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In an article in the April 2018 issue of the American Journal of Public Health, four researchers at the Centers for Disease Control and Prevention’s Division of Unintentional Injury Prevention report that the CDC’s methods for tracking opioid overdose deaths have over-estimated the number of those deaths due to prescription opioids, as opposed to heroin, illicitly manufactured fentanyl, and other illicit variants of fentanyl. They called the prescription opioid overdose rate “significantly inflated.”

Fentanyl is a synthetic opioid categorized as a prescription opioid. But, in the outpatient setting, it is predominantly prescribed as a time-release transdermal patch, not suitable for nonmedical users. Occasionally, it is prescribed as a lozenge, a nasal spray, or a small film that can be placed within the corner of one’s mouth, usually to cancer patients in extreme pain. These forms of the drug don’t lend themselves to being converted into a form suitable for nonmedical users wishing to snort or inject the drug. The injectable form of fentanyl is almost exclusively used in the hospital setting, both as an anesthetic agent and to control severe pain in patients who are critically ill or in the postoperative recovery room. Over the past several years, the underground market has been flooded by illicitly manufactured fentanyl and its variants, often moved into the country in a powdered form through the mail.

The authors of the AJPH article state, “Traditionally, the Centers for Disease Control and Prevention (CDC) and others have included synthetic opioid deaths in estimates of ‘prescription’ opioid deaths. However, with IMF (illicitly manufactured fentanyl) likely being involved more recently, estimating prescription opioid–involved deaths with the inclusion of synthetic opioid–involved deaths could significantly inflate estimates.” They suggest that under a new “conservative” definition—excluding deaths involving synthetic opioids like fentanyl—the 32,445 prescription opioid-involved deaths that the CDC estimated occurred in 2016 would be revised down to 17,087.

The authors point out that the exact drugs involved in overdose deaths are not identified in 20 percent of death certificates, and the number of deaths due to diverted (stolen, smuggled, or sold by dealers) prescription opioids is unknown. They also note that multiple drugs are involved in over half of their reported cases of prescription opioid overdoses—although other centers report multiple drugs involved in over 90 percent of overdoses. Because of this, they say, even that reduced estimate is likely inaccurate.

In December 2017, the CDC reported that overdose deaths due to fentanyl have been increasing at a rate of 88 percent per year since 2013, and now make up the largest component of opioids responsible for overdose deaths.

The authors go on to state, “Obtaining an accurate count of the true burden and differentiating between prescription and illicit opioid-involved deaths are essential to implement and evaluate public health and public safety efforts…If deaths involving synthetic opioids—likely IMF—are categorized as prescription opioid overdose deaths, then the ability to evaluate the effect of interventions targeting high-risk prescribing practices on prescription opioid–involved deaths is hindered. Decreases in prescription opioid–involved deaths could be masked by increases in IMF deaths, resulting in inaccurate conclusions.”

This last statement is important. Policymakers seem intent on seeing doctors treating patients in pain as the source of the opioid overdose crisis. And their focus has been on getting doctors to curtail prescribing opioids, while ordering a reduction in the manufacture of opioids (25 percent in 2017 and 20 percent this year) by pharmaceutical companies. This has made a lot of patients, in and out of the hospital, suffer from under-treatment of pain. Yet, the government’s own numbers have shown for years that the overdose crisis is primarily the result of nonmedical users seeking drugs in the black market created by drug prohibition. This article from the CDC researchers provides yet another reason why policymakers should rethink their approach.

Quite rightly, President Donald Trump and his Administration are targeting the transgressions of China against US intellectual property rights in their unfolding trade strategy. But why not use the WTO rules that offer a real remedy for the United States without resorting to illegal unilateral action outside the WTO?

Seventeen years after China joined the WTO, China still falls considerably short of fulfilling its WTO obligations to protect intellectual property. About 70 percent of the software in use in China, valued at nearly $8.7 billion, is pirated. The annual cost to the US economy worldwide from pirated software, counterfeit goods, and the theft of trade secrets could be as high as $600 billion, with China at the top of the IP infringement list. China is the source of 87 percent of the counterfeit goods seized upon entry into the United States.

