Understandably, the Brexit talks are hung up on big questions such as the UK’s trade relationship with the EU Single Market and what to do about the Irish border. Tariffs, the traditional focus of trade policy, have played only a small role in the debate. UK-EU tariffs are already at zero, so the typical trade negotiating exercise of phasing out tariffs on particular products has not been followed. The apparent assumption that any Brexit deal will maintain zero tariffs is reassuring.
But this assumption may only apply to ordinary tariffs. There is also a special category of “trade remedy” tariffs that apply to so-called “unfair trade”, and the approach of a Brexit deal to these tariffs has been less clear. Brits received a crash course in the use and abuse of “trade remedies” last year, when there was the prospect of the United States imposing tariffs on Bombardier aeroplanes in amounts close to 300% — although, ultimately, the US agency responsible decided not to impose them.
Trade remedies include tariffs imposed in response to import prices that are deemed too low (anti-dumping duties) and to foreign government subsidies (countervailing duties).
With regard to dumping, when people hear this word, they may assume that it means something like the predatory pricing that competition policy usually deals with. In reality, though, dumping calculations do not assess actual predation; they often rely on dubious facts or methodologies; and they are mainly an excuse for protectionism. Any actual unfair pricing practices related to foreign goods can be taken into account by domestic competition policy laws; special anti-dumping laws for foreign goods are not needed.
As for subsidies, they can be a source of market distortions, but a better response is to address them directly in complaints at the WTO, under its Agreement on Subsidies and Countervailing Measures. National countervailing duty laws are subject to the same political pressures that distort anti-dumping measures. If the goal is to police global subsidies and get them removed, rather than just impose a new tariff, the WTO may be the better forum.
Nevertheless, trade remedies are an established part of domestic trade policy. Prior to Brexit, the UK relied on the EU to carry out trade remedies. Now, the UK is setting up a Trade Remedies Organisation of its own to oversee a domestic trade remedies regime.
That takes us to Brexit, where negotiators need to decide what to do with this issue in the context of UK-EU trade. Are tariffs on this trade going to remain at zero for all products, or will an exception be made for trade remedies? This exception would mean that high tariffs could be imposed on UK-EU trade in response to vaguely defined “unfair trade.”
There may be calls from industry groups to make trade remedies available for UK-EU trade. But Brexit negotiators should resist any such demands.
Adding trade remedy tariffs to the UK-EU relationship will have extremely negative consequences. Any industry that is facing competition from imports has an incentive to look for pricing patterns that can lead to a finding of dumping — or to look for government programmes that constitute subsidies — and then file a complaint. Even the mere filing, without a conclusion of dumping/subsidisation and injury, places a burden on foreign companies to hire lawyers and defend themselves.
And the actual tariffs imposed can be so high as to stop trade in particular products almost completely. Average tariffs for developed countries range from 3-5%, depending on how they are measured. As the Bombardier case demonstrated, however, trade remedy tariffs can reach astronomical levels.
Moreover, the UK-EU economic relationship would be permanently soured through recurring claims of cheating. Constant allegations of unfair trade are bad for overall relations.
Many people assume, or hope, that UK-EU trade will be tariff-free after Brexit. However, if trade remedies are available, it will not be. Instead, there will be frequent litigation to decide whether to impose tariffs — sometimes very high ones — on specific products. That will be extremely disruptive for UK-EU trade relations. The UK and EU Brexit negotiators should make it a priority to save UK-EU trade from the scourge that is trade remedies.Simon Lester is the Associate Director of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute.
James A. Dorn
This year marks the 40th anniversary of China’s opening to the outside world in 1978. Following the disastrous Cultural Revolution and Mao Zedong’s death in 1976, economic development, not class struggle, became the primary aim of the Chinese Communist Party (CCP). Deng Xiaoping allowed experimentation with market-based alternatives to central planning, and for a while it appeared that economic liberalization would help create a free market in ideas with greater debate on political as well as economic issues. That hope is rapidly disappearing with the rising power of China’s president for life, Xi Jinping.
A new “little red” book, Thirty Chapters about Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, compiled by the Publicity Department of the CCP’s Central Committee, presents the politically correct view on Chinese-style socialism. The book is being widely distributed within China, but there is little room for serious debate. As the China Daily notes, the book “explains that Xi Jinping Thought is the guiding thought that the Party and the country must follow in the long run.”
Xi Jinping Thought is a 14-point manifesto to ensure CCP “leadership over all forms of work.” It promises “continuation of ‘comprehensive deepening of reforms’ ”; propagates the long-held myth that under “socialism with Chinese characteristics,” the “people” are “the masters of the country”; asserts that China should be governed by “the rule of law”; reinforces the post-Maoist idea that “the primary goal of development” is to improve “people’s livelihood and well-being”; and advocates creating “a peaceful international environment.”
In March 2018, the National People’s Congress, by a vote of 2,958 to 2 (with 3 abstentions), added “Xi Jinping Thought” to the Preamble of the PRC’s Constitution, alongside “Marxism-Leninism, Mao Zedong Thought, and Deng Xiaoping Theory.” At the same time, the NPC amended Article 1 by adding: “The defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China.”
China’s institutional infrastructure is weaker than it might appear at first glance.
If President Xi actually allowed the common people to be “masters of the country,” adopted a genuine rule of law to limit the power of government and safeguard persons and property — including freedom of thought — then he would truly transform China. Yet his actions and growing power do not instill much confidence that the Middle Kingdom will couple economic freedom with limited government and protect basic human rights. Indeed, since Xi took over as paramount leader, economic reform has stalled or even regressed, and suppression of human rights has worsened.
Liu Xiaobo’s dream for “a future free China” looks dim. As a signatory to Charter 08, he was imprisoned and not allowed to receive the 2010 Nobel Peace Prize in person, and his wife, Liu Xia, was put under house arrest for eight years. The empty seat at the Nobel ceremony was a stark reminder that although China is the largest trading nation in the world, it ranks near the bottom in terms of a free market for ideas.
Without open debate and competition in a free market for ideas, the probability of big errors increases dramatically. China learned that lesson under Mao’s central planning and control. That is why Article 45 of the PRC’s 1978 Constitution guaranteed individuals “the right to speak out freely, air their views fully, hold great debates and write big-character posters.”
Those “four big rights” were ended in 1980, and no longer appear in the Constitution. They ended because the CCP has a monopoly of power and to maintain that power the ruling elite must not let liberalization in the market for goods and services spillover to the market for ideas. All individual rights in China are suppressed by the power of the state, as represented by the vanguard of the CCP.
Today, the PRC Constitution declares: “Citizens of the People’s Republic of China enjoy freedom of speech, of the press, of assembly, of association, of procession and of demonstration” (Article 35). It also states that “freedom of the person of citizens … is inviolable” (Article 37). Yet the reality is much different.
The CCP’s Constitution continues to hold that “the highest ideal and ultimate goal of the Party” is “the realization of communism.” In truth, the Party’s monopoly on power is maintained through the suppression of a free market in ideas. Any criticism of the CCP is dealt with swiftly with no effective due process and no independent judiciary. In a country without a just rule of law and the free flow of information, there is little trust in government and much fear with regard to one’s security. Those cracks in the institutional infrastructure will put a drag on China’s future development and cause untold misery.James A. Dorn is a senior fellow and China specialist at the Cato Institute in Washington, D.C.
A. Trevor Thrall and Jordan Cohen
A recent video showing the Cameroonian military executing two women and two children by gunshot to the head shocked many Americans, most of whom are certainly unaware that since 2002 the United States has trained nearly 6,400 soldiers, sold Cameroon $6 million worth of American weapons, and provided its military with $234 million in security aid.
Making matters worse is the fact that this sort of behavior is nothing new in Cameroon. In 2017, Amnesty International revealed that the Cameroonian military tortured prisoners in over 20 sites, and recorded 101 cases of incommunicado detention and torture between 2013 and 2017. Chillingly, the report also notes that many of these actions took place at the same military base used by U.S. personnel for drone surveillance and training missions. During the U.S. fortification of this site — known as Salak — Amnesty International found that suspects were subjected to water torture, beaten with electric cables and suspended with ropes, among other horrors.
American counterterrorism policy should never allow the ends to justify such means. Though unintentional, American counterterrorism policy in Cameroon has done just that. Even after learning of the crimes documented in the Amnesty report, the United States continued to provide training and funding for the Cameroonian military, enabling the ongoing torture and the execution of innocent people.
Washington needs to take steps to ensure that it does not enable the torture and oppression of Cameroonians in the name of American national security.
The rationale for American aid and assistance to Cameroon since 2001 has never been in question. Nigerian-based Boko Haram — a group briefly affiliated with the Islamic State — is indeed a violent group. It is responsible not only for the famous kidnapping of over 276 schoolgirls in 2014 but also for tens of thousands of deaths in Nigeria (and many in Cameroon, as people fled across the border from Nigeria to escape) since 2009. Beyond this, Cameroon is Central Africa’s second-biggest economy after Nigeria and is a development hub with regard to paved roads and sea ports, both of which play a large role in the region’s future. Though Boko Haram does not pose a direct threat to American national security (it has never attacked the United States), it certainly remains a destabilizing force in Africa today. As such, making efforts to help local partners confront and manage Boko Haram is a reasonable policy.
Unfortunately, the very states like Nigeria and Cameroon that suffer from violent insurgencies and terrorism are also extremely unreliable partners. Cameroon ranks among the world’s 25 most fragile states, rife with corruption and political instability. As noted, the government has a track record of human rights abuses and makes extensive use of the military and police to oppress political opponents. Putting money and weapons in the hands of such governments is a recipe for disaster.
