Steve H. Hanke
Yesterday, the ticket of Alberto Fernandez and Christina Kirchner crushed the hapless President of the Argentine Republic Mauricio Macri in a primary election. Their victory virtually guarantees that the Fernandez-Kirchner team will occupy the Casa Rosada after the presidential election scheduled for October.
For many, including the pollsters, Sunday’s results were a stunner. Not for me. I have been warning for over a year that gradualism, which is Macri’s mantra, is a formula for political disaster. If that wasn’t enough, the Argentine peso is another time bomb that has sent many politicians in Argentina into early retirement. And, to add insult to injury, Macri called in the “firefighters” from the International Monetary Fund (IMF) to salvage the peso. These three factors sealed Macri’s fate.
As it turns out, this movie has been played over-and-over again in Argentina. Argentina has seen many political gradualists bite the dust. What makes Macri unique is that he advertised gradualism as a virtue. Macri and his advisers obviously never studied the history of economic gradualism. When presidents are faced with a mountain of economic problems, it’s the Big Bangers who succeed.
As for the venom that can be injected by a peso crisis, the instances of the poison delivered by that snake bite are almost too numerous to count. To list but a few of Argentina’s major peso collapses: 1876, 1890, 1914, 1930, 1952, 1958, 1967, 1975, 1985, 1989, 2001, and 2018.
It is noteworthy that the frequency of peso crises picked up after the establishment of the Central Bank of Argentina (BCRA) in 1935. With that, serial monetary mismanagement ensued. The chart below tells the BCRA story. Before the BCRA, Argentina (the peso) held its own against the United States (the dollar), with the respective per capita GDPs being roughly equal in 1935. But, after the BCRA entered the picture, a great divergence began. Now, the U.S. GDP per capita is roughly three times higher than that of Argentina.
The BCRA’s most recent monetary mishap occurred last year, when the poor peso lost 58% of its value against the greenback from the start of 2018 until the end of May 2019. What was behind that collapse? On Macri’s watch, no less, the BCRA had been surreptitiously financing the government’s deficit spending. It did this through the sterilization of increases in the net foreign asset component of Argentina’s monetary base. This was done via the sale of bonds issued by the BCRA (LEBACS). The sterilization (and financing of the government’s deficit) was on a massive scale. In the January 2017-May 2018 period, the BCRA sterilized 50% of the total increase in the foreign asset component of the monetary base. In consequence, the BCRA was the largest source of financing for Argentina’s sizable primary fiscal deficit. These typical Argentine monetary-fiscal shenanigans were an invitation for yet another currency disaster.
After the peso rout, Macri went hat in hand to the IMF. This was the dagger in the heart of Macri’s political career. For one thing, the Argentine public distrusts, if not despises, the IMF-and for good reasons: namely, the IMF’s record of failure in Argentina. Yes, the IMF’s prescriptions have turned out to be the wrong medicine. To stabilize a half-baked currency’s (read: the Argentine peso) exchange rate, the IMF orders sky-high interest rates. With these rates, the economy collapses, as does the local currency that the IMF is trying to stabilize.
As Harvard University’s Robert Barro put it, the IMF reminds him of Ray Bradbury’s Fahrenheit 451 “in which the fire department’s mission is to start fires.” Barro’s basis for that conclusion is his own extensive research. His damning evidence finds that:
And, if that’s not bad enough, countries that participate in IMF programs tend to be recidivists. The IMF programs don’t provide cures, but create addicts.