One possible response by the United States is the one the Trump Administration seems to be taking: slapping billions of dollars of tariffs on imports of more than 100 Chinese products through unilateral trade action. Given its protectionist predilections, taking this approach is surely tempting to the Trump Administration. Doing so will, however, harm American workers, businesses, and consumers, and contribute to further turmoil in the global economy.

The results will likely include retaliation by China against the goods and services of American companies and workers; lawful economic sanctions imposed by China on American exports to China after the US lost to China in WTO cases; the hidden tax of higher prices for American consumers; less competitiveness in the US market and in other markets for American companies that depend on Chinese imports as intermediate goods in production; and doubtless still more American and global economic landmines from the downward spiral of tit-for-tat in international trade confrontations.

These tariffs are not only self-defeating and counter-productive; they are also illegal under international law. Where an international dispute falls within the scope of coverage of the WTO treaty, taking unilateral action without first going to WTO dispute settlement for a legal ruling on whether there is a WTO violation is, in and of itself, a violation of the treaty. The WTO treaty establishes mandatory jurisdiction for the WTO dispute settlement system for all treaty-related disputes between and among WTO Members. The WTO Appellate Body has explained, “Article 23.1 of the (WTO Dispute Settlement Understanding) imposes a general obligation to redress a violation of obligations or other nullification or impairment of benefits under the covered agreements only by recourse to the rules and procedures of the DSU, and not through unilateral action.”

Thus, the United States is not permitted by the international rules to which it has long since agreed to be the judge and the jury in its own case. Imposing tariffs on Chinese products without first obtaining a WTO ruling that Chinese actions are inconsistent with China’s WTO obligations is a clear violation by the United States of its WTO obligations to China – as WTO jurists will doubtless rule when China responds to the tariffs by challenging the tariffs in the WTO.

Such a legal loss by the United States, with all its unforeseeable economic and geopolitical consequences, can be avoided while still confronting Chinese IP violations effectively. Before resorting to unilateral action outside the WTO and in violation of international law, the United States should take a closer look at the substantial rights it enjoys under the WTO treaty for protecting US intellectual property against abuse.

Potential remedies in the WTO exist and should not be ignored. These remedies can be enforced through the pressure of WTO economic sanctions. WTO rules do not yet cover all the irritants that must be addressed in US-China trade relations. Even so, instead of just concluding that there are no adequate remedies under WTO rules to help stop IP infringement, the United States should first try to use the remedies in rules we have already negotiated that bind China along with all other WTO Members.

A number of these rules have not yet been tested against China or any other country – which is not proof they will not work. Generally, when tried for the first time, WTO rules have been found to work, and, generally, when China has been found to be acting inconsistently with its WTO obligations, it has complied with WTO rulings. The actual extent of Chinese compliance with WTO judgments can be questioned; in some instances it is seen by some as only “paper compliance.” But whether any one WTO rule can in fact be enforced cannot be known if no WTO Member bothers to try to enforce it.

The WTO rules in the WTO Agreement on the Trade-related Aspects of Intellectual Property Rights – the so-called TRIPS Agreement – are unique among WTO rules because they impose affirmative obligations. Yet, this affirmative aspect of WTO intellectual property rules has been largely unexplored in WTO dispute settlement. In particular, WTO Members have so far refrained from challenging other WTO Members for failing to enforce intellectual property rights.

On enforcement, Article 41.1 of the TRIPS Agreement imposes an affirmative obligation on all WTO Members: “Members shall ensure that enforcement procedures… are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements. These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.”

Note that this “shall” be done by all WTO Members; it is mandatory for compliance with their WTO obligations. And yet what does this obligation mean by requiring that effective actions against infringements must be “available”? Is this obligation fulfilled by having sound laws on the books, as is generally the case with China? Or must those laws also be enforced effectively in practice, which is often not the case with China?

The Appellate Body has said that “making something available means making it ‘obtainable,’ putting it ‘within one’s reach’ and ‘at one’s disposal’ in a way that has sufficient form or efficacy.” Thus, simply having a law on the books is not enough. That law must have real force in the real world of commerce. This ruling by the Appellate Body related to the use of the word “available” in Article 42 of the TRIPS Agreement and to a legal claim seeking fair and equitable access to civil judicial procedures. Yet the same reasoning applies equally to the enforcement of substantive rights under Article 41.