Thus, even though American “advise and assist” efforts were designed to enable Cameroonian forces to better fight terrorist groups, the United States has effectively strengthened a military that now uses its newfound abilities against civilians, spawning further human rights abuses and raising the risk of state failure.
Nor is this just a problem in Cameroon. American intervention and assistance in Somalia, Ethiopia and Nigeria, just to name a few, risk similar unintended outcomes, or perhaps even worse. Academic research has shown that, over the past four decades, foreign military training increases the likelihood of a military-led coup d’état because of the way it strengthens military organizations relative to civilian ones within a state.
And despite all of the American money and aid, it also looks like there is a real chance that U.S. counterterrorism efforts could backfire in Africa. A recent report from the Carnegie Endowment for International Peace found that the American military presence in Africa has not only created backlash against local governments but spawned increased resentment of the United States. U.S. Africa Command’s own force posture statement recognizes that “abusive security forces” can make local populations “prime targets” for exploitation.
Given how small the threat of African-based terrorism is to the United States today, it makes little sense to take actions that may wind up increasing the threat in the future. Though there are no easy answers to the question of how to combat terrorism, especially in places like Cameroon, Washington needs to take steps to ensure that it does not enable the torture and oppression of Cameroonians in the name of American national security.A. Trevor Thrall is an associate professor at George Mason University’s Schar School of Policy and Government and a senior fellow at the Cato Institute. Jordan Cohen is a Ph.D. student in political science at George Mason University’s Schar School of Policy and Government.
The push for federal subsidies for child care is gaining momentum. Ivanka Trump has urged Congress to pass a tax deduction for child-care expenses. During the 2016 presidential campaign, both Hillary Clinton and Bernie Sanders proposed new federal preschool and child-care programs. And recently, one commentator even advocated opening federally subsidized care centers nationwide.
The concern is understandable. According to 2016 data compiled by Child Care Aware, the average annual cost of full-time center-based infant care varies dramatically nationwide, from $5,178 in Mississippi to $23,089 in the District of Columbia. That amounts to 27.2 percent of median single-parent family income in Mississippi and fully 89.1 percent in D.C. Such high burdens not only have a crippling financial impact on poorer families but can make it uneconomic to work and pay for child care at the same time.
Yet none of the proposed solutions to costly care would make it cheaper. They would simply transfer the high costs to taxpayers. A better starting point would surely be to ask: Why is child care so expensive? One important answer, it turns out, is state-level regulation. Staff-child ratio rules and worker-qualification requirements, in particular, increase prices and reduce availability, particularly in poor areas. These are things state legislators can do something about.
Suppose a staff-child ratio is made more stringent, meaning that fewer children can be cared for per staff member, and qualification requirements for directors of infant centers are increased. These could theoretically improve care by heightening the quantity and quality of interactions with children. The regulations may even convince wary parents that their child would be well cared for, increasing demand for formal, center-based care.
But both regulations raise the cost of serving a given number of children. These increased costs reduce supply, increasing prices and encouraging parents to use less-costly alternatives. Child-care centers could try to compensate by paying staff lower wages, but this may mean the industry attracts lower-quality workers. They might also try to hire cheaper, lower-quality support staff. Both could actually lower quality, rather than increase it.
Empirical research analyzing differences across states shows that the net effects of these requirements are costly and that relaxing them would have beneficial effects without significantly compromising quality. Mercatus Center economists Diana Thomas and Devon Gorry, for example, estimate that loosening ratios by just one child across all age groups would result in prices falling by 9 percent or more. That’s over $2,000 per year for a family using full-time infant-center care in D.C. Requiring lead teachers to have high-school diplomas likewise raises prices by between 25 percent and 46 percent.
The rules the states impose raise costs. That’s hard on poorer people and particularly single mothers.
It’s a matter of supply and demand, as research by economists Joseph Hotz and Mo Xiao shows. They find that tightening the staff-child ratio by one child reduces the number of child-care centers in an average area by 10 percent with no apparent impact on quality. Increasing the average required years of education for center directors by one year has modest positive effects on quality, but likewise reduces the number of centers by between 3.2 percent and 3.8 percent.
Crucially, the negative consequence occur almost entirely in poorer areas, and they disproportionately impact single mothers, who are particularly sensitive to child-care costs in terms of deciding whether to work. Costly center-based care also appears to drive parents toward home-based day care or using unlicensed relatives, alternatives that, in the absence of regulation, may result in much lower quality care.
To increase accessibility and reduce the price of formal child-care, then, we need state legislatures and regulators to liberalize these regulations. This should not be considered crazy. Many European countries have no statutory limits on staffing, with no ill effects. Parents demand a safe environment from their providers. It should be up to them to decide what price-quality bundle they want and for providers to be able to operate efficiently to deliver that.
Federal subsidies, in contrast, amount to just disguising the high costs through the generosity of others. They may not even improve access if the program is badly designed. Of course, families would see lower out-of-pocket payments, but others’ tax bills would rise to pay for this. And attempts to subsidize “free” care often bring huge unintended consequences. In the United Kingdom, for example, the number of child-care centers is falling as they struggle to maintain profitability given low subsidy rates.
Deregulation of child care is a preferable means of both reducing the cost of care and increasing its availability. It would not put taxpayers on the hook for a single dollar. Rather than introducing a whole new federal entitlement, let’s unpick the state-level interventions that drive up the costs of care in the first place.Ryan Bourne occupies the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute.
Christopher A. Preble
Two articles in different weekend magazines have me thinking about America’s many wars. David Montgomery in last weekend’s Washington Post pondered the proliferation of war memorials in our nation’s capital. The second, an excerpt from C.J. Chivers’s new book in the latest New York Timesmagazine, details the experiences of an Army unit in Afghanistan’s Korengal Valley.
Some of those killed in that desolate distant place will be remembered, indirectly at least, in a new Global War on Terrorism Memorial. Montgomery reports that President Donald Trump “signed legislation waiving the statutory 10-year post-war waiting period so planning could begin.” He continues:
That memorial would accomplish a feat rarely if ever matched in the annals of memorial building: commemorating a war before it is over. It also epitomizes the new state of affairs, where endless war means endless war-memorial building.
In a similar context, Chivers notes that the Afghan war will enter its 18th year in October. As he explains, this means that soldiers born after the U.S. military toppled the Taliban in 2001, who were not even crying babes when the planes hit the towers, will likely be serving there soon. And this is only one of several initiated after 9/11. Chivers recites the grim statistics that, for many Americans, have become akin to the music played in retail stores: We’re vaguely aware that a song might be playing, but unable to hum the tune, let alone recite the lyrics:
More than three million Americans have served in uniform in these wars. Nearly 7,000 of them have died. Tens of thousands more have been wounded. More are killed or wounded each year, in smaller numbers but often in dreary circumstances…
Beyond the statistics, beyond the numbers killed and wounded, Americans are similarly disinclined to weigh their deeper meanings. Chivers spells those out, too.
On one matter there can be no argument: The policies that sent these men and women abroad, with their emphasis on military action and their visions of reordering nations and cultures, have not succeeded. It is beyond honest dispute that the wars did not achieve what their organizers promised… [They] have continued in varied forms and under different rationales… They continue today without an end in sight, reauthorized in Pentagon budgets almost as if distant war is a presumed government action.
I wonder: Might our war memorials do more than memorialize war? Might they also help us to avoid future ones?
It’s not the first time that I contemplated this question.
Back in May 2004, I ventured down to the National Mall and wondered “What kind of memorial will they build for the Iraq war?” This was not long after the dedication of the new World War II memorial, and more than 22 years after one for Vietnam veterans was completed.
The contrasts between the two, with the Korean War memorial wedged both physically and stylistically in between, were obvious. Now 14 years later, Montgomery explained, the Vietnam Veterans Memorial remains among the most visited sites in the city (only the Lincoln Memorial draws more).
I recall the controversies surrounding the Vietnam memorial when it was commissioned and dedicated in the early 1980s. I was then in junior high school and had no personal memories of the period when the war, and the protests against it, raged. I asked one of the few men that I knew who had served in Vietnam, my eighth-grade history teacher, how he felt about the wall. I sensed a certain ambivalence in his response. He thought it appropriate, but there was no great enthusiasm for it. He was the kind of person, I think, who would have preferred a soaring testament to victory over evil. But, knowing the reality in Vietnam was a lot more complicated than that, he seemed content with (or perhaps resigned to) the compromise.
How can we redirect the nation’s energy away from distant wars that years from now will require memorials to honor those killed in them?
We don’t yet know what the Global War on Terrorism Memorial will look like. The satirical Duffleblog suggests an “Eternal Flaming Wheelbarrow Full of Cash.” But while Trump ensured that the war will have a memorial, he has also ensured the monument will memorialize the sacrifice of future soldiers, sailors, airmen, and marines, not merely those who have already served. The president hasn’t seen to ending the wars he inherited. In many respects, he has expanded them. And there is no end in sight.
On the campaign trail, Donald Trump railed against Bush and Obama’s wars. He elicited gasps from a partisan crowd in South Carolina when he accused George W. Bush of lying about weapons of mass destruction in Iraq, then shocked the GOP establishment by winning the primary there.
Then, in the general election against another key Iraq war booster, Trump defied the conventional wisdom again. Research shows that he fared well in those communities that paid the heaviest price during America’s post-9/11 wars in Afghanistan and Iraq — so well, conclude study authors Douglas Kriner and Francis Shen, that these communities “may have been critically important to his narrow election victory” over Hillary Clinton.
Trump could reasonably have claimed that he had an electoral mandate to wind down the Global War on Terrorism, with its many theaters. But he did the opposite. Given the context of his campaign message, that he sustains the military campaign in Afghanistan and expands U.S. involvement and support to conflicts elsewhere, confounds some.
