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Ignore the Chancellor, We Don’t Need Chequers to End Austerity

2 hours 18 min ago

Ryan Bourne

I generally presume cynicism in politicians’ arguments.

But Philip Hammond implying a Chequers-style relationship with the EU is needed to “end austerity” was shocking in its brazenness.

Ahead of the October Budget, the chancellor has echoed Theresa May in suggesting that looser government spending is just around the corner. Their calculation seems to be that voters truly desire ending fiscal constraint.

Conveniently from a political perspective, Hammond has said that the close EU relationship the government desires is crucial to delivering this higher spending.

A successful negotiated Brexit deal, he said, would lead to stronger growth forecasts from the Office for Budget Responsibility (OBR), allowing the government to achieve its fiscal targets while spending more in the coming five years.

Britain’s long-term fiscal challenge remains daunting. Minor changes to long-term growth brought about by differences between Chequers and a Canada-plus agreement do little to change that.

Avoiding the spectre of a no-deal Brexit would furthermore allow the chancellor to release the “fiscal buffer” he had built up for a no-deal scenario. With a stronger growth outlook and no need to budget for contingencies, Hammond says that there would be a supposed double spending dividend from a Chequers-style deal.

First off, any decision to “end austerity” — meaning consolidation of the public finances — would be arbitrary in its timing.

Net borrowing adjusted for the economic cycle has fallen substantially since 2010, but it still stands at around two per cent of GDP — a level which would probably keep the debt-to-GDP ratio constant given economic growth, but would certainly not see debt fall back towards its historic norms.

UK government debt is still extraordinarily high. In the event of another major recession, it would jump to truly unprecedented levels for peacetime.

Worse, the longer-term public finance challenge associated with an ageing population looms just around the corner. On unchanged policies, the OBR forecasts that public sector net debt will rocket from around 85 per cent of GDP today to 380 per cent over the next 50 years.

This is unsustainable, and so won’t happen. Instead, the demands on healthcare and pension spending associated with changing demographics will require some combination of higher taxes or cuts to the spending baseline.

Any claim by politicians today that austerity is over is therefore either dishonest or misinformed.

What then of Hammond’s two “dividends”?

Once a deal is agreed, the UK should indeed see some bounce-back growth, as uncertainty is lifted and businesses begin making new investments in the knowledge of the new arrangements. But this rebound growth from more certainty would be temporary.

Though it might improve near-term growth forecasts, it would not represent a structural improvement in the public finances, and so cannot be used to justify new permanent spending.

The only mechanism through which a Brexit deal could theoretically improve the UK public finances permanently is if raises the long-term GDP potential of the economy. So we return to the classic debate about the long-term effects of Brexit, and the assumptions underpinning different models.

The Treasury view has long been that a no-deal scenario will be meaningfully worse than an ordinary free trade agreement. The leaked Cross Whitehall Briefing suggested a 7.7 per cent long-term hit to GDP with no deal (under WTO rules), and a 4.8 per cent contraction under a Canada-plus deal relative to EU membership.

The government has failed to release the detailed analysis and assumptions of this work, despite over 60 MPs demanding that it does so just last weekend.

Crucially, though, few believe that the UK will have no trade deal with the EU in the long term. Most Brexiteers want a Canada-style free trade agreement — something EU negotiators have stated is on the table, provided that solutions to the Irish border question can be agreed.

It is incredible to suggest that Chequers will deliver some fiscal bonanza through higher growth above and beyond what an extensive free trade agreement would deliver.

For this particular chancellor to hang so much on small changes to growth forecasts is especially galling.

Hammond has suggested in the past that Britain’s main economic problems are homegrown, and little to do with EU policy.

Yet faced with sustained low potential growth rates, he has done virtually nothing to try to improve prospects through tax reform, land-use planning reform, or other serious deregulatory measures.

Appealing to MPs to support Chequers to “end austerity” therefore rings hollow.

Britain’s long-term fiscal challenge remains daunting. Minor changes to long-term growth brought about by differences between Chequers and a Canada-plus agreement do little to change that. And using a temporary growth bounceback to justify permanent spending is irresponsible.

The government might have decided that it wants to open the spending taps. It should not pretend that this is conditional on May’s desired form of Brexit.

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

America Must Realize It Has No Say in Syria's Future

Fri, 10/12/2018 - 07:47

Doug Bandow

Damascus is large and busy, as befits Syria’s capital. The city hosts the nation’s elite and is filled with government buildings and security forces. President Bashar al-Assad’s image adorns virtually every street. There is no doubt who is in charge.

But drive just a few minutes, and you enter a neighborhood only recently recovered after bitter fighting. Wrecked buildings stand as silent sentinels amid a sea of rubble. The carnage of seven years of horrid civil war reached even Damascus.

