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5 Ways Trump’s Anti-Sanctuary City Orders Are Unconstitutional

Devin Watkins

Attorney General Jeff Sessions recently announced that he
will begin punishing states and local governments who refuse to
help the federal government enforce its immigration laws —
known as sanctuary cities – by taking away federal
grants. Sessions even mentioned using a “claw-back” to
retake money already given to local governments. Two federal judges
are already examining if they should be put on hold.

The order is plainly unconstitutional. It
undermines federalism in several ways.

1. States
can’t be forced to help enforce federal law.
In
1996, Congress enacted 8 U.S.C. § 1373, which attempts to stop states and cities
from enacting policies that would block state employees from
helping the federal government enforce its immigration laws. Yet
the next year, the Supreme Court ruled that the federal government
cannot force states and cities to help enforce any federal law. As the late Justice Antonin Scalia
wrote in the court’s opinion for Printz v. United States,
states can be enticed to do so willingly, but they can’t be
“commandeered.” States and cities do not have to obey
— which directly contradicts Sessions’ requirement.

The order is plainly
unconstitutional. It undermines federalism in several
ways.

2. The White House
can’t make new requirements.
The executive order
purports to create new conditions on federal grants to state
governments. But the Administration has no authority to do so. The
Supreme Court, in Pennhurst State School and Hospital v.
Halderman
(1981), held that only Congress could impose
conditions on federal grants to states — not a President.

3. Even if
Congress added the requirements, these are unclear.
Even
where Congress imposes conditions on spending, it must “speak
with a clear voice” and make the condition
“unambiguous” so that states know what they are
agreeing to by taking the money. Sessions’
“claw-back” threat spotlights how unclear the
immigration-enforcement requirements — if they exist at all
— are for the thousands of federal programs and grants
potentially affected. Didn’t the states and cities have to
qualify to get the money in the first place?

4. It’s too
late to add new requirements.
After a new large spending
program is created, even Congress can’t later add new major
conditions. The Supreme Court considered this problem with
Obamacare’s Medicaid requirement that either a state expand
Medicaid or lose even its preexisting Medicaid funds in
2012’s NFIB v. Sebelius. Seven
justices found this unconstitutional. So even if Congress wanted to
impose these conditions on current substantial funding, it
couldn’t. It could only impose them on new funding.

5. The
requirements have nothing to do with many of the threatened
programs.
Any condition attached to spending must be
germane to the purpose of that spending. In South Dakota v. Dole (1987),
the Supreme Court allowed Congress to condition a small portion of
the federal highway funds on the requirement that the state enact a
minimum drinking age of 21. The Court found this constitutional
because this was related to the purpose of the funds. Even Congress
cannot use highway funds to force states to change education
policy. If the Administration limits the order to the Department of
Justice programs that Sessions talked about, they might be
considered germane. But Trump’s executive order adds
conditions to all federal grants, and the vast majority of them
have purposes — like education or environmental protection
— entirely unrelated to immigration. We will see how far the
executive order reaches.

What Should Be Done Instead

Before Sessions’ announcement to begin
enforcement, San Francisco and Santa Clara County were seeking to
prevent these actions from going into effect. They have asked for a
nationwide preliminary injunction, which a federal judge will
consider on April 5 and April 12. Seattle is also seeking to stop
these actions, but likely will take longer for the courts to
consider. Now that the Administration has started enforcing the
order, the courts seems likely to issue the injunction and block
it.

Immigration reform is an important issue for
the President, and an important reason for his election. But there
are other ways of accomplishing this objective. For instance, the
President could send federal agents to sanctuary cities to enforce
federal law. Or he could ask Congress to pass a new law that
tailors new law-enforcement grants to these purposes.

As it stands, a President could use these
kinds of threats to coerce states in all kinds of ways, including
against policies dear to his fellow conservatives. Trump will not
be in office forever, but the precedents he sets will live on.
Accordingly, this threat to constitutional governance should be
reconsidered or struck down.

After all, the people elected Donald Trump to
“drain the swamp” by taking power away from Washington
and returning it to the states, not the other way around.

Devin
Watkins
is a legal associate in the Cato Institute’s Center for
Constitutional Studies.

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Congress Should Stop Funding Transit ‘New Starts’

Randal O’Toole

Congress should follow the proposal in President Trump’s
2018 budget blueprint to stop funding new projects under the
Federal Transit Administration’s capital investment program,
sometimes known as “New Starts,” and its cousin,
“Small Starts.” Created in 1991, this program has
funded dozens of light-rail, heavy-rail (elevated trains &
subways), commuter-rail and streetcar projects.

