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The New York Times Leaks a Publicly Available Climate Report!

Patrick J. Michaels

On Tuesday, The New York Times breathlessly reported it
“obtained” a draft of an upcoming federal climate
report. It even provided a link!

Actually, anyone who wanted to could have “obtained”
the same document. It’s been available online since January,
making this hardly “news that’s fit to
print.”

The text is more
circumspect, even as it sometimes suffers from cherry-picking of
data in the service of an alarmist picture.

The document, the “Climate Science Special Report” (CSSR)
from the U.S. Global Change Research Program, is a “state of
the science” summary on climate change. It’s a prelude
to the fourth “National Assessment” of climate change
impacts on the U.S. These are quadrennially mandated by the U.S.
Global Change Research Act of 1990.

The math doesn’t comport with the law, though. There has
only been three such documents produced to date, each horrible.
Consequently, many critics (including this writer) have speculated
as to whether the new Administration might squash the new one or
maybe “red team” it. And that is the reason for the
NYT’s story, which really does come very close to
fake news. It is a pre-emptive strike against the Trump
Administration, effectiveness yet to be determined.

There are real reasons to throw sand in the gears of the
National Assessment process. The first one, published in the waning days of the
Clinton-Gore Administration, specifically chose the most extreme
climate models available, and even though after the senior climate
scientist in charge was informed the models were performing worse
than a table of random numbers when simply simulating ten-year
means of U.S. temperatures, the report went forward anyway.

That’s scientific misconduct, and exactly akin to a
physician prescribing a treatment he or she knows does not work.
Even better, the boffins in charge acknowledged in an email they
were aware of this problem. That’s double misconduct.

The second one, which didn’t appear until the
G.W. Bush Administration was out of town, missed so much relevant
science an entire palimpsest was published as criticism. And the
third—not making this up—was touted
by the National Oceanic and Atmospheric Administration as “a
key deliverable of President Obama’s Climate Action
Plan.” There’s no mixing of science and politics in
global warming.

And so people suggesting that the new Administration might want
to have a look at the draft text of the upcoming (2018) version
have a pretty good point, based upon the ugly track records of the
previous work.

The NYT’s “leaked” draft is very interesting.
The Executive Summary, which is all most people will read, is
horrific in spots. But if one takes the time to examine the
relevant subsequent text in the body of the report, it’s a
mixed bag.

Take one phrase from the Summary: “Some storm types such
as hurricanes, tornadoes, and winter storms are…exhibiting
changes that have been linked to climate change”. It’s
really hard to imagine some “executive” reading the
summary not concluding that these types of significant storms are
being juiced by global warming, which of course is the intent.

But the text is more circumspect, even as it sometimes suffers
from cherry-picking of data in the service of an alarmist picture.
For example, it correctly states that “no consensus has been
reached” on whether there is a human influence, or the
magnitude of that influence, on hurricanes. But then it makes a
real hot whopper, citing an “observed increase in hurricane
activity since the 1970s”.

This piece of misinformation has already been called out. The 2014 National Assessment shows
an increasing trend in Atlantic hurricane activity from 1980
through 2009. But if it had used available data up to the time of
writing (2013), it would have been obvious that activity declined
after 2009 to pre-1980 values. And, even worse, hurricane activity
can be reconstructed all the way back to 1920, and the increase in
the mid-20th century was no different in magnitude than the one
from 1980 to 2009.

With regard to tornadoes, the CSSR notes computer models suggest
they should be increasing, but it neglects to mention the trend in
strong tornadoes—the kind you don’t need a radar or the
Weather Channel to see—is actually downward. And in a
wonderful triumph of technology and adaptation over the most
powerful vortices on earth, the associated death rate has dropped
by around 90 per cent since the early 20th century, despite major
population increases in the central U.S. tornado alley.

The bottom line is that the leaked CSSR really needs some
cleaning up to be a comprehensive representation of climate change,
and it may be prudent to do so before it is released. Otherwise it
will be subject to the withering criticism that has affected the
credibility of its predecessors.

Patrick J.
Michaels
of the Cato Institute is the author of “Lukewarming:
The New Climate Science that Changes Everything.”

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OPM Just Made It Harder to Drain the Swamp

Alex Nowrasteh

President Donald Trump took office with a promise to drain the
swamp, but the federal agency that manages the government’s
two million civilian employees is making it harder to do that.
Under a new policy, the Office of Personnel Management recently
stopped reporting data on employees terminated for wrongdoing or
poor performance.

This information is critical because the data inform the public
about incompetent and, in some cases, corrupt government employees.
Without it, systematic government wrongdoing and poor performance
may go unnoticed and unreformed.

The data provide information on separations, which,
in bureaucratic language, is when a federal employee stops working
for the government. OPM assigns a cause to each separation,
choosing from a list of 12 different categories—such as death
or a transfer­—and releases these details annually, along
with information on employees’ age, rank, pay, and other
characteristics.

No administration can
drain the swamp if it doesn’t know where to look.

That’s where the latest policy change comes into effect. A
termination for discipline or poor performance is coded as
“SI, Termination or Removal (Discipline/Performance).”
But that information was not included in OPM’s 2016
separations data. Every other separations category, in alphabetical
order from “SA, Transfer Out” to “SL, Other
Separation,” was retained in the 2016 dataset.

While OPM publishes guides with the separations datasets that
explain the contents of the newly released information, the guide
for the 2016 separations data, unlike every previous year’s
guide, makes no mention of terminations for discipline or
performance.

When I contacted OPM in July, a public affairs official
explained this hole in the agency’s otherwise orderly set of
separations data as necessary to “protect information at the
individual record level” based on a 2007 memo that laid out federal guidelines for
protecting the personally identifiable information of
Americans.