At long last, the conflict is winding down. Assad has won, and Washington has lost. However, the war’s impact will linger for years, perhaps decades. I just spent a week in the war-ravaged state (at my organization’s expense). America’s approach has been a disastrous failure.

Like Lebanon decades ago, the Syria conflict was an unusually complicated civil war. The fighting was brutal all around, with multiple warring forces to blame for an estimated half-million deaths. Indeed, past casualty breakdowns, admittedly of unknown accuracy, reported more combat than civilian deaths and more government than insurgent deaths.

The reality on the ground is that there is no good reason for a continued U.S. military presence.

Assad survived because he had—and still has—serious, even fervent support. He receives strong backing from his fellow Alawites, a minority sect and Shia offshoot. They commonly display pictures of him and speak of his humanitarian virtues. Other religious minorities, such as Christians, also tend to support his government. They saw the U.S.-inspired revolution in Iraq and didn’t like the ending. After all, even an American occupation didn’t prevent sectarian cleansing and slaughter, and many of the survivors fled to Syria.

Moreover, there is some broader acquiescence if not support for the regime. The military has sustained itself, despite suffering significant casualties, which required employing conscription beyond minority communities. Posters picturing dead soldiers adorn signs and buildings in the communities I visited. Far from hiding its losses, the regime appears to use them to forge a common identity. Assad’s backers cannot be wished aside, as Washington seemed to do. Furthermore, since defeat would have guaranteed their destruction, they fought ferociously.

The United States is mistakenly fixated on Assad. Of course, he was no friend of America, but if he lost, someone else would win. Washington should have focused on the “compared to what” question. Was American involvement likely to lead to a better result? The Iraq debacle demonstrated how America could make the situation far worse.

The Assad government is a dictatorship, but it is authoritarian, not totalitarian, and secular, not religious. Syrian society is striking—it looks and feels remarkably modern. There are religious conservatives, of course, but the Assads, father and son, like Saddam Hussein, created a diverse and secular public square in which most Americans would feel comfortable.

Of course, Washington wanted a truly liberal, democratic Syria. That was a worthy objective, but none of the armed factions was likely to deliver such a future. Even the so-called moderates may have been less than what they seemed. For instance, some Assad supporters contended that some early peaceful demonstrations emphasized sectarianism, with some crowds shouting, “Christians to Beirut, Alawites to the grave!”

In any case, the so-called Free Syrian Army proved to be a weak reed. In one program Washington spent a half-billion dollars on training fifty-four fighters, most of whom were quickly captured or killed. Radicals have also admitted posing as “moderates” to collect U.S. cash and weapons. U.S.-supported groups seemed to lose most of their battles and end up surrendering, along with their U.S.-supplied weapons, to more radical forces.

The alternative was a variety of extremists, including Jabhat al-Nusra, which Washington backed, and the Islamic State, which the United States opposed. Additionally, Saudi Arabia and other Gulf State allies poured billions of dollars into various murderous jihadist factions. Moreover, Turkey—focused on ousting Assad—allowed ISIS to transit Turkish territory and sell captured oil.

Did the Obama administration really believe that Syrians and Americans would benefit if any of these groups gained control? American support for Jabhat al-Nusra was particularly bizarre since it was affiliated with Al Qaeda which, if anyone forgot, staged the 9/11 attacks.

However, in a multisided conflict, American backing for the FSA ultimately empowered the radicals. The Assad government was the strongest force battling ISIS and other extremists. The FSA could only weaken Damascus, not actually take and maintain power. At least, absent strong and sustained American combat support, which was politically impossible.

U.S. policy was not just hopeless but inconsistent and even confused. The Obama administration sought to oust Assad and defeat ISIS, even though the former battled the latter. By aiding the FSA and fighting ISIS, Washington created an incentive for Damascus to concentrate on the former and ignore the latter. The United States opposed other radical jihadist groups despite allying with Saudi Arabia, United Arab Emirates, and Qatar—all of which supported the very same extremists while abandoning the fight against ISIS. Washington also sought to work with both Turkey, which prioritized curbing Kurdish autonomy, and the Kurds, who were prepared to cooperate with Damascus to achieve that autonomy.

Washington also railed against Iran and Russia for assisting Syria’s government, even though Assad requested it. Yet, while complaining about that assistance, Washington flouted international law to intervene against Damascus and claimed the right to determine Syria’s future. Indeed, American forces still illegally occupy Syrian land in hopes of forcing Assad from power.

The Trump administration’s wartime objectives have turned into pure fantasy. No combination of insurgents threatens Assad. At the start of the war, Damascus suburbs were in flames, bombs were exploding in the capital, new opposition groups were arising, and the Syrian army was over-stretched. At the time, few observers imagined Assad regaining control over most of his country. However, today the regime has mostly defeated all of its opponents. Damascus residents are largely optimistic about the future.

