The Solar Power Market Is under Threat??from One of Its Own

Ike Brannon

In April, the American solar manufacturer Suniva filed a
petition under Section 201 of the Trade Act of 1974, asking the
U.S. International Trade Commission for new tariffs on solar cells
and the establishment of a minimum price for solar modules imported
into the United States. Last month, the commission announced it was
proceeding with an investigation into the issue. But if the Trump
administration grants these tariffs and minimum prices, it will
have created an irony: an extraordinary intervention into the
marketplace that could devastate, not protect, a thriving domestic
industry.

The market for solar power in the United States is growing
smartly these days: rapid advances in the efficacy of solar panels
have led to a market where solar power can potentially be
cost-effective for tens of millions of homeowners. As a result,
there is now a robust industry for installing solar panels on
houses, apartment buildings, and businesses, which employs hundreds
of thousands of Americans. Today, in fact, over half of the
quarter-million workers employed in the solar industry in some way
install solar panels. That’s
more people
than are employed in the coal industry these
days.

A bankrupt manufacturer
is asking for tariffs that would harm the whole
industry.

However, there is a much smaller fraction of people work at
producing solar panels—just 38,000 people, according to the
Solar Foundation, a trade group for the industry. Higher tariffs on
solar panels will slow down and possibly reverse the healthy job
creation in this sub-sector of the economy, without any
commensurate gains elsewhere.

It seems doubtful that more solar panel construction will
commence in the United States, even with a massive tariff and
minimum prices. One such production facility, Solar City’s new
giga-factory in upstate New York, does have the potential to be
price-competitive with foreign producers. But that represents an
enormous investment that few, if any other domestic solar producers
can ever hope to replicate. The number of jobs there is still
dwarfed by the installation sector’s employment, anyway.

The higher price of solar panels that would result from a tariff
would not only dampen the demand for producing them. It would also
lower the demand for installing them, which is an important fact
given Suniva’s request for a rarely-used emergency trade
protection. The company filed for bankruptcy last month, and blames
its financial travails on “unfair” competition from Chinese and
other producers.

There is just a bit of extra irony here. The company was founded
in the United States by two Americans, and over the last few years
it has received various subsidies for its research from the U.S.
government. But in 2015, a Chinese solar energy conglomerate called
Shunfeng took a majority stake in the company. Shunfeng has said it
does not want the United States to impose new tariffs—since
it would hurt the company’s other businesses—and there is
speculation that Suniva is proceeding with its attempt ?to? obtain
relief from the? International Trade Commission because its
?creditors in ?bankruptcy are pushing? it to do so.

It would be a shame if such an “accidental” complaint were to be
successful: If the International Trade Commission grants the relief
requested, it would double the price of solar panels, which would
debilitate the rest of the solar industry. Many projects, including
many of those currently under contract, may become unviable as a
result.

President Trump’s pledge to create more jobs for blue-collar
workers is admirable, and politicians on both sides of the aisle
seem to share this sentiment. But limiting the imports of solar
panels via higher tariffs would do little to boost domestic
production, and any jobs created in that industry would be a purely
pyrrhic gain, swamped by the jobs lost in the solar panel
installation industry. Most of these jobs happen to be, it should
be noted, well-paying blue-collar jobs.

Ike Brannon is
a visiting fellow at the Cato Institute and President of Capital
Policy Analytics.

Trump Is Right Not to Spend for the Sake of Spending

Ryan Bourne

Donald Trump’s adviser Steve Bannon once claimed US
conservatives were going to “go crazy” about the new
administration’s infrastructure plans. Trump had spoken endlessly about
investing $1?trillion
(£773bn) in American highways, roads,
bridges, tunnels, airports, and more, and how this was going to
create jobs and improve growth.

This won praise even from his Democrat opponents, but coming so
soon after President Obama’s 2009 “stimulus”
programme, was the stuff of fiscal conservative nightmares.

Fast forward to today and it’s the Democrats upset with
Trump again. The one issue which offered the possibility of
cross-party co-operation has again broken along partisan lines.

A thought-through
supply-side agenda which cut red tape and removed barriers to
privatisation could make infrastructure development both more
responsive to demands and cheaper for US taxpayers.

That’s because in his budget a fortnight ago, Trump relegated infrastructure to
his second tier of priorities
, pledging a much smaller $200bn
(£155bn). Instead of federal spending, Trump’s team wants to
focus on reducing regulations, streamlining permitting processes
and encouraging user fees, such as tolling, to boost private
investment to get to the $1?trillion total. To Democrats, who want
more spending and are concerned by more private sector involvement
in infrastructure, this is seen as a missed opportunity to boost
growth significantly.

But is it? The Democrat position has become conventional wisdom
among commentators. More government infrastructure spending is seen
as a “win-win” that can boost GDP in the short term,
creating high-paid jobs, and enhance productivity in the longer
term, through better connectivity and mobility. Just last week the
OECD called for more public investment in the UK.

Yet there are good reasons to think both claims are severely
overblown, particularly for the US.