That explanation defies logic. These datasets have never
included the names of the terminated individuals. If protecting the
personally identifiable information of federal employees was the
real reason for not reporting terminations for discipline or
performance, then why is the gender, location, agency and
occupation, rank, salary, and other information about these
employees available for every termination prior to 2016 (and for
every other separation in that year)?

Publishing this information about terminated federal employees
does not violate anyone’s privacy. But withholding it keeps
taxpayers in the dark about the extent of personnel problem in the
agencies they fund. For example, OPM’s data allows us to know
about federal employees fired for misconduct, such as Border Patrol agents fired after
convictions for bribery and drug charges
. If these employees
had lost their jobs in 2016, the current OPM policy would not list
their terminations under the discipline and performance category,
and we’d have no idea how widespread such firings are.

No administration can drain the swamp if it doesn’t know
where to look. OPM once provided valuable information on
discipline, performance, and corruption problems in federal
agencies. As it is, it’s notoriously difficult to fire
federal employees. But neglecting to report information on federal
employees who are fired for serious reasons makes it impossible to
reform the federal bureaucracy.

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

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When Protectionism Is Not Protectionism

Daniel J. Ikenson

In the Wall Street Journal last week, Commerce
Secretary Wilbur Ross shared some of his views about free trade and
protectionism, which were widely and deservedly criticized for
their misguided obsession with trade deficits and their
mercantilist disregard for U.S. consumers. But Ross also offered a
more nuanced take on what does and does not constitute
protectionism, which is a matter of great relevance in this
atmosphere of increasing trade frictions.

Attempting to offer an explanation for U.S. goods trade deficits
with China and the EU, Ross presents a bar chart showing the
average tariffs for 22 manufacturing industries in the United
States, Europe, and China. U.S. tariffs are lower than
China’s in 20 of 22 industries and lower than the EU’s
in 17 of 22 industries. Does that mean that China and the EU are
more protectionist than the United States? In the category of
applied tariffs, yes, it does. Does that means that China and/or
the EU are engaging in “protectionism,” which might
warrant a ruling from the Dispute Settlement Body of the World
Trade Organization, and possibly authorization for the United
States to retaliate? No, it doesn’t.

Tariff differentials among members of the World Trade
Organization today are the product of multilateral trade
negotiations, beginning in 1947 and spanning six decades, which
lead to gradual reductions in global trade barriers. The formulae
for tariff reductions permitted countries with smaller economies
and at earlier stages of development to reduce tariffs more slowly
and less steeply. Among the rationales for permitting asymmetric
tariff liberalization was that it was the only way to bring more
countries into the rules-based trading system. Countries at
different levels of development with different-sized economies,
different factor endowments, different political sensitivities to
trade liberalization, and different tariff practices would never
have been able to agree to identical tariff rates.

The “bound” tariff rates of the United States
(meaning the highest rates the United States can assess on imports
under its GATT/WTO obligations) are, in fact, lower than those of
the EU and China. We can argue over whether that’s fair or
whether or how much the differentials contribute to U.S. trade
deficits or how much better off U.S. consumers and consuming
industries are when their government taxes their purchases at lower
rates. But, while it is appropriate to consider tariffs
“protectionism,” the higher average tariffs in China
and the EU are not protectionist in the sense that they violate
either government’s obligations under the WTO.

It is certainly desirable to reduce all tariffs to zero, but
that’s probably not feasible multilaterally—within the
WTO—anytime soon. However, U.S. bilateral free trade
agreements with China and the EU, in which the United States asks
for zero tariffs, are possible. Whether this administration has the
interest or wherewithal to pursue that course is unclear. After
all, President Trump withdrew the United States from the
Trans-Pacific Partnership during his first week in office. Under
the TPP, 88 percent of tariffs in 12 countries would have gone to
zero immediately, with nearly all going to zero over a period of 16
years.

Ross then goes on to defend certain U.S. trade remedy
actions—duties imposed under the U.S. antidumping and
countervailing duty laws to redress “unfair”
trade—as “measures necessary to ensure a level playing
field.” Ross laments the fact that U.S. trade remedy measures
are often characterized as protectionism, when in fact—he
argues—those laws are consistent with WTO rules.

Secretary Ross is right. Although antidumping and countervailing
duty measures are forms of protectionism, their application by
member governments is not considered protectionist under WTO rules.
In fact, they are specifically authorized by the WTO, as a means to
redress injurious dumping and injurious subsidization. However,
those domestic laws and their administration must comport with
provisions in various WTO agreements. When they don’t
comport—because, perhaps, the U.S. Commerce Department has
been too aggressive in its assumptions, too partial in its
calculation methods, or too capricious in its
adjustments—governments representing the foreign exporters
can challenge the United States at the WTO and, unless the issue is
resolved in the consultations stage, the DSB will issue a
ruling.

On 38 occasions since 1995, the WTO DSB has found aspects of
U.S. trade remedy law administration to be “out of
conformity” with U.S. WTO obligations. That’s another
way of saying that the protectionism accorded U.S. industries under
the trade remedy laws is in fact protectionist by WTO standards at
least some of the time.

Secretary Ross then turns his attention to China’s and
Europe’s “formidable non-tariff trade barriers against
imports.” He alludes to onerous certification standards,
sanitary and phyto-sanitary measures (e.g., food safety
regulations), non-science based prohibitions against genetically
modified goods, local production requirements, and forced
technology transfer. He also mentions low-cost loans, energy
subsidies, and other forms of support bestowed upon China’s
and Europe’s exporters by their respective governments.