This program was a mistake from the beginning, as rail transit
is an obsolete technology that makes no sense outside of New York
City, the only place in the nation with the population and job
densities that require rail transport. Instead of improving
transportation, the only real beneficiaries of New Starts and Small
Starts are rail contractors and railcar manufacturers.

Since 1991, the federal government has spent about $70 billion
(in today’s dollars) on New/Small Starts. To be eligible for
this money, local transit agencies must put up matching funds and
agree to pay to operate and maintain the rail lines. The result has
been rapidly rising construction costs and growing maintenance
backlogs, putting major burdens on local taxpayers.

To stop wasting money on
obsolete transportation, Congress should end appropriations to new
capital improvement transit projects.

In exchange for these high costs, the number of annual transit
rides taken by urban residents has declined 10 percent. One reason
is that new rail lines are so costly that transit agencies are
often forced to cut bus service and raise fares.

Los Angeles, for example, started planning and building rail
transit in the mid-1980s. By 1995, the region had opened several
expensive rail transit lines. To pay for these lines, it reduced
bus service, and total transit ridership fell by 17 percent.

The NAACP sued Los Angeles’ transit agency for building
rail into white neighborhoods while it let transit to minority
neighborhoods decline. The court ordered the agency to restore bus
service for 10 years, which restored ridership to its mid-1980
levels. But when the court order expired, Los Angeles began cutting
bus service to pay for new rail lines, and ridership has again
declined.

This pattern has been repeated in many regions. While not all
cities that built rail have seen total ridership fall, most have
seen declines in per capita ridership. Atlanta, Baltimore, Buffalo,
Dallas, Houston, Los Angeles, Norfolk, Phoenix, St. Louis, and
Sacramento are among the cities that have received New Starts funds
and have seen both per capita transit ridership and transit’s
share of commuting decline since they began building rail
transit.

To make matters worse, New Starts encourages transit agencies to
get more federal dollars by planning increasingly expensive rail
lines. In the early 1990s, new light-rail construction costs
averaged $40 million per mile in today’s dollars. Today, they
average more than $160 million per mile.

Seattle just completed a light-rail line that cost $626 million
per mile, and Los Angeles is planning one that will cost close to
$1 billion per mile. No one in the transit industry seems to be
bothered by these ridiculous costs.

To gain support for such expensive projects, advocates claim
rail transit relieves congestion. Yet light rail, streetcars, and
commuter rail usually increase congestion, both because the first
two occupy lanes once open to automobiles and because cities give
rail priority over cars at traffic lights. The traffic analysis for
Maryland’s Purple Line, for example, predicts that it will
increase the time people waste in traffic by 35,000 hours per
day.

Rail transit is obsolete because buses can move more people,
faster, and more safely than most rail lines at far lower startup
and operating costs. Buses may be smaller than railcars, but they
can operate far more frequently. The Washington Metro can run just
28 trains per hour, and most light-rail lines can safely run only
20 trains per hour, but bus-rapid transit lines can easily move
more than 250 buses per hour. Outside of New York City, no place in
America needs more capacity than buses can provide.

Unlike other federal transit programs, new/small starts require
deficit spending out of general funds, not gas taxes. To stop
wasting money on obsolete transportation, Congress should end
appropriations to new capital improvement transit projects.

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

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On Venezuela’s Death Spiral

Steve H. Hanke

With the arrival of President Hugo Chávez in 1999,
Venezuela embraced Chavismo, a form of Andean socialism. In 2013,
Chávez met the Grim Reaper, and Nicolás Maduro
assumed Chávez’ mantle.

The Grim Reaper has also taken scythe to the
Venezuelan bolivar.
The death of the bolivar is depicted in the
following chart. A bolivar is worthless.



The fall in the value of the Venezuelan bolivar

With the collapse of a currency comes inflation. By the time
President Nicolás Maduro arrived, inflation was in triple
digits and rising.

It’s time for
enlightened, practical politicians in Venezuela to embrace the
dollarization idea. The public already does.

With the acceleration of inflation, the Banco Central de
Venezuela (BCV) became an unreliable source of inflation data.
Indeed, from December 2014 until January 2016, the BCV did not
report inflation statistics. To remedy this problem, the Johns
Hopkins-Cato Institute Troubled Currencies Project
, which I
direct, began to measure inflation in 2013.

The most important price in an economy is the exchange rate
between the local currency and the world’s reserve currency —
the U.S. dollar. As long as there is an active black market (read:
free market) for currency and the black market data are available,
changes in the black market exchange rate can be reliably
transformed into accurate estimates of countrywide inflation rates.
The economic principle of Purchasing Power Parity (PPP) allows for
this transformation.