In the past, the United States has challenged certain parts of the overall Chinese legal system for intellectual property protection – and successfully – in WTO dispute settlement. Despite its overall concerns about enforcement by China of US intellectual property rights, the United States has not, however, challenged the Chinese system as a whole in the WTO. Instead of indulging in the illegality of unilateral tariffs outside the legal framework of the WTO, the Trump Administration should initiate a comprehensive legal challenge in the WTO, not merely, as before, to the bits and pieces of particular Chinese IP enforcement, but rather to the entirety of the Chinese IP enforcement system.

To be sure, a systemic challenge by the United States to the application of all China’s inadequate measures relating to intellectual property protection would put the WTO dispute settlement system to a test. It would, what’s more, put both China and the United States to the test of their commitment to the WTO and, especially, to a rules-based world trading system.

As Trump’s trade lawyers will hasten to say, a systemic IP case against China in the WTO would also involve a perhaps unprecedented amount of fact-gathering. It would necessitate an outpouring of voluminous legal pleadings. It would, furthermore, force the WTO Members and the WTO jurists to face some fundamental questions about the rules-based trading system. Yet it could also provide the basis for fashioning a legal remedy that would in the end be mutually acceptable to both countries, and could therefore help prevent commercial conflict and reduce a significant obstacle to mutually beneficial US-China relations.

Going outside the WTO to try to resolve this trade dispute will undermine the WTO and thereby ultimately undermine US trade in goods and services – not to mention the protection of US intellectual property rights – throughout the world. Far better for the United States to play by the rules within the WTO – not least because it was the United States that insisted the most on having those rules when they were negotiated. Far better, too, for China to have its compliance with its WTO obligations judged by impartial and objective WTO jurists than by Donald Trump.

A positive solution should be sought by the Trump Administration through dispute resolution in the WTO over the systemic shortcomings of Chinese intellectual property protection before plunging into the commercial black hole of unilateral trade action.

A new study by economists Carlos Dobkin, Amy Finkelstein, Raymond Kluender, and Matthew J. Notowidigdo – “Myth and Measurement — The Case of Medical Bankruptcies” [subscription required] – challenges the conventional wisdom on the effect of medical bills on the rate of personal bankruptcy. From the study:

Policymakers’ beliefs about the frequency of medical bankruptcies are based primarily on two high-profile articles that claim that medical events cause approximately 60 percent of all bankruptcies in the United States. In these studies, people who had gone bankrupt were asked whether they’d experienced health-related financial stress such as substantial medical bills or income loss due to illness. People were also asked whether they went bankrupt because of medical bills. People who reported any of these events were described as having experienced a medical bankruptcy…

[But] the existing, widely cited evidence on medical bankruptcy is built on the fallacy that when two things occur together there is necessarily a causal relationship between them.

The study’s authors looked instead at people who had a hospitalization to see whether that expensive episode of care increased the probability of filing for bankruptcy. They write, “we estimate that hospitalizations cause only 4 percent of personal bankruptcies among nonelderly U.S. adults.” Even among uninsured adults, “hospitalizations are responsible for only 6 percent of personal bankruptcies.” While medical bills can still drive someone to bankruptcy even if they don’t experience a hospitalization, the authors conclude, “focusing on hospitalized people probably does not lead to vast underestimation of the effect of all illness and injury on bankruptcy rates.”


  1. Always be skeptical of everything you read. (Up to and including this blog!)
  2. Keep in mind this study does not show the overall personal bankruptcy rate is lower than believed. It shows only that the share attributable to medical expenses is lower than believed. It therefore follows that, to the extent your support for single-payer springs from a desire to reduce bankruptcies, you should shift your energies toward combating whatever is actually causing the 56 percent of bankruptcies you incorrectly believed to be attributable to medical expenses.
  3. Health care reform should be able to get the medical-bankruptcy rate down even more.

Congress appears unwilling to provide any sort of ObamaCare relief. 

But did you know states can exempt their residents from ObamaCare’s costliest regulations simply by letting them purchase insurance licensed by U.S. territories—i.e., across state lines? 

Or that the Trump administration has the authority to provide even more relief from ObamaCare than last year’s Cruz Compromise would have, just by reversing HHS’ administrative ban on renewal guarantees in short-term plans? 

Well, now you do. From my latest oped in The Hill:

States and the Trump administration each have the power to deliver relief from ObamaCare while Congress dithers.