For a clear picture of the addiction problem (read: recidivism), review the chart below. It lists the number of IMF programs that 146 countries have participated in. Haiti leads the pack with 27 programs since joining the IMF in 1953. Argentina is a heavy hitter, too. It joined the IMF in 1956 and is now hooked on its 22nd IMF program. That’s a new program every 2.8 years on average.Armed with this weekend’s election results, Argentines are exchanging pesos for greenbacks as fast as they can. The peso has shed a stunning 20.5% against the preferred greenback since last Friday. And, by my measure, which uses high-frequency data, Argentina’s inflation rate has exploded to 103%/yr (see the chart below). To end Argentina’s never-ending monetary nightmare, the Central Bank of Argentina, along with the peso, should be mothballed and put in a museum. The peso should be replaced with the U.S. dollar. Argentina’s government should do officially what all Argentines do in times of trouble: dollarize. It’s time for the elites in Argentina to wake up and face reality. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
While President Trump’s immigration rhetoric continues to focus on the need to build a southern border wall, his administration is quietly pursuing a policy that could provide a lasting solution to the ongoing migrant surge.
The Department of Labor recently signed an agreement with Guatemala to increase bilateral cooperation for the H-2A visa program for low-skilled Guatemalans. By providing transparency and accountability measures, such as ensuring that labor recruiters are bona fide and vetted, the agreement paves the way for more Guatemalans to come legally.
The administration should sign similar agreements with the other Northern Triangle countries, El Salvador and Honduras, which are responsible for the overwhelming number of migrants, as well as exempt them from H-2A seasonality requirements. Historical experience suggests increasing legal immigration options would reduce the number who come illegally.
The Trump administration could end the Central American border surge by shelving unhelpful border wall boasts in favor of doubling down on sound H-2A visa policy initiatives.
The H-2A visa is for seasonal workers in agriculture. It offers low-skilled migrants the best — and in many cases only — opportunity to come work in the U.S., while also addressing the acute labor shortage faced by American farmers. The Trump administration seems to recognize that economic migration can be channeled into this legal system.
That’s important, because the surge of Central American migrants is not correlated with murder rates in their home countries and most arrivals aren’t referred to asylum interviews. Central Americans are primarily being pushed out of their home countries by a poor economy — exacerbated by the crash in coffee prices — and drawn in by a booming labor market here.
Neither of these push nor pull migration factors are going to change soon, so diverting the migrants onto legal H-2A worker visas is key to meaningfully fixing the situation on the southern border.
For proof of the effectiveness of H-2A visas in stemming illegal migration, the Trump administration can consult recent history. Legal Mexican migration on expanded H-2A and H-2B (seasonal, non-agricultural) visas dramatically reduced illegal Mexican immigration over the last two decades. As the U.S. government increased the annual number of H-2 visas for Mexicans from 56,090 in 2000 to 242,582 in 2018, Mexican illegal immigration fell from over 1.6 million in 2000 to almost 137,000 in 2019 so far — a 91% drop.
During that time, a single additional H-2 visa for a Mexican worker is associated with 2.6 fewer Mexicans apprehended — controlling for border enforcement.
“Most of my friends go with visas or they don’t go at all,” said Mexican agricultural worker Jose Bacilio. In previous years, Mexican workers like Bacilio would have come illegally, but now they wait for visas.
Guatemalans, Hondurans and Salvadorans currently have no reason to wait, as they only got about 9,000 H-2 visas in 2018, slightly down from 2017. If the government issues more H-2 visas to Central Americans, then it will divert much of the current economic flow of migrants into the legal market, just like it did with Mexicans.
The Trump administration could achieve this by signing similar H-2A pacts with Honduras and El Salvador then asking Congress to exempt these H-2A workers from the visa’s seasonal requirements, which requires migrants to return home after the harvest is finished. This provision would guarantee that American labor recruiters flock to hire Central Americans without impacting Mexican recruitment.
Electronic visa application processes at U.S. embassies and consulates in Central America must also be modernized and streamlined. Officials should copy their counterparts at U.S. consulates in Mexico.p>The Trump administration’s first steps in streamlining the H-2A visa process for Guatemala is promising, but more needs to be done. Extra Mexican immigration enforcement and the summer heat cut the number of Central Americans showing up at the border by 29% — but neither will last forever.