But there is nothing confounding about it to me. The impulse driving the Trump administration to double down on foolish and unnecessary conflicts speaks to the key themes of Montgomery’s article on war memorials: The United States is in the business of war. It’s what we do. In the eyes of many Americans, war has become what makes America great.
So said former marine Scott Stump, the president of the National Desert Storm War Memorial Association. Stump campaigned tirelessly for a memorial on behalf of the over 700,000 Americans who served in the wars that reversed Saddam Hussein’s invasion and occupation of Kuwait in 1991.
This means he claims to speak for me. I’m a veteran of that war. As a junior officer onboard USS Ticonderoga, a guided missile cruiser, at the tail end of a scheduled six-month Mediterranean deployment, I witnessed first-hand the earliest phase of America’s intervention from the middle of the Red Sea. Less than a year later, the ship we affectionately called Tico returned to the region, this time all the way from Norfolk. By then the shooting had stopped.
Skeptics dismissed the short campaign, fought from mid-January to the end of February 1991, as a “video-game war,” over almost before it began. Stump disagreed. The war “was a really big deal… It validated that America was back in business.”
Such sentiment worried the University of Virginia’s Elizabeth K. Meyer, a professor of landscape architecture, and the lone dissenter on the U.S. Commission of Fine Arts, the body entrusted with the task of deciding what does or does not get built in the nation’s capital. When the commission heard testimony from Stump and others, Meyer pushed back. “The mall is a public space that symbolizes our collective national identity, and we’re more than wars.”
Her objection was noted — and ignored. The National Desert Storm and Desert Shield Memorial will be constructed on the southwest corner of Constitution Avenue and 23rd Street NW, not far from the Vietnam and Lincoln Memorials. It is expected to be ready for visitors in 2021.
It wasn’t always this way.
Montgomery notes that “for nearly 200 years after Washington became the nation’s capital — and after nine wars, plus the Indian wars — the Mall contained no major war memorials.” After watching the debate over the Desert Storm memorial and the many of other monuments planned, including one for World War I, and for Native American veterans, and African Americans who served in the Revolutionary War, he wondered, “as the balance shifts ever more toward war, aren’t we fundamentally changing our account of what makes America great? What, ultimately, is war’s proper place in the national narrative?”
Later in the article he observes that “we have reached the point where not erecting a national tribute to those who served in a given war now speaks as loudly as building one. A failure to honor that memory in the heart of the nation’s capital can increasingly be interpreted as a lack of respect.”
Montgomery is hardly the first to comment on Americans’ shifting attitudes toward war. Andrew Bacevich’s The New American Militarism, first published in 2005, has the most to teach us today about this problem. It is one of my favorite books — and, judging from the fact that it is now in its second edition, it has obviously struck a nerve with many other readers.
My former Cato colleague Justin Logan, writing in The American Conservative in 2010, also took note of the remarkable change in tone and sentiment toward the American military, and the wars that it fights:
The American Founders detested the signs of a bloated state: standing armies, a large fiscal-military federation, and a capacious national bureaucracy. It may be going too far to say that today’s conservatives would denounce the Founding Fathers as unpatriotic conservatives — but not much too far. While members of the Right now flutter like schoolgirls at the mention of military leaders like Gen. David Petraeus, the Founders scorned the prospect of military leaders becoming figures of worshipful esteem…
In his farewell address to the nation, George Washington advised his countrymen to “avoid the necessity of those overgrown military establishments which, under any form of government, are inauspicious to liberty, and which are to be regarded as particularly hostile to republican liberty.”
“The vast majority of America’s landowning aristocracy,” writes Bruce Porter in War and the Rise of the State, “had an almost congenital distrust of standing armies, which their ancestors for generations had identified with despotism.”
Physician Benjamin Rush, a civic leader in Philadelphia and signer of the Declaration of Independence, suggested a series of slogans to be “placed over the door of the War Office,” including “An office for butchering the human species” and “A Widow and Orphan making office.”
After the American Civil War, attention shifted toward remembering those who fought in that conflict. But this, too, engendered vehement opposition. For example, Montgomery quotes William Dean Howells, writing in the Atlantic Monthly in 1866, and decrying the national urge to raise “a much greater standing army in bronze and marble than would have been needed for the suppression of any future rebellion.” Howells worried that a proliferation of war memorials would “misrepresent us and our age to posterity; for we are not a military people, (though we certainly know how to fight upon occasion).”
But the character of the American people seems to have changed since then. Judging from the war memorials now adorning the National Mall, and those planned, we are a military people, and our constant wars are disrupted only by brief occasions of peace.
What is the solution? How can we redirect the nation’s energy away from distant wars that years from now will require memorials to honor those killed in them?
Some argued that conscripting all 18-year old men, and now women, into the military, or at least subjecting some portion of that age cohort to the prospect of involuntary service, as was done during Korea and Vietnam, would force the public to confront the costs of the nation’s wars. It might even, we are told, cause us to fight fewer of them, or fight them for a shorter period of time.
But I think that the memorials already built, and those under consideration, tell a different story. It is certainly true that the public today is generally unaware of the sacrifices that a small fraction of the population endures in war. The mere possibility that one’s son or daughter, or brother or sister, or even their next-door neighbor, might come home in a flag-draped coffin could arouse Americans to care more. But is that what has happened?
The draft enabled U.S. leaders to imagine eventually deploying a force of more than 536,000 men to distant Southeast Asia. And casualties on the order of several hundred killed in a single month were not uncommon. In 1968, the war’s deadliest year for U.S. troops, 16,899 Americans were killed. The knowledge that a ready supply of fresh recruits, many drawn against their will from the American hinterland, would replenish those lost in combat allowed for a certain complacency. Despite the shock of the Tet Offensive in early 1968, and the groundswell of opposition that arose after, U.S. forces remained in Vietnam long after, though in smaller numbers. The drawdown was hardly precipitous. Americans were still dying in Southeast Asia as late as 1975. For many Americans, and especially for U.S. leaders, such losses were unfortunate, but tolerable.
That is no longer the case. Though a comparably sized force was sent to Saudi Arabia in the prelude to the First Gulf War, most of those troops were there for only a few months. The prospect that a mere few thousand casualties might elicit an overwhelming flood of opposition helped to ensure that the war’s losses would be contained. As it happened, the war claimed 383 American lives (148 of those in combat). The Gulf War force, comprised entirely of volunteers, did not resemble the armies who fought in the world wars, Korea, and Vietnam, which were made up of both volunteers and conscripts. Many young men enlisted with the knowledge that they were likely to be drafted if they did not volunteer. In other words, in a critical respect, the draft made it possible for over 58,000 names to be inscribed on that black granite wall. More than 36,000 Americans died in Korea over a much shorter period of time. The prospect that the Global War on Terrorism will eventually consume nearly as many American lives — even if it lasts for decades — seems impossible to contemplate. The total from the wars in Iraq and Afghanistan currently stands at 6,954, according to icasualties. We have the volunteer army partly to thank for that.
Ultimately, those who send the nation to war must be held accountable for their decisions. I would like to see members of Congress take their oath to uphold the Constitution seriously, but that seems to be going nowhere. A new approach to our war memorials might be more effective.
In 2009, as Viper Company battled Taliban insurgents in the Korengal Valley, higher-ups were contemplating whether U.S. troops should be there at all. Within a year, they had evacuated the Korengal Outpost. Robert Soto, the Army specialist featured in Chivers’ story, heard the news while in Port-au-Prince, Haiti, where he was issuing food to earthquake survivors. “On one level he understood,” Chivers writes, “On another he was crushed. Why did it take years to acknowledge mistakes? he wondered. All of a sudden, now, you’re realizing that maybe this isn’t working?”
Years later, when Soto allowed himself to consider the deeper meaning of his time in Afghanistan, Chivers explains:
He tread as if a balance might exist between respecting the sacrifice and pain of others and speaking forthrightly about the fatal misjudgments of those who managed America’s wars. “I try to be respectful; I don’t want to say that people died for nothing,” he said. “I could never make the families who lost someone think their loved one died in vain.”
Still he wondered: Was there no accountability for the senior… officers whose plans and orders had either fizzled or failed to create lasting success, and yet who kept rising. Soto watched some of them as they were revered and celebrated in Washington and by members of the press, even after past plans were discredited and enemies retrenched.
Near the end of the fifth episode in Ken Burns and Lynn Novick’s “The Vietnam War” series, we learn that Defense Secretary Robert McNamara had grave concerns about the U.S. war in Vietnam by late 1967. In a secret memo to President Lyndon Johnson, he urged a halt to bombing, a freeze on American troop levels, and renewed negotiations. There is no “reason to believe,” McNamara wrote, “that the steady progress we are likely to make, the continued infliction of grievous casualties, or the heavy punishment of air bombardment will suffice to break the will of the North Vietnamese and the Viet Cong to continue to fight.” Separately he stated his “belief that continuation of our present action in Southeast Asia would be dangerous, costly in lives, and unsatisfactory to the American people.”
Had the troop levels come down then, there would be far fewer names carved in black granite in that wall on the National Mall. Instead, McNamara kept his doubts concealed from public view. LBJ secured him a comfortable job as president of the World Bank. And the casualty rolls from Vietnam only grew longer. The names can now be found on Panels 33E through W1 on the wall.
Perhaps our memorials should honor those killed in distant lands, but also recall the policies and people that put them in those places? Perhaps we should acknowledge those who had the courage, or the wisdom, to end the wars once it was obvious that the costs outweighed the benefits? I’d support some sort of formal recognition for those who eventually pulled U.S. troops out of Korengal. Maybe a plaque somewhere?