Certainly, government subsidization and behind the border rules
and regulations can have protectionist intentions or consequences,
and where there are agreed upon rules to heed, the WTO provides a
reliable forum for addressing these issues—and resolving
most. But there are a couple of important points Secretary Ross
should bear in mind about protectionism.

First, the U.S. government is not an angel; it’s part of
the problem. In the United States, there are “Buy
American” rules that restrict most government procurement
spending to U.S. suppliers, ensuring that taxpayers get the
smallest bang for their buck; heavily protected services
industries, such as transportation and shipping, that drive up the
cost of everything; apparently interminable farm subsidies; quotas
and high tariffs on imported sugar; high tariffs on basic consumer
products, such as clothing and footwear; energy export
restrictions; the market-distorting cronyism of the Export-Import
bank; trade remedies actions that violate WTO rules and strangle
downstream U.S. industries and tax consumers; regulatory
protectionism masquerading as public health and safety precautions;
rules of origin and local content requirements that limit
trade’s benefits; restrictions on foreign investment, and
more.

Second, if the Trump administration intends to ramp up
enforcement to tackle what it sees as foreign protectionism, it had
better do it by the book. Don’t act unilaterally, as judge,
jury, and executioner. Mind the rules of the WTO, which provides a
legitimate path for challenging and resolving issues, such as those
mentioned above. The minute the U.S. government goes rogue by
implementing trade restrictions without following WTO protocols,
the United States will be the violator, the protectionist. And
acting unilaterally, such as by conducting a Section 301
investigation and them imposing measures in response to Chinese
forced technology transfer policies, for example, will set a
terrible example, invite immediate Chinese retaliation, and
encourage all members to abandon their WTO commitments.

The global economy remains rife with protectionism. The worst
way to address it is by being a protectionist.

Daniel J.
Ikenson
is the director of Cato Institute’s Herbert A. Stiefel
Center for Trade Policy Studies.

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Ignorant Immigration Reform

David Bier

This week the Republican senators Tom Cotton of Arkansas and
David Perdue of Georgia introduced a bill that they said would cut legal immigration to the United States
by 50 percent. They are right about that, but nearly everything
else that they have said about their bill is false or
misleading.

The senators, whose bill is endorsed by President Trump, argue
that America is experiencing abnormally high immigration; that
these immigrants are hurting American wages; and that their bill
would prioritize skilled immigrants, the way Canada does, thus
making the United States more competitive internationally. These
talking points are pure fiction.

They have justified this drastic cut in immigration by stating
that the bill will, as they put it in February when announcing an earlier version, bring “legal
immigration levels” back down to “their historical
norms.” But the senators fail to consider the impact of
population growth. A million immigrants to the United States in
2017 isn’t equivalent to the same number in 1900, when there
were a quarter as many Americans.

A smart reform would
double green cards and peg future work visas to economic growth,
responding to market forces rather than political whims.

Controlling for population, today’s immigration rate
is nearly 30 percent below its
historical average. If their bill becomes law, the rate would fall
to about 60 percent below average. With few exceptions, the only
years with such a low immigration rate were during the world wars
and the Great Depression. Surely, these are not the
“norms” to which the senators seek to return.

Senator Cotton is trying to connect a slow increase in the immigration rate
in recent decades to declining wages for Americans without a
college degree, implying that low-skilled workers are facing more
competition for jobs than in earlier years. But this correlation is
spurious, because it ignores the size of the overall labor
pool.

Looking at all new job seekers — born here and abroad
— actually reveals a significant decline in new workers
competing for American jobs. During the postwar period from 1948 to
1980, as incomes rose for all workers, the labor force grew by 76 percent, driven largely by baby boomers and
women entering the labor force for the first time. Since then,
declining birthrates have led to about half as many new competitors
entering the labor force each year, despite many more
immigrants.

Less-educated Americans also faced less competition. The ranks
of on-college educated workers swelled 50 percent
in the postwar period, compared with just 16 percent in recent
decades. During both periods, high school dropouts saw a near
continuous decline in labor market competition — from workers
born here or elsewhere. In contrast, college graduates actually
dealt with more competition than they had before.

All this suggests that the stagnation of wages has other
origins, such as new technology and the increasing burden of regulations, not more job seekers
immigrant or otherwise.

The senators’ analysis suffers from similar confusion when
they say that their bill would create a system
modeled after Canada and Australia. Controlling for population,
these countries accept two to three times as many legal
immigrants as America.

A related fiction is that the bill would
“prioritize” skilled immigrants. In fact, it contains
no more visas for skilled workers than our current law does. All
the bill would do is cut the number of visas for the family members
of United States citizens. Canada and Australia prioritize skilled
workers by allowing far more of them to come — while also
accepting more family members than we do.

Canada and Australia aren’t the only ones surpassing us in
terms of welcoming immigrants; 17 developed countries accept more
legal immigrants as a share of their population than does the
United States. This places the United States at an economic
disadvantage in the global race for talent. For years, Canada has
attracted skilled immigrants from America, and Microsoft even
opened an office there specifically to take advantage of its
system.

In other contexts, Senators Perdue and Cotton have often discussed how America’s tax and
regulatory policies send jobs overseas. But micromanaging labor
markets from Washington has the same damaging effect, pushing
businesses away from the United States and hurting those that
remain.

Rather than cutting immigration, Congress should raise the
employment-based quotas, which it has not adjusted since 1990
— when the United States had some 77 million fewer people and
the economy was half the size it is now. A smart reform would
double green cards and peg future work visas to economic growth,
responding to market forces rather than political whims.

Smart reforms, however,
require that Congress first understand the basic facts: America has
not seen a deluge of immigration. Low-skilled American-born workers
have not faced more competition for jobs. Other countries accept
more immigrants per capita. Until these facts penetrate the halls
of the Capitol, the immigration debate will continue to be mired in
ignorant proposals like this.