Central Americans will come again in large numbers if they can’t come legally. The Trump administration could end the Central American border surge by shelving unhelpful border wall boasts in favor of doubling down on sound H-2A visa policy initiatives.Alex Nowrasteh is the director of immigration studies at the Cato Institute.
The Endangered Species Act has been called the strongest environmental law Congress has ever written because it gives the government almost unlimited power to regulate private landowners with the objective of saving wildlife, fish, and even insects. Environmental groups that relish seeing this law enforced are upset that the Trump administration is proposing to change how the law is administered.
The Fifth Amendment to the Constitution forbids the taking of private property for public use without compensation. The Endangered Species Act violates the spirit, if not the letter, of this amendment.
Under the law, if you have an endangered species on your land, or if the government thinks you might have an endangered species on your land, or if the government knows you don’t have an endangered species on your land but thinks that you might someday have that species on your land, then the government can so strictly regulate your land that you can’t get any economic use out of it. For example, the government told Louisiana landowners that they couldn’t develop their property because it was defined as “critical habitat” for a rare frog — even though the frog didn’t, and couldn’t, live on the land without completely removing existing trees and replacing them with other species.
Effectively, the government is requiring some private landowners to house and feed certain species of wildlife at the landowners’ expense. Moreover, the government can force this without providing any compensation at all. The law doesn’t require the government to consider the cost of its regulation, so government officials can write overly strict rules just in case it might help a species.
Yet there is little evidence that giving the government this power has done much to save species. The few species that have recovered from danger did so mostly for other reasons.[pullquote]Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners.[/pullquote]
For example, America’s symbol, the bald eagle, was once considered endangered. But scientists agree that it recovered primarily because the Environmental Protection Agency banned the use of the pesticide DDT a year before the Endangered Species Act was passed.
Moreover, the Endangered Species Act may actually do more harm than good to endangered species. To avoid regulation, the law gives private landowners incentives to do everything they can to keep endangered species off their land, leading to the phrase, “shoot, shovel, and shut up.”
This entire system is unfair because it forces a few people to pay the costs for something that benefits everyone else. While it is unknown whether the Supreme Court would agree that the law is unconstitutional, we shouldn’t have to ask it because we shouldn’t have imposed such an inequitable burden on a few people in the first place.
The Trump administration has proposed to revise how the law is administered in several ways. Among other things, the proposed rules would allow the government to consider the costs of its regulation and would impose less intrusive regulations for the protection of species that are considered “threatened” as opposed to “endangered.”
While these changes may ease the burden on some private landowners, Congress and the administration could do much more to assure species recovery without imposing the costs on a few landowners. Carrots work better than sticks, meaning we can save more species by rewarding people for doing so rather than punishing them for having those species on their land.
First, a share of public land recreation fees should go into trust funds for protecting endangered species. To adequately fund this program, federal agencies such as the National Park Service, Forest Service, and Bureau of Land Management should be allowed to charge for all recreation on public lands.
Currently, most public land recreation, including hunting, fishing, hiking, boating, and off-road vehicles, is free. It is perfectly fair to ask people who use public lands to pay such fees, and many will be happy to pay such fees knowing that by doing so they are helping to save endangered species.
Second, on a case-by-case basis, it may be appropriate to give people ownership rights to selected species. In Britain, wildlife are owned by the owners of the land the wildlife use, which can give landowners incentives to protect such wildlife. Giving Americans similar ownership rights can help save many species.
People go to great lengths to save rare breeds of dogs, cattle, and other domestic animals, not for any economic reward but simply for the pride in doing so. Creating ownership rights in some species of wildlife can put this energy to work in saving rare species.
Saving endangered species is important, but imposing the costs of doing so on a few people is unfair, counterproductive, and may be unconstitutional. Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners.Randal O’Toole is a senior fellow with the Cato Institute and author of Reforming the Forest Service and co-author of The Endangered Endangered Species Act.