Meanwhile, perhaps those still living, who were responsible for the names carved in smooth stone, should be tasked with tending these memorials, much as common criminals are put to work picking up trash along the highways.
Better yet, perhaps we should recognize those who keep the country out of unnecessary wars altogether. Alas, they left no memorials to tend.Christopher Preble is vice president for defense and foreign policy studies at the Cato Institute.
Ted Galen Carpenter
Tensions between China and the United States are rising on multiple fronts. The onset of dueling tariffs is threatening to trigger a full-fledged bilateral trade war. Beijing’s anger is rising about Washington’s growing attempts to upgrade diplomatic and military ties with Taiwan. Finally, the two countries are sparring dangerously over their respective policies and goals in the South China Sea.
All of those disputes are dangerous, but the Taiwan and South China Sea issues hold the most potential for poisoning the bilateral relationship and escalating into war. Compromise regarding Taiwan is inherently elusive, but a modest change in U.S. policy could significantly dampen tensions in the South China Sea. Specifically, Washington needs to dramatically reduce its confrontational “freedom of navigation” patrols and stop treating Beijing as a disruptive element, if not an outright threat, in that region.
One longstanding reason for a large-scale U.S. naval presence in the western Pacific is the importance of unimpeded shipping to the health of the global economy. U.S. political and economic leaders fret about potential disruptions to the flow of commerce and have done so for decades. That is an understandable concern. The United Nations Conference on Trade and Development (UNCTAD) estimates that 80% of world trade measured by volume and 70% measured by value travels by sea.
The sea lanes transiting the South China Sea are especially crucial arteries. UNCTAD’s analysis shows that one-third of global shipping passes through that body of water. A conservative estimate of the annual dollar value by the Center for Strategic and International Studies’ China Power Project put the figure at $3.37 trillion, but concedes that other estimates are as high as $5.3 trillion. The CSIS study emphasizes that the waters “are particularly critical for China, Taiwan, Japan, and South Korea, all of which rely on the Strait of Malacca, which connects the South China Sea and, by extension, the Pacific Ocean with the Indian Ocean.”
U.S. leaders increasingly view China as a potential menace to that commerce. The root of Washington’s suspicion is the extent and intensity of Beijing’s territorial claims in the South China Sea. It is not a new issue. In December 1947, the government of the Republic of China (Chiang Kai-shek’s regime) issued a map delineating an 11-dash line (later reduced to a 9-dash line) that laid claim to more than 80% of the South China Sea. The communist regime that overthrew Chiang two years later and established the People’s Republic of China (PRC) subsequently embraced that claim.
Until the past decade or so, though, Beijing’s audacious territorial ambition remained little more than theoretical. The PRC lacked the military power to make even a credible effort to enforce its claims. But as China’s economic and military power has grown, PRC leaders have become more insistent that most of the South China Sea is rightfully Chinese territorial waters. Beijing also has dredged areas surrounding partially sunken reefs to expand the land areas on those reefs into full-fledged artificial islands. Even more troubling from the U.S. perspective, China has built structures, including military airstrips, on those new islands. Although China is not the only country to pursue such reclamation projects (Vietnam, in particular, also has done so), the PRC’s program is the most extensive.
Washington has flatly rejected Beijing’s stance regarding the South China Sea. U.S. officials have repeatedly condemned the creation of artificial islands, especially China’s building of military installations. The U.S. Navy also has increased the frequency of patrols through the South China Sea and explicitly labeled them ‘freedom of navigation patrols.’ That term implies that Washington regards China’s growing presence, including an increase in PRC naval activities, as a potential threat to free navigation. Beijing, in turn, has reacted angrily to intrusive U.S. patrols so close to the Chinese homeland, condemning them as a serious provocation.
Washington needs to reconsider its policy in the South China Sea. The PRC’s territorial claims are not justified by either history or law — as the International Court of Arbitration ruled in 2016 in a case brought by the Philippines against Beijing. But given its own extensive shipping that transits the South China Sea, the PRC also has a powerful incentive to keep the waterway open. The amount of Chinese exports transported through that body of water is larger than that of any other country, accounting for nearly 25% of the overall flow. Indeed, some 40% of China’s total exports travel those sea lanes.
PRC leaders know that if they disrupt that commerce, the United States (and other naval powers such as Japan and Australia) could easily choke-off the flow of Chinese products as well. Given its export-driven economy, causing problems in the South China Sea would be an especially foolish policy for Beijing to adopt. Chinese leaders seem to recognize that point, as evidenced by their work with member states of the Association of Southeast Asian Nations (ASEAN) to establish a “code of conduct” that could minimize disputes in the South China Sea.
Instead of viewing China as a potential threat to South China Sea commerce, the Trump administration should recognize that the PRC can be a useful partner in helping to keep the sea lanes open. One should not expect Beijing to abandon its territorial claims, and that stance will always have a somewhat menacing potential. Chinese leaders undoubtedly want their country to be recognized as the leading power in the South China Sea; Washington cannot possibly achieve the goal of having Beijing accept continued U.S. hegemony there. At the same time, the United States has no intention of acquiescing in the PRC’s legal quest to convert the South China Sea into Chinese territorial waters.
There is little chance of a comprehensive settlement to completely resolve such an impasse in the foreseeable future. But the two sides can reach a more limited accommodation that would reduce the upward trend in dangerous tensions. The main problem is China’s anger about the U.S. Navy’s freedom of navigation patrols. U.S. leaders should offer to greatly reduce the number of those patrols, and avoid sending them into the vicinity of Chinese-built artificial islands, as long as Beijing is willing to offer formal assurances that it will take no action to disrupt shipping through the South China Sea, and will, in fact, work to combat existing threats, most notably the continued problem of piracy in waters near the vital Strait of Malacca.
Such a de facto truce and modus vivendi would not guarantee lasting harmony regarding the South China Sea. However, it would markedly reduce diplomatic strain between Beijing and Washington — and, perhaps even more importantly, decrease the mounting tensions between the naval forces of the two countries. That potential achievement is well worth Washington taking the initiative and offering such a proposal to Beijing.Ted Galen Carpenter, a senior fellow in defense and foreign-policy studies at the Cato Institute and a contributing editor at the National Interest, is the author of ten books, the contributing editor of ten books, and the author of more than seven hundred articles on international affairs.
Juan Carlos Hidalgo
The recent and bizarre alleged assassination attempt on Venezuelan President Nicolas Maduro, complete with exploding armed drones, remains mostly a mystery. Regardless of who perpetrated it or why, however, the controversy is already allegedly being used by the regime to persecute political enemies and distract from the serious economic crisis besieging that country.
Despite constant condemnation from outside observers, the situation in Venezuela continues to worsen. A top U.N. official recently warned that the country is on the verge of turning into “an absolute disaster in unprecedented proportions for the Western Hemisphere.”
What was once Latin America’s richest nation, is now sending hordes of refugees into neighboring countries. Since 2016, nearly two million people have fled the country. Those unfortunate enough to stay are facing life-threatening shortages of food and medicine, one of the highest murder rates in the world and an annual inflation rate that now sits above 40,000 percent.
The seeds of this crisis were planted in 1999, but the chaos has flourished under President Nicolas Maduro and his incompetent, corrupt ideologues.
A national survey in 2017 found that 87 percent of families live below the poverty line. Nearly two-thirds of Venezuelans reported losing an average of 25 pounds in the previous year — some have called it the “Maduro diet.” The Pharmaceutical Federation estimates that 80 percent of drugs are not available in drugstores. There are outbreaks of diseases that had been eradicated or were under control, such as diphtheria, measles and malaria.
Maduro has reacted to the collapse of the economy by consolidating the dictatorship, intensifying human rights abuses (including torture) and further cracking down on the private sector. He claims that his regime is the victim of an “economic war” waged by the opposition and the United States. The reality is that this man-made tragedy has a well-known culprit: socialism.
The seeds of this crisis were planted in 1999, when the late President Hugo Chavez came to power. He soon went about rebranding his nationalist Bolivarian revolution, proclaiming it 21st-century socialism. Chavez dramatically increased the size of the government payroll and the reach of social programs. In fairness, patronage had been a common practice in Venezuela for decades. However, buoyed by more than $1 trillion in oil revenues during his time in office, Chavez took that practice to unprecedented levels. These social policies earned him popularity at home and plaudits from abroad — including from Nobel laureate Joseph Stiglitz — even though they were financially unsustainable. Today, an estimated 60 percent of Venezuelans are reportedly dependent on government handouts.
Chavez also nationalized and expropriated key industries, mostly in the agribusiness, commerce and food sectors. Driven by his ideological agenda, the government seized 1,168 enterprises and farms between 2002 and 2012. Most of them were run into the ground due to sheer incompetence, sleaze and negligence, decimating Venezuela’s productivity. According to Fedeagro, the leading agricultural association, the country imports 75 percent of the food it consumes.
Economic controls also played a major role in the destruction of Venezuela’s private sector. Currency and price controls were first introduced in 2003 when inflation and capital flight began to surge. At this point, the government became the sole official provider of dollars, a process that was characterized by cronyism and corruption. Countless businesses were starved of access to hard currency due to political reasons or lack of connections. Chavez also instituted harsh mandates on credit, ordering banks to channel an increasing share of their portfolio to mostly unviable pet projects. The tightening of price controls in 2011 and 2014 was the last nail in the coffin for many companies since it forced them to sell their products below production costs. This contributed to widespread shortages.