David Bier is a
policy analyst at the Cato Institute.

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Jeff Sessions’ Justice Department Goes after Affirmative Action’s Institutional Racism

Ilya Shapiro

Who could have predicted that one of President Trump’s
projects would be to root out institutional racism? Yet
that’s the upshot of an internal memo which apparently
launches a push to review university admissions policies for
race-based discrimination. The memo is still not public but the
Justice Department has said that, at least so far, the focus will
be on one complaint filed by Asian-American groups against Harvard.

There’s strong evidence
that schools are discriminating based on race in the name of
‘affirmative action.’

To be sure, the Supreme Court has said three times in the last
30 years that race can be “a factor” in admissions decisions,
to be used to achieve the “compelling interest” of
educational diversity. At least for another decade, when the
25-year clock that swing Justice Sandra Day O’Connor set in
two 2003 University of Michigan cases runs out. In
those cases, the Court struck down the use of a mechanical points
system — five points if you’re a violin virtuoso, 20
points if you’re black — but upheld the law
school’s supposedly more individualized, “holistic” review.

But invoking the word “holistic” isn’t the end
of the constitutional inquiry. As Justice Anthony Kennedy wrote for
a 7-1 majority (Justice Ruth Bader Ginsburg dissented) in the 2013
case Fisher v. UT-Austin, universities bear
“the ultimate burden of demonstrating that, before turning to
racial classifications, workable, race-neutral alternatives do not
suffice.”

Although the Supreme Court two years later okayed the University of Texas system, college
officials don’t have carte blanche just so long as they avoid
points or quotas. Even after Fisher II, a school with a
race-conscious process must show three things to pass
constitutional muster:

(1) that its program is necessary to achieve diversity; (2) that
its chosen means properly “fit” its ends; and (3) that
it provides individualized consideration, such that colleges
don’t make race the “defining feature.”

But can any school show how or when race affects admissions
decisions? Can anyone offer evidence that would enable a court to
evaluate whether the use of race is narrowly tailored to achieve
its purported goal? The black-box nature of admissions policies
makes it impossible to ascertain whether race is a thumb or brick
on the scale.

Admissions programs frustrate accountability because schools
wield “holistic review” as a shield to frustrate
scrutiny, judicial or otherwise. Holistic review can serve as a
cover for the illegitimate use of race.

For example, Princeton professor Thomas Espenshade found that Asian students applying to selective
private colleges are six times less likely to be admitted than
Hispanic students with the same academic qualifications and 16
times less likely than black students. And despite being the
fastest-growing population in America, Asians are admitted at Ivy
League schools in remarkably similar numbers and percentages
year-to-year.

That’s strong evidence that schools are discriminating
based on race. It all hearkens to the less-than-illustrious history
of the so-called Harvard Plan, which began as an alternative to
explicitly capping the number of Jewish students

Those are the sorts of things that the Justice Department should
look into. Government lawyers must open the “holistic”
black box and hold administrators’ feet to the constitutional
fire. And that’s before we even get into the harm to the
beneficiaries of racial preferences!

I have my policy disagreements with Attorney General Jeff
Sessions over the drug war and related issues, but I applaud
him here. When he was nominated, his supporters argued that he was
a civil-rights advocate who had no truck with racial
discrimination. Six months later, he’s proving their
point.

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

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Why Trump’s Legal Immigration Reforms Would Be Bad for Americans

Alex Nowrasteh

President Trump campaigned on creating a new U.S. immigration
policy that is in the national interest. Rising to Trump’s call,
two Republican Senators — Tom Cotton of Arkansas and David
Perdue of Georgia — have introduced the RAISE Act to slash
legal immigration by 50%.

It’s easy to claim that something is in the “national interest.”
It’s much harder to justify it. In the case of these immigration
restrictions, invoking the national interest just doesn’t make
sense.

In a White House press conference announcing the bill, President
Trump said that it “will reduce poverty, increase wages.” Cotton
later chimed in by arguing that “there is a direct correlation
between the mass unskilled, low skilled migration we have seen over
the last few decades and stagnant wages and standards of living for
working Americans.”

The U.S. immigration
system needs reform, but RAISE’s push to cut of legal immigration,
without any corresponding increase in skilled immigrants, worsens
the problem.

In reality, the RAISE Act would slow wage and economic growth
and would do nothing to create a merit-based immigration policy
favoring skilled immigrants.

We’ve already seen what happens to wages when similar bills are
enacted. Congress last cut legal migration in 1964 when it
cancelled the Bracero program for Mexican farm workers. Lawmakers
believed arguments made by the United Farm Workers union, led by
Cesar Chavez, that cancelling Bracero would raise wages for
low-skilled farm workers.

However, wage growth for American farm workers actually slowed
after Congress cancelled Bracero, because farmers mechanized
agriculture and grew less labor-intensive crops rather than pay
higher wages.

It’s odd that two GOP senators would now embrace an economic
argument made by labor unions and left-wing activists like Cesar
Chavez.

The immigrants the RAISE Act would exclude and the bill’s
details are eerily similar to those in the Bracero program. The
RAISE Act would cut green cards by about 500,000 annually — a
number close to the annual admissions under the Bracero program at
its peak. Furthermore, the Bracero workers were relatively lower
skilled, just like many of the family-based immigrants the RAISE
Act would exclude. Lastly, today’s immigrants and Bracero workers
were concentrated in just a handful of states.

Furthermore, immigration’s impact on wages is overstated. A
recent National Academy of Sciences study found that “the impact of
immigration on the wages of native-born workers overall is very
small.” Most of the effect is actually concentrated on other
immigrants who compete with new immigrant arrivals.

