The NATO summit starts Sunday in Chicago and will be the largest gathering ever held by the alliance. This is fitting given NATO’s desire to act around the globe. While U.S. officials say no decisions on further expanding membership will be made at the meeting, they explain that the door remains open. Adding additional security commitments in this way would be a mistake.  

The United States has always been and will continue to be the guarantor of NATO’s military promises. In reality, NATO could not pay its bills without the United States, much less conduct serious military operations. American alliance policy has become a form of foreign aid. Nowhere is that more true than in Europe.  

America’s alliances once had a serious purpose: to increase U.S. security. NATO joined the United States and Western Europe to prevent the Soviet Union from dominating Eurasia. The alliance lost its raison d’être in 1989 when the Berlin Wall fell. Communist regimes throughout Eastern Europe had toppled. The Warsaw Pact soon dissolved. Ultimately the Soviet Union collapsed.

Yet 23 years later NATO labors on, attempting to remake failed societies and anoint winners in civil wars. There’s no big threat left: Russia isn’t going to revive the Red Army and conquer the European continent. Moscow was barely capable of beating up on hapless Georgia.

Moreover, the Euro zone crisis threatens to turn NATO’s military capabilities into a farce. Virtually every European state is cutting back on its military, even France and Great Britain, which traditionally had the most serious—and most deployable—forces. NATO always looked like North America and The Others. Today the only power prepared to battle even a decrepit North African dictatorship is America.

Yet like the Borg of Star Trek fame, the alliance wants to ever-expand, absorbing every country in its path. Bosnia—an artificial nation who military was cobbled together from three warring factions—hopes to join. So, too, Macedonia, which remains at odds with Greece over its very name. Georgia, which triggered a war with Russia in apparent expectation of receiving U.S. support, wants in. Montenegro, which has no military of note, is also interested.

There is even talk of adding Kosovo, another artificial country in which the majority ethnically cleansed national and religious minorities while under allied occupation. Serbia, bombed by NATO in 1999 and still resisting Kosovo’s secession, is on the long list. As is Ukraine, a country with a large Russophile population and a government that acts more Russian than Western.

Adding these countries would greatly expand America’s liabilities while adding minimal capabilities. The United States would have to further subsidize the new members to bring their militaries up to Western standards while making their disputes and controversies into America’s disputes and controversies. Worst would be expanding the alliance up to Russia’s southern border, giving further evidence to Moscow of a plan of encirclement. As Henry Kissinger once said, even paranoids have enemies. Indeed, Washington would not react well if the Warsaw Pact had included Mexico and Canada.

The United States cannot afford to take on more allies and effectively underwrite their security. It is not worth protecting Georgia at the risk of confronting Russia, for instance. Moreover, now is the time to end this foreign aid to wealthy European countries. The Europeans have a GDP ten times as large as that of Russia. Europe’s population is three times as big. The Europeans should defend themselves.  If they want to expand their alliance all around Russia, let them. But the U.S. government, bankrupt in all but name,

NATO Has Become a Form of U.S. Foreign Aid is a post from Cato @ Liberty – Cato Institute Blog

Yesterday Professor Giovanni Peri presented an immigration reform plan that would auction work visas to employers.  As I wrote yesterday, Peri’s plan would diminish the misallocation of current visas but not do much to increase the quantity of work visas.  Since the real problem with America’s immigration system is a lack of work visas and green cards, Peri’s plan seeks to solve a rather miniscule problem by comparison.

Proponents of selling visas either support auctioning a limited number of visas to the highest bidders or establishing a tariff that sets prices but allows the quantity to adjust.  An immigration tariff is far superior to an auction of numerically limited work visas.  You can read my proposal in more detail here or listen  me explain it here.

Here are three reasons why an immigration tariff is better than an auction:

First, a tariff is the most market friendly way of restricting work visas.  Limiting the government’s role to setting the price of work visas, allowing the purchased quantities to adjust, would make for a much more market-friendly and flexible system.  A tariff would decrease immigration relative to open borders, but misallocation isn’t a big concern because immigrants with the most to gain would pay the tariff.

Second, an immigration tariff is more economically efficient because the quantity of work visas would adjust to market demand unlike an auction of numerically limited work visas.  When there is economic growth more people would buy work visas to keep pace with labor demand.  In slow economic times the number of visa purchases would automatically shrink.  With an immigration tariff, there is no need for a government commission to somehow figure out how many are demanded.  They can just set the price and let the market figure out the quantity.