A key element in Venezuela’s crisis is the mismanagement of its oil. One might expect that having one of the largest reserves of crude in the world would be a blessing; instead, Venezuela has turned natural resource wealth into a curse. In 1976 the government nationalized the exploration, production, refining and exporting of crude under the aegis of a state-owned monopoly, PDVSA. Still, for over two decades the company enjoyed administrative autonomy and built a reputation for efficiency and competence. That changed in 2003, however, when Chavez took over PDVSA, dismissed more than 18,000 of its most qualified employees, and replaced them with loyalists with little industry experience. Chavez weaponized PDVSA, using it to finance his social programs, prop up regional allies and invest in dubious schemes marred by widespread corruption. As a result, production has steadily declined since 2002. This phenomenon has further accelerated in recent years, with oil output in April falling to its lowest level since 1949.
And yet, the collapse in both the price and production of oil that took place in 2014 triggered, but did not cause, the current economic crisis. It laid bare a ruined productive sector that could not satisfy domestic consumption and exposed the unsustainable nature of government spending. This has had a two-pronged effect. Printing money substituted oil revenues as a source of government finance, which resulted in hyperinflation. At the same time, imports fell dramatically as oil accounts for 98 percent of export earnings. By 2017, imports had dropped by nearly 75 percent as compared to 2013 levels.
Venezuela is not simply governed by incompetent ideologues. Regime leaders run a criminal gang. Two former ministers turned-critics estimate that over $300 billion of oil revenues have been stolen in the past decade. The armed forces are deeply involved in smuggling and drug-trafficking. The U.S. Treasury Department has sanctioned several high-ranking government and military officials as “drug kingpins,” including Tareck El Aissami, the 43-year-old minister of Industries and Production, who has had half a billion dollars in assets seized by the U.S. authorities. The criminal nature of Venezuela’s regime makes it highly unlikely that its leaders will surrender power peacefully.
Venezuela is in free fall. Unfortunately, we haven’t seen it hit bottom yet.Juan Carlos Hidalgo is a policy analyst on Latin America at the Cato Institute’s Center for Global Liberty and Prosperity.
Of all 50 states, California has enacted perhaps the most stringent legislative barriers to police accountability. Not only do state laws protect misconduct findings against officers from the public, but the law also keeps that information out of the hands of prosecutors who need to trust the police to ensure justice. A prosecutor cannot put an officer on the witness stand that she knows has a history of lying. But if that prosecutor cannot easily get access to the officer’s disciplinary record, as California law currently ensures, then she may be relying on bad police information or, even worse, prosecuting an innocent person on the word of a dishonest officer. As both a matter of principle and practicality, the government should do its best to maintain the honesty and integrity of its police officers.
For police to be effective in their job to protect and serve the public, they require the trust of the communities they serve. Without trust, witnesses will not cooperate and provide testimony to bring criminal perpetrators to justice. Without witness cooperation, perpetrator apprehension becomes less likely — negating the greatest deterrent to committing crime — and thus public safety suffers. When police are not held accountable for their actions and misconduct against the community, then, the public suffer twice: first, the community is damaged by the misconduct itself and second, the community’s security is compromised by the diminished trust that comes from misbehaving police who remain on the streets.
Restoring community trust in police and the justice system writ large will require more transparency from departments and more accountability for those officers who have abused their positions.
There is currently a bill before the California Legislature that would ease the burden for the prosecutors and the public to know whether the officers in their communities are trustworthy. SB1421 would require police departments to release information about, inter alia, sustained findings of dishonesty in the course of criminal cases and other instances of police misconduct. This bill would also require police departments to release information about serious uses of force, including officer-involved shootings, to increase transparency.
Law-and-order conservatives can support SB1421 because it may restore a level of legitimacy to criminal prosecutions. When dishonest officers are found out after many years of misconduct, hundreds or thousands of prosecutions in which they played a role may be jeopardized because of their misdeeds. The criminal justice system relies upon honest police officers and shielding the dishonest among them, as California law currently does, undermines the integrity and, ultimately, the final disposition of criminal prosecutions.
Officers who honor the badge and have no history of lying or other serious misconduct — which, in most departments, should be a large majority of officers — have nothing to fear from the identification of problem officers who tarnish the reputation of their colleagues. Police shootings and other serious uses of force, while often tragic, are part of the job and the departments should be as open as they can be while preserving the integrity of the investigation into those incidents. Withholding the names of officers who shoot and kill someone can create the perception of a cover-up, whether or not the shooting was justified, again tarring officers who are doing their jobs correctly.
At bottom, current California law protects the worst officers by hiding their identities from the public and makes them indistinguishable from the bulk of the officers who do their jobs faithfully in accordance with the Constitution. Restoring community trust in police and the justice system writ large will require more transparency from departments and more accountability for those officers who have abused their positions. The California legislature should not maintain laws that make that trust systemically impossible.Jonathan Blanks is a research associate at the Cato Institute’s Project on Criminal Justice.
Ted Galen Carpenter
There are growing bipartisan concerns and warnings about the unrestrained power of presidents to take the republic into war. That worry has surfaced most recently with respect to U.S. military involvement in Syria and the looming danger of war with Iran. Both Barack Obama and Donald Trump committed U.S. military personnel to Syria, ostensibly to repel the terrorist threat that ISIS posed, but also to assist other insurgent forces attempting to overthrow Syrian dictator Bashar al-Assad. Obama and Trump did so without seeking (much less obtaining) a declaration of war—or even a more limited congressional authorization.
Those episodes are just the latest manifestations of what historian Arthur Schlesinger, Jr. labeled the imperial presidency more than four decades ago. Schlesinger worried that the ability of presidents to launch major military ventures on their own had grown steadily during the Cold War and had reached the point that it undermined the constitutional system of checks and balances. Matters have grown considerably worse since he expressed such concerns. Indeed, the reality of an out-of-control presidency regarding decisions of war and peace may well have reached the point where it cannot be reversed.
The emergence of an imperial presidency reflects both executive usurpation of the constitutional war power and congressional abdication of that power. The most crucial episode was Harry Truman’s commitment of U.S. troops to the Korean War in the summer of 1950. True, there had been earlier episodes of executive military missions with little or no congressional approval, especially interventions in Latin America during the first decades of the twentieth century. But there had never been anything close to the scale of the Korean War. Not only the two world wars, but smaller conflicts such as the Spanish-American War and the War of 1812, were authorized as the Constitution required: with a formal declaration of war. Yet Truman sent more than three hundred thousand U.S. military personnel to the Korean battlefield to wage a full-scale war that ultimately lasted more than three years and resulted in some thirty-six thousand American fatalities without even asking for such a declaration.
The rule of law and the health of the republic suffered a severe blow when the eighty-first Congress failed to fulfill its constitutional duty and impeach Truman.
The flaccid congressional response to Truman’s violation of the Constitution was an omen of how subsequent Congresses would fail to defend the war power that the founders explicitly entrusted to the legislative branch. Members of the eighty-first Congress had an opportunity to strangle the imperial presidency in its cradle by impeaching the president if he persisted. But at this crucial moment, they flinched from confrontation. A repetition of the twin processes of usurpation and abdication became increasingly routine in future episodes.
It is doubtful that legislators failed to defend the prerogative of their branch because they believed Truman’s rationale for authorizing a massive military venture on his own. The president asserted that he did not need a declaration from Congress because the United Nations Security Council had approved the operation, and the Senate’s ratification of the UN Charter made the exercise of such authority legal. Indeed, Truman administration officials refused to call the Korean conflict a “war,” insisting instead that it was a UN “police action.”
The use of Orwellian euphemisms would become a staple of the imperial presidency. When Obama launched an air-and-missile barrage against the Libyan regime of Muammar el-Qaddafi in 2011, he and his advisers insisted that it was not a war, but a “ kinetic military action .” Naturally, Obama concluded that he did not need congressional approval for such an operation.
When the founders established the system of checks and balances in the Constitution, they assumed that each branch would jealously guard its powers. Why, then, did Congress fail to challenge Truman’s usurpation of the war power? One reason was sheer partisanship. The vast majority of Democrats in both chambers loyally lined up in support of their party’s leader. Most of the opposition to the Korean intervention came from conservative Republicans.
But GOP critics tended to be conflicted. Since the enemy in Korea was a Godless communist regime, and an ally of the Soviet Union and a newly communist China, right-wing legislators found it difficult to oppose an initiative to prevent the further spread of that odious doctrine. Prominent conservative Republicans such as Senators Robert Taft of Ohio, William Jenner (Indiana) and Kenneth Wherry (Nebraska) found themselves criticizing Truman’s unilateral exercise of presidential power, but endorsing the underlying mission. That was an extremely awkward position to sustain.
Finally, as with many later presidential wars, avoiding responsibility for the decision to go to war in Korea reduced the political risk to members of Congress. If the intervention turned out well, they could maintain that they supported the policy all along. If it turned out badly, then they could (as they ultimately did) brand it as “Truman’s war.” That cynical, opportunistic sequence would surface again when the Vietnam and Iraq wars began to turn sour.
But the rule of law and the health of the republic suffered a severe blow when the eighty-first Congress failed to fulfill its constitutional duty. There have been more than a dozen presidential wars since Truman set the precedent in Korea. In some cases, there has been nominal congressional input amounting to little more than Congress giving the president blank-check authority. The infamous 1964 Gulf of Tonkin Resolution for the Vietnam War and the Authorization for the Use of Military Force following the 9/11 attacks fall into that category. But presidents frequently dispense even with such façades. Reagan’s intervention in Lebanon, Clinton’s in Bosnia, and Obama’s in Libya and Syria were graphic examples. Indeed, Clinton surpassed even the executive branch’s usual contempt for Congress. He waged his military intervention in Kosovo despite a House vote declining to endorse that campaign.