There is little empirical evidence to support the claim that
reducing immigration increases American wages. The most negative
empirical finding is that competition with immigrant workers from
1990 to 2010 reduced the wages of native high-school dropouts,
relative to other American workers, by 1.7%. But the average
relative wages for the 91% of American workers who are not dropouts
— including the middle class — actually rose because of
immigration during that time. Is slowing middle class wage growth
truly in the national interest?

Even critics of immigration acknowledge that it leads to
economic gains. Cotton conceded at a press conference this week
that lowering immigration would also diminish economic growth. The
NAS found immigration boosts growth, which is what drives wage
increases, productivity gains, and a higher standard of living. Is
slowing economic growth truly in the national interest?

Even more worrisome, despite talking points to the contrary, the
RAISE Act does not create a merit-based immigration system. The
bill does not increase the number of skilled immigrants; it only
cuts other categories and reforms some aspects of the
employment-based green card system for skilled workers. Is a cap in
the number of skilled immigrants truly in the national
interest?

The truth is that none of these things are in the national
interest. The U.S. immigration system needs reform, but RAISE’s
push to cut of legal immigration, without any corresponding
increase in skilled immigrants, worsens the problem.

This legislation should have taken the approximately 500,000
green cards it eliminates from other categories and instead put
those in the merit-based category.

At a minimum, the RAISE Act will diminish wage growth for over
90% of American workers and slow the economy overall – a far cry
from what’s best for the national interest.

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

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Trump Isn’t Draining the Swamp, He’s Deepening It

Ryan Bourne

Drain
the swamp!
” was a powerful rallying cry during Donald
Trump’s presidential campaign. The businessman promised to
govern in the public interest, and end the revolving door between
politics and lobbying. If anyone had the chance to overturn special
carve-outs, subsidies, regulatory barriers and access generated by
special pleading, it was surely a wealthy populist insurgent
unbeholden to major donors.

Yet eight months in to the Trump presidency, there appears to be
little momentum behind his pledge to overhaul the relationship
between big vested interests and the US government.
A poll in late May
found that 32 per cent of voters thought
Trump had made the swamp worse, against 24 per cent who saw
improvement. More worryingly, the President’s arbitrary
conduct risks exacerbating crony capitalism in future.

The first ominous signs came with Trump’s cabinet
selection. Appointing
a former CEO of Exxon Mobile
to head the State Department,

a former Goldman Sachs partner
to the Treasury,
the daughter of a shipping company magnate
to the
Transportation department and
an investor in steel, automotive components and coal
to
Commerce, hardly screamed an intent to break links between business
and government.

Eight months in to the
Trump presidency, there appears to be little momentum behind his
pledge to overhaul the relationship between big vested interests
and the US government.

Assigning conventional politicians to other positions did little
to suggest major change was coming, either. A
Newsweek analysis
found that approximately 70 per cent of
Trump’s White House staff were working in DC before the start
of the administration too.

Trump’s picks for key government agencies likewise raised
eyebrows.
Professor Luigi Zingales of the University of Chicago Booth School
of Business has highlighted
how the lawyer
Walter Clayton
was appointed as Chairman of the Securities and
Exchange Commission, for example, having previously represented
many major Wall Street firms in fraud cases — and despite
being married to another Goldman Sachs employee.

True,
one of Trump’s early executive orders
sought to stop a
“revolving door” by preventing administration employees
from taking up lobbying posts for five years after their government
jobs, and for government employees to recuse themselves from
actions that affect their former employers. But this did not go
anywhere near as far as Trump had promised.

In
a Wisconsin rally last October
, he pledged to oversee similar
legislation applied to Congress too. He also promised campaign
finance reform to prevent foreign lobbyists from raising money in
US elections. No such legislation has been forthcoming.

What about policy? The Trump administration had a real
opportunity to end government-granted regulatory, spending and tax
privileges. But little progress has been made here either.

Trump has used a host of executive orders to set frameworks to
constrain the growth of regulation, and the Congressional Review
Act to eliminate many rules passed under Barack Obama. Though an
imperfect measure, there are some indications this is working. In
May, the Federal Register for 2017 stood at around 20,000 pages
(which would imply a level around 62,000 for the full year). This
was much lower than whopping 95,894 of 2016 under President
Obama.

A substantial deregulatory effort could theoretically help
reduce cronyism by reducing the scope of regulation that can be
shaped by special interests. In fact, reducing the size and scope
of government more broadly can eliminate many specific perks and
instances of favouritism towards certain sectors. Trump’s recent
budget showed this, and he is to be commended for proposing cuts,
for example, to farm subsidies, which are perhaps the most
egregious form of privilege with concentrated benefits and diffused
costs across taxpayers.

Yet the President could be going much further to eliminate
government involvement with business.

One obvious example is Trump’s
flip-flop on the Export-Import bank
— the pinnacle of
corporate cronyism. As a candidate, Trump pledged to dissolve the
bank, which divvies out loan guarantees and direct taxpayer funds
to facilitate the exports of some of the US’s biggest companies,
such as Boeing and General Electric. But in office, the President
appears to have been nobbled by its beneficiaries. He now claims it
is vital for them to have access to this kind of export
finance.

On trade, Trump has been more consistently anti-market. But more
protectionist measures, particularly those designed to insulate the
US steel industry, will adversely affect consumers and downstream
industries in order to protect one of the President’s favoured
sectors. Worse, they will embolden other sectors facing strong
foreign competition to lobby the government for similar treatment,
exacerbating cronyism.