In fact, now is probably the worst possible time for a fiscal
stimulus there. The unemployment rate has fallen to 4.3pc, below
the level that many organisations believe is sustainable. There are
some reports of labour shortages. In such an environment, more
government borrowing for major projects will simply shift workers
from private sector activity into government-driven activity. This
is particularly true given the recorded unemployment rate in
construction is now at its lowest level since the height of the
boom in 2007.

More government borrowing in a period when interest rates are
rising and with full employment will also increase inflation,
leading to higher interest rates more quickly, in turn discouraging
capital investments in the private sector. Increasing federal
spending temporarily will do little to boost short-run GDP but will
raise US public debt further.

No serious economist, of course, would argue that having good
infrastructure in the long term would not enhance an
economy’s growth potential. With productivity growth
projections in the US so low compared to historic rates, one can
see the appeal of thinking careful, targeted, long-term
infrastructure investment could really help boost growth. But the
real question is whether a centralised national infrastructure
programme is the best means of achieving good infrastructure and
higher productivity.

Japan threw $6.3?trillion at infrastructure between 1991 and
2008 and, while they have an excellent rail system and other
marvels, it did little to boost long-run growth. A recent academic
study of major Chinese infrastructure investment projects
undertaken by the University of Oxford found that over half had
benefit-to-cost ratios below 1 — net losses in economic
value.

When resources are allocated through the political process, many
considerations other than growth come into play. Politicians do not
choose the unsexy but crucial projects such as road maintenance,
but prefer megaprojects. In the UK, the 2010 spending review
allocated funds to HS2 even though the benefit-cost
ratio is around 1
, deferring or cancelling road schemes with
ratios of 6.8 and 3.2 respectively.

In the US, research has found that allocating federal funding
for highways on the basis of benefit-cost ratios could deliver the
same outcomes for the system at 30pc less cost.

In other words, though theoretically governments can enhance
growth by investing in good projects with higher returns than the
private sector, in practice they do not. The book Megaprojects and
Risk by Bent Flyvberg and others at Oxford University has shown
that governments’ conflicting role of both promoting and
being responsible for projects often leads to a significant bias
toward overoptimism. In a study of 258 projects across 20
countries, they found nine out of 10 ended with cost overruns.

Given all this, Trump should ignore Democrat whining. He is
surely right that re-examining the incentives, frameworks and
institutions surrounding infrastructure provision are more
important than merely chucking more money at it. The US certainly
has significant infrastructure needs given areas of high
congestion, but one could easily see a huge amount of taxpayer
money being wasted on bad investment.

A thought-through supply-side agenda which cut red tape and
removed barriers to privatisation could make infrastructure
development both more responsive to demands and cheaper for US
taxpayers. The devil will be in the details, but Trump is right to
reject the principle of a mammoth infrastructure spending
spree.

Ryan Bourne
holds the R Evan Scharf Chair for the Public Understanding of
Economics at the Cato Institute.

President Trump’s Lower-Court Nominees Are as Good as His SCOTUS Pick

Ilya Shapiro

Whatever’s happening with James Comey’s testimony, Donald
Trump’s Twitter account, or congressional inaction on Obamacare
repeal, tax reform, or much of anything else, from where I stand
all that is fake news designed to distract your eyes from the
prize: we have more judicial nominees!

This week, in an echo of how the 21 contenders for the Supreme
Court vacancy were rolled out during the presidential campaign, 11
would-be black-robers join last month’s stellar list of 10 lower-court
nominees. They join the one confirmed nominee, Sixth Circuit Judge
Amul Thapar, who was elevated from a Kentucky district court after
having been on that list of Supreme Court potentials.

ase Western law professor Jonathan Adler, who appeared with me
on a panel at Cato’s
40th anniversary celebration
right before the May 8
announcement, says they’re “‘incredibly strong
nominees’ who were within the judicial mainstream and should
‘have an intellectual influence on their
courts.’” As they say in Congress, I wish to associate
myself with that analysis—and to extend those remarks to
apply to all the nominees we’ve seen thus far.

This week, in an echo of
the 21 contenders for the Supreme Court rolled out during the
campaign, 11 would-be black-robers join last month’s stellar list
of 10 lower-court nominees.

Let’s Take a Look

In that first batch are two state justices who were on the
potential Supreme Court list, Michigan’s Joan Larsen
(nominated to the Sixth Circuit) and Minnesota’s David Stras
(nominated to the Eighth Circuit). These are engaged and scholarly
jurists—both former law professors who still teach on the
side—who will make terrific circuit judges.

Eleventh Circuit nominee Kevin Newsom, a former Alabama
solicitor general who hosted me when I spoke to the Birmingham
Federalist Society chapter earlier this year, is a serious lawyer
and public servant who will serve the nation well even if I
disagree some with his interpretation of the
Slaughterhouse cases.

Pacific Legal Foundation’s Damien Schiff, with whom
I’ve worked on many cases, is an inspired pick for the Court
of Federal Claims, an Article I court that mainly handles
government-contract disputes and property-rights claims against the
government. Throughout his career, Damien has shown a commitment to
protecting individual rights against government overreach.