Nor is there is any effective pressure on Syria to democratize. The moderate insurgents always appeared to be a mystical unicorn which the West expected to materialize magically. They were vital to giving the opposition international legitimacy but never appeared to be serious rivals for power. Currently, only Islamist extremists and the Kurds remain. For instance, dominant in Idlib province is Hayat Tahrir al-Sham, an Al Qaeda affiliate backed by Turkey.

The Assad government is threatening to open an offensive against Idlib. This has prompted Moscow and Ankara to reach a demilitarization agreement for Idlib, but Syria insists it is merely a temporary expedient to limit casualties. In northern Syria, American forces back Kurdish militias, which control around a third of the country. Meanwhile, Washington hopes to pressure the Assad regime to agree to its own dissolution by denying it oil along with population and territory.

However, the regime is more secure than at any point since 2011. The Trump administration has no authority to invade, occupy, and dismantle a foreign nation, for whatever reason. Moreover, Washington’s failure to protect Syrian Kurds from Turkish attack has encouraged Kurdish discussions with Damascus—the two sides had largely avoided fighting even as civil war spread—over a long-term modus vivendi. Restored Syrian control over the region and especially border might alleviate Turkish fears over an independent Kurdish state.

Nor can Washington force Hezbollah, Iran, and Russia from Syria. They long were allied with Damascus, and they have far more at stake than America in Syria’s future. Their role is significant and transparent: I drove by Hmeimim airbase shared by Moscow near the coast. While I was at a roadside stand two trucks emptied armed Russians who purchased snacks. Pictures of Assad with Vladimir Putin and Hezbollah’s Hassan Nasrallah are common. In Damascus, I also walked by a mosque which was identified as catering to Hezbollah.

Washington should bring its forces home. Neither Iraq nor Syria has threatened America. The designation of Damascus, which never staged a terrorist attack against American targets, as a state sponsor of terrorism was political, reflecting Syria’s support for such groups as Hamas, which is a quasi-state hostile to Israel. But since 1973, Syria has lived in a cold peace with Israel, and that won’t change. Overall, Damascus is much weaker than before the civil war and will have to focus on reconstruction.

In any case, President Donald Trump has no warrant to occupy Syria without congressional approval and has no purpose which justifies congressional assent. Washington’s plan to deny aid to areas under government control is equally dubious. There are reasonable arguments for America to keep its money at home, but not for discriminating against those subject to the Assad regime. But the idea that withholding American aid dollars will foster unrest and even revolt is fanciful.

The Syrian civil war has been a great tragedy. Hopefully, the long-term result will be a more liberal, democratic state. However, nothing justifies continued U.S. military involvement. America’s attempt at coercive social engineering never was realistic. The Trump administration should end Washington’s latest Middle Eastern misadventure.

Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is the author of Foreign Follies: America’s New Global Empire.

America's Disastrous Occupation of Afghanistan Turns 17

Thu, 10/11/2018 - 08:43

Doug Bandow

America has now passed the 17-year mark in Afghanistan. U.S. troops have been fighting there for longer than the Revolutionary War, Civil War, World War I, and World War II combined. Yet Washington is further away than ever from anything that might pass for victory.

More than 2,300 American military personnel and 3,500 contractors have died in Afghanistan. The latest death occurred last week—Specialist James A. Slape from Morehead City, North Carolina. Another 1,100 allied soldiers have been killed, almost half of them from the United Kingdom. More than 20,000 Americans have been wounded. The direct financial cost has amounted to $2 trillion, with another $45 billion budgeted for this year.

And for what?

After so many years of senseless combat, Erik Prince’s proposal to turn the conflict over to contractors almost sounds reasonable. His lobbying efforts in Kabul have not been notably successful, but some day American personnel will come home. And then Washington’s friends in Afghanistan will find themselves on their own.

And the Taliban are in their strongest position in just that many years.

Seventeen years ago the Bush administration was forced to act. After the 9/11 attacks, it was imperative to disrupt if not destroy al-Qaeda and punish the Taliban regime for hosting terrorist training camps. Washington quickly succeeded: al-Qaeda was degraded and dispersed, the Taliban was overthrown and punished. Washington should have left as quickly as it came. But the Bush administration had other hopes: to create a friendly, liberal, democratic state in Central Asia.

If there was ever a chance to establish a stable regime in Kabul, it was right after the Taliban’s ouster. However, the Bush administration immediately turned to Iraq, which had nothing to do with 9/11. That shift allowed for a Taliban revival. Even after twice increasing force levels—which peaked at 110,000 U.S. and 30,000 allied troops in 2011—the Obama administration was only able to limit the insurgency’s reach. Around that time I twice visited Afghanistan, and found that private, off-the-record opinions of allied military personnel, civilian contractors, and Afghan officials were uniformly pessimistic.