That is not to say that all of Trump’s actions reflect a desire
to favour corporate interests. One certainly could not accuse Trump
of listening to big business in his decision to withdraw from the
Paris climate agreement — a decision which brought a stinging
rebuke from a range of company heads and industries keen on the
deal, and the loss of Tesla’s Elon Musk and Disney’s Robert Iger
from his business panel.

But the President’s failure to take a principled, consistent
position on the role of government in business means that these
individual decisions tend to come with strong assumptions about
motive. If Trump thinks protecting steel is acceptable, then it is
understandable why others believe his decision on Paris reflects a
desire to protect fossil fuels.

While the effect of Trump’s policies on the swamp are ambiguous,
his personal conduct is surely deepening it.

The principle that companies should be treated equally under the
law, and that government should avoid picking winners and losers,
is a mainstay of market economy. But even prior to coming to
office, Trump used the bully pulpit of his Twitter account to
praise Ford for a decision not to build a new plant in Mexico,
alongside tweets which warned ominously that companies that
“want to do business in our country, have to start making
things here again”.

He and his team seemingly changed the business decision of
United Technologies, which cancelled plans to move a plant to
Mexico, through a range of proposed US tax incentives and implicit
threats to some of the company’s revenues from government
contracts. The stock prices of other businesses have risen or
fallen based on Trump’s musings on Twitter. Just last week,
Trump and the White House made lots of noise about the Foxconn
plans in Wisconsin.

As a candidate, Trump
threatened Amazon with antitrust action
, following critical
coverage of him in the Washington Post (owned by Amazon
CEO Jeff Bezos). More recently, there have been strong indications
that
the Trump team are using implicit threats
against CNN by
hinting at interventions in the proposed merger between AT&T
and Time Warner (CNN’s parent company). All that is not to
mention the shameless use of public office to boost the value of
Trump properties, and
the use of Mar-a-Lago as a means of access
to the
President.

This behaviour all threatens worsening crony capitalism, because
companies will be more likely to base their business decisions
according to expected political reaction rather than servicing
consumer demand. Innovation and entrepreneurial activity will be
less likely — the easier path for big business will be to
become a “favourite” of the administration. Already we
have seen instances of this politicisation, with companies
re-releasing job announcements to seek the President’s
approval
and recipients of Export-Import bank funds justifying
them using Trump’s protectionist language.

As business becomes politicised, the incentive to invest more in
lobbying, government relations and political donations to meet the
demands and desires of government, rather than consumers, will be
irresistible. And if the electors perceive the negative results of
this cronyism to be a consequence of enterprise rather than
political failure, government control will ratchet up further.

Of course, the Trump presidency has a long way to run. The
Republican Congress and White House could eliminate many of the
opportunities for cronyism by shrinking regulatory agencies, and
ending direct government subsidies. But judged so far on his
government construction, policies and conduct, it is difficult to
conclude that Trump is “draining the swamp”.

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

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If Trump Wins on Steel, US Manufacturers Lose

Daniel R. Pearson

President Trump and his trade policymakers have made no secret
of their desire to restrict steel imports as part of their
focus on US manufacturing. But the broad US manufacturing community
will not be well-served by such a move. What those limitations will
actually do is increase US steel prices above their already high levels.

Steel is already one of the country’s most protected sectors. US
law allows special duties to be assessed against imports that are
priced at what the Department of Commerce has determined to be
unfairly low levels. Over 200 anti-dumping and countervailing duty orders,
which are intended to “protect” US producers from so-called unfair
competition, currently constrain imports of steel and iron products
from a long list of countries. The effect has been to raise US prices well above
global levels to the great detriment of the large
manufacturing and construction sectors in America that use steel to
make higher-value products.

Although it may not be a wise approach to public policy, it’s
true that governments often pick winners and losers. Policies
intended to help one group of constituents usually hurt another. So
wouldn’t tighter import controls on steel just shift money from
steel consumers to steel producers, while having a more-or-less
neutral effect on the economy overall? Unfortunately, no. The
reason is that the steel-consuming sector is so much larger than
the steel-producing sector.

America can have either
higher steel prices, or more manufacturing and construction jobs.
Mr. President, the choice is yours.

How high do steel prices have to be to make President Trump
happy? And how much unemployment is he willing to inflict on
workers at steel-consuming firms? For a president who campaigned on
a theme of bringing back American industrial jobs, this is a grand
irony, indeed.

A July 24, 2017, report from SteelBenchmarker™, a price reporting
service serving the steel industry, shows the US price for
hot-rolled band (hot-rolled steel in coils) to be $681 per metric
ton, 38% above the world export market price of $491. The US price
for hot-rolled band is even higher, by 19%, than the $573 price in
Western Europe. Restrictive US import policies have forced steel prices to
levels much above those enjoyed by manufacturers in a relatively
high-cost economy such as Germany.

Steel mills add $36 billion of value to the economy each
year, accounting for 0.2% of GDP. Theyemploy 140,000 workers. Taking a conservative
approach and looking just at companies that buy steel as an input
for further manufacturing, we find a broad industry producing
economic value added of just over $1 trillion — or
5.8% of GDP. Those firms employ 6.5 million workers. So downstream
manufacturers are 29 times larger than steel mills in terms of GDP
and 46 times larger in terms of employment.

Manufacturers are particularly vulnerable to artificially high
steel costs because many of them compete directly with goods
produced at lower costs in other countries. It is hard to be a
successful producer of automobiles or air conditioners, for
instance, if US policies give overseas competitors a built-in cost
advantage. Worth noting is that loss of only 2% of jobs at
steel-using manufacturers would equal the size of the entire
steel-mill workforce.

But manufacturers aren’t the only businesses hurt by high steel
prices. Construction activities account for 42% of all US steel consumption and
employ 6.8 million workers. Raising the cost of steel will mean
fewer construction projects started and fewer workers employed, not
the best possible approach to rebuilding American
infrastructure.