I compute the implied annual inflation rate on a daily basis by
using PPP to translate changes in the VEF/USD exchange rate into an
annual inflation rate. The chart below shows the course of that
annual rate, which peaked at 800% (yr/yr) in the summer of 2015. At
present, Venezuela’s annual inflation rate is 150%, one of the
highest in the world (see the chart below).



Venezuela’s annual inflation rates

To stop Venezuela’s death spiral, it must dump the bolivar
and adopt the greenback. This is called
“dollarization.” It is a proven elixir. I know because
I operated as a State Counselor in Montenegro when it dumped
the worthless Yugoslav dinar in 1999 and replaced it with the
Deutsche mark. I also watched the successful dollarization of
Ecuador in 2001, when I was operating as an adviser to the Minister of Economy and
Finance
.

Countries that are officially dollarized produce lower, less
variable inflation rates and higher, more stable economic growth
rates than comparable countries with central banks that issue
domestic currencies. Dollarization is, therefore, desirable. The
chart below shows the normalized values of real GDP in terms of
U.S. dollars between 2001 (index value = 100) and 2016 for nine
Latin American countries. Three — Panama, Ecuador, and El
Salvador — are officially dollarized, while Peru is
semi-officially dollarized (read: both the Peruvian sol and USD are
legal tender). In the three officially dollarized countries, real
GDP growth has been more stable than and generally superior to
growth in the countries that issue their own domestic
currencies.



Dollarized vs. Undollarized Latin American GDPs

So, not all the news from Venezuela is grim. After all, there is
a tried and true way to stabilize the economy, which is a necessary
condition required before the massive task of life-giving reforms
can begin. It is dollarization.

Just what does the Venezuelan public think of the dollarization
idea? To answer that question, a professional survey of public
opinion on the topic was recently conducted by Datincorp in
Caracas. The results are encouraging. Sixty-two (62%) of the public favors
dollarization.
It’s time for enlightened, practical politicians
in Venezuela to embrace the dollarization idea. The public already
does.

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

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Greed and Genius — Not Obama Plan — Led to Coal’s Decline

Patrick J. Michaels

Many in the energy and environmental industries thought Donald
Trump’s victory in November meant certain death for the Clean Power
Plan (CPP), a piece of low-hanging fruit in Trump’s promise to
revitalize coal country. This regulation, which many
argue
is one of the most expensive in American history, was key
to Obama’s climate legacy and, indeed, the President’s Executive
Order issued this week does kill the CPP. Until, that is, the
environmental activists file for a stay, which could happen any day
now.

As with Trump’s promises for the revitalization of coal
country
, all of this will be more complicated than
suggested.

Legally, the Supreme Court’s 2007 decision, Massachusetts v. EPA, held that if the EPA
determined carbon dioxide is a pollutant causing harm to human
health and welfare, then it is empowered to regulate it under the
1992 amendments of the Clean Air Act.

The conversion from coal
to cleaner burning natural gas has led to the decoupling of
economic growth from an increase in carbon emissions — something
many said would only be possible through government
coercion.

Trump’s executive order cannot call on the EPA to cease and
desist from its Clean Power Plan until it somehow determines that
carbon dioxide, after all, does not cause endangerment, or that the
science is simply not there to show that it does. As science moves
slowly, and with the federal government itself providing a vast majority of all climate science
funding
, this will be a difficult battle.

Undoing regulations is typically more difficult than creating
them. However, the selection of Scott Pruitt, who defended the
rights of Oklahomans to set their own environmental standards,
shows the Trump administration is serious. While many left-leaning
environmentalists tend to believe Pruitt is “against” the
environment, the truth is that most Republicans strongly value the
environment — they just wish to regulate it at a state level,
where local knowledge and values can be applied. Pruitt is not an
anti-environmental zealot; as for the EPA, he’s said “Clearly the mission of the EPA is to
protect our natural resources, protecting our water quality,
improving our air.”

And, as many have noted, even the elimination of the Clean Power
Plan will not itself bring coal back to anything like its former
life. The major reductions that the US has made in its greenhouse
gas emissions stem not so much from a war on coal (indeed, the
previous administration was surely belligerent toward the
industry), but from the market itself.

Dramatic advances in geolocation and hydraulic fracturing have
made natural gas, which only emits half as much carbon dioxide as coal
when used for power generation, and the equipment used to burn
it, cheaper
than coal.
It also burns much cleaner, so the expensive
scrubbers and bag houses required to capture coal’s bad residuals
are not necessary.