Not only has congressional abdication of the war power led to a marked increase in the number of dubious wars America has waged, it has produced a dangerous overall expansion in presidential power. Truman again demonstrated the potential menace when, in the name of national security because of the ongoing Korean conflict, he seizedthe nation’s steel mills in April 1952 to thwart a strike that was disrupting production. Fortunately, the U.S. Supreme Court demonstrated on that issue the courage that Congress lacked regarding the war power. It struck down Truman’s latest power grab. Nevertheless, it was ominous that three justices were willing to ratify the president’s outrageous action. The incident itself confirmed that potential abuses of power by an imperial presidency would not be confined to foreign affairs.
The founders intended that no single person should have the authority to take the nation into the horrors of war. At the Constitutional Convention Elbridge Gerry of Massachusetts epitomize the majority view when he stated that he “never expected to hear in a republic a motion to empower the Executive alone to declare war.” And the delegates clearly believed that “declare” meant “authorize.”
We have paid, and will continue to pay, an awful price for the cowardly failure of the eighty-first Congress to defend the prerogatives of the legislative branch and stop the president’s usurpation of the war power. If a bipartisan majority had impeached Truman for his unconstitutional action in initiating a presidential war, his successors likely would have been wary of venturing down the path of an imperial presidency. One can only hope that the lost opportunity was not irreplaceable and that a future Congress will finally muster the courage and integrity that the eighty-first Congress so clearly lacked.Ted Galen Carpenter, a senior fellow in defense and foreign-policy studies at the Cato Institute and a contributing editor at the National Interest, is the author of ten books, the contributing editor of ten books, and the author of more than seven hundred articles on international affairs.
Steve H. Hanke
Since President Tayyip Erdogan has been at the helm, the Turkish lira has tumbled. Today, it collapsed. At one point, it was down as much as 18.5% against the U.S. dollar. The chart below traces the ugly course the lira has taken against the greenback under Erdogan’s tutelage.
With the collapse of the lira, Turkey’s inflation has surged. The most important price in an economy is the exchange rate between the local currency and the world’s reserve currency mdash; the U.S. dollar. Changes in the 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 measure Turkey’s implied annual inflation rate on a daily basis by using PPP to translate changes in the TRY/USD exchange rate into an annual inflation rate. The chart below shows the course of that annual rate. At present, Turkey’s annual inflation rate is 85%. This rate is 5.5 times higher than Turkey’s last reported official inflation rate of 15.39%.
President Erdogan claims that Turkey will come up with a new economic game plan to save the lira. Well, he better come up with one fast. As it turns out, there is a ready-made economic strategy on the shelf, and it’s a strategy that works. I refer to it as the “Singapore Strategy.”
Singapore gained its independence in 1965, when it was, in effect, thrown out of Malaysia. At that time, Singapore was backward and poor — a barren speck on the map in a dangerous part of the world. If that wasn’t enough, it was experiencing race riots, which came close to igniting a civil war. Singapore’s per-capita income in 1965, adjusted for inflation, was roughly equivalent to that of poor countries like Albania, Angola, Armenia, Guyana, Kosovo, and Mongolia, today.
But, at its founding, Singapore had a leader, Lee Kuan Yew. He had clear ideas about how to modernize the country: the “Singapore Strategy.” This strategy contained the following elements:
The first element was stable money. Singapore started with a currency board system — a simple, transparent, rule-driven monetary regime. Currency boards operate on autopilot, with automatic adjustments keeping the system in balance. Accordingly, currency boards deliver discipline to the spheres of money, banking, and fiscal affairs. For Singapore, the currency board provided stable prices and free convertibility of the Singaporean dollar, which was fully backed by foreign reserves and gold, at a fixed exchange rate. This established confidence and attracted foreign investment.
Turkey should follow Singapore’s lead and adopt a currency board in which the lira would be linked to and fully backed by gold. Such a gold-backed currency board would make the lira as good as gold.
The second element was that Lee Kuan Yew ruled out passing the begging bowl. Singapore refused to accept foreign aid of any kind. This is a far cry from many developing countries, where, when you pick up the paper, all you see are politicians and bureaucrats trying to secure foreign aid from someone, be it an NGO, a foreign government, or an international financial institution, like the World Bank. By contrast, signs reading “no foreign aid” were hung figuratively outside every government office in Singapore.
The third element was that Singapore strived to have first-world, competitive private enterprises. This was accomplished via light taxation and light regulation, coupled with completely open and free trade — in short, policies that enabled Singapore to become one of the Asian Tigers.
The fourth element in the Singapore Strategy was an emphasis on personal security, public order, and the protection of private property.
The fifth, and final, element in the Singapore Strategy was a “small,” transparent government — a minimalist government that avoided complexity and “red tape”.
To execute the strategy with precision, Singapore appoints only first-class civil servants and pays them first-class wages. Today, for example, the Singaporean Finance Minister’s annual salary is $1.3 million dollars (USD). In exchange for these high salaries, the Singapore Strategy demands that the government runs a tight ship, with no waste or corruption. By embracing Lee Kuan Yew’s Singapore Strategy of stable money, no foreign aid, first-world competition, law and order, and a government that is free of waste and corruption, Singapore has transformed itself from a poor, barren speck to a global financial center.
If President Erdogan was smart, he would embrace the Singapore Strategy. And he should do it Monday morning, before the markets open.Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute.
Ted Galen Carpenter
Donald Trump has again stirred the wrath of his critics by charging that the media can cause wars. His opponents immediately howled that he’d launched another salvo in his ongoing campaign to vilify journalists as the “enemy of the people.” They also ridiculed his contention as factually absurd. Fox News reporter Chris Wallace bluntly asked National Security Advisor John Bolton: “What wars have we caused?” Princeton University historian and CNN analyst Julian E. Zelizer epitomized the view that Trump’s charge is unfounded with a piece in The Atlantic titled, “The Press Doesn’t Cause Wars—Presidents Do.”
Zelizer and similar critics are technically correct, of course. Media outlets have no power to launch attacks on foreign countries or order U.S. troops into combat. But that view is much too narrow. As Zelizer himself admits, the new media have considerable ability to influence public opinion. Such a capacity to shape the overall narrative is not a trivial power. An irresponsible press can, and has, whipped up public sentiment in favor of military actions that subsequent evidence indicated were unnecessary and even immoral.
Two cases stand out: the Spanish-American War and the Iraq War. Historians have long recognized that jingoistic “yellow journalism,” epitomized by the newspaper chains owned by William Randolph Hearst and Joseph Pulitzer, played a significant role in the former conflict. Months before the outbreak of the war, one of Hearst’s reporters wished to return home from Cuba because there was no sign of a worsening crisis. Hearst instructed him to stay, adding, “you furnish the pictures, and I’ll furnish the war.”
History shows that a jingoistic media can whip up support for hardline policies, as Trump rightly pointed out.
Hearst’s boast was hyperbolic, but the Hearst and Pulitzer papers did repeatedly hype the Spanish “threat” and beat the drums for war against Madrid. They featured stories that not only focused on but exaggerated the uglier features of Madrid’s treatment of its colonial subjects in Cuba. Those outlets also exploited the mysterious explosion that destroyed the U.S. battleship Maine in Havana’s harbor. To this day, the identity of the culprit is uncertain, but the yellow press exhibited no doubts whatever. According to their accounts, it was an outrageous attack on America by the villainous Spanish regime.
Such journalistic pressure was not the only factor that impelled William McKinley’s administration to push for a declaration of war against Spain or for Congress to approve that declaration. A rising generation of American imperialists wanted to emulate the European great powers and build a colonial empire. That underlying motive became evident when the first U.S. attack following the declaration of war came not in Cuba, but in the Philippines, Spain’s colony on the other side of the Pacific.
Nevertheless, it would be naïve to assume that the jingoist press did not play a significant role in causing the war against Spain. Indeed, the corrupt role of yellow journalism in creating public support for that conflict is not a particularly controversial proposition among historians.
The role of an irresponsible press in shaping a pro-war narrative was even more evident in the prelude to the 2003 U.S. military intervention in Iraq. New York Times reporter Judith Miller and other prominent mainstream journalists were especially culpable in publicizing erroneous information about Saddam Hussein’s government regarding two emotionally charged issues. They uncritically circulated “evidence” from Iraqi defectors and George W. Bush’s administration that Iraq was in league with al-Qaeda and may well have had a role in the devastating 9/11 terrorist attacks. And they pushed the case that Saddam had weapons of mass destruction and was actively working on developing a nuclear arsenal.
Again, it would be too much to place all or even most of the blame for the disastrous Iraq war on gullible or ultra-hawkish journalists. The Bush administration seemed determined to oust Saddam, and it might have attempted to do so even without strong public support. But most of the media was staunchly pro-war, and that bias greatly skewed the narrative presented to the public. When highly respected journalistic institutions like the New York Times circulated story after story highlighting the alleged security threat that Saddam posed, and those stories were then featured in other publications and on TV, it was hardly surprising that much of the public believed the narrative. The tendency of mainstream media outlets to ignore or marginalize war critics amplified their pro-war bias.
As is so often the case with Trump’s arguments, his accusation that the press can cause wars is an exaggeration, but one that contains an important kernel of truth. Irresponsible media coverage has undoubtedly strengthened public sentiment for ill-advised wars in the past, and it could do so again in the future. The sometimes shrill hostility of the mainstream media towards Russia is pushing the United States toward an increasingly hardline policy that now borders on a second cold war. The original Cold War nearly escalated to a hot one on several occasions. The press needs to be doubly cautious about pushing policies that would send America down a similar perilous path. Trump is wrong to brand the press as an enemy of the people, but it is still a powerful institution that has not always used its great influence responsibly regarding matters of war and peace.Ted Galen Carpenter, a senior fellow in defense and foreign policy studies at the Cato Institute, is the author of 10 books on international affairs, including The Captive Press: Foreign Policy Crises and the First Amendment.
