailed study published by the American Medical Association (AMA) sheds a common-sense light on what Washington chooses to ignore. For every hour physicians spent with patients, almost two additional hours are spent pushing papers. Even when face-to-face with patients, doctors spent 37% of their time filling out forms.

Burdened with the weight of regulatory paperwork, doctors are becoming increasingly unhappy — more paperwork, less time with patients. Indeed, in a typical day, during office hours, doctors spent only 27% of their time attending to patients face-to-face and 49.2% on electronic health records (EHR) and desk work. Even during after-hours work, doctors spent a whopping 59% of this time dealing with electronic health records.

The following table summarizes the AMA’s stunning findings. It tells the red-tape tale in horrifying detail.

image

Just why do regulators promulgate so many regulations and produce so much red tape? For one thing, it creates jobs for the boys (read: the Princes of Paperwork). There is no better bulletproofing for a bureau’s bloated budget than a complex maze of regulations that “must” be enforced to protect the public’s health and safety.

But, there is another, perhaps more important, reason why regulatory bureaus produce endless miles of red tape to wrap around doctors, medical staffs, and the U.S. healthcare system. Bureaucrats are conservative. They like to avoid risks, and decision making is an inherently risky activity. After all, decisions can prove to be wrong, unpopular, or both. So, to avoid the risks and responsibilities that come with discretion and decision making, regulators produce rigid rules and red tape — the more, the merrier. The regulators’ check-the-box mentality allows them to slip out from under any responsibility if something under their regulatory purview “goes wrong.” The regulators are protected, and the onus is placed on the doctors and their staffs who must check all those boxes — boxes that cover everything under the sun.

The fallout has been enormous. The cost of healthcare has shot to the moon — lots of forms to fill out and massive gold-plating of treatment to cover all those regulatory bases. Also, a great deal of discretion has been removed from doctors’ hands (read: Doc, you must follow the rules, even if a different prescription is advisable, and you must fill out all the forms, even if it is a distraction). Thus, the quality of patient care has suffered.

Doctors have been forced to push too much paper and too many pills. And that’s not all. The plethora of rules and regulations has exposed doctors and their staffs to lawsuits and sky-high medical malpractice insurance rates. What if something is alleged to have “gone wrong” and you failed to check all those regulatory boxes? After all those years in medical school and the big bucks to finance them, you are still just one missed checkbox away from a medical malpractice suit. It’s time for Washington to wake up and cut the needless medical red tape.

Steve Hanke is a professor of applied economics at The Johns Hopkins University and a senior fellow at the Cato Institute.

Trump’s Big Problems: Anemic Private Investment and Weak Productivity

Steve H. Hanke

Why was the Great Depression so deep, and why did it drag on for so long? According to impressive research by Robert Higgs of the Independent Institute, it was because President Roosevelt abandoned his campaign promises of 1932: to cut federal spending, to balance the budget, to maintain a sound currency, and to rein in Washington’s bureaucracy. Instead, Roosevelt switched gears. Roosevelt and the Congress, according to Higgs, produced a “bewildering, incoherent mass of new expenditures, taxes, subsidies, regulations, and direct government participation in productive activities … . The New Deal created so much confusion, fear, uncertainty, and hostility among businessmen and investors that private investment and hence overall private economic activity never recovered enough to restore the high levels of production and employment enjoyed during the 1920s.”

Crucially, the economy failed to add anything to its capital stock between 1930 and 1940, when the net private investment for that period totaled a minus $3.1 billion.

Higgs’ granular analysis of this collapse in private investment led him to introduce and test a new concept: “regime uncertainty.” 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 derive 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.

Trump’s challenge will be to reduce regime uncertainty, and also introduce tax and regulatory policies that encourage private investment.

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.” 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 tenures of Presidents George W. Bush and Barack Obama. For example, Pew Research Center surveys find that the percent of the public that trusts Washington, D.C. to do the right thing has fallen to all-time lows.

So, President Trump has inherited a legacy of regime uncertainty, which has caused both private investment and productivity to sag. Trump’s challenge will be to reduce regime uncertainty, and also introduce tax and regulatory policies that encourage private investment. If he fails, private investment and productivity will continue their downward secular trends, and the economy will continue to underperform.

Just how bad is Trump’s inherited legacy? 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. This is bad news, as productivity is dependent on the quality and size of the economy’s private capital stock.

image

Steve Hanke is a professor of applied economics at The Johns Hopkins University and a senior fellow at the Cato Institute.