This conversion from coal to cleaner burning natural gas has led
to the decoupling of economic growth from an increase in carbon
emissions — something many said would only be possible
through government coercion. Instead it was accomplished by greed
and genius.

It’s hard to predict the legal fate of Mr. Trump’s latest
executive order. What we do know, though, is it will be a long time
before the dust settles, and unless many fundamental changes occur
legally, diplomatically, and scientifically, any new administration
can bring Obama’s policies back to life with a pen and a phone.

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

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Requiem for a Sane Immigration Policy

Jonathan Blanks

Attorney General Jeff Sessions’s recent threat to pull
grants from “sanctuary cities” should come as no
surprise to those who spent any time listening to the rhetoric of
then-candidate Donald Trump on the campaign trail. Doing so, you
might have thought that a very disproportionate number of
America’s problems are caused by “illegal
immigrants”—people who lack the legal qualifications to
live and work in this country. It is to remedy this apparent
problem that President Trump wants to increase immigration
enforcement and build a wall on the southern border of the United
States. Even if we put aside the enormous price tag to build and
man a border wall of that size and the logistical nightmare
required to successfully identify, detain, and deport the estimated
11 million undocumented immigrants in this country, these laws will
not likely fix the problems they are meant to solve. Indeed,
history shows that increased immigration enforcement and other
measures meant to discourage immigration have unintended
consequences that can actually increase the number of undocumented
immigrants and decrease overall public safety.

History shows that
increased immigration enforcement has often had unintended
consequences, ones these laws are supposedly there to
prevent.

Take, for example, the border wall. What walls the United States
already has on its southern border were built to keep unauthorized
people out of the country, and Trump’s proposed expansion
will, according to him, be better than what we have now. But as
Douglas Massey noted in 2015, when the current walls and
enforcement militarized the border in the 1980s and ’90s, it
disrupted decades of “circular” migration. Before the
buildup, Mexican migrants would typically come to the United States
to work and then return home voluntarily, so at any given time the
“illegal” population was relatively small. However, by
making the trip across the border more difficult—and thus
more expensive and dangerous for unauthorized persons—more
migrants stayed in the United States. In effect, the current walls
have been much better at keeping unauthorized immigrants
in the United States than it has at keeping them out.

And as my colleague Alex Nowrasteh has written, a large reason we
have so many unauthorized immigrants in the first place is that the
government shut down programs that allowed people to come and work
legally. Among these was the Bracero program that allowed seasonal
migration for labor:

From 1942 to 1964, nearly five million Mexican workers legally
entered and worked in the United States on Bracero, returning home
at the end of their seasonal employment. At the height of the
program, half a million workers came in annually to work on
American farms. In its main failing as a bill, the 1965 Act did not
create a similarly flexible migrant work visa and also piled on
more wage regulations for the few economic migrants allowed,
consigning these migrants to work as illegal immigrants.

Bracero was not without its flaws, but the fact remains that
when given legal means to make money in the United States,
immigrants took advantage and played by the rules. Our current
laws, on the other hand, prevent most unskilled immigrants from
coming here legally and don’t allow those already here to
go to the back of the line” to do so. Our
current system is incapable of meeting the labor demands of the
American economy, and the laws of economics usually trump the laws
of Congress. Thus, millions of good, hardworking people live in the
shadows in violation of inapt, antiquated laws so that they can
make a living and keep the American economy going.

Some of the sensationalist rhetoric around undocumented
immigrants has also focused on crime and violence, very often on
rare and horrific acts of violencecaused by
individuals here illegally. But a wide
range of data show
that increased violent crime rates are not
correlated with increased immigration and, indeed, may be inversely
correlated. In plain English, an increase in immigrant populations
does not result in crime increases and, in many cases, may result
in crime rate declines. Almost all available data show that
immigrants are less likely to commit crimes than native-born
Americans, and violent crimes in particular. Although no one can be
sure exactly why these data show this, it makes intuitive sense
that people who self-select to leave their loved ones to find work
in a new country would be less likely to violate the laws and norms
that would jeopardize the opportunities they sacrificed so much
for.

Again, however, certain federal law enforcement practices
undermine the principles they are supposedly there to uphold. In
recent weeks, federal immigration officials have seized or prepared
to seize people at courthouses who may be in violation of
immigration laws. Perhaps the most famous case came from El Paso,
Texas when federal agents detained a woman who was filing a protective order against a
domestic abuser
. Some people close to the case believe the
woman’s abuser was the person who tipped off federal
authorities to her court appearance.