This week’s second batch brought us three more circuit court
nominees, including Justice Allison Eid of the Colorado Supreme
Court to fill Neil Gorsuch’s vacant Tenth Circuit seat and
professor Stephanos Bibas of the University of Pennsylvania Law
School for the Third Circuit. I know Eid by reputation. A former
clerk for Supreme Court Justice Clarence Thomas, she’s a thoughtful
and intellectual jurist much in the mold of her former boss. Bibas
is one of the top criminal-law scholars in the country. I’ve worked
with him professionally and had drinks personally; he’ll be
outstanding but leaves a gaping hole as faculty adviser for Penn’s
Federalist Society chapter.

Then there’s Stephen Schwartz, an old friend who was a few years
behind me at the University of Chicago Law School and has also been
nominated to the U.S. Court of Federal Claims. Stephen has the
perfect blend of nerdiness and skepticism of federal power that the
job demands.

I’ll Never Tire of This Kind of Winning

If the other eight announced June 7 are of the same caliber as
these three (and the previous 10)—and we have no reason to
think otherwise given that the administration’s nominations staff
is the same—then this is the sort of #winning of
which I won’t ever tire.

The only curiosity is the continued absence of Justice Don
Willett of the Texas Supreme Court—and indeed no nominees to
the Fifth Circuit at all. As Hugh Hewitt tweeted, of the 11 original SCOTUS short-listers, five
were state judges. Three have now been nominated to the federal
appellate courts. The two remaining are Tom Lee of Utah (which has
no current vacancies) and Willett (and Texas has two
vacancies). Moreover, Willett was apparently one of the five or six
finalists for the seat that Gorsuch filled, and is close to Texas
Sen. Ted Cruz. So you’d think he’d be a shoo-in.

Now, it’s certainly possible there’ll be some grand
bargain whereby two other worthies get the Fifth Circuit slots but
Willett goes to the high court whenever Justice Anthony Kennedy
decides to retire. But that’s pie-in-the-sky because so many
other stakeholders are involved at that point. Of course, if this
deal—a fabulous deal, believe me!—is ratified by the
president himself, that would be bigly indeed.

In the meantime, the White House counsel’s office should
just keep these black-robe orders coming. Their work, and that of
the Federalist Society’s Leonard Leo, has allowed President
Trump—regardless of what else he does with his time—to
continue fulfilling what was probably his most important campaign
promise: to appoint “the best” judges.

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.

Embracing the Hard Realities of Health-Care Reform

Michael D. Tanner

It is an old joke among health-policy wonks that what the
American people really want from health-care reform is unlimited
care, from the doctor of their choice, with no wait, free of
charge. For Republicans, trying to square this circle has led to
panic, paralysis, and half-baked policy proposals such as the
Obamacare-replacement bill that passed the House last month. For
Democrats, it has led from simple disasters such as Obamacare
itself to a position somewhere between fantasy and delusion.

The latest effort to fix health care with fairy dust comes from
California, whose Senate voted last week to establish a statewide
single-payer system. As ambitious as the California legislation is,
encompassing everything from routine checkups to dental and
nursing-home care, its authors haven’t yet figured out how it will
be paid for. The plan includes no copays, premiums, or deductibles.
Perhaps that’s because the legislature’s own estimates suggest it
would cost at least $400 billion, more than the state’s entire
present-day budget. In fairness, legislators hope to recoup about
half that amount from the federal government and the elimination of
existing state and local health programs. But even so, the plan
would necessitate a $200 billion tax hike. One suggestion being
bandied about is a 15 percent state payroll tax. Ouch.

The utopian fantasy of a
single-payer system is attractive to many voters, but it would
destroy the American economy.

The cost of California’s plan is right in line with that of
other recent single-payer proposals. For example, last fall,
Colorado voters rejected a proposal to establish a single-payer
system in that state that was projected to cost more than $64
billion per year by 2028. Voters apparently took note of the fact
that, even after figuring in savings from existing programs,
possible federal funding, and a new 10 percent payroll tax, the
plan would have still run a $12 billion deficit within ten
years.

Similarly, last year Vermont was forced to abandon its efforts
to set up a single-payer system after it couldn’t find a way to pay
for the plan’s nearly $4 trillion price tag. The state had
considered a number of financing mechanisms, including an 11.5
percent payroll tax and an income-tax hike (disguised as a premium)
to 9.5 percent.

On the national level, who could forget Bernie Sanders’s
proposed “Medicare for All” system, which would have cost $13.8
trillion over its first decade of operation? Bernie would have paid
for his plan by increasing the top U.S. income-tax rate to an
astounding 52 percent, raising everyone else’s income taxes by 2.2
percentage points, and raising payroll taxes by 6.2 points. Of
course, it is no surprise that Medicare for All would be so
expensive, since our current Medicare program is running $58
trillion in the red going forward.

It turns out that “free” health care isn’t really free at
all.

How, though, could a single-payer system possibly cost so much?
Aren’t we constantly told that other countries spend far less than
we do on health care?