In 2014, the Obama administration reversed its interpretation of ObamaCare and found the law’s costliest regulations do not apply in U.S. territories. As a result, states can provide relief from ObamaCare by freeing individuals and employers to purchase health insurance licensed by American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands.

The Obama administration’s reversal also provides a model for the Trump administration. HHS has the authority to and should reverse its administrative ban on short-term health plans offering “renewal guarantees.” Ending that ban would dramatically reduce premiums for the vast majority of consumers in the individual market, even as ObamaCare premiums continue to skyrocket. Conservative states and states with vulnerable GOP members like Florida, Illinois, and Pennsylvania would see the largest premium reductions. 

Read the whole thing.

This afternoon, for the second time in the space of a month, President Trump is expected to invoke his authority under a rarely used statute to levy restrictions on a vast swath of imports and investment from China. The cause for today’s measures is behavior that the U.S. Trade Representative has characterized as rampant, sustained theft of U.S. intellectual property by Chinese entities and the Chinese government.

Although allegations—and the evidence supporting those allegations—that China routinely transgresses in the realm of intellectual property have been accumulating for many years, it does not follow that the appropriate response is to restrict trade and investment. In fact, the collateral damage inflicted by those restrictions will be widespread.

President Trump’s “remedies” are likely to raise production costs for U.S. businesses, diminish U.S. productivity, squeeze real household incomes, reduce the revenues of U.S. farmers and other export-dependent industries targeted by Chinese retaliation, exacerbate tensions with China and other countries adversely affected by the restrictions, and hasten the demise of the rules-based trading system.

Among the imports expected to be targeted by punitive tariffs are information and communication technology (ICT) products, which are presumed to have benefited from IP theft. As a preliminary matter, it’s important to note that most exports of ICT products from China contain more non-Chinese value than Chinese value. On an aggregate basis, non-Chinese inputs (material, labor, overhead, R&D, etc.) account for nearly 50 percent of the value of all U.S. imports from China.  For ICT products, the percentage of non-Chinese value is much greater than half. 

Remember the inscription on the back of the Apple iPhone? It reads “Designed by Apple in California; Assembled in China.” In 2013, it cost $178.96 to produce an iPhone, but only $6.44 or 3.6% was Chinese value added. Yet, the entire $178.96 is chalked up as imported from China, exaggerating the U.S. bilateral trade deficit, which is the main reason Trump wants to impose tariffs in the first place! It’s important to note that Japanese, Korean, Singaporean, German, and many other (including American) companies will be hurt by U.S. tariffs on Chinese ICTs.

Moreover, ICT products are inputs to value added production in the United States. Raising the costs of computers, devices, and technology components will raise the cost of production or reduce productivity across the U.S. services and manufacturing sectors. Meanwhile, U.S. consumers will have to devote more of their income to ICT products, leaving fewer dollars to spend on other U.S. goods and services or to save and invest in other businesses. The tariffs will make scarce resources scarcer still.

Yet another significant economic cost of Trump’s tariffs is the loss of revenues U.S. farmers and other U.S. targets of retaliation will be forced to endure. China is reportedly preparing to impose restrictions on U.S. soy exports and, almost certainly, other agricultural products will be targeted as well.  Don’t be surprised to see U.S. technology companies hurt as well, as China considers justifying its intrusive forced technology transfer policies as a national security imperative. (With his steel and aluminum tariffs, Trump opened the door to abuse of that excuse.)

The appropriate response to China’s infractions would be to use the evidence collected as the basis for a formal complaint at the World Trade Organization. In fact, that should have been done several years ago, but apparently U.S. multinationals were reluctant to go on record with evidence of those infractions for fear of suffering retribution from Beijing. As the problem worsened and a tit-for-tat high tech trade war began to play out in the shadows, a narrative emerged (which has come to dominate the debate over economic relations with China) that the WTO rules are inadequate to restrain certain discriminatory, predatory Chinese industrial policies, and that even if they could be used to discipline those practices, China wouldn’t comply.

This is a false narrative—or, at least, an untested one. The United States has brought only 21 cases against China (but 116 overall), and China has a strong record of compliance when its practices have been found to violate the rules. By circumventing the WTO under the premise that its rules are inadequate to discipline China, and invoking a law that is incompatible with U.S. obligations under the WTO rules, President Trump has delivered a vote of no confidence in a system that has served U.S. interests well for 70 years.