Most saw the operation as a staying action at best. Since then allied troop levels have fallen precipitously, but the large Afghan security forces are an inadequate substitute. Afghan officials figure that as many as a third of soldiers and police are “ghosts,” existing only for payroll purposes. Attrition rates and desertions are soaring. Reported Anthony Cordesman of the Center for Strategic and International Studies, the Afghan National Security Forces “performance will probably worsen due to a combination of Taliban operations, ANSF combat casualties, desertions, poor logistics support, and weak leadership.” To make up for that failure, “U.S. Special Operations troops increasingly [are] being deployed into harm’s way to assist their Afghan counterparts.”

Over the last four years, U.S. officials figure the number of Taliban fighters has trebled to 60,000; Afghan sources put the number closer to 80,000. Estimates of government control are inflated by counting areas where the district headquarters is in Kabul’s hands, even if the rest of the territory is not. A January BBC survey estimated that the Taliban controlled 4 percent of the country and was active in another 66 percent of Afghanistan: the insurgents have “pushed beyond their traditional southern stronghold into eastern western and northern parts of the country.” Cordesman reported that the “Taliban now holds more territory than in any year since 2001.”

The insurgents are using night vision equipment to mount attacks in the dark. Indeed, observed Cordesman, “Injured Afghan soldiers say they are fighting a more sophisticated and well-armed insurgency than they have seen in years”

Even Kabul is unsafe: Washington now takes personnel to the airport via helicopter, avoiding the roads that I took as NATO’s guest in 2011. Of Taliban activity this summer, Al Jazeera reports: “The scale and intensity of these attacks have not been seen since 2001. The Taliban never had the capability to launch such massive offenses and never succeeded in taking over any major cities.” Civilian casualties are on the rise, hitting 2,258 during the first quarter of 2018. Although the Taliban is responsible for most of the deaths, as Kabul relies more on air support the UN reports that casualties from U.S. and Afghan airstrikes are rising.

One need look no further than the Department of Defense for bad news. In May, the Pentagon’s inspector general reported that “available metrics showed few signs of progress.” And results are usually worse than what is admitted. For instance, Cordesman concluded that official U.S. data “provide highly suspect analysis.” Moreover, “official U.S. and Afghan data seem to sharply understate the level of growing threat presence, influence, and control.” Worse, official testimony estimates offered in testimony “seem more spin than objective.” Overall, Cordesman said, “the ‘surge’ in U.S. forces in Afghanistan failed to have a lasting effect and the levels of violence have grown sharply.”

Money offers no answer. The Afghan government is incompetent, divided, and corrupt. The Special Inspector General for Afghanistan Reconstruction continues to issue reports detailing massive waste and ineffectiveness of programs for everything from development to security. A recent analysis of Washington’s stabilization program concluded: “The U.S. government greatly overestimated its ability to build and reform government institutions in Afghanistan.” Whatever success it had won’t outlive the U.S. presence: “successes in stabilizing Afghan districts rarely lasted longer than the physical presence of coalition troops and civilians.”

In short, the future looks dismal. Cordesman cited the Director of National Intelligence in concluding, “The overall situation in Afghanistan will very likely continue to deteriorate, even if international support is sustained.” Best would be a swift exit, bolstered by a simple understanding with the Taliban: create an Islamic state and Washington will stay away, but host terrorists who attack America and Washington will come back bigger and badder than the first time. The Taliban likely would respect that deal.

But reality has little influence on U.S. policy. Both old and new military commanders, as well as administration officials led by Secretary of State Mike Pompeo, claim that administration strategy is succeeding. The president bumped up troop levels to some 15,000 U.S. and 7,000 allied personnel. “Our troops will fight to win,” he said. “We will fight to win. From now on, victory will have a clear definition: attacking our enemies, obliterating ISIS, crushing al-Qaeda, preventing the Taliban from taking over Afghanistan, and stopping mass terror attacks against America before they emerge.” Alas, this is errant nonsense. The most the new policy will do is put off failure until the next president takes office.

None of the arguments for permanent war are persuasive. As a matter of geopolitics, Afghanistan is irrelevant to U.S. security. Russia, China, India, Pakistan, and Iran all have a greater interest in regional stability. Washington should encourage a Central Asian conclave, perhaps under the auspices of the Shanghai Cooperation Organization. Far better for Washington to leave and allow Afghanistan’s neighbors to reach a modus vivendi reflecting their relative interests. The result wouldn’t be a liberal, Westminster-style democracy allied with America. But it might be the best possible outcome in a messy, ugly world.