It is true that the U.S. spends nearly a third more on health
care than the second-highest-spending developed country (Sweden),
both in per capita dollars and as a percentage of GDP. But that
reduction in spending can come with a price of its own: The most
effective way to hold down health-care costs is to limit the
availability of care. Some other developed countries ration care
directly. Some spend less on facilities, technology, or physician
incomes, leading to long waits for care. Such trade-offs are not
inherently bad, and not all health care is of equal value, though
that would seem to be a determination most appropriately made by
patients rather than the government. But the fact remains that no
health care system anywhere in the world provides everyone with
unlimited care.

Moreover, foreign health-care systems rely heavily on the U.S.
system to drive medical innovation and technology. There’s a reason
why more than half of all new drugs are patented in the United
States, and why 80 percent of non-pharmaceutical medical
breakthroughs, from transplants to MRIs, were introduced first
here. If the U.S. were to reduce its investment in such innovation
in order to bring costs into line with international norms, would
other countries pick up the slack, or would the next revolutionary
cancer drug simply never be developed? In the end, there is still
no free lunch.

American single-payer advocates simply ignore these trade-offs.
They know that their fellow citizens instinctively resist rationing
imposed from outside, so they promise “unlimited” care for all,
which is about as realistic as promising personal unicorns for all.
In the process, they also ignore the fact that many of the systems
they admire are neither single-payer nor free to patients. Above
and beyond the exorbitant taxes that must almost always be levied
to fund their single-payer schemes, many of these countries impose
other costs on patients. There are frequently co-payments,
deductibles, and other cost-sharing requirements. In fact, in
countries such as Australia, Germany, Japan, the Netherlands, and
Switzerland, consumers cover a greater portion of health-care
spending out-of-pocket than do Americans. But American single-payer
proposals eliminate most or all such cost-sharing.

Adopting a single-payer system would crush the American economy,
lowering wages, destroying jobs, and throwing millions into
poverty. The Tax Foundation, for instance, estimated that Sanders’s
plan would have reduced the U.S. GDP by 9.5 percent and after-tax
income for all Americans by an average of 12.8 percent in the long
run. That is, simply put, not going to happen. So Americans are
likely to end up with a lot less health care and than they have
been promised.

Santa Claus will always be more popular than the Grinch. But the
health-care debate needs a bit more Grinch and a lot less Santa
Claus. Americans cannot have unlimited care, from the doctor of
their choice, with no wait, for free. The politician that tells
them as much will not be popular. But he or she may save them from
something that will much more likely resemble a nightmare than a
utopian dream.

Michael
Tanner
is a senior fellow at the Cato Institute, a free-market
oriented think tank.

Try as It Might, Ballistic Missile Defense Won’t Solve the United States’ North Korea Problem

Eric Gomez

While North Korea has not yet tested an intercontinental
ballistic missile (ICBM), the
pace
of
missile testing

under Kim Jong-un
indicates steady progress. Yet the
continental United States has missile defense systems in place, so
there’s nothing for Americans on the mainland to worry about,
right?

Well, not quite. The only system capable of defending the United
States from an ICBM attack is the
Ground-Based Midcourse Defense (GMD) system
, which was

successfully tested Tuesday
. The test, featuring a new and
improved kill vehicle, was the first intercept test since 2014 and
the first one involving a target missile that simulated an
ICBM.

However, it would be unwise for policymakers or the American
people to assume that the GMD could
reliably defend the U.S. homeland
from a North Korean ICBM.
While Tuesday’s test was more realistic than previous ones, it was
still tightly controlled and predictable compared to a wartime use
of an ICBM by North Korea. Moreover, expanding the quantity and
quality of U.S. homeland missile defense systems could prompt
negative countermoves by other nuclear powers.

Americans should not
breathe easy just because of one successful ground-based midcourse
defense (GMD) system test.

Three important technical caveats should curb the enthusiasm of
missile defense advocates. First, the target missile barely
qualified as an ICBM. Such missiles have a
minimum range of 5,500 km
. According to a
pre-test analysis by Laura Grego
at the Union of Concerned
Scientists, the target missile used in the test had a range of
approximately 5,800 km. Any North Korean ICBM would have to fly
much farther than 5,800 km to reach U.S. territory, which means a

faster burnout speed
for the missile. A North Korean ICBM
headed for Hawaii or the mainland United States would be
moving faster than the target missile
used in Tuesday’s
test, which makes a successful intercept more difficult.

Second, the kill vehicle tested Tuesday is not widely deployed
across the GMD system. Two kill vehicles are
currently deployed across the system
in large numbers, the

CE-I and the CE-II
. Neither of these models has been tested
against an ICBM target, and both have
low success rates in intercept testing
. The kill vehicle used
in yesterday’s test, the CE-II Block 1, is not yet deployed
on the GMD fleet.
According to a recent report by the Center for Strategic and
International Studies
, by the end of 2017 there should be eight
CE-II Block 1 kill vehicles out of 44 total.

Finally, the test was scripted and far less complicated than a
North Korean wartime ICBM launch would be. The launch point of the
target ICBM was also known in advance of the test, which makes it
easier to intercept. In an actual conflict it is highly unlikely
that the North Korean ICBM launch point would be known in advance,
especially since
all of North Korea’s ballistic missiles are mobile
.