Whether the system endures or something else emerges to fill the void remains an open question. But for the foreseeable future, an environment of higher consumer prices, higher production costs, unpredictable lawlessness, and tit for tat protectionism is likely to prevail.

The scope of the Trump administration’s Section 232 “national security” tariffs is filled with uncertainty – exemptions are being negotiated this week – but we are already on to the next set of aggressive trade moves: reports suggest that the administration will announce tariffs on imports of Chinese products today, as punishment for China’s alleged unfair trade practices. This would be a unilateral response to China’s practices, with the U.S. Trade Representative acting as the judge, jury, and executioner. This approach may not be all that effective in getting China to change, and risks retaliation by China.

But there is another way: Bring complaints against China to the WTO, and get rulings from a neutral arbiter on these practices.

Unfortunately, the Trump administration does not seem to have much confidence in the ability of WTO dispute settlement to discipline China. Leading administration officials have referred to the WTO’s “abject failure to address emerging problems caused by unfair practices from countries like China” and its “inability to resolve disputes, limit subsidies or draw China into the market status that was envisioned when China joined the WTO”; and have declared that the WTO “is not equipped to deal with [the China] problem.”

Is this skepticism justified? We looked at all of the WTO complaints against China, and we see something quite different. In almost all complaints brought against China, whether litigated fully or resolved without litigation, the complainants have made at least some progress towards their goals of greater market access in China. Overall, it’s a pretty good record of success, both on its own and in comparison to how other countries have reacted to WTO complaints.

A table of all the cases is here (this is a work in progress, part of a longer paper we are working on). Here is a brief narrative summary.

China joined the WTO in 2001. The first complaint against it was brought in 2004, with governments perhaps letting China gain some experience with the system before challenging it in dispute settlement. In the 14 years from 2004-2017, 39 complaints were brought against China, on 26 separate issues (“matters” in WTO-speak – sometimes multiple countries complained about the same matter, so there are more complaints than matters). In that time, China was second only to the United States in the number of complaints it faced.

Of the 26 matters litigated against China, 4 are still pending. 12 have been litigated all the way through, and 10 were resolved through some kind of settlement, or not pursued after the measure was modified. These cases addressed a wide range of issues: Export restrictions, subsidies, intellectual property protection, discriminatory taxes, trading rights, specialized services, and trade remedies.

In all the completed cases, with one exception where a complaint was not pursued, China’s response was to take some action to move towards greater access. This was done either through an autonomous action by China, a settlement agreement, or in response to a panel/appellate ruling.

For the cases where there was a WTO ruling, there was sometimes a dispute about compliance with the ruling (as happens with other countries as well), and China’s compliance came only after the follow-up complaint procedure provided for in WTO law (Article 21.5 of the WTO’s Dispute Settlement Understanding). In other cases, the complainants have disputed whether China has complied, but have not brought an Article 21.5 complaint to push China to comply.

The overall picture of China’s response to WTO complaints looks very much like the situation of other governments who face such challenges. China has made efforts to comply, although some issues are still contested. There are no cases where China has simply ignored rulings against it, as has happened with some other governments. For example, the United States has not complied in the cotton subsidies complaint brought by Brazil, and the EU still does not allow hormone treated meat to be sold there even after losing a complaint brought by Canada and the U.S.

Today’s announcement is just the beginning. In the coming weeks and months, the Trump administration will have some decisions to make on how exactly it will implement this announcement so as to address Chinese protectionism and other trade practices. The administration’s instinct seems to be that unilaterally imposed tariffs are the best option. But the WTO offers a better way, and the administration should consider joining with other governments to pursue more WTO complaints against China (and negotiating new rules – e.g., on state-owned enterprises – where WTO rules are lacking).

This week, a seventeen-year-old student at Great Mills High School in Maryland brought a Glock 17 handgun to the school and wounded two students before being stopped by Blaine Gaskill, the school resource officer. The event came weeks after the Valentine’s Day massacre in Parkland, Florida, which set off a deluge of public outcry for “school safety” reform. The problem, though, is that nobody can agree on what “school safety” reform is. Before this week, activists have been pushing for stricter gun control, while others pushed various measures to enhance school security.