What should the Trump administration do, instead of imposing new
import restrictions, to help US manufacturing and construction? Two
policy shifts could make a big difference.

The first would be to announce that the national security review
has concluded that all existing anti-dumping and countervailing
duty measures on steel should be ended. Yes, this would mean that
historically protected steel mills would face increased competition
from overseas firms. The Department of Commerce should consider how
best to facilitate the industry’s transition to free trade in
steel, a task aided by the general resilience of the US
economy.

Ending import controls would be good for the US economy. Gains
to the overall manufacturing and construction sectors would far
exceed any temporary pain borne by the steel industry.

The second policy change would be to rethink the various
adjustment assistance programs intended to help unemployed workers.
The federal government simply isn’t able to make factory jobs
reappear in every town. What it can do, though, is to empower
people as they search for opportunities by ensuring they have
access to education, vocational training and relocation
assistance.

Rather than doubling down on a failed strategy of import
protection, the Trump administration should try working with
economic forces instead of against them. This would mean embracing
the gains to manufacturing and construction that would result from
access to competitively priced steel.

The bottom line is clear: America can have either higher steel
prices, or more manufacturing and construction jobs. Mr. President,
the choice is yours.

Daniel R.
Pearson
is a senior fellow in trade policy studies at the Cato
Institute.

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Washington’s Addictive Foreign-Policy Drug

Ted Galen Carpenter

Congress has overwhelmingly passed legislation imposing new
economic sanctions on North Korea, Russia and Iran. There was some
speculation that President Trump might veto the measure, both
because of concerns that it would prevent an improvement in
America’s troubled relations with Moscow and because of
stringent limitations imposed on the president’s ability to
waive sanctions in the name of national security. However, the
White House announced that the president would sign the bill—perhaps reflecting
just how much proponents of a new cold war with Russia have
intimidated the Trump team. The extent and virulence of anti-Russia
sentiment has reached alarming levels. Members of Congress and other opinion leaders in both parties have branded the alleged Russian
hacking of the 2016 election as an act of war, and one congressman
even explicitly compared it to Pearl Harbor and 9-11.

Given such hysteria and the lopsided congressional vote in favor
of the sanctions legislation, Trump’s reluctance to use his
veto power was not necessarily a manifestation of political
cowardice. Only three House members and two senators(Rand Paul and Bernie Sanders) cast
negative votes. Even Senator Mike Lee (R-Utah), who usually is
sensible on foreign policy issues, joined the legislative lynch
mob.

Policymakers need to
overcome their addiction to sanctions before it produces an immense
tragedy.

The enthusiasm for the latest sanctions initiative ignores the
longtime unimpressive record of that tactic. Some three decades
ago, the seminal scholarly work of Gary Hufbauer, Jeffrey Schott,
and Kimberly Ann Elliott, Economic Sanctions Reconsidered,
demonstrated that sanctions rarely achieve their policy goal. More
recent editions of the book confirm the basic
conclusion. Sanctions may inconvenience the targeted
regime—and create substantial suffering for innocent people
in that country—but they seldom compel the regime to
capitulate or even make major concessions. That is especially true
when the issue in question is a high-priority matter for the
country’s political leadership.

The track record in recent decades does very little to
contradict that thesis. The United States and its allies have
imposed ever-tightening sanctions on North Korea to force that
country to give up its nuclear weapons and ballistic missile
programs. Pyongyang’s repeated nuclear tests and its recent
launches of an intercontinental ballistic missile demonstrate
the utter futility of the sanctions strategy.

Washington has been equally unsuccessful in using that tactic
toward another adversary, Cuba. A succession of U.S.
administrations, beginning with Dwight Eisenhower’s,
maintained that approach for more than a half century before Barack
Obama began to normalize relations with Havana in
late 2014. Unfortunately, President Trump rescinded several of the beneficial and
realistic changes that his predecessor had made. Yet the results of
the Cuba embargo were no more impressive than the outcome of
sanctions against North Korea. Washington’s demands that the
Castro regime stop its human-rights abuses, move toward democracy,
and compensate Americans for property seized following the 1959
revolution all failed to produce any discernible results. The
Castro dynasty remains in power, the Cuban regime is still a
communist dictatorship, there has been no compensation for seized
property, and the improvement in the treatment of political
dissidents is minimal, at best.

Even the alleged success stories that sanctions proponents tout
turn out to be unimpressive. The Iran agreement is a prominent
example. Sanctions may have played a modest role in getting Tehran
to the conference table, but the agreement occurred only when the
United States and the other P5+1 powers backed off of their demand
that Iran capitulate and refrain from developing any capacity to
enrich uranium. The resulting agreement was very much a compromise
measure, and hawks in the United States vehemently condemned it as a U.S.-led surrender to Iran.

Imposing harsh measures on Russia is especially worrisome.
Moscow was quick to retaliate for congressional passage of the
latest punitive package. Vladimir Putin’s government immediately ordered a reduction in the size of
America’s embassy staff in Moscow and seized several U.S.
diplomatic properties. Moreover, the argument that Russia’s
actions were in response to the Obama administration’s
similar steps in December 2016 misconstrues the situation. Putin
made a point of assuring President-elect Trump that he would not retaliate for the December penalties. But imposition of the new sanctions triggered a decisive policy
change.

Economic sanctions appear to be the habitual favorite tool in Washington’s
foreign policy tool kit. It provides the illusion of a moderate,
middle course between a total reliance on diplomacy and resorting
to military force. Given that tactic’s pervasive lack of
effectiveness, though, policymakers need to overcome their
obsession. That is especially so when the underlying demands are
completely unrealistic.