A stable Pakistan is in America’s interest, but the war is highly destabilizing. Rather than push Islamabad to act against its perceived interests, Washington should exit and allow Islamabad to work with neighboring states in forging an acceptable compromise for those most concerned.

Advocates of Afghanistan-forever cite terrorism. They contend that if we don’t fight the terrorists in Kandahar, we will have to fight them in New York. Really. For instance, the ever-hawkish Senator Lindsey Graham argued, “Last time we ignored Afghanistan we got 9/11.” Even the normally sober Defense Secretary Jim Mattis said America was in Afghanistan “to prevent a bomb from going off in Times Square.”

Yet this tragic nation has little to do with terrorism. The Taliban are Islamic fundamentalists, interested in ruling at home, not killing abroad. In 2001, Afghanistan served as a convenient base for Osama bin Laden. After the U.S. intervened, he moved to neighboring Pakistan, where he was later killed. The architect of 9/11, Kalid Sheikh Muhammed, spent time in Bosnia, Kuwait, Pakistan, Qatar, and Pakistan—but never Afghanistan. Al-Qaeda morphed into a group of national franchises. These days the most vibrant branch is al-Qaeda in the Arabian Peninsula, which has been empowered by the U.S.-backed Saudi and Emirati onslaught against Yemen.

Why else sacrifice U.S. lives and wealth in Afghanistan? There are many Afghans, especially women, who support creation of a liberal society. But that is beyond Washington’s ability to deliver, at least at reasonable cost. Afghanistan always has been ruled at the village and valley level. Someday it might become something different. But that is not Washington’s responsibility today.

For some, to leave suggests failure by those who fought courageously. But it is not American or allied military personnel who are at fault. They have done everything they were asked to do and more. The blame falls primarily on three successive presidents who embraced a quixotic crusade to remake Afghanistan.

In contrast to his predecessors, Donald Trump seemed to understand how hopeless the Afghanistan war is. Before announcing his candidacy, he said simply: “Let’s get out of Afghanistan.” A gaggle of establishment advisors has since pressed him to suppress his instincts, but he still has time to do the right thing. At 17 years and counting, it is far past time to bring America’s bravest home.

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.

A Smarter Plan for Immigrant Welfare

Thu, 10/11/2018 - 07:41

David Bier and Alex Nowrasteh

The Trump administration recently unveiled a plan to prevent immigrants who the government predicts might be unable to support themselves financially from entering the country. But the proposal relies too much on guesswork. A bill introduced by Wisconsin Republican Glenn Grothman, which would allow immigrants into the country without giving them access to the welfare system, is a preferable alternative.

The Department of Homeland Security’s proposed regulation— the “public charge” rule—poses a major problem for legal immigrants. It would bar them from entry if a bureaucrat predicts that they might use some welfare here. But because the law makes them eligible for it, legal immigrants could always potentially use welfare at some point, even if they never have and never would. It may be difficult for many to convince the government otherwise.

If the administration’s goal is truly to prevent overuse of welfare benefits, however, Grothman’s bill provides a better strategy to support immigrant self-sufficiency and protect taxpayers. It bans access to all means-tested welfare and entitlement programs for immigrants until they become citizens. That means verified U.S. citizens could access federal welfare benefits like food stamps, Medicaid, and Medicare, but no noncitizens would be able to.

A bill introduced by Wisconsin Republican Glenn Grothman would allow immigrants into the country without giving them access to the welfare system.

According to our estimates using data based on noncitizen use of welfare and entitlements in the Census Bureau’s Survey of Income and Program Participation, Grothman’s bill could save U.S. taxpayers about $60 billion in the first year that it takes effect (it provides a two-year grace period). Most rigorousestimates show that immigrants already pay more than enough in taxes to cover the cost of their benefits, but Grothman’s bill would end any debate over the fiscal impact of immigration by making it unambiguously positive.

Under Rep. Grothman’s bill, legal immigrants could continue to come to the United States to live and work as they do now. The only difference is that they will be totally barred from all welfare benefits and entitlement programs. Rather than building a virtual wall around the country to keep out legal immigrants—like the public charge rule would do—Grothman’s bill builds a virtual wall around the welfare state.

His bill would expand a 1996 law that restricted federal welfare to only noncitizens who were eligible to become U.S. citizens after living here as a legal permanent resident for five years. The Grothman bill would take the next logical step by limiting all benefits only to those who actually go through the naturalization process and become U.S. citizens.

In addition to the $60 billion in savings, tax revenue would also increase as more noncitizens would work after losing their benefits. Harvard economist George Borjas found that after welfare reform in 1996 cut noncitizen access to welfare, immigrants worked so many more hours that their rates of poverty didn’t actually increase. Today’s booming economy provides exactly the right environment for noncitizens who lose benefits to make up the difference in the worker-hungry labor market.