Third, an auction system will not do much to diminish unauthorized immigration going forward.  An immigration tariff allows immigrants, temporary workers, American businesses, and families to plan ahead, save, borrow, and pool resources to pay the tariff.  Tariff prices will change, no doubt, but they won’t change all of the time as they would under Peri’s system.  An auction would provide less price certainty, fewer guarantees of entering legally, and incentivize more unauthorized immigration than a tariff.

Selling Work Visas: Auctions or a Tariff? is a post from Cato @ Liberty – Cato Institute Blog

Professor Giovanni Peri today made an interesting proposal to auction work visas to the highest bidding employer. His reform is similar to an auction proposal made by Gary Becker, but more specific. His idea is innovative and deals with transitioning from the current maze of quotas, visa categories, and other barriers to a more open system that better allocates visas to the highest bidders.

The one  problem with Peri’s proposal is that it does not meaningfully increase the number of work visas. The limited number of work visas, not the distribution, is the main problem with America’s immigration system.  Instead, he calls for reallocating visas from families to the employment based category. He then wants American employers to bid for the limited quantity of work visas issued quarterly. A government commission would adjust the quantity and immigrants would be free to move between employers who purchase visas.

Economists like Becker and Peri are rightly concerned with how societies allocate scarce resources to different uses, but the scarcity of work visas is an artificial one created by the government, not one that results from a scarcity of the factors of production or other inputs. This is why there should be no numerical limits on the quantity of work visas issued even if they are priced. Charging for work visas is a substantial improvement over the current system, as I say here, here, here, and here. Most of the welfare gains come from allowing the quantity of visas to adjust to the price, not the other way around. An efficient visa selling process will operate more like a tariff than an auction.

For normal goods and services, a rising price incentivizes consumers to limit their consumption and producers to increase production. A government commission tasked with adjusting visa quantities would face political rather than market incentives and not increase visas in response to rising prices. Unless the incentives are carefully aligned, the result would probably be a more arbitrary and numerically limited immigration system.

Another problem with Peri’s proposal is that it only allows employers to bid for work visas. Immigrants should also be able to bid because they have the most to gain from migrating and have a better notion of their value on the labor market. Immigrants already pay to be smuggled into the United States—some Chinese pay $75,000 per person—so that money might as well be collected by the federal government instead of a coyote. If employers buy visas for specific immigrants, contracts or bonds can effectively guarantee compliance.

Peri’s proposal is a thoughtful and serious attempt to reform immigration but it does not address the main problem with our immigration system: too few work visas.

Selling Work Visas is a post from Cato @ Liberty – Cato Institute Blog

Earlier this month, it was my distinct privilege to moderate a panel of renowned authors and activists from around the globe at the PEN World Voices festival, to discuss “Life in the Panopticon.” The folks at PEN have since posted the prepared version of my opening remarks, which try to get at the special relevance of literature to our understanding of these issues:

When we talk about surveillance and privacy—perhaps more than any other political question—we speak a language borrowed from fiction. When we’re worried about the civil liberties implications of the Patriot Act or wiretapping by the National Security Agency, we may say they are “Orwellian,” or raise the specter of “Big Brother” government. As we slip off our shoes, separate our mini-shampoo bottles, and raise our arms for the friendly agent of the Transportation Security Administration, the word “Kafkaesque” may leap to mind unbidden.

And then, of course, we have the Panopticon. In 1787, when the philosopher Jeremy Bentham first imagined a prison on the model of an “inspection house,” architected to enable total surveillance of its inmates (or patients, or students), he believed himself to be writing non-fiction—a proposal for a real structure. But the modern reader is far more likely to have encountered the Panopticon by way of Michel Foucault, whose seminal Discipline and Punish invoked it as a kind of fable or metaphor to illustrate the principle of control through observation. Though prisons on Bentham’s model were eventually constructed—long after his death—for us it is, above all, a useful fiction.

It is a fiction with increasing relevance, as technology tears down the walls of Bentham’s prison, and embeds panoptic architectures in the camera networks trained on our public streets, the computers in our homes, and the phones in our pockets. If we insist on giving it a physical address, the modern panopticon might be the massive data storage facility being constructed in Salt Lake City Utah by the National Security Agency, which will allow the complete storage of all Internet communications—or the facilities where Chinese censors aided by powerful algorithms strictly enforce the parameters of acceptable online discussion.