India’s Narendra Modi Wins Big: Time to Finish Economic Reforms

Doug Bandow

Despite imposing a disastrous “currency reform” that
impoverished poorer people and small businesses across his nation,
Indian Prime Minister Narendra Modi won big in five state elections
a week ago. His Bharatiya Janata Party’s sweep was
incomplete—the BJP lost one state and will rule only in
coalition in two others—but the BJP triumphed dramatically in
mega-state Uttar Pradesh.

There the BJP forged a broad coalition to overcome caste
politics and staged an effective grassroots campaign. Modi, rather
than local leaders, acted as the BJP’s public face. The
Observer Research Foundation’s Ashok Malik called it “a
stupendous achievement.” Even the Congress Party’s
Kapil Sibal acknowledged: “No doubt, it’s an astounding
victory for the BJP.”

The result strengthens the ruling party’s influence in the Rajya
Sabha, the nation’s upper house, which it still does not control,
and positions the BJP for reelection in national elections for the
more important lower house, or Lok Sabha, two years hence. Modi
parlayed a mix of business friendliness, reputation for competence,
and Hindu nationalism into a stunning national victory in 2014,
humiliating the long-dominant Congress Party.

Today, with the latter’s dynastic leadership in decline,
the BJP appears to be the natural governing party. No politician
has enjoyed such sway for years. Observed Sandeep Shastri of Jain
University: “Modi represents that national-level figure that
we’ve not seen since Indira Gandhi,” the Congress Party
prime minister assassinated more than three decades ago.

Modi also has made an international impact, raising his
country’s profile. He represents a people on their way to
greatness. Today India has the world’s fastest growing
economy and second largest population—on its way to becoming
the largest. English is commonly spoken and ethnic Indians are
productive traders around the world. Several years ago the Cato
Institute’s Swaminathan S. Anklesaria Aiyar noted that
India’s diaspora, at more than 30 million worldwide, is
another source of economic strength and international influence for
the homeland. The number of Indian students studying at American
universities is second only to those from China.

Growth has been driven by
government spending rather than private investment, and India’s per
capita GDP growth dropped early in the decade, a bad sign for
future economic progress.

Nevertheless, Indian voters were most interested in bettering
their lives domestically. Indians long languished in poverty as
their leaders followed a collectivist, dirigiste economic strategy.
New Delhi imposed confiscatory tax rates, employed a bureaucracy
rated the worst in Asia, nicknamed the “License Raj,”
and controlled the economy’s commanding heights. Indian
politicians pushed industrialization, but focusing on capital- and
skill-intensive industries, acting “against its comparative
advantage,” explained HDFC Bank, since “India’s
comparative advantage lay in an abundance of relatively low-skilled
workforce.” Indeed, New Delhi was not only a political friend
but also an economic mimic of the Soviet Union.

The consequences for the Indian people were catastrophic. Growth
lagged behind numerous other developing nations; until 1983 the
poverty rate was about 60 percent. There were brief attempts at
economic liberalization in 1966 and 1985, but both elite and
popular resistance remained strong. Real progress occurred in 1991,
freeing Indians to be more entrepreneurial. Eric D. Dixon and Tarun
Vats of the Atlas Network reported: “Within a decade, the
average income in India had doubled, and nearly 250 million
people—about a fifth of the population—have risen out
of poverty since then.”

However, progress remained incomplete, especially compared to
China, which became a global economic powerhouse. Explained Aiyar
in a recent Cato Institute study, “Although many old controls
have been abolished, many still continue, and a plethora of new
controls have been created.” Indians’ economic liberty
actually peaked in the mid-2000s.

The 2014 Economic Freedom of the World report, the most
recent ranking, rated India a disappointing 112 out of 159 nations,
down from 102 the previous year. (India did substantially better on
personal freedom, coming in at 77.) The Heritage Foundation’s
2017 Index of Economic Freedom rated India at 143 of 180 countries,
well behind China at 111. India’s rating dropped from the
year before, and New Delhi did particularly badly on investment
freedom, financial freedom, labor freedom, government integrity,
judicial effectiveness, and business freedom.

Although growth increased after liberalization, India failed to
overtake China as had been predicted. Since 2013 growth rates have
accelerated, though pulling 86 percent of India’s money out
of circulation late last year had a negative effect. The
International Monetary Fund originally forecast growth of 7.4
percent this year, but recently cut the estimate to 6.6
percent.

Other caution lights are blinking. Growth has been driven by
government spending rather than private investment, and
India’s per capita GDP growth dropped early in the decade, a
bad sign for future economic progress. Moreover, job growth remains
weak. It first slowed markedly in 2012 but has not recovered under
the current government, which according to HDFC Bank, indicates a
“growing disconnect between economic growth, education,
skilling and jobs.”