Beyond the fiscal benefits, Americans would almost certainly be more supportive of legal immigration if they had certainty that immigrants were here solely to work and could not receive benefits. It would take away a major talking point for opponents of immigration. In fact, according to Gallup polling, Americans flipped from two-thirds in favor of cutting immigration in 1996 to a majority opposed to cuts shortly after welfare was restricted.

The new law would not remove eligibility for U.S. citizen children of noncitizens, in addition to immigrants who become U.S. citizens themselves. Naturalization, or the process of becoming a citizen, generally requires living legally in the United States as a legal permanent resident for at least 5 years, demonstrating basic knowledge of English, passing a test on U.S. history and civics, taking an oath of allegiance to the United States, passing a background check, and paying a $725 fee. If they pass, they would have access to all of the rights, responsibilities, duties, and benefits that Americans at birth do—including welfare.

Any immigrant who can’t meet those citizenship requirements would have to work or live on their own savings. If they fell on hard times and could no longer support themselves, they would need to rely on family, friends, private charities, or return to their home countries. This is how legal immigration worked for more than 150 years of American history, and it would work just as well today.

Restricting welfare is a smarter approach than the government’s public charge rule. Grothman’s bill will save taxpayers a boatload of money, and it would do it without losing the benefits that hardworking immigrants provide. With more self-reliant immigrants, America could open its doors to even more who want to contribute to this country.

David Bier and Alex Nowrasteh are immigration policy analysts at the Cato Institute.

Best and Worst Governors 2018

Wed, 10/10/2018 - 11:53

Chris Edwards

The U.S. economy is booming, and state governments are benefitting from strong revenue growth. Many governors are using the opportunity to expand spending programs, while others are cutting tax rates. Some governors are hiking taxes despite already overflowing coffers.

Which governors are the most frugal and which the most spendthrift? The Cato Institute’s new “fiscal report card” calculates the answer based on recent tax and spending changes, and assigns letter grades of “A” to “F.”

The report awarded an “A” to five governors.

Susana Martinez of New Mexico has been steadfast in opposing tax increases over eight years in office. Many GOP governors break their promises not to raise taxes, but not Martinez. Last year, she vetoed $350 million of tax hikes. She has also kept a lid on budget growth and has repeatedly vetoed wasteful spending.

The focus of governors should be delivering efficient state services at lower costs to create budget room for competitive tax rates.

Henry McMaster of South Carolina is off to a conservative start as governor since 2017. He has also vetoed tax hikes and proposed cutting income tax rates across the board.

Doug Burgum of North Dakota entered office in 2017 after North Dakota’s energy boom had turned to a bust. With falling state revenues, Burgum pursued broad spending cuts to balance the budget, not tax increases.

Paul LePage of Maine has been a staunch fiscal conservative over eight years in office. He has restrained spending, reformed welfare programs, and repeatedly cut taxes, including repealing a surtax on high earners last year.

Greg Abbott of Texas has held the state budget flat in recent years and pursued business tax reforms. He cut the state’s damaging franchise tax and wants to cut it further until it “fits in a coffin.”

The “A” governors are all Republicans, and the overall results show that GOP governors are more fiscally conservative than Democrats, on average. That party divide has persisted over time on the Cato report cards, which are computed every two years from objective tax and spending data.

Switching to the worst governors, the report awarded eight F’s this year, with the two worst scores going to “left coast” Democrats Kate Brown in Oregon and Jay Inslee in Washington.

Spending has exploded under Brown, with the general fund budget rising 14 percent in the past two-year cycle and 10 percent in the current one. She supported a 2016 ballot measure to impose a gross receipts tax to raise $3 billion a year. Oregon voters defeated the measure by a 59-41 margin, but Brown ignored the anti-tax message and signed into law large tax hikes in 2017.

Inslee’s appetite for tax and spending increases is insatiable even though he promised he would not raise taxes when running for office. On a 2016 ballot, Washington voters soundly defeated a state carbon tax 59-41. But Inslee is still pushing to impose a carbon tax to raise at least $750 million a year. Inslee has also jacked up spending, with the current two-year budget rising 17 percent.

Republicans have been known to break promises and hike taxes as well. Consider two “D” governors this year, Charlie Baker of Massachusetts and Brian Sandoval of Nevada. Baker kept his promise not to raise taxes for a while, but this year he approved a huge $800 million payroll tax increase to fund a new paid-leave subsidy.

Sandoval also promised no tax increases, and voters showed they agreed with that view on a 2014 ballot by rejecting 79-21 a new business tax to fund education. But Sandoval made a U-turn in 2015 and signed into law a $600 million tax-hike package that included-wait for it-a new business tax to fund education.