Homeland missile defense advocates will likely use the
successful test to push for the continued development and expansion
of the GMD, despite its
limited track record of success and high cost
. Senator Dan
Sullivan from Alaska
praised the test on Facebook
, saying “we need to do more
to ensure that our missile defense system continues to advance
ahead of the rapidly increasing North Korean threat.” On May
22, Sullivan and several other senators introduced the
Advancing America’s Missile Defense Act of 2017
, which
would add 28 GMD interceptors and accelerate environmental impact
statements for additional interceptor sites. Some experts have
called for expanding the number of GMD interceptors even further.

A Defense News article by Thomas Karako and Ian
Williams
argued that at current rates of production there could
be 80 interceptors deployed by 2020.

Expanding homeland missile defense may bolster deterrence
against North Korea, but it could also lead to negative
consequences for
strategic stability
with other countries,
especially China
. In order for nuclear deterrence to be
credible, countries have to be confident in the ability of nuclear
weapons to reach their target. Increasing the quality or quantity
of U.S. homeland missile defense reduces the chance that nuclear
weapons can hit the United States. Therefore, China will face
pressure to
counteract U.S. missile defense developments
to preserve
confidence in their own deterrent.

The recent success of the GMD system seems like an impressive
feat on the surface, but the caveats and consequences of its
success should give policymakers and the American people pause. The
test does not prove that the GMD would succeed in defending against
a North Korean ICBM attack. Furthermore, using the test as a
rationale for expanding U.S. homeland missile defense could carry
negative long-term consequences. Missile defense systems
shouldn’t lull anyone into a false sense of security.

Eric Gomez is a
policy analyst for defense and foreign policy studies at the Cato
Institute.

Corbyn and McDonnell’s Dark Vision of a Venezuelan Britain

Ryan Bourne

Politicians regularly claim elections are crucial to the future
of the country. Few are.

At times of consensus, as between 1945 and the 1970s, or 1997
and 2010, it probably did not make a huge difference who was in
power.

But this Thursday, Britain faces a stark choice. On one hand, a
continuity Conservative government keen to deliver Brexit. On the
other, a Labour leadership determined to launch a pre-Thatcherite
economic transformation of Britain.

There is, quite simply,
no economic or liberal case for Corbyn’s Labour.

Just a month ago, Labour seemed irrelevant. Economic liberals
had the luxury of slamming Conservatives for their energy price
caps and arbitrary migration targets. But now some polls show
Labour within a few points of the Tories.

The prospect of Jeremy Corbyn as Prime Minister and John
McDonnell as chancellor is real. The time for false equivalence is
over — this Labour party would be calamitous for our
economy.

Corbyn has publicly supported the government of Venezuela, a
country destroyed by socialist economics and currently ravaged by
mass protests, food shortages, spiralling violence and
hyperinflation.

Meanwhile, McDonnell has talked of “fermenting the
conditions to overthrow capitalism”, nationalising the entire
banking system and forcing the Bank of England to overtly finance
government spending. In other words, the economics of a banana
republic.

This is important. After the publication of Labour’s
manifesto, left-wing pundits swarmed to portray it as a moderate
social democratic agenda.

But Corbyn and McDonnell’s comments above show the
ideological star that guides them. The manifesto is the thin end of
the wedge. Even then, the sum of its policies would slow growth and
reverse the liberal economic order built up over three decades.

The tax burden would be raised to its highest level since the
1940s. Marginal tax rates for mobile high earners would be raised,
even though the exchequer is dangerously dependent on them already.
The government would go on an infrastructure spending binge, a
recipe for cronyism and pork-barrel politics. Collective bargaining
would return, bringing with it the industrial unrest that brought
the country to its knees in the 1970s, when rubbish went
uncollected and bodies unburied.

Rent controls and huge council house building would destroy the
private rental sector and trap people in areas of deprivation.
European-style regulation of the labour market would result in
continental European rates of unemployment. The long-term debt
outlook would deeply worsen, as Labour commits to cancelling
planned increases in the state pension age, and nationalises social
care further.

That is to say nothing of the party’s disdain for property
rights. Football club owners will be forced to offer shares to
supporters when selling. Bank branch closures would have to be
approved by government and workers given first refusal to buy their
company.

Corbyn has even talked before about granting a “right to
buy” to renters and introducing a “maximum
wage”.

The combined damage of these ideas cannot be downplayed. These
policies led to the disastrous relative decline in productivity and
living standards here in the post-war period. The results today
would be no different.

We could expect lower private investment, higher government
debt, a flight of talent and capital, higher levels of unemployment
and the insider-outsider politics of conflict that built up slowly
through the 60s and 70s.

Of course, some liberal-minded voters might be tempted by
Corbyn’s perceived ability to prevent a clean Brexit. But
even this would be misguided.

Corbyn has for years opposed the EU on socialist grounds. He
demanded Article 50 be invoked straight after the referendum. His
manifesto says that Labour would keep the UK in the Single Market
but also control migration — something the EU has said would
be impossible.