Since the El Paso case, court watchers and lawyers have noticed
that domestic violence and sexual assault complaints are measurably
down in Latino areas in cities like Los Angeles and Denver. Crime victims who fear
deportation—or perhaps deportation of innocent loved
ones—are reluctant or unwilling to come forward to identify
their abusers. This chilling effect most directly harms the victims
of crimes, not the perpetrators, who may not even themselves be
immigrants.

Police officers cannot do their jobs effectively without
cooperation from victims, witnesses, and other members of the
general public. One detective complained to the Los Angeles Times
that “I can’t get justice for people, because all of a
sudden, I’m losing my witnesses or my victims because
they’re afraid that talking to me is going to lead to them
getting deported.” Nevertheless, immigration authorities
continue to subvert the priorities of local law enforcement,
including posing as local police officers to gain entry into
immigrants’ homes
, which law enforcement officials called
“corrosive…to public safety.”

According to an internal memorandum, the Trump Administration
has explored lowering hiring standards for agents to dramatically
increase staffing at Border Patrol and the U.S. Customs and Border
Protection (CBP). If history is a guide, lower standards will lead
to increased problems of misconduct and corruption, due to the
intense pressure to smuggle drugs, guns, money, and people across
the American border, often with the assistance of bribed or
otherwise compromised agents. Jay Ahern, a deputy commissioner of
CBP in the George W. Bush Administration, told Foreign Policy, “We
actually lived through this…If you start lowering standards, the
organization pays for it for the next decade, two, or three.”
The federal government has released studies that indicate the
highest incidents of misconduct and corruption in CBP happen
at the southwestern U.S. border
. More people on guard does not
necessarily mean better border security.

Federal immigration enforcement policy has been working at
cross-purposes with its stated goals for decades, and the Trump
Administration seems dedicated to the most counter-productive
policies to those ends. The walls and laws that were created to
keep people out have kept far more undocumented people in the
country than there had been in years past. Trump wants more laws
and walls. Yet the overzealous tactics to target victims of crimes
for possible deportation poison the relationship between local
police and those they are sworn to protect and serve, allowing more
crime to happen and more violent criminals to escape justice.
Trump’s Department of Justice is pushing the envelope of
aggressive enforcement. And to implement a hasty increase of
immigration officials on the border would be to repeat a recent
mistake that could lead to more problems of bribery, smuggling, and
corruption among federal law enforcement, thus diminishing border
security. Trump appears to be pushing for quantity at the very high
price of officer quality.

Would it be too much to ask to make immigration policy sane
again?

Jonathan
Blanks
is a research associate in the Cato Institute’s Project
on Criminal Justice and managing editor of PoliceMisconduct.net

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

Tim Lynch

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

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

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

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

On that recommendation, Lee pled guilty.

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

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

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

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

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

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

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

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

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

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

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

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Fixing the Endangered Species Act

Randal O’Toole

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Steve H. Hanke

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

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

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

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

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

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

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

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

image

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

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

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

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

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

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

Steve H. Hanke

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

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

Higgs’ granular analysis of this collapse in private investment led him to introduce and test a new concept: “regime uncertainty.” Higgs’ regime uncertainty is, in short, uncertainty about the course of economic policy — the rules of the game concerning taxes and regulations, for example. These rules of the game affect the net benefits and free cash flows investors derive from their property. Indeed, the rules affect the security of their property rights. So, when the degree of regime uncertainty increases, investors’ risk-adjusted discount rates increase and their appetites for making investments diminish.

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

Since the Great Recession of 2009, regime uncertainty has been elevated. This has been measured by Scott R. Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago. Their “Economic Policy Uncertainty Index for the U.S.” measures, in one index number, Higgs’ regime uncertainty. In addition, there is a mountain of other evidence that confirms the ratcheting up of regime uncertainty during the tenures of Presidents George W. Bush and Barack Obama. For example, Pew Research Center surveys find that the percent of the public that trusts Washington, D.C. to do the right thing has fallen to all-time lows.

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

Just how bad is Trump’s inherited legacy? As the accompanying chart shows, gross private domestic business investment, which does not include residential housing investment, has rebounded modestly since the Great Recession. But, most of this gross investment has been eaten up in the course of replacing capital that has been used up or became obsolete. Indeed, the private capital consumption allowances shown in the chart are huge. While these capital consumption figures are approximate, they are large enough to suggest that there is little left for net private business investment. This means that the total capital stock, after actually shrinking in 2009, has grown very little since then. This is bad news, as productivity is dependent on the quality and size of the economy’s private capital stock.

image

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

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

Doug Bandow

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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