The 2017 federal tax law has changed the dynamics of state tax policy. The law capped the deduction for state and local taxes, subjecting millions of higher-income households to the full burden of state and local taxes. That should pressure governors to restrain individual income, sales, and property taxes.

Governors do face tough fiscal choices. They must deal with large and growing costs of retired employees that past lawmakers imposed on current budgets. But tax hikes just prompt people and businesses to leave, which shrinks state tax bases and reduces growth.

The focus of governors should be delivering efficient state services at lower costs to create budget room for competitive tax rates. In recent years, Susana Martinez has shown the way.

Chris Edwards is director of tax policy studies and editor at the Cato Institute.

What to Expect If Democrats Win the House

Wed, 10/10/2018 - 08:14

Michael D. Tanner

There’s less than a month until the midterm elections, and, despite an uptick in Republican enthusiasm following the spectacle of the Kavanaugh nomination, it still seems likely that Democrats will capture control of at least one chamber of Congress. And as Election Day draws nearer, we can expect both parties to cast the stakes in increasingly apocalyptic terms. But what would a Democratic Congress actually mean for the future direction of the country?

First, despite the hopes or fears of both sides, we can forget about the big-ticket items on the Democratic left. We are not going to see single-payer health care, guaranteed jobs for everyone, or free college. While the loonier elements of the Democratic party have been campaigning on the idea of “Make Venezuela Great Again,” most of the party is united on little more than opposition to President Trump.

And, even if some of the more extreme Democratic proposals made it through the House, they would then have to face the Senate, which, as we all know, is where bills go to die. Republicans are still favorites to keep control of the Senate, however narrowly, and even if they don’t, the Democratic majority will be far short of the 60-seat threshold to break filibusters.

More big spending, pushback on deregulation, heavy investigation of administration officials, but no big-ticket items from the Left’s agenda.

Moreover, even if the Democrats were able to kidnap Mitch McConnell and replace him with an accommodating clone, President Trump would still have the veto. After all, this is a president who thrives on “fighting.” What better way for him to excite his base than to turn every Democratic proposal into a dramatic showdown?

One exception to this, unfortunately, is liable to be increased spending and bigger deficits. While it is difficult to imagine a more spendthrift Congress than this one (spending is up 7 percent over last year, for instance, and next year’s deficit will top $1 trillion), but history suggests that the combination of a Democratic Congress and Republican president tends toward even greater profligacy.

Of course, once they are in the opposition, House Republicans might suddenly rediscover their opposition to big spending (it’s surprising how that works), but I wouldn’t hold my breath. Certainly, President Trump has shown no inclination to curb excessive spending. And some Democratic initiatives, like a gigantic infrastructure boondoggle, may be particularly appealing to this president.

A Democratic Congress may be able to slow President Trump’s deregulatory efforts but won’t be able to stop them. That’s because, following the lead of his predecessors, he is accomplishing many of his goals through executive actions. Democrats will continue to learn that if you live by the pen and the phone, you die by the pen and the phone.

The one thing that a Democratic Congress can absolutely do is . . . make Donald Trump’s life miserable. Impeachment is not going to happen, but a Democratic House would have investigatory and subpoena power. Elijah Cummings would likely become chairman of the Oversight Committee, Adam Schiff would take over at Intelligence, and Jerry Nadler at Judiciary. Consider it a full-employment opportunity for White House lawyers. From Russian collusion to emoluments to the myriad scandals of the Trump cabinet, administration officials can expect to spend so much time testifying before Congress that they might as well move cots into the halls of the Capitol.

The one thing a Democratic victory will definitely not do, unfortunately, is bring an end to the tribalism and polarization that is bedeviling American politics. With some 400 or so Democrats running for Congress, and Trump being Trump, we can expect the name-calling and nastiness to continue pretty much unabated.

Of course, elections have consequences, as we are so frequently reminded. But the reality is that the Founding Fathers designed an American system of government that is resistant to radical change. Whether you are demanding change or fear it, those consequences are likely to be far more modest than the rhetoric suggests.

Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis.

Republicans Treated Merrick Garland Way Better Than Democrats Treated Brett Kavanaugh

Tue, 10/09/2018 - 11:09

Ilya Shapiro

Even though Brett Kavanaugh was ultimately confirmed to the Supreme Court, while Merrick Garland’s nomination expired alongside the Obama presidency, there’s no question that the chief judge of the D.C. Circuit was treated better than the newest justice has been.

Set aside the debate over whether it was proper for Senate Republicans to hold open the seat vacated by Justice Antonin Scalia’s passing, whether norms were broken and institutions sacrificed on the altar of power politics. Nobody’s mind will change on that.