Nevertheless, India could pull ahead with better policies. The
McKinsey Quarterly contended that deregulation would kick
growth rates up to ten percent. Inflation is lower than in other
“emerging markets” and the Economist Intelligence Unit
rates New Delhi’s “country risk” below that of
China. Growing wealth is spurring domestic demand: India’s
“consuming class” is expected to treble during the
coming decade. Democracy provides a political safety valve not
present in China.

Modi’s 2014 triumph reflected his pro-business record as
chief minister of the state of Gujarat and the widespread belief
that he would transform national economic policy as well. However,
despite his big win and large parliamentary majority, his
government has moved only slowly to free the economy. For instance,
the Times of India (New Delhi) complained about the slow
“implementation of projects” and that “the
government hasn’t pressed the pedal hard on reforms.”
Business Standard (New Delhi) columnist Shankar Acharya
warned: “Economic reforms have clearly lost momentum and
there is a sense of drift in economic policy.”

In part this reflects opposition control of the Rajya Sabha,
whose membership changes only with state government control.
However, New Delhi’s failure to liberalize more also appears
to reflect the fact that Modi believes not so much in free markets
as in better managed markets. So, too, do other members of the BJP.
Milan Vaishnav of the Carnegie Endowment for International Peace
noted the party’s “nationalist, protectionist wing will
also demand a pound of flesh” after the UP victory. Moreover,
Sebastian Mallaby of the Council on Foreign Relations argued that
Modi “seems stuck in the mindset of a provincial executive:
he is more interested in projects than in policies; he is a
modernizer, not a reformer.”

The demonetization project is a dramatic example of a Modi
policy expanding government control over people’s economic
lives. Other counterproductive initiatives include agricultural
price controls and attacks on “hoarding.” Worse,
according to the Telegraph (Calcutta): “the Modi
government has started to drum up the virtues of creating large
state-owned assets in a throwback to a Nehruvian era of creating
state monopolies in strategic areas.” This is a prescription
for economic stasis.

Still, the Modi government has restrained spending, sped
environmental regulatory approvals, eliminated capital and
certification barriers for new businesses, streamlined distribution
of welfare benefits, improved sanitation, and attempted to move
poorer Indians into the financial system. New Delhi also has begun
to improve the electrical grid and transportation infrastructure.
Perhaps most important have been passage of a new bankruptcy code
and a uniform goods and services tax (GST) to replace a complex and
confusing hodge-podge of regional and national taxes (though the
new levy itself seems more complicated than necessary). In January
the government eased limits on foreign direct investment, including
in the aviation, defense, and pharmaceutical sectors.

These are important steps. However, much more remains to be
done. Eswar Prasad of Cornell argued that the government must
demonstrate its commitment “to deep-rooted reforms including
reducing labor regulations, unshackling businesses from red tape
and bureaucracy, reducing government control of banks and clearing
up their bad loans, developing capital markets, revamping the
government’s tax and expenditure systems and improving
infrastructure.”

For instance, New Delhi should end the web of government
controls over business hiring and firing. Companies with at least
100 employees generally require government permission to cut staff,
which is one reason nine out of ten Indians work in the informal
economy. Noted the OECD: “In labor markets, employment growth
has been concentrated in firms that operate in sectors not covered
by India’s highly restrictive labor laws.” In contrast,
in regulated areas employment has been falling. Moreover, contract
employees account for almost half of the workforce at large
industrial firms, compared to under nine percent in service
enterprises.

The American Enterprise Institute’s Derek Scissors
observed that such restrictions “essentially guarantee mass
underemployment and an India that, unlike its neighbors in East
Asia, cannot benefit from global demand for manufactured
goods.” Yet one unnamed BJP official told the
Telegraph (Kolkata): “if it’s a conflict
between a corporate entity and its workers, we have to be on the
side of the workers.” Even though those workers would most
benefit from new and better positions in place of their current
jobs.

Modi also should dismantle the state economic sector which has
expanded dramatically over the last couple of decades. Losses from
public enterprises run billions of dollars annually. Among the
biggest problems are public-sector banks. Profits are down and
negative overall. These institutions hold 70 percent of the
nation’s financial assets: alas, more than a sixth of the
loans are “stressed,” many unable to even pay interest.
Problem loans total roughly $200 billion, reducing credit for
productive enterprises and increasing chances of a financial
crisis.