And we know from his pronouncements that his vision of
post-Brexit Britain would mean more protectionism under the guise
of “raising standards” and “protecting
jobs”.

There is, quite simply, no economic or liberal case for
Corbyn’s Labour. They offer no coherence on Brexit, the
biggest issue of the day. Instead they promise steps towards
socialist populism, where the state does everything but let us be
free and prosperous.

Ryan Bourne
occupies the R Evan Scharf Chair in the Public Understanding of
Economics at the Cato Institute in Washington DC.

Dear Jeanne Shaheen: If New Hampshire Can’t Afford Education Programs, Who Can?

Neal McCluskey

Today, Secretary of Education Betsy DeVos testified before a
Senate Appropriations subcommittee to defend the Trump
administration’s proposed education budget, which would
cut about $9 billion
from around a $68 billion baseline. Taking

it all in
, you could easily get the impression that no state
could ever possibly handle the education of their own children, at
least financially.

As Sen. Jeanne Shaheen, D-N.H., protested during a discussion of
eliminating the 21st Century Community Learning Centers program, “A
state like New Hampshire doesn’t have the funds to put together
programs if you take away the federal dollars that support these
at-risk kids.”

Set aside that the 21st CCLC program was found largely
ineffectual, if not a negative influence, by
top-quality federal assessments
. The immediate question is: If
New Hampshire could not afford to pay for currently federal
programs, assuming its taxpayers got to keep the money from federal
cuts, who the heck could? The Live Free or Die State has the
seventh-highest median household income in the country.

New Hampshire would have to be able to afford it. Or at
least it absolutely should be able to.

You see, the money to pay for federal education programs has to
come from somewhere. And from whence does it come? People —
we call them taxpayers — who live in states.

Sooner or later the bill
for federal education programs will come due. Acting like
Washington funds them without real costs to taxpayers just puts off
the day of reckoning.

When the federal government pays for something, including
education, it does so by taking money and redistributing it. New
Hampshire, as one of the wealthiest states, logically should be a
net contributor, not a net taker, and hence should be more than
able to pay for services currently furnished by Washington if state
taxpayers were to keep their dough.

This leads to two disturbing conclusions:

1. Sen. Shaheen said something that is patently incorrect.

or

2. The federal government is uniquely able to pay for programs
like the 21st CCLC because only it can repeatedly spend money it
does not actually have. Of course, it does so by constantly
expanding the yawning debt that real, but future, taxpayers will
have to pay.

Sooner or later the bill for federal education programs will
come due. Acting like Washington funds them without real costs to
taxpayers just puts off the day of reckoning.

Neal
McCluskey
is a contributor to the Washington Examiner’s
Beltway Confidential
blog. He is the director of the Cato
Institute’s Center for Educational Freedom and maintains Cato’s
Public Schooling Battle Map.

Britain’s Economically Illiterate Election

Ryan Bourne

Economics is not the most important thing in life, and often not
in public policy. But it is the area of activity where governments
most frequently mess up, with disastrous consequences for living
standards.

So at a time when Britain faces the all-encompassing challenge
of Brexit, continued weak productivity growth and a rapidly ageing
population, it’s quite shocking that we have not had a proper
economic debate in this election. Without it, we face huge
unanswered questions about Britain’s future.

Take Brexit. Both party leaders say they are reconciled to it.
But neither has outlined an agenda for using the newly repatriated
powers to improve economic outcomes. Jeremy Corbyn’s Labour manifesto
somewhat bizarrely claims that we can be in the single market and
customs union and also control migration, but offers little else.
The message seems to be that the status quo is the pinnacle of our
ambition.

Theresa May wants to leave the customs union and single market,
but has said next to nothing about how she will make a success of
it. Yes, she wants to sign a UK-EU free trade deal and new deals
with third parties. But this is not solely within her control.

We are set to experience
the biggest shift in power over economic policy since we entered
the EU, and yet neither party leader has said anything about how
they would like to use these levers.

On the matters that are within her control — reducing
tariffs unilaterally, regulatory change, agricultural reform,
devolving specific powers to even lower levels and redeploying
budget contributions — she has been silent. No areas in which
supply-side reform could improve our growth performance have been
outlined.

This is extraordinary. We are set to experience the biggest
shift in power over economic policy since we entered the EU, and
yet neither party leader has said anything about how they would
like to use these levers.

But the poverty of our economic debate goes beyond Brexit. Even
where economics has been mentioned during the election campaign, it
was overly focused on public-finance bean-counting.

Labour commentators were right to lament last week that the
“IFS approach” to examining the costs of policies was
too partial and static, because it ignored economic growth. Yet in
the next breath, they themselves were using static estimates of how
much they would raise from hiking up corporation tax, i.e. ignoring
its impacts on behavior and growth.

The media’s obsession with “costings” of
manifestos also means there is too much focus on how new measures
will be paid for and to little on terrible ideas which have
unquantifiable effects on economic activity.

So we focus on whether Jeremy Corbyn can remember how much his new
childcare pledges will cost
, while ignoring the way that
nationalisation (which Corbyn wants more of) lowers productivity.
The media speculates about how much a social care cap would cost,
but pays less attention to the unknown (but surely negative) impact
of the Conservatives’ migration target — and in
particular, the inclusion of overseas students.

