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.
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.
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.
If government says that you are free to believe in something, but not to act on it, you are not truly free. That reality lies at the heart of a federal lawsuit filed by the Bethel Christian Academy against the state of Maryland, which kicked the academy out of a private school voucher program for having policies consistent with the school’s religious values. Such unequal treatment is unacceptable.
Immediately at issue are the school’s policies requiring that students and staff behave in ways consistent with the idea of marriage being between a man and a woman, and an individual’s proper gender being the one assigned at birth. The state maintains that those policies are discriminatory against LGBTQ individuals and that allowing public money - school vouchers from the state’s BOOST program - to flow to Bethel Christian is unacceptable.
The state’s position is totally understandable: All people should be treated equally when government is involved. The problem is that the state government is not treating religious people equally - a problem in the public education system not just in Maryland, but in every state in the country.
It would be better if Maryland had a scholarship tax credit program than a voucher. Then taxpayers could choose to direct their education dollars to religious institutions and get a credit for it, rather than all taxpayers having some sliver go to religious institutions, like it or not.
How does the current education system discriminate against religious people? Everyone is forced to pay for public schools - government run and funded schools - but those institutions cannot be religious in nature. They can teach about religion, but even that is very difficult because public schools must not be perceived as even incidentally promoting any religious precepts, much less being openly guided by them. In other words, non-religious people can get the education they want from the government schools for which they must pay, but religious people cannot.
There is an excellent reason for prohibiting the endorsement of religion by public schools: In a diverse society, it would inevitably end up with government favoring one person’s religion over another’s. Indeed, for much of our history public schools did exactly that, typically favoring Protestantism over Catholicism, Judaism, atheism and so on. The current system no longer favors Protestantism, instead favoring secularism over religion, a violation of government’s mandate to be neutral with regard to religion. Most famously, a public school can teach that the theory of evolution is true, but not creationism, a religious explanation.
If government can neither favor nor disfavor religion, what is it to do? As long as it is going to fund education, the answer is to do what BOOST begins to do: allow families to choose schools with the tax money earmarked for their children’s education. Do not have government decide what is acceptable or unacceptable for children to learn, let families decide for themselves. That is true equality under the law.
Which brings us back to Bethel: If a religious school cannot act on its religious principles without being cut off from a choice program, that program ceases to provide equality under the law. It essentially says that educators and parents may pick a school consistent with their faith, but as a practical matter that faith must be dead.
Of course, just because liberty and equality dictate that government not take sides on religious questions, it does not mean that individuals who dislike religious schools’ policies have to just accept them. They can and should use their own liberty, especially freedom of speech, to critique and even condemn them.
It would be better if Maryland had a scholarship tax credit program than a voucher. Then taxpayers could choose to direct their education dollars to religious institutions and get a credit for it, rather than all taxpayers having some sliver go to religious institutions, like it or not. But it is still far more appropriate in a free society that people can choose schools consistent with their faith rather than be rendered second class.Neal McCluskey is the director of the Cato Institute’s Center for Educational Freedom and maintains the Center’s Public Schooling Battle Map.
Ted Galen Carpenter
President Trump is once again beating the drums about the need for greater burden-sharing by U.S. allies. The latest example is his demand that South Koreans pay “substantially more” than the current $990 million a year for defraying the costs of American troops defending their country from North Korea.
This is not a new refrain from the president. Most of Trump’s spats with NATO members have focused on the financial aspects of burden-sharing. Yet the nature of his complaints leads to the inescapable conclusion that if allies were willing to spend more on collective defense efforts, he would have no problem maintaining Washington’s vast array of military deployments around the world.
Trump’s obsession with financial burden-sharing misses a far more fundamental problem. Certainly, the tendency of U.S. allies to skimp on their own defense spending and instead free ride on the oversized American military budget is annoying and unhealthy. But the more serious problem is that so many of Washington’s defense commitments to allies no longer make sense-if they ever did. Not only are such obligations a waste of tax dollars, they needlessly put American lives at risk, and given the danger of nuclear war in some cases, put America’s existence as a functioning nation in jeopardy. American military personnel should not be mercenaries defending the interests of allies and security clients when their own country’s vital interests are not at stake. Even if treaty allies offset more of the costs, as Trump demands, we should not want our military to be modern-day Hessians.