In fact, many companies fear the future. Sales growth and
capacity utilization are low compared to the past, and business
confidence is the lowest in two years. Reported the
Economist in early March:”If India is indeed the
world’s fastest-growing big economy, as its government once
again claimed last week, no one told its bankers and business
leaders. In a nation of 1.3 billion steadily growing at around
seven percent a year, the mood in corner offices ought to be
jubilant. Instead, firms are busy cutting back investment as if
mired in recession. Bank lending to industry, growth in which once
reached 30 percent a year, is shrinking for the first time in over
two decades.”

New Delhi should respond by accelerating reforms. A foreign
investor told Open Magazine last year; “The BJP
underestimated the extent of the problem” and concentrated on
“low-hanging fruits.” However, spurring manufacturing
and reviving banks required more than “a few quick
fixes.” India also needs a change in economic philosophy, as
public support for statism if not old-fashioned socialism endures.
Economist Mohan Guruswamy of the Center for Policy Alternatives
observed that “There is still a distrust of private capital
and foreign capital, and a consensus on state control of industries
that cuts across parties. People still want a lifetime of
employment, a lifetime of assured income.”

Finally, government must perform better when it acts. India
remains a poor nation, so government welfare is no surprise.
However, there are nearly 1000 national programs, supplemented by
various state initiatives. The result, said Aiyar, is “a
bewildering variety of freebies,” many to the well-off.
Complained the Economist: “the plethora of schemes
in place for Indians to claim subsidized food, fuel, gas,
electricity and so on are inefficient and corrupt.” Better to
consolidate the in-kind benefits into individual cash payments. The
latter would reduce inefficiency and corruption and return
decision-making to the poor.

Moreover, observed Aiyar in his Cato study: “With almost
no exceptions, the delivery of government services in India is
pathetic, from the police and judiciary to education and health.
Unsackable government staff members have no accountability to the
people they are supposed to serve, and so callousness, corruption,
and waste are common.” A mix of privatization and better
management are necessary.

Unfortunately, India’s economy may suffer from the ongoing
surge in Hindu nationalism. Modi got his start in the Rashtriya
Swayamsevak Sangh, or RSS, which promotes Hindu nationalism. While
in Gujarat he was blamed for mob violence that killed hundreds of
Muslims, though his responsibility was never proved. Religious
persecution and intolerance, long present in India, have worsened
with his 2014 victory. Warned the U.S. Commission on International
Religious Freedom in a report issued last month: “threats,
hate crimes, social boycotts, desecration of places of worship,
assaults, and forced conversions led by radical Hindu nationalist
movements have escalated dramatically under the BJP-led
government.”

Most violence occurs at the state level, beyond the prime
minister’s direct reach. However, the BJP has pandered to
Hindu nationalists. For instance, in last week’s election
Modi accused the ruling local party of favoring Muslims. After the
BJP victory he appointed as UP’s chief minister a
parliamentarian who doubles as Hindu priest and violent
provocateur. Indeed, Yogi Adityanath was briefly jailed for his
incendiary rhetoric against Muslims. He also has pushed for
building a Hindu temple on the site of a mosque destroyed years ago
by a mob, which triggered deadly sectarian violence.

To the extent these violent currents ripple outward, foreign
investment could suffer. Warned Manu Bhagavan of Hunter College,
such “regressive identity politics … are more about the
last century than the next.”

India is gaining economically. But continuing liberal reform is
necessary to sustain strong economic growth. Modi is India’s
most popular politician and dominates the national political
landscape. So far he has only cautiously pushed economic reforms,
but voters have credited him with making an effort, even forgiving
the bungled currency reform since it was targeted at the well-off.
He has two years left before the next national contest.

After last week’s election Jain University political
scientist Sandeep Shastri predicted that Modi “will likely
try for some measures in the coming months that will capture the
imagination of voters that will help him win in 2019.” But
that won’t necessarily be economic liberalization. After
being accused of running a “suit-boot” administration
too friendly with corporate elites, he turned more populist.
Novelist Pankaj Mishra argued that Modi relied on
ressentiment by “presenting himself as a relentless
scourge of elites and sentinel of the upwardly mobile.” The
Brookings Institute’s Tanvi Madan predicted that Modi will
move forward on the anti-corruption front, which “is
something that resonates with people.”

Does Modi want free the economy? Madan contended that
“It’s been established that he is not a free-market
guy.” Indeed, Modi looks ever less like Ronald Reagan, to
whom the prime minister once was compared, and more like Donald
Trump, argued Ruchir Sharma of Morgan Stanley Investment
Management. Polls indicate that Indians increasingly want a strong
leader, and Modi is “concentrating power in his own hands,
thus shifting the driver of economic growth from the private sector
to the state.” The ironic result may be a better managed but
not much freer economy.