Democrats’ anger at Senate Majority Leader Mitch McConnell’s tactics is understandable, even if they would’ve done the same thing in his place. But this was a black swan event. The last time the Senate confirmed a Supreme Court nominee of a president of the opposite party to a vacancy arising in a presidential election year was 1888.

Focus instead on how the Senate treated each nominee personally. McConnell announced his “no hearings, no votes” stance within hours of Scalia’s death, without waiting for President Obama to pick a nominee (which didn’t happen for another month). He argued that, since the country was embroiled in a heated election campaign and the next justice could shift the balance of the Supreme Court, the American people should decide who gets to fill that seat—when they chose a new president less than nine months later.

Brett Kavanaugh takes his seat amid debates about the Supreme Court’s ‘legitimacy,’ with substantial portions of the population thinking he’s a rapist.

Senators made clear, both before and after Garland was formally nominated, that this was about the direction of the Supreme Court, not about any person. There were no charges that Garland was a left-wing firebrand or otherwise unqualified. Indeed, such accusations would’ve been absurd. Nor were there fishing expeditions into Garland’s past, with media leaks to portray any juicy morsel in the most negative light possible.

Contrast that with the trial by ordeal that Kavanaugh endured. While there was gnashing of progressive teeth when Justice Anthony Kennedy announced his retirement, the opposition machine didn’t shift into high gear until President Trump selected his successor.

At that point, Senate Minority Leader Chuck Schumer vowed to oppose Kavanaugh “with everything I have.” Sen. Cory Booker, a member of the Judiciary Committee, said those who supported Kavanaugh are “complicit in evil.” Sen. Richard Blumenthal, who also sits on that committee, called Kavanaugh “your worst nightmare.” Former Virginia governor and Democratic National Committee Chairman Terry McAuliffe said Kavanaugh would “threaten the lives of millions for decades.”

I could go on, because these aren’t isolated examples. Senators accused Kavanaugh not just with the “usual” attacks on Republican judges as against women, minorities, workers, etc. He was also allegedly picked to enable Trump to avoid the Robert Mueller investigation and complicit in torture and other Bush-administration excesses. Then, of course, Kavanaugh and his Trump/Bush-stooge buddies supposedly stonewalled senators’ demands for documents, even though more were produced than for the last half-dozen Supreme Court nominees combined.

That’s even before taking into account the last three weeks, most notably (1) Democrats sitting on Christine Blasey Ford’s allegations until the last possible moment (instead of allowing the FBI to conduct a confidential investigation); (2) raising every aspect of juvenile behavior into an impeachable offense; and (3) complaining about “temperament” after humoring spurious allegations of gang rape and the like.

It’s no wonder that, when I ran a Twitter poll before the final confirmation vote, 60 percent of the roughly 900 respondents said they’d rather be Garland than Kavanaugh. That’s not in any way scientific, and my Twitter followers are by no means representative of the nation, but the fact that a significant number of people would rather be a failed nominee than one who at that point was more likely than not to be confirmed is telling.

Would it have been more humane or charitable to have given Garland a kabuki hearing followed by a no vote? Or, since hearings aren’t constitutionally required, maybe just rejection on the Senate floor without any debate, formally providing the “advice” to President Obama that there would be no “consent”?

I certainly feel sorry for Garland, but it’s not like he was banished onto an ice floe with his reputation in tatters. He just returned to his job as the chief judge of the second-highest court in the land, with even more respect from the legal profession and sympathy from all, including his political enemies.

Kavanaugh, meanwhile, takes his seat amid swirling debates about the Supreme Court’s “legitimacy,” with substantial portions of the population thinking he’s a rapist, or at least that he would’ve been if he weren’t too drunk to pull it off. Justice Clarence Thomas went through something similar 27 years ago, but Kavanaugh’s experience in our new-media age must have been even more searing.

The sad thing is that such a campaign of personal destruction would’ve been run on any Trump nominee. Those opposition press releases with “XX” in place of the nominee’s name attest to that. The details would’ve been different because each potential justice’s offenses against the latest hierarchy of intersectional pieties are different, but the result is the same: guerrilla war by any means possible.

If the Democrats had simply itemized their jurisprudential concerns with Kavanaugh—abortion, the Second Amendment, Chevron deference, and anything else—and declared uniform opposition on that basis, that would’ve been fine. (I thus disagree with Sens. Lindsey Graham and Susan Collins on whether senators should approve all nominees who have the requisite intellect and legal training, regardless of judicial methodology or constitutional theory.)

But that’s not what happened. The fiasco that we just lived through wasn’t about blocking a nominee, but about tearing him down. It’s definitely worse than what happened to Garland.

Ilya Shapiro is a senior contributor to The Federalist. He is a senior fellow in Constitutional Studies at the Cato Institute and Editor-in-Chief of the Cato Supreme Court Review.


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