Sanctions will not compel North Korea to give up its nuclear and
ballistic missile programs. Pyongyang’s leadership elite
believes that it needs such capabilities to deter Washington from contemplating forcible
regime change. Given U.S. actions against such nonnuclear adversaries as Serbia, Iraq, and
Libya, that is not an irrational conclusion.

Likewise, new sanctions against Tehran for violating
the spirit” of the P5+1 accord is
thoroughly counterproductive. Even the Trump administration had to
concede, however reluctantly, that Iran has
abided by the actual terms of the agreement. Imposing sanctions is
not likely to cause President Rouhani’s relatively moderate
government to become more cooperative. Indeed, that step may
strengthen the power of Iranian hardliners who wish to repudiate
the agreement and move to build a nuclear deterrent.

Most worrisome of all, sanctions will only inflame Moscow and
intensify an already worrisome new cold war. Russia is not likely
to concede that it meddled in America’s 2016
elections—and, in fact, there are serious doubts about those allegations. The chances
that Russia will abandon its secessionist allies in eastern Ukraine
are not much better, and there is virtually no possibility that
Russia will
reverse its annexation
of Crimea. The chances of that happening
are about the same as Israel giving up the Golan Heights or Turkey
withdrawing from occupied northern Cyprus and repudiating the
puppet Turkish Republic of Northern Cyprus.

Economic sanctions have the dubious quality of being
simultaneously provocative and ineffectual. The latest
manifestation likely will cause serious trouble for the United
States on multiple fronts. Policymakers need to overcome their
addiction to sanctions before it produces an immense tragedy.

Ted Galen
Carpenter
, a senior fellow in defense and foreign policy
studies at the Cato Institute, is the author of 10 books, the
contributing editor of 10 books, and the author of more than 650
articles on international affairs.

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Is Donald Trump Doomed to Repeat History in the Middle East?

Emma Ashford

As a presidential candidate, Donald Trump made waves when he
publicly declared that the Iraq War had been a disaster for America, causing chaos in the
Middle East. With the rise of ISIS, a refugee crisis, and
substantial unrest across the region, it’s not hard to see
why the majority of Americans now agree with him.

Yet the Trump administration appears poised to make many of the
same mistakes in its increasingly belligerent approach to Iran, a
strategy virtually guaranteed to increase tensions and worsen
regional conflicts.

This month’s internal turmoil inside the Trump White House
over whether or not to recertify Iran’s
compliance with the 2015 nuclear deal is only the most recent
example of the administration’s steps towards a tougher
approach against Iran.

In reality, Iran is complying with the terms of the deal.
But administration officials have repeatedly sought to shift the
goalposts, arguing that Iran is instead violating the
“spirit” of the agreement.

Indeed, though the details are not yet clear, the
administration’s ongoing Iran policy review is widely
expected to result in a more assertive and belligerent approach to
Iran. In recent testimony, Secretary of State Rex Tillerson told Congress that the
administration intended to support “elements inside of Iran
that would lead to a peaceful transition of that
government.”

And while others have refuted the idea that regime change is
under consideration, the administration’s Iran hawks —
from Secretary of Defense James Mattis to CIA Director Mike Pompeo
— have repeatedly described Iran as “the single
most enduring threat to stability and peace in the Middle
East.”

***

Whether it takes the form of “ripping
up” the nuclear deal, adding new sanctions, or pushing back
militarily against Iran in conflicts in Syria, Iraq, or Yemen, it
seems likely that the new administration is headed for a collision
with Iran. Yet the assertions and arguments made in favor of taking
a harder line against Iran are profoundly misleading.

For starters, the idea that Iran is a threat to the United
States comparable to that of the late Soviet Union — an idea
expressed in several recent articles – is laughable. The Soviet
Union was a suprastate of almost 300 million people with a massive
army and civilization-ending nuclear arsenal. Iran, by comparison,
has around 82 million citizens and no nuclear weapons.

Iran may be able to threaten American citizens abroad, but it is
fundamentally unable to harm the U.S. through military means.

Another common misconception is the idea that Iran is the root
of all regional problems.

It is certainly true that Iran’s regional influence has
grown in recent years, particularly in Iraq. But that growing
influence is due less to Iranian revisionism and more to the U.S.
invasion of Iraq, which removed a regime that acted as a check on
Tehran.

And while Iran’s behavior in regional conflicts like Syria
is reprehensible, it has not alone caused the chaos currently
gripping the Middle East.

A variety of factors, including the failed Arab Spring
revolutions, the U.S. War in Iraq, and malicious meddling by other
regional states from Saudi Arabia to Qatar, have all contributed to
today’s turmoil.

Even the idea that the Iranian people seek external support for
regime change is flawed.

Certainly, many Iranians are hungry for more democratic rights.
But the leaders of Iran’s 2009 Green movement protests have
been clear that they want to improve the system from inside, not overthrow
it. There is no true domestic support for the National Council of Resistance of Iran (NCRI),
the group most commonly presented as an alternative by
regime-change hawks.

***

In the absence of domestic support, attempts to
conduct “regime change from within,” as some
administration officials have suggested, is a recipe for failure at
best, and disaster at worst.

Ultimately, it remains baffling that the Trump administration
— faced with historically high levels of unrest in the Middle
East — would voluntarily seek to undermine one of the
region’s few relatively stable and semi-democratic
states.

Donald Trump was right about Iraq during the campaign: the 2003
U.S. invasion was a massive, unforced strategic error. Yet it is a
mistake his administration seems poised to make again, albeit on a
smaller scale.

If the president forgets history, he is likely only to worsen
the chaos in the Middle East.

Emma Ashford
is a research fellow at the Cato Institute.