India has come far. Extreme poverty still afflicts millions of
people across this complex and diverse nation, however. Much more
economic work remains to be done. If Narendra Modi desires to be a
truly transformational leader, he will press market reforms to
fully release the extraordinary economic talents of the Indian
people.

Doug Bandow is
a senior fellow at the Cato Institute and a former special
assistant to President Ronald Reagan.

It’s Time to Dump Most Central Banks

Steve H. Hanke

On March 16th, the New York Times carried reportage by Peter S. Goodman, Keith Bradsher and Neil Gough, which was titled “The Fed Acts. Workers in Mexico and Merchants in Malaysia Suffer.” The theme of their extensive reportage is that U.S. monetary policy is the elephant in the room. It is the elephant that swings exchange rates and capital flows to and fro in emerging-market countries, causing considerable pain.

Emerging-market countries should dump their central banks and local currencies.

The real problem that all of the countries mentioned in the New York Times reportage face is the fact that they have central banks that issue half-baked local currencies. Although widespread today, central banks are relatively new institutional arrangements. In 1900, there were only 18 central banks in the world. By 1940, the number had grown to 40. Today, there are over 150.

Before the rise of central banking the world was dominated by unified currency areas, or blocs, the largest of which was the sterling bloc. As early as 1937, the great Austrian economist Friedrich von Hayek warned that the central banking fad, if it continued, would lead to currency chaos and the spread of banking crises. His forebodings were justified. With the proliferation of central banking and independent local currencies, currency and banking crises have engulfed the international financial system with ever-increasing severity and frequency. What to do?

The obvious answer is for vulnerable emerging-market countries to do away with their central banks and domestic currencies, replacing them with a sound foreign currency. Panama is a prime example of the benefits from employing this type of monetary system. Since 1904, it has used the U.S. dollar as its official currency. Panama’s dollarized economy is, therefore, officially part of the world’s largest currency bloc.

The results of Panama’s dollarized monetary system and internationally integrated banking system have been excellent (see accompanying table).

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  • Panama’s GDP growth rates have been relatively high. Since 1994, when the Mexican tequila crisis commenced, real GDP growth has averaged 5.8% per year.
  • Inflation rates have been somewhat lower than those in the U.S. Since 1994, CPI inflation has averaged 2.3% per year.
  • Since Panama’s fiscal authorities can’t borrow from a central bank, the fiscal accounts face a “hard” budget constraint dictated by the bond markets. In consequence, fiscal discipline is imposed, and since 1994, Panama’s fiscal deficit as percent of GDP has averaged 1.7% per year.
  • Interest rates have mirrored world market rates, adjusted for transaction costs and risk.
  • Panama’s real exchange rate has been very stable and on a slightly depreciating trend vis-à-vis that of the U.S.
  • Panama’s banking system, which operates without a central bank lender of last resort, has proven to be extremely resilient. Indeed, it weathered a major political crisis between Panama and the United States in 1988 and made a strong comeback by early 2000.

To avoid the pain described in the New York Times reportage, emerging-market countries should dump their central banks and local currencies. They should follow Panama’s lead and adopt a stable foreign currency. Or, they could install a competitive currency regime, which would allow for more than one foreign currency to be used.

Steve Hanke is a professor of applied economics at The Johns Hopkins University and a senior fellow at the Cato Institute.

Trump’s Wars

Emma Ashford

President Donald Trump is no stranger to conflict escalation. In
his short time in office, he has managed to successfully escalate
disputes against the media, immigrants and the intelligence community. Yet Trump’s most
important escalation has been in the War on Terror, substantially
increasing the U.S. commitment to wars in Yemen, Syria and
elsewhere. Unfortunately, these steps are likely only to draw
America deeper into some of the world’s most intractable
conflicts.

Trump’s foreign policy approach during the campaign can be
charitably described as incoherent. On the one hand, he openly
admitted that the Iraq war had been a mistake, and repeatedly
criticized the money wasted on pointless Middle East conflicts. These ideas,
unorthodox for a Republican candidate but popular with the general
public, helped to win him votes.

But on the other hand, candidate Trump often contradicted
himself, calling for the use of overwhelming force in the fight against the Islamic State group, and
promising a massive increase in U.S. military spending. The candidate’s
militaristic worldview frequently came through in his off-the-cuff
remarks, most memorably when he told a rally of supporters,
I love war, in a certain way.”

The president is doubling
down on the Middle East quagmires he once criticized.

Sadly, since his inauguration, Trump has pursued the second of
these two approaches. This choice — escalating U.S.
involvement in a variety of conflicts — risks dragging his
administration further into the very Middle Eastern quagmires he
once railed against.