Why is the public’s grasp of economics so weak? A recent Radio 4 documentary by economics commentator Martin Wolf pointed the finger partly at the impenetrable jargon of economists. Wolf worried that “one could not understand politics if one does not understand economics”.
He highlighted a concerning 2017 YouGov poll showing that half of the UK public didn’t feel confident they understood the economic impact of policies on which they were voting. Surely, we’d all benefit, as one interviewee recommended, if economists, politicians and commentators told stories and used simple historical examples to get across complex ideas?
I wonder. Sure, your average guy in a pub might not know the ins and outs of monetary policy (then again, most experts at central banks appear uncertain of its effects these days). But in some areas the public’s inherent common sense seems more economically sophisticated than the talking points of commentators and politicians.
Yes, levels of economic education in the UK overall might be poor. Yet simple historical stories and clichés could sometimes worsen public understanding, not improve it.
A great example of this is the public’s continued opposition to the increasingly costly HS2 rail project. In an age where seemingly intelligent thinkers seem to believe that saying “infrastructure spending is good for the economy” suffices to justify any project, the public shows awareness of the large costs involved and the weak “bang for the buck”.
Indeed, there is an argument that banal, lazy and simplistic storytelling would worsen the quality of public debate about such issues.
Take recent academic work by Danish economists, who in true Monty Python style explored the question “what have the Romans ever done for us?” by examining the legacy of the Roman Empire’s road system. Using mapping and statistical techniques, they showed the patterns of roads built two millennia ago in Europe strongly correlate with prosperity levels today, as proxied by modern road intensity, how built up an area is via night-time light imagery, and population.
The economists produce a convincing case that the direction of causation flows from the public roads to economic development, rather than roads being built with economic potential in mind. The Romans, after all, were primarily concerned about moving armies, not trade. In North Africa and the Middle East (where roads were allowed to fall into disrepair following greater use of camels) the link between roads and today’s prosperity levels is much weaker.
This is a fascinating case study of infrastructure that hugely increased connectivity. But some commentators lazily generalise to suggest this insight shows how “infrastructure investments today could continue to bear fruit for thousands of years to come”.
This kind of conclusion - sweeping judgments about all infrastructure spending - does nothing to inform the public, but actually worsens economic understanding by conflating the intuitive concepts of average effects and marginal effects. That the development or maintenance of a road or rail system has major benefits overall tells us very little about the desirability of new or additional investments today, which should be judged according to their own merits.
Academic evidence from the US by John Fernald, for example, has shown development of the interstate highway system there produced a big one-time boost to economic activity. More recent studies, though, actually find that too many new highways were built between 1983 and 2003 and that these extensions did not bring net social benefits. That was not least because the cost savings of reducing travel times further are small relative to incomes and prices.
Similar reasoning has shown why HS2 is so wasteful. Not only will the high-speed line only shave off a small amount of journey time between London and Birmingham. But technological developments mean that the costs of travelling by rail in terms of productive time lost are much lower today then they have been anyway. Not only can one video-conference, but you can also work online as you travel.
Though politicians supportive of the scheme like to portray its opponents as Nimbys stifling an economically beneficial scheme, the truth is the public know it is just poor value for money. The Government’s own 2010 comprehensive spending review deferred, cancelled or placed under review road investments with average benefit-cost ratios of 6.8, 3.2 and 4.2 respectively, but persisted with HS2 (which had a benefit-cost ratio of 1.2).
But it has become even more obvious since. A fortnight ago, a leaked report suggested the scheme could run as much as 60pc over budget, taking the cost to £90bn or more. The Government’s own assessment suggests there is a high risk of the project not delivering value for money.
Of course, not all projects are this wasteful. The public wants more infrastructure investment. But given we have major networks already, marginal improvements are where the big wins can be found. Some roads and commuter routes in particular suffer from heavy congestion, both requiring new capacity and more effective pricing.
There is scope, with technological developments, to adopt comprehensive road pricing in the longer term, which would provide the clear signals for where new capacity was needed. Eliminating bottlenecks, in particular, can bring big economic benefits. The modern equivalent of the Roman roads could well be capacity for flights to rapidly growing areas of the global economy.
Despite the large sums of money involved, this is one policy area where economists and politicians have oversimplified and often exhibit less level-headedness than the country at large. You’re more likely to hear an economist quoted as saying “infrastructure investment is good for economic growth” in newspapers than garner any insight on these trade-offs and spillovers.
Yes, levels of economic education in the UK overall might be poor. Yet simple historical stories and clichés could sometimes worsen public understanding, not improve it. And that creates a lack of trust in the political class to deliver the public goods that do bring major economic benefits.Ryan Bourne is the R Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute
Corey A. DeAngelis
Representatives from President Trump’s Federal Commission on School Safety just met in Cheyenne, Wyo., for their third public listening session aimed at reducing violence in schools. In these meetings, people have called for arming teachers with guns, hiring more counselors, putting more officers on campuses, and throwing more money at the issue. But none of these types of proposals address the root of the school safety problem.
A just-released study by Harvard University’s Dr. Dany Shakeel and I suggests that private school vouchers could be tickets to safer schools.
A just-released study by Harvard University’s Dr. Dany Shakeel and I suggests that private school vouchers could be tickets to safer schools.
We employ nationally representative data from the Schools and Staffing Survey for the most recently available (2011-12) school year. Using survey responses from school principals across the nation, we find that safety problems are less likely to occur at private schools than government schools. In fact, we find that private schools have a statistically significant advantage for each of the 13 discipline problems examined - even after controlling for factors such as school size, school type, enrollment, student-teacher ratio, percent of minority teachers, percent of minority students, and urbanicity.
And the safety benefits of private schooling are large.
For example, as shown in the figure below, private schools are about 8 percentage points less likely to have physical conflicts among students and 12 percentage points less likely to have students using illegal drugs than government schools. Moreover, private schools are about 18 percentage points less likely to have gang activities at school and 28 percentage points less likely to have student possession of weapons than government schools.
But that’s not all. We also find that private schools are less likely to restrict student liberties than government schools. After controlling for student and school characteristics, we find that private schools are about 6 percentage points less likely to require students to pass through metal detectors each day, 20 percentage points less likely to search for drugs using random dog sniffs, and 7 percentage points less likely to require students to use clear backpacks. Obviously, the prison-like environment in government schools doesn’t create a healthy school culture, which could lead to less student learning and more discipline problems.
And this new study isn’t the only evidence suggesting that private school choice can lead to more safety for students in U.S. schools. As I pointed out at the second public listening session (in Lexington, Ky.) all four rigorous evaluations linking private school choice programs to student safety find large positive effects. For example, the most recent federal evaluation of the D.C. voucher program found that students that won the lottery to attend a private school were 35 percent more likely to report that they were in a very safe school than their peers in government schools.
The results of these studies are significant. But they shouldn’t surprise us all that much. Families care about the safety of their children more than anyone else. And private schools must cater to the needs of families if they wish to keep their doors open. On the other hand, government schools remain open whether they are safe or not. Unfortunately, simply throwing more resources at a broken system won’t fix anything. Hopefully the Federal Commission on School Safety will figure that out soon.Corey DeAngelis is a contributor to the Washington Examiner’s Beltway Confidential blog. He is an education policy analyst at the Cato Institute’s Center for Educational Freedom and a Distinguished Doctoral Fellow at the University of Arkansas.
Germans are losing their trust in America’s security guarantees. Believing that U.S. troops would always defend Europe, Berlin has allowed its military outlays and capabilities to wither. German defense spending at present barely breaks 1 percent of GDP. With only slight overstatement, political scientist Christian Hacke recently said of the German military, “nothing flies, nothing floats, and nothing runs.”
For years, Washington officials have whined about Europe’s and especially Germany’s failure to take defense seriously. Yet the U.S. also continued to spend money and deploy troops to “reassure” its allies, giving them less incentive to do more.
Despite his tough rhetoric, in practice, President Donald Trump’s policy has proven to be more of the same. He criticized America’s defense commitments to Montenegro, yet allowed it to enter NATO. At the latest alliance summit, his subordinates advanced new subsidies for member states. This year the administration is putting another $6.5 billion into the European Deterrence Initiative, formerly called the European Reassurance Initiative.
Nevertheless, the president’s crude hostility and unpredictability have set him apart from his predecessors. Thus, many Germans and other Europeans worry that he might walk away from NATO.
German Chancellor Angela Merkel has been particularly vocal. Last year she defiantly responded to President Trump’s criticism by calling on Europeans to “take our fate into our own hands.” She remains committed to bumping her country’s military outlays up to 2 percent of GDP, despite opposition from her coalition partners.
Proliferation is a good thing if it means relieving some of America’s numerous security guarantees.
Other Germans want to do even more. For instance, shortly after Trump’s election, Roderich Kiesewetter, a member of the Bundestag and former German general staff officer, suggested creating a European military budget to expand the French and British nuclear arsenals. Berthold Kohler, publisher of the influential Frankfurter Allgemeine Zeitung, urged direct German support.
Two weeks ago, the Welt am Sonntag ran an article by Christian Hacke that argued Germany was no longer under America’s nuclear umbrella and that “national defense on the basis of a nuclear deterrent must be given priority in light of new transatlantic uncertainties and potential confrontations.” Criticism of his idea was fierce — a former intelligence official denounced it as “reckless, foolish, and incendiary.”