School shootings are a very unique and complicated problem, further frustrating the likelihood of any coherence coming out of this outcry. They are, in fact, very rare, and generally planned far ahead of time. This makes it difficult for any gun-control law to affect a school shooter. In general, gun-control laws tend to dissuade criminals on the margins–the guy who is vacillating about whether to kill his wife but who may decide to do it if given a gun. School shooters are not that type of criminal. Moreover, Maryland has some of the strictest gun-control laws in the nation. In addition to existing federal law—including the federal prohibition on handgun transfers to persons under 21—Maryland’s gun laws include:

  • A comprehensive “assault weapon” and “large capacity magazine” ban.
  • A universal 10-round magazine limit.
  • Background check requirement for all handgun transfers.
  • An exhaustive application process as a prerequisite to being permitted to purchase a handgun.
  • Mandatory registration of all handguns, and mandatory licensing of all handgun owners.
  • Prohibition on purchasing more than one firearm per month.
  • A seven-day waiting period for all handgun and “assault weapon” transfers.

In spite of all those laws, the shooter, who could not legally own the handgun under Maryland law (it was his father’s), still shot two innocent students. When laws are being demanded to ensure school shootings never happen again, we must always ask whether a new law would have actually prevented the harm. The paradigm school shooting in the United States, Columbine, happened during the federal assault weapon ban, using compliant weapons.

While the Maryland shooting appears to have been a targeted attack rather than a massacre, we will never know what might have happened had Gaskill not promptly responded. Hopefully this tragic situation can promote a broader debate on school safety and lead to productive discussions that might actually reduce this type of crime.

While the trend line of violent crime continues to wane, and schools remain statistically safer than our streets and homes, school safety is a legitimate objective. Where, as with schools, the government has effectively forbidden people from defending themselves, the government takes on a duty to protect everyone in school zones. For this reason, demanding better protection in state schools is the most reasonable idea that has emerged from the calamity over the past two months.

When policies are proposed, it is important to remember that hundreds of thousands, and likely millions, of Americans use firearms for self-defense every year. Gun-control proposals have a tendency to forget or ignore the lives of those people. It should come as no surprise that tackling violence, especially on the part of motivated killers, is a complex game of chess. There are no obvious answers, only a series of sacrifices, some more grave than others.

School resource officers tend to worsen the school-to-prison pipeline, making criminal cases of juvenile indiscretion. Metal detectors and heightened security are less problematic, but expensive and slow. Arming teachers–whether selecting teachers to be armed, or simply allowing them to carry as they otherwise might when at home, the grocery store, or otherwise–poses a complex series of issues in the power dynamics of a classroom setting, in addition to the possibility of the guns going off in school.

While it’s worthwhile to discuss gun control when addressing the problem of school shootings, focusing only on that issue alone could make us ignore more effective solutions to the problem at hand. And the problem at hand–school shootings–is specific and unique, and not necessarily directly related to the broader issue of gun control. After all, before 1968, there were very few federal laws regulating the sale and possession of guns. Guns were everywhere, and schools were easy targets. Why didn’t school shootings happen then? Perhaps other factors are in play.

If anything good can come out of the tragic events in Maryland, it should be a renewed focus on protecting schools as a measured and reasonable response to the school-shooting problem.

Government-provided paid leave is back in the headlines, and Ivanka and company are in the process of building a Republican coalition for it. The coalition includes Republican senators Mike Lee, Joni Ernst, and Marco Rubio.

As a result, bad arguments for government paid leave are increasingly pervasive on both sides of the aisle. Last week, Caleb O. Brown and I discussed three of the usual suspects, outlined below. 

1) All other industrialized countries have paid leave, so Americans should too.

This argument is used by almost every public proponent of government paid leave. It represents a logical fallacy, colloquially the “bandwagon fallacy.” After all, it doesn’t matter so much whether other countries have government paid leave, but how the policy worked out for them.

Unfortunately, there are many examples of unexpected and costly consequences of government paid leave. For example, in the Nordic countries, government paid leave has contributed to a glass ceiling for professional women. This issue was outlined in a recent Cato policy analysis paper, The Nordic Glass Ceiling

A paper circulated by the National Bureau of Economic Research finds women in the United States are more likely to have full-time jobs and work as managers as compared to other OECD countries because the United States lacks a