As the Slovenian philosopher Miran Bozovic has observed, the Panopticon is actually a fiction within a fiction: it is not the warden’s real monitoring that makes the Panopticon’s discipline effective, but the idea of the observer, hidden from view by the panoptic architecture, that forces the prisoners to always act as though they could be under surveillance. In the most efficient prison, the tower can be empty—the observer a complete fiction—so long as the inmates believe in his presence. If you want to deprive online dissidents of the advantages of Internet communications, the fiction of omniscience may be better than the real thing: the story, unlike the real policeman, can build its outpost in the citizen’s mind.

If the purpose is to gather intelligence rather than exert discipline, of course, the opposite fiction is needed—the fiction of privacy that induces the target to lower his guard and disclose his secrets. When the courts belatedly began to impose limits on the warrantless wiretapping program inaugurated by President Bush, administration officials loudly declared that the intelligence agencies had been struck blind, which we now know was almost certainly another fiction.

For both purposes—intelligence and deterrence—as far as the government is concerned, the less the public knows about the detailed structure and capabilities of the Panopticon, the better. This secrecy is the source of the familiar tension between the imperatives of intelligence and those of liberal democracy under accountable government. It may also be why we so often turn to fiction to understand surveillance—to shine a spotlight on the invisible observer, and hear the dissident voice that, in reality, falls silent under the panoptic gaze.

Our ability to understand the realities and dangers of surveillance, then, depends crucially on the stories we tell. The dystopia of Nineteen-Eighty Four is not that of Brave New World—even if our reality contains the seeds of both. The legal scholar Daniel Solove, in his important book The Digital Person, argues that modern threats to privacy are better understood through the lens of Kafka than Orwell—and that by relying too heavily on Big Brother metaphors, we misunderstand where the most pressing threats lie. If the Panopticon is made of stories, so is the gate that might lead us out of it.

Remarks on Fiction and Surveillance from PEN World Voices is a post from Cato @ Liberty – Cato Institute Blog

The Washington Times today discusses whether Mitt Romney’s political and policy team is looking too much like George W. Bush’s team. The reporter quotes me in his article:

Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian-leaning think tank, offered glowing reviews of Mr. Romney’s troika of advisers—Mr. Hubbard, Mr. Mankiw and Kevin Hassett, another former member of the Bush team—on issues of taxation and economic policy.

“These are brilliant economists,” Mr. Edwards said before cautioning that Mr. Romney shouldn’t look to Mr. Bush’s team on the spending side.

“A key failing of Bush was that he spent far too much money. Bush’s Office of Management and Budget chiefs, like Joshua Bolten, were not spending cutters. Indeed, they were believers in big government like Bush was,” he said.

“So,” he said, “Romney needs spending-cutting experts to complement these tax experts. Our giant $1 trillion deficits and huge Obama spending increases will be the key thing Romney needs to tackle if he is elected.”

“So he needs experts on how to cut, privatize and downsize federal departments like Housing and Urban Development, Energy and Education. If elected, he needs a hard-line spending-cutting OMB chief. He needs Cabinet secretaries who believe in cutting their own departments.”

Romney Needs Spending Cutters is a post from Cato @ Liberty – Cato Institute Blog

As Tad has noted, Thumbtack.com in cooperation with the excellent Kauffman Foundation of Kansas City has produced this attractive, clickable map of the 50 states displaying the results of a survey of small-business friendliness. It’s worth checking out your state’s standing, as well as that of states with which it competes for new business. To a large extent the findings come in just about where one would expect:

• California plus the Northeast (aside from New Hampshire) are the most unfriendly overall. Add in the trio of Midwest industrial states (Illinois, Michigan, Ohio) plus Washington and Hawaii and you get the full list of seriously unfriendly states, with “D+” or worse grades.
• The list of best states also includes few surprises: Texas, Oklahoma, Idaho, Utah, Virginia and several other Southern states.
• Virginia (grade of A) far outdistances Maryland (C-), notwithstanding the views of Washington Post business writers who often chide the Old Dominion for not emulating the economic policies of its neighbor to the north.
• Other states, even in the Northeast, tend to do OK in one or two areas—New Jersey and Vermont avoid piling costs onto new hiring, Connecticut and Illinois are not entirely hopeless on zoning, and so forth. The exception is California: it’s awful on everything.

There are also some data available on the city level.

Tad and Econlog’s David Henderson pick up on the following remarkable sentence from the study:

Small businesses care almost twice as much about licensing regulations as they do about tax rates when rating the business-friendliness of their state or local government.

Everyone knows high taxes depress business activity; it is libertarians who go on to offer a critique of licensure laws, and never has it seemed so relevant.