U.S. commentators also dumped on Hacke’s proposal. Jim Townsend, a one-time deputy defense secretary, argued: “Trump notwithstanding, the U.S. nuclear guarantee is not going anywhere.” That, of course, is the conventional wisdom inside the Blob, as the Washington foreign policy establishment has been called, which also believes that America must forever defend Europe, Asia, and the Middle East; fix failed societies and sort out foreign civil wars everywhere; and underwrite every authoritarian regime that claims to oppose Washington’s enemy du jour.
But it isn’t just the Germans who are considering nuclear options. Jarsolaw Kaczynski, former Polish prime minister and dominant figure in Poland’s current government, has suggested developing a European nuclear arsenal to confront Russia.
The same question also has arisen in Asia. The Republic of Korea embarked on a nuclear program in the 1970s after President Park Chung-hee doubted the Nixon administration’s commitment to the ROK’s defense. Seoul later abandoned the effort under U.S. pressure, though in recent years the North’s nuclear advances have fed popular support for a South Korean bomb. A poll found two thirds of South Koreans in favor and some newspapers and politicians offered their support.
North Korea’s new pacific course has reduced the perceived necessity of a nuclear arsenal and leftish President Moon Jae-in last fall declared, “We will not develop or possess nuclear weapons.” However, the future remains uncertain. Indeed, few Korea analysts believe Pyongyang will ever fully disarm, and President Trump has shown disdain for America’s defense commitment to South Korea.
Even more controversial is the case of Japan. The idea of possessing nuclear weapons remains anathema to much of the Japanese population, but they also remain sheltered beneath America’s nuclear umbrella. Despite Prime Minister Shinzo Abe’s attempt to tie himself to President Trump, an increasingly burdened America may tire of protecting its wealthiest ally.
So far the proliferation door is “ajar, even if no one is leading the way through it,” observed Llewelyn Hughes of GR Japan. The idea of a Japanese nuke was studied (and rejected) by military and civilian policymakers as far back as the 1960s. During the conservative nationalist Abe’s earlier stint as prime minister a decade ago, he appeared to offer indirect support for a Japanese nuclear weapon, though nothing came of that gambit. In April 2016, Abe observed that the Japanese Constitution does not preclude the country from possessing and using nuclear bombs, which reaffirmed a position going back to Prime Minister Nobusuke Kishi in 1957. The same reasoning allows Tokyo to field a “Self-Defense Force” despite the constitution’s Article Nine, which holds that “land, sea, and air forces, as well as other war potential, will never be maintained.”
Most U.S. policymakers dismiss the idea of friendly proliferation in Asia, though analyst Ira Straus has proposed a nuclear loan by Washington to Japan and the ROK. Ultimately, however, there is no reason for the U.S. to remain entangled in those nations’ defense. Both are nuclear capable and could develop their own weapons if they desired. America should consider shifting — permanently, not temporarily — nuclear as well as conventional defense responsibilities onto its freeloading allies.
Uncle Sam has been profligate with his nuclear umbrellas. The 28 other NATO members — including Montenegro, President Trump’s bête noire — each received one. So did Japan and South Korea. Australia and Taiwan could also be seen as protected. Certainly Israel would be had it not developed its own arsenal. Perhaps Saudi Arabia would get one if Iran developed a bomb. Ukraine probably thought it had one after yielding its leftover Soviet nukes.
The presumption is that America’s commitments are costless since they will never be called in. Washington deters the bad guys while preventing the spread of nuclear weapons. Whatever risk might exist, believes the Blob, it’s vastly exceeded by the dangers of proliferation. Under such assumptions, no wonder non-proliferation is one of foreign policy’s great sacred cows.
The problem with our promises to use nukes on behalf of other nations is that doing so costs nothing only so long as deterrence holds. And history is full of conflicts in which conventional alliances failed to prevent war. World Wars I and II are prime examples.
A nuclear guarantee that failed at deterrence would force either military action likely to result in destruction on the American homeland or humiliating retreat and a consequent loss of credibility and honor. What U.S. cities should be held hostage for Berlin, Taipei, Podgorica, Tokyo, Warsaw, and Canberra? Only an interest most compelling could justify taking such a risk. Yet Washington has opened its nuclear umbrellas casually, even thoughtlessly, without much regard for the consequences.
In fact, most of America’s nuclear guarantees are leftovers, tied to antiquated alliances created during a different time. But for those commitments, the U.S. would not be a nuclear target of so many opposing regimes. Through its alliances, Washington has needlessly turned itself into an adversary of nuclear-armed powers.
Hence last year’s bizarre nuclear scare involving North Korea. No serious analyst believed the DPRK planned to start a nuclear war with America. Nothing suggested that any one of the three Kims who ruled the North were suicidal. Yet in the event of a conventional war, Pyongyang could still be tempted to either strike out in desperation or threaten attacks on civilian targets to halt an allied advance. With South Korea well able to defend itself, Washington is risking nuclear attack for no good reason.
The dangers are exacerbated by the potential impact of nuclear guarantees on allied behavior, which can encourage intransigence and even recklessness. Conventional commitments are dangerous enough. In the early 2000s, Taiwan’s independence-minded Chen Shui-bian government appeared to provoke Beijing in the belief that the U.S. would deal with any consequences. In 2008, Georgia’s Mikheil Saakashvili triggered a disastrous conflict with Russia, bombarding Moscow’s troops in the breakaway territory of South Ossetia, apparently expecting Washington to enter any war on his government’s side.
While friendly proliferation could create instability and encourage competing arms build-ups, it would also be the most effective way to constrain China without forcing the U.S. into a military confrontation over primarily allied interests with what will be soon a great power, perhaps eventually even a superpower. Enabling more nuclear states would be unfortunate, but it still might be the best among bad options.
If nothing else, Americans should debate Washington’s multiple nuclear guarantees. Recipient nations increasingly recognize that the nuclear umbrella offers an imperfect defense at best. And the U.S. government’s nuclear commitments create enormous, disproportionate costs and risks for Americans. When the issue is nuclear war, without question America must come first.Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is author of Foreign Follies: America’s New Global Empire.
Vanessa Brown Calder
Since her father’s inauguration, Ivanka Trump has campaigned for federal paid family leave. A few weeks ago, Ivanka was instrumental in organizing a Senate hearing to discuss her government-supported paid family leave proposal. The “Economic Security for New Parents Act” relies on Social Security to front parental benefits and was introduced in the Senate recently.
Previously, Ivanka tweeted her support for the proposal and argued, “Only 15% of American workers have access to Paid Family Leave, and of those, only 6% are low-income workers.”
That is alarming if true, but abundant data paint a different picture. The private market at-large is voluntarily providing paid family leave to millions of workers, and the market is on-trend to provide paid family leave to millions more in coming years.
For example, the Census Bureau’s Survey of Income and Program Participation and the National Survey of Working Mothers found more than 60 percent of employed mothers have access to paid leave following the birth of a child. These figures are about four-fold the amount of paid leave Ivanka claimed parents are receiving today.
The private market at-large is voluntarily providing paid family leave to millions of workers, and the market is on-trend to provide paid family leave to millions more in coming years.
SIPP data show that access to paid leave use has grown substantially between 1961 and 2008, without government intervention. The share of first-time mothers that report using paid leave and/or disability grew from 16 to 61 percent over 50 years.
The only state that implemented a paid leave program during the surveyed period was California, during the last year of the survey. The vast majority of increases in the paid leave provision occurred before California’s policy could have any impact. This suggests the private market is responsive to employee demands after all.
Meanwhile, over the same time period, working mothers’ commitment to work grew naturally. The share of first-time mothers quitting jobs declined significantly in previous decades, from over 60 percent in 1961 to just over 20 percent in 2008.
There is reason to think private paid leave continued growing following the Census Bureau’s last survey. For example, in the last three years, 100 name-brand companies created or expanded paid family leave policies. Since late 2017 alone, companies such as Walmart, Walgreens, Home Depot, Target, Starbucks, Amazon, FedEx and McDonald’s created or expanded paid leave programs that apply to low-wage and hourly workers.
Although data and news stories demonstrate that the private market continues to improve its paid leave offerings, policymakers still want to intervene with a government-provided option. Advocates seem to think government-supported leave can be provided to American workers, leave utilization will increase and nothing else will change. That scenario is unlikely, since individuals change their behavior in the face of new incentives.
In the simplest case, it’s likely government-supported leave will rearrange worker compensation without necessarily making workers better off. For example, the average worker currently is provided about 70 percent of his or her compensation in wages and an additional 30 percent in benefits (including paid leave and legally required benefits like Social Security), according to the Bureau of Labor Statistics.
Under paid leave laws, including the Democrats’ FAMILY Act, which funds a federal benefit via new employee and employer payroll taxes, a higher proportion of employee compensation would go toward employee benefits, and a smaller proportion of employee compensation would be wages. This would likely make some groups, such as higher-income working mothers, better off, while leaving other demographic groups slightly worse off.
But employers may not be able to fully offset the cost of government-supported leave simply by rearranging employee compensation. In this case, businesses may respond by reducing their dependency on workers who could potentially be more costly. This would mean hiring fewer (likely) leave-takers, promoting fewer leave-takers to important management roles, or further reducing leave-takers’ wages to cover the costs of their absences. The vast majority of leave-takers are female, even when leave is available to men and women, so wage and employment effects are likely to affect them.
This makes government-supported leave different from privately provided leave. In the case of privately provided leave, employers proactively decide they can afford the costs associated with leave-taking. As a result, firms that voluntarily provide paid leave have limited incentive to discriminate against women or penalize workers. Paid leave is part of their business model.Vanessa Brown Calder is a policy analyst at the Cato Institute.