The result is that a false equivalence develops. Both parties
are seen as being dishonest about where the money will come from,
which has some truth. But is this really more significant than the
fact that Jeremy Corbyn wants a pre-Thatcherite transformation of
the economy? Is it really more economically important than his
desire for a return to collective bargaining, high marginal income
and corporate tax rates, nationalisation, industrial councils, huge
increases in labour market regulation and an undermining of
property rights?

True, each individual measure he proposes might not do much
damage. But the UK has been down this road before: a similar policy
framework led to significant relative decline in the 1960s and
1970s, only reversed when Margaret Thatcher, John Major and Tony
Blair changed course. While May has certainly ignored economics,
her relatively mainstream platform is certainly not comparable with
his.

Even when we do focus just on the public finances, as all the
commentators seem to do, we miss what matters: the long-term path
of debt. The parties quibble over whether to include public
investment in deficit targets — yet both offer up a relaxed
ambition to get debt on a downward path.

They agree that the growing pensioner population deserves an
ever more generous state pension compared with wage growth, pass
over reforms to the NHS and believe that the state should now start
subsidizing inheritances for those in need of social care. Corbyn
even wants to cancel rises in the state pension age, which would
shrink the working-age population at just the time when the costs
of provision for retirees is rising rapidly.

The result? Whoever wins, we are sailing into a demographic
headwind without repairing or preparing the public finances.

This election, in other words, has ignored the economics of
Brexit, obsessed about the “costs” of policies while
downplaying the damage they will do, ignored the importance of
growth and kicked the can down the road on long-term debt.

There has, in other words, been no proper economic debate
— let alone any serious ambition regarding our future
prosperity. The resulting vacuum has been filled by a “plague
on all your houses” mentality among the commentariat, which
downplays both the radical nature of Corbyn’s manifesto and
the significance of the risks and opportunities of Brexit.

Why has this happened? Perhaps the failure of the Remain
campaign has made politicians wary of using economic scare tactics.
Maybe politicians of all parties believe the referendum result was
a cry for new levels of state intervention. Perhaps politicians
calculate that voters are bored of economics full stop.

Whatever the reason, economics has not just taken a back seat
during this campaign — it’s been the real loser.

Ryan Bourne
holds the R Evan Scharf Chair for the Public Understanding of
Economics at the Cato Institute

Is an Allowance for All Americans as Crazy as It Sounds?

Michael D. Tanner

Looking for the next big political idea? How about this: Let’s
scrap our entire social welfare system, including all of our
anti-poverty programs, unemployment insurance, Medicare and even
Social Security. In its place, just send every American a
no-strings-attached check for enough money to ensure that no one
falls below the poverty line.

Controversial? Absolutely. Politically explosive? Almost
certainly. Crazy? Maybe not. In fact, a growing and diverse group
of people from across the political spectrum have been debating
just such an approach to revamping the safety net. The latest is
Facebook founder and CEO Mark Zuckerberg, who
told graduating Harvard students last week that we should blow up
the existing New Deal-based social contract and replace it with a
universal basic income (UBI).

In calling for a universal basic income, Zuckerberg joins a
growing number of Silicon Valley entrepreneurs who back a UBI.

The current welfare state
is a clear failure. A universal basic income may or may not provide
a better alternative, but it’s almost certain we will hear a great
deal about in the next few years.

To be sure, there is a fair degree of self-interest in the tech
community’s call for a universal basic income. There has been
growing concern in some arenas that advances in automation and
artificial intelligence could lead to widespread job loss,
especially for low-skilled workers. The fear is that politicians
may respond by limiting technology or imposing other burdens on the
industry.

Already, San Francisco is debating a ban on robotic delivery
vehicles. A UBI is seen as a way to ameliorate the pain of a
changing work environment without retreating into luddism.

But there may be other reasons to consider replacing the
existing welfare state with a universal basic income. The most
obvious one is that current welfare programs have so clearly failed
to help people escape poverty. The federal government currently
funds more than 100 separate anti-poverty programs, at an annual
cost of nearly $700 billion per year.

State and local governments spend another $300 billion per year
on anti-poverty programs. Yet, despite this roughly $1 trillion investment, poverty rates
(even using more accurate alternative measures) have not
significantly improved since the 1970s, and economic mobility among
the poor remains stagnant.

A universal basic income would have several advantages over the
current welfare system. It would obviously be simpler and far more
transparent than the hodgepodge of existing anti-poverty programs.
With different, often contradictory, eligibility levels, work
requirements and other restrictions, our current welfare system is
a nightmare of unaccountability that fails to effectively help
people transition out of these programs and escape poverty.

Finally, and perhaps most importantly, a UBI would provide far
better incentives when it comes to work, marriage and savings.
Because current welfare benefits are phased out as income
increases, they, in effect, create high marginal tax rates that can
discourage work or marriage. In contrast, a universal basic income
would not penalize someone who left welfare for work.