Survey: Which States Are Small-Business-Friendly? is a post from Cato @ Liberty – Cato Institute Blog

It is very sad that America’s tax system is so onerous that some rich people feel they have no choice but to give up U.S. citizenship in order to protect their family finances.

I’ve written about this issue before, particularly in the context of Obama’s class-warfare policies leading to an increase in the number of Americans “voting with their feet” for places with less punitive tax regimes.

We now have a very high-profile tax expatriate. One of the founders of Facebook is escaping to Singapore. Here are some relevant passages from a Bloomberg article.

Eduardo Saverin, the billionaire co-founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill. …Saverin’s stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. …Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. …“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” said Tom Goodman, a spokesman for Saverin, in an e-mailed statement. …Singapore doesn’t have a capital gains tax. It does tax income earned in that nation, as well as “certain foreign-sourced income,” according to a government website on tax policies there. …Renouncing your citizenship well in advance of an IPO is “a very smart idea” from a tax standpoint, said Avi-Yonah. “Once it’s public you can’t fool around with the value.” …Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records. …“It’s a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice,” said Richard Weisman, an attorney at Baker & McKenzie in Hong Kong. “The tax cost, complexity and the traps for the unwary are among the considerations.”

What makes this story amusing, from a personal perspective, is that Saverin’s expatriation takes place just a couple of days after my wayward friend Bruce Bartlett wrote a piece for the New York Times in which he said that people like me are exaggerating the impact of taxes on migration. Here are some key excerpts from Bruce’s column:

In recent years, the number of Americans renouncing their citizenship has increased. …This led William McGurn of The Wall Street Journal to warn that the tax code is turning American citizens living abroad into “economic lepers.” The sharply rising numbers of Americans renouncing their citizenship “are canaries in the coal mine,” he wrote. The economist Dan Mitchell of the libertarian Cato Institute was more explicit in a 2010 column in Forbes, “Rich Americans Voting With Their Feet to Escape Obama Tax Oppression.” …[T]he sharp rise in Americans renouncing their citizenship since 2008 is less pronounced than it appears if one looks at the full range of data available since 1997, when it first was collected. As one can see in the chart, the highest number of Americans renouncing their citizenship came in 1997. …The reality is that taxes are just one factor among many that determine where people choose to live. Factors including climate, proximity to those in similar businesses and the availability of amenities like the arts and cuisine play a much larger role. That’s why places like New York and California are still magnets for the wealthy despite high taxes. And although a few Americans may renounce their citizenship to avoid American taxes, it is obvious that many, many more people continually seek American residency and citizenship.

I actually agree with Bruce. Taxes are just one factor when people make decisions on where to live, work, save, and invest.

But I also think Bruce is drinking too much of the Kool-Aid being served by his new friends on the left. There is a wealth of data on successful people leaving jurisdictions such as California and New York that have confiscatory tax systems.

And there’s also a lot of evidence of taxpayers escaping countries controlled by politicians who get too greedy. Mr. Saverin is just the latest example. And I suspect, based on the overseas Americans I meet, that there are several people who quietly go “off the grid” for every person who officially expatriates.

The statists say these people are “tax traitors” and “economic Benedict Arnolds,” but those views are based on a quasi-totalitarian ideology that assumes government has some sort of permanent claim on people’s economic output.

If people are leaving America because our tax law is onerous, that’s a signal we should reform the tax code. Attacking those who expatriate is the fiscal version of blaming the victim.

Facebook Billionaire Gives Up Citizenship to Escape Bad American Tax Policy is a post from Cato @ Liberty – Cato Institute Blog

In 1972, the Club of Rome published an extremely popular and influential neo-Malthusian tract called The Limits to Growth. This apocalyptic warning about over-population, over-consumption, and environmental destruction sold some 12 million copies and was translated into 37 languages. According to the authors of The Limits to Growth, “Serious stresses involving population, resources, and environment are clearly visible ahead. Despite greater material output, the world’s people will be poorer in many ways than they are today.”

How accurate were those predictions? As I wrote on May 4 in the Washington Times, since the late 1960s,

 [The] world population has doubled from 3.5 billion to 7 billion, inflation-adjusted average annual income per person has risen from $3,147 to $5,997, and life expectancy at birth has increased from 59 years to 69 years.

The world’s daily caloric intake per person rose from an average of 2,610 in 1990 to 2,790 in 2006…. In sub-Saharan Africa, the caloric intake increased from 2,290 to 2,420 in just 16 years. To put these figures in perspective, the U.S. Department of Agriculture recommends that adult men eat between 2,000 and 2,500 calories a day and women between 1,800 and 2,300 calories a day.