Media reports on Yemen have largely focused on the disastrous raid – apparently ordered by
Trump over dinner – in which a U.S. Navy Seal and a number of
Yemeni civilians were killed. But U.S. involvement is expanding in
other areas too: the president recently loosened the military’s
rules of engagement in Yemen, and has
dramatically increased airstrikes against al-Qaida.

The new administration has also effectively doubled U.S.
deployments to the campaign against the Islamic State group in
Syria, adding 400 additional troops to the forces already
deployed there. Like their counterparts in Iraq, these soldiers are tasked with
providing support to local forces in northern Syria, but the
mission has nonetheless resulted in the death of one marine, and the injuries of
several others.

Trump is also considering escalation elsewhere: Another 2,500
paratroopers have been placed at a staging base in Kuwait to support the campaign
against the Islamic State group. Meanwhile, military leaders
responsible for the fight in Afghanistan have petitioned Congress
and the White House for more troops, and the White House is
considering loosening the rules of engagement in
Afghanistan and Somalia.

Yet in each of these conflicts, additional military force is
unlikely to improve the situation. In Yemen, U.S. raids and
airstrikes focus on a resurgent al-Qaida and an emerging branch of
the Islamic State group. Yet the two terror groups are growing
primarily thanks to the Saudi-led war in Yemen, a war the Trump
administration enables through air support and arms sales. Increasing military strikes treat
the symptoms of Yemen’s turmoil, but leave the disease
untouched.

In Syria, there is no clear strategy for U.S. forces. Though the
military goal — the defeat of the Islamic State group and
recapture of Raqqa — is obvious, basic political problems
remain unresolved. Will U.S. troops will be involved in
post-conflict stabilization work? Or will local actors be able to
control retaken territory? Worryingly, U.S. forces in Syria have
even been forced to physically place themselves between rival
Kurdish and Turkish forces to prevent them fighting.

And there appears to be little strategic rationale to the
president’s choices to escalate the War on Terror elsewhere.
Increasing the number of U.S. troops in Afghanistan may lengthen
the stalemate there, but it is unlikely to bring an end to
America’s longest war. Even Trump’s budget, which proposes military
spending increases and dramatic cuts to agency budgets, ignores the
need for effective foreign aid and diplomacy in combating
terrorism.

During his campaign, Trump railed against the excesses of U.S. intervention in the Middle
East, noting “I don’t want to see the United States get bogged
down. We’ve spent now $2 trillion in Iraq, probably a trillion in
Afghanistan. We’re destroying our country.” Yet in the short time
since his inauguration, he has chosen instead to escalate these
conflicts. If Trump doesn’t want a legacy as the president who
perpetuated America’s Middle East messes, he needs to change course
soon.

Emma Ashford
is a Research Fellow at the Cato Institute.

Day One of the Neil Gorsuch Hearings Was Not about Neil Gorsuch

Ilya Shapiro

Those who tuned into C-SPAN today for hot-and-heavy questioning of President Donald Trump’s Supreme Court nominee were sorely disappointed. The first day isn’t actually about the nominee, but just a chance for senators on the Judiciary Committee to make opening statements. Accordingly, we learned very little about Judge Neil Gorsuch—he made an opening statement too, confirming everything we already knew about him as a humble jurist and western family man—and some about the Democrats’ approach to this confirmation process.

Actually, there was nothing new there either. There was no magical coalescence around certain deadly needles found in the haystack of 2,700 Gorsuch opinions. Just the tired old issues we saw the day after the nomination announcement on January 31. First, this was a #StolenSeat, so no Republican nominee will be confirmed until Merrick Garland is returned from exile. This issue was of course litigated at the election, and the voters decided that they’d rather have Trump filling the Scalia vacancy. So it’s unclear who this argument is for, other than the arch-blue base.

Second, a handful of carefully cherry-picked cases show results that don’t make Gorsuch look sympathetic to the “little guy.” The leading contenders for this strategy are the “frozen trucker” case, the “cancer survivor” case, and the “taser-to-the-head” case. Indeed, Senator Mazie Hirono (D-HI) accused Gorsuch of being too “fixated on the plain meaning” of a statute. Well, then.

These hearings are unlikely to change a single vote on anything (filibuster or nomination).

Oh, and then there’s an addendum strategy. When do you think Trump stopped beating his wife? Particularly on display from Senator Richard Blumenthal (D-CT)—who leaked Gorsuch’s private comment about being dismayed at attacks on the judiciary—we’ll see much more of this as senators try to pin some of the president’s controversial pronouncements, tweets, and policies onto the elegant nominee.