Donald Trump wants our allies to pay more, but outdated overseas defense obligations are the real problem.
Unfortunately, the current situation is not unprecedented. During the Persian Gulf War, President George H.W. Bush expressed satisfaction that allied financial contributions offset most of Washington’s expenses. That was undoubtedly true. Indeed, according to some calculations, the United States may have ended up with a modest profit. Kuwait and Saudi Arabia were especially willing to contribute financially to support the U.S.-led military campaign to expel Saddam Hussein’s forces from Kuwait. Japan, still agonizing over the alleged limitations on military action that its “peace constitution” imposed, asserted that while it could not send troops, it would contribute funds to the war effort. All three countries practiced rather blatant “checkbook diplomacy.”
The Persian Gulf War was surprisingly short, and U.S. forces incurred far fewer casualties than anticipated. However, the immediate costs were merely the beginning of an expanded American security role in the Middle East that has proven to be disastrous. The checkbook diplomacy payments of 1990 and 1991 did not even begin to offset those horrendous, ongoing costs in treasure and blood.
Financial considerations aside, it never served American interests to become the onsite gendarme of the Middle East. Those who saw the Persian Gulf War as a low-cost, perhaps even no-cost, venture from the standpoint of finances were incredibly myopic. America’s role as Hessians for Kuwait, Saudi Arabia, and other powers undoubtedly benefited the ruling elites in those countries, but it clearly has not benefited the American people.
Yet Trump’s security policies continue to evince similar myopic impulses. During the 2016 presidential campaign, he repeatedly criticized NATO members for their lack of burden-sharing, and he even indicated that Washington’s defense commitments to an “obsolete” alliance might be reconsidered. But when the allies pledged greater defense spending at the 2018 NATO summit, Trump’s grousing was replaced by praise and expressions of alliance solidarity. He greeted with even greater enthusiasm the Polish president’s offer to offset construction costs if the United States built a military base in Poland-even though such a move would deepen already worrisome tensions with Russia. The American Conservative’s Daniel Larison put it well: “Trump is often accused of wanting to ‘retreat’ from the world, but his willingness to entertain this proposal shows that he doesn’t care about stationing U.S. forces abroad so long as someone else is footing most of the bill.”
The overwhelming focus of Trump’s burden-sharing goals continues to be financial. His administration shows little receptivity to independent defense policy initiativeson the part of allies. Indeed, he and his advisers, especially National Security Adviser John Bolton, show outright hostility to proposals for a European Union army or other manifestations of greater Europeans-only security efforts, even though they would seem to constitute meaningful burden-sharing. Bolton has blasted such initiatives as “a dagger pointed at NATO’s heart.” Washington simply wants the allies to pay more for its own defense protection.
Instead, U.S. leaders need to engage in burden-shedding-eliminating security commitments that now entail far more risks than benefits to America. For example, it makes little sense to retain, much less add, obligations to defend small, strategically insignificant countries on Russia’s border. The risks of such a provocative stance clearly outweigh any potential benefits. Likewise, the risk-benefit calculation to continue providing a security shield for South Korea has changed dramatically since the days of the Cold War. Not only is South Korea now a much stronger country economically, one that can build whatever forces are needed for its defense, but North Korea is now capable of inflicting grave damage on U.S. forces stationed in East Asia and will soon be able to strike the American homeland with nuclear warheads.
Greater burden-sharing efforts by NATO members or South Korea will not change that more important risk-benefit calculation. The American people deserve a far more substantive policy change.Ted Galen Carpenter, a senior fellow in security studies at the Cato Institute and a senior editor at The American Conservative, is the author of 12 books and more than 800 articles on international affairs.