Often seen as hopeless, Africa has made other significant gains. In spite of wars, massive economic mismanagement and the ravages of AIDS, the continent’s population has more than trebled — from 280 million to 854 million — since 1968, and life expectancy has increased from 44 years to 54 years.

According to the latest World Bank research, global poverty is declining rapidly. In 1981, 70 percent of people in poor countries lived on less than $2 a day, while 42 percent survived on less than $1 a day. Today, 43 percent live on less than $2 a day, while 14 percent survive on less than $1.

The world is not a perfect place, but the last four decades have not been too shabby as far as growth and human progress are concerned. Bearing that in mind, a bit of soul-searching at the Club of Rome’s HQ in Winterthur, Switzerland, would have been in order.

Instead, the Club of Rome’s latest offering 2052: A Global Forecast for the Next Forty Years, “raises the possibility that humankind might not survive on the planet if it continues on its path of over-consumption and short-termism.” Released on May 7, the report states that “We already live in a manner that cannot be continued for generations without major change. Humanity has overshot the earth’s resources, and in some cases we will see local collapse before 2052.”

Niels Bohr, the famous Danish physicist, is supposed to have said that “prediction is very difficult, especially if it’s about the future.” True, no one has a crystal ball, but human experience points to growing abundance, not looming disaster. It is a pity that the Club of Rome has learned so little from The Limits to Growth fiasco.

Apocalypse 2.0 is a post from Cato @ Liberty – Cato Institute Blog

Yesterday evening I blogged on a pending vote in the House on an amendment introduced by Rep. Mike Pompeo (R-KS) to eliminate funding for the Economic Development Administration. Unfortunately, the amendment failed today on a vote of 129-279. All 175 Democrats voting joined 104 Republicans in keeping the EDA alive.

A single Democrat voting to axe a government program would have been a shock. But congressional Republicans regularly extol the virtues of limited government and free markets. As Rep. Pompeo said in a statement, “If those who talk constantly about rolling back the unsustainable size and scope of the federal government are serious, then they will support my efforts to eliminate the EDA.” Well, 104 Republicans voted to continue spending taxpayer dollars on warmed-over subsidy program that’s been hanging around since the 1960s.

Rep. Kristi Noem (R-SD), for example, voted against the Pompeo amendment. But in a column she penned in April, Noem said “Our debt crisis is a result of Washington spending money it doesn’t have and letting our children and grandchildren pick up the tab.” Noem favors a Balance Budget Amendment and says that “Our government must come together and make the tough decisions to secure our nation’s prosperous future.” Really? Noem says tough decisions need to be made but she can’t even get behind the elimination of the EDA. Talk about chutzpah.

Noem and 85 other Republicans also voted against Rep. Ben Quayle’s (R-AZ) amendment that would have defunded a new corporate welfare program asked for by President Obama in his fiscal 2013 budget proposal. Thanks to the 86 Republicans in the House, instead of terminating programs, taxpayers will get a new one called the Advanced Manufacturing Technology Consortia program.

Negativity aside, Representatives Pompeo and Quayle deserve kudos for actually trying to kill a federal program. Even though their efforts failed this time, they could bear fruit in the future if more members decide that they’d rather not take another vote exposing them to be complete hypocrites.

Republicans Help Save the Economic Development Administration is a post from Cato @ Liberty – Cato Institute Blog

My new piece at Daily Caller looks at how the Democratic Party’s approach to tax policy has changed over the decades.

The piece was prompted by a recent article from Norm Ornstein and Tom Mann claiming that needed bipartisan reforms are being blocked by the new “ideologically extreme” Republican Party.

Baloney. It’s the Democrats who have changed. The party’s leaders have moved far to the left on economic issues.

As evidence, I point to this Cato Journal article from 1985 by Democrat Richard Gephardt, who was a leader on tax reform. As a free-market guy, I agree with the great majority of what Gephardt said, yet I agree with virtually nothing that modern Democratic leaders say about tax policy.

Regarding ridding the tax code of special breaks, Gephardt says, “I confess that I am not qualified to act as a central planner and I do not know anybody on either committee who is.” Amen!

And Gephardt says, “We in Congress take pride in the free market system.” When was the last time you heard a Democratic leader say something like that?
 

Democratic Tax Policy, Then and Now is a post from Cato @ Liberty – Cato Institute Blog