For those who believe in getting government out of people’s
lives, a UBI would also be far less paternalistic, expecting the
poor to budget and manage their money like everyone else. It all
adds up to a strong case, yet there are also serious
trade-offs.

For example, a recent study from scholars at the American Enterprise Institute suggests that the
only way to afford a universal basic income would be to replace not
just anti-poverty programs and unemployment insurance, but also
middle-class entitlements, such as Social Security and Medicare.
The poor would be big winners under such a shift, but politically
powerful seniors would lose out. That seems like a political
nonstarter.

A negative income tax, which limited the basic income to
lower-income people, would be more affordable, but would also
import all the complexity, fraud and abuse of the current U.S. tax
code. For example, how would a negative income tax handle someone
who had little income but substantial assets? It would also
recreate many of the same incentive problems we see in the current
welfare systems, imposing high effective marginal tax rates, which
discourage work.

Moreover, as with other government programs, there would be
constant pressure to expand benefits. Once we’ve established
the idea that people are “entitled” to an income, it
becomes much harder to say “no” in the future. How long
would it be before we heard that no one can live on whatever
benefit the UBI provides at the moment?

Finally, we should be careful of the illusion of bipartisan
agreement on the issue, even among its advocates. Free-market
advocates see the UBI as a replacement for the existing welfare
state. Many on the left call for a UBI as an additional benefit on
top of existing programs, funded through new taxes on carbon,
natural resources, businesses, or “the rich.” Bridging
those differences will likely be much harder than advocates on both
sides may believe.

Still, advocates of free markets and welfare reform should not
dismiss the idea out of hand. The current welfare state is a clear
failure. A universal basic income may or may not provide a better
alternative, but it’s almost certain we will hear a great
deal about in the next few years.

Michael
Tanner
is a senior fellow at the Cato Institute, a free-market
oriented think tank.

Restoring Justice to all in Tennessee

Tim Lynch

The U.S. Supreme Court has ruled that every state must provide
counsel for criminal defendants who can’t afford one.

At first, the ruling was widely celebrated as a victory for the
poor, but the right to adequate legal representation has been
severely undermined by overcrowded court systems.

Imagine an injured person arriving at a hospital only to wait
hours to see a busy doctor with inadequate supplies of the
necessary medicine.

This has been a concern for State Supreme Court Justice Sharon
Lee, who decided that the state “can’t keep doing the
same thing and hoping for a different result.”

State policymakers have
let the indigent defense problem fester long enough. It’s time to
get on with the job of fixing it.

In 2015, Justice Lee established a special Indigent
Representation Task Force with orders to find solutions. After 18
months, the Task Force released a report detailing
Tennessee’s underfunded indigent defense system.

Although the results are bleak, other parts of the country may
have a solution worth importing.

Currently, Tennessee provides legal representation to indigent
defendants by way of three separate bodies: a capital
post-conviction office, the district defender office system, and
the private attorney appointment system.

The Task Force found that all three are critically underfunded,
with a disproportionate amount of funding being allocated to the
many sparsely-populated districts at the expense of urban areas
with larger caseloads.

As Tennessee’s public defender system was coping with
overcrowded courts, the state increasingly turned to the private
attorney appointment system. Judges appoint a private attorney to
take the case, who is then paid a fixed hourly rate.

The Task Force notes that these rates haven’t changed
since 1997, and are often not sufficient even to cover an
attorney’s expenses. That explains why attorneys are
reluctant to accept more indigent clients.

While underfunding is an important element of Tennessee’s
indigent defense problem, the Task Force did not focus on other
promising models that deliver legal services to the poor.

For example, in 2012, big change came to the indigent defense
system in Comal County, Texas.

Inspired by similar programs in England and Canada, the Texas
Indigent Defense Commission assembled a team of judges, law
professors, and practicing attorneys to design and implement
America’s first ever Client Choice program.

Under the new program, indigent defendants were allowed to
select their own attorney from a list approved by Comal County
judges.

The idea was to improve the quality of indigent defense
representation by establishing a stronger “customer”
relationship, incentivizing the attorney to invest more time and
effort into each individual case.

To get more clients, attorneys will try to enhance their
reputations by fighting harder. After all, that’s the market
dynamic for legal services for wealthy and middle-class
families—when they need an attorney, they ask around for who
does good work.

A new report by the Justice Management Institute determined that
Comal County’s Client Choice program produced better results
for indigent defendants without negatively impacting costs to the
taxpayers.

Defendants who participated in the Client Choice program were
2.96 times more likely to plead to a lesser charge than those who
did not participate.

The local judges were surveyed and they said the attorneys that
were chosen were better prepared and met sooner and more frequently
with their clients.

The benefits of Comal County’s Client Choice program are
most desperately needed in states like Tennessee, but they have
much broader implications for America’s criminal justice
system.

Better legal representation from the start of each case means
that defendants will have a greater opportunity to expose mistakes.
Fewer mistakes will mean fewer wrongful conviction lawsuits, which
are ultimately paid by taxpayers.

State policymakers have let the indigent defense problem fester
long enough. It’s time to get on with the job of fixing
it.

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