Still, the results-oriented foofaraw was really quite astonishing. Ranking Member Dianne Feinstein (D-CA) both botched the definition of originalism and then claimed that this rather standard legal theory would lead to all sorts of bad things. (It was sort of like Ted Kennedy’s “Robert Bork’s America” speech, except lacking in imagination.) Sen. Sheldon Whitehouse—who once asked me at a hearing why I thought corporations had more rights than amputee vets—railed against the corporations that have apparently bought all Republican-appointed judges (and Justice Ruth Bader Ginsburg?). And on and on, as if judges were supposed to put a thumb on scale of certain preferred parties—after checking the latest hierarchy of intersectionality of course—rather than doing their best to apply the law to the facts in a neutral manner.

The Republican senators were less memorable—perhaps because I didn’t have to take Bacardi shots for “super-precedent,” “Garland,” “Citizens United,” and the rest—but generally set a good tone. I alas was at lunch when Senators Ted Cruz (R-TX) and Mike Lee (R-UT), both former Supreme Court clerks, gave their remarks, but Senator Ben Sasse (R-NE) gave a characteristically thorough explication of judges as ideally indistinguishable “black robes.” The Twitterverse has “black rober” as the early favorite for the theme of the hearings.

Of course, Tuesday the real fun begins, with each of the 20 senators taking half an hour for questioning Gorsuch. If they need any help on what to ask, here are some good suggestions from George WillRamesh PonnuruRandy Barnett/Josh Blackman, and yours truly.

But really, unless something really weird happens, this is so much about everything except the nominee. These hearings are unlikely to change a single vote on anything (filibuster or nomination). I’m just hoping they elucidate some important areas of constitutional interpretation and legal process despite (because of?) that dynamic.

Ilya Shapiro is a senior fellow in constitutional studies at the Cato Institute.

Trump’s Tsa Budget Fails to Cut the Obvious: Air Marshals

John Mueller and Mark G. Stewart

To fund President Donald Trump’s fanciful plans for a massive southern border wall, his administration is scrounging around in the budgets of current US government programs. The results are evident in last week’s budget blueprint.

The administration has been looking to squeeze money from the budget of the Transportation Security Administration, which may represent an admission that some of the money slung at the terrorism problem in the United States might have been wasted.

Although such a reappraisal is a decade or more overdue, it isn’t clear that Trump’s budget staffers know what they are doing. In particular, in their quest to cut costs they have ignored an elephantine program, the Federal Air Marshal Service, which provides little security at great cost.

In their quest to cut costs they have ignored an elephantine program, the Federal Air Marshal Service, which provides little security at great cost.

For some time, in books and professional articles we have been applying standard techniques of risk and cost-benefit analysis to domestic counterterrorism efforts. By those measures, we have repeatedly found that FAMS fails spectacularly at reducing risk enough to justify its cost.

The program involves paying people to fly shotgun on airliners to prevent or disrupt hijackings. Even though there are thousands of such marshals, there are too few to be on much more than 5 percent of all flights—though the service still wouldn’t be cost-effective even if that number rose to 20 percent. The TSA insists marshals are placed on high-risk flights, but since no terrorist has boarded an airliner in the US with hostile intent since 2001, it is difficult to see how that “risk” is determined.

A 2015 CNN investigation found that air marshals were often medicated. Because of their hectic schedule they were also often sleep-deprived: 75 percent on domestic runs and 84 percent on international ones.

Crucially, the program is very expensive. It takes up some 10 percent of the TSA’s budget, costing more than $1 billion per year, including losses borne by airlines forced to provide free seats (mostly in first class) for their uninvited guests. In general, spending one dollar on the service generates less than 10 cents in benefit.

We have assessed a policy mix in which the air marshal budget is reduced by 75 percent (still leaving hundreds around for special assignments), the inexpensive program to train and arm pilots to resist hijackers is doubled, and secondary barriers to the cockpit—easily deployable and stowable—are installed. The result: better aviation security and a savings of hundreds of millions of dollars each year for both the taxpayers and the airlines.

Whether the border wall makes sense or not, the Trump budget staff is on firmer ground with a couple of other suggestions. They want to dump the legions of “behavioral detection officers” (BDOs) who wander the airports looking for passengers with quirks like exaggerated yawning, excessive throat clearing, bobbing Adam’s apples, and downward gazes, while arriving late for flights, whistling during the screening process, making repetitive grooming gestures, and/or wearing improper attire. The BDOs have yet to waylay a single terrorist, visibly anxious or not.

After reviewing more than 400 studies about detect­ing deception, the Government Accountability Office found that “the ability of human observers to accurately identify deceptive behavior based on behavioral cues or indicators is the same as or slightly better than chance.” It also noted that, after years of implementing and testing, “TSA cannot demonstrate that the agency’s behavior detection activities can reliably and effectively identify high-risk passengers who may pose a threat to the US aviation system.”

Also dumpable are the VIPRs. Visible Intermodal Protection Response (we’re not making this up) consists of teams of air marshals, transportation security inspectors, behavior detection officers, explosives specialists, and local law enforcement and airport officials who coordinate to randomly screen aviation workers, property, and vehicles for terrorists. They have had about the same success rate as BDOs.

In our assessment, the costs of both the BDO and the VIPR programs considerably outweigh the benefits, even if we bend over backwards to assume they offer any of the latter.

Because the programs are so labor-intensive, they are quite expensive: about $200 million per year for the BDOs and $50 million for the VIPRs. The budget blueprint says the administration wants to reduce the VIPRs and eliminate the BDOs for savings of $80 million, a number that doesn’t exactly add up.

However, the costs of these two programs clearly pale when they are compared to those of the monumentally expensive TSA program the Trump budget scroungers have clearly, and unaccountably, ignored: the air marshals.

John Mueller is a political scientist at Ohio State University and a senior fellow at the Cato Institute.

California’s Cap-And-Trade Train Wreck

Patrick J. Michaels

Californians like to brag they are the nation’s pioneers, pointing to freeways, Disneyland and In-N-Out Burger. They’ve started construction on a 118-mile high-speed rail segment, the first in the nation, from Madera (population: 61,416) to Shafter (population: 16,998). They’re paying for it with revenues from a statewide cap-and-trade system, which sells “permits” allowing industry to emit carbon dioxide.

That first segment, which is over land as flat as a table, requiring very little bulldozing and very few superelevated curves, was supposed to cost $6.4 billion, but that’s already ballooned to $10 billion. As Steven Greenhut at Reason.com wrote earlier this year, “it’s costing the train to nowhere a lot to get there.”

If the legislature doesn’t extend it, the train to nowhere might come to the end of the line.

Twenty-five percent of the cap-and-trade permit revenue is earmarked for the train, which is generated by four sales a year. The last tranche of sales, which was supposed to produce $600 million in revenue, only sold $8.2 million. This was the third sale in a row that has gone badly, and if it keeps up, the train to nowhere is headed for oblivion unless money can be reallocated from elsewhere in the California budget.

What’s going on? The spin from environmentalists is cap-and-trade permits are not selling because industry has been so successful at reducing its emissions that it doesn’t need those stinking permits.

If only that were true! That would mean that reducing emissions 40 percent by 2030, as mandated by California law, is a piece of cake, and that the whole world will soon follow.

But that’s not the case. The problem is the cap-and-trade program is probably illegal. It was passed by a simple majority in the Legislature, but in California, taxes require a two-thirds supermajority. The California Chamber of Commerce and a tomato processor have sued over this, because it looks like a tax (the government taking your money) and acts like a tax (it spends it on dozens of different projects). The California Appellate Court may declare, after all, that it is a tax, and if it does not, the case will go to the state Supreme Court.

A judgment ruling it’s a tax will suspend the program, which legislatively sunsets in 2020 anyway, also helping to explain why no one is buying the permits. Gov. Jerry Brown, whose term ends in 2019, is now asking the Legislature to admit it’s a tax, and pass a new bill with a two-thirds majority. He has also made rumblings that the program can continue without specific legislative authority, sounding curiously like the nation’s last president on climate policy.

Passing this tax may be a problem. Even though the Democrats hold a supermajority in both state houses, a defection of one senator or two Assembly members will kill the bill. There are surely some in the less-blue parts of the state who don’t want their taxpayers to be responsible for these costs.

There are a large and diverse number of contenders to succeed Gov. Brown, and one or more may stake out a position against cap-and-trade. It was one “different” candidate vying against a dozen others with similar ideas that resulted in the Republican nomination of Donald Trump. Polls have support for the cap-and-trade around 54 percent.

California is not the first location of a cap-and-trade train wreck. In December, 2010, the Chicago Climate Exchange, the nation’s first carbon dioxide cap-and-trade market, shut its doors when the U.S. Senate had the good sense to run away from cap-and-trade, less than two months after the Democrats lost control of the House as a result of passing it.

Will California’s cap-and-trade program meet a similar fate? If the legislature doesn’t extend it, the train to nowhere might come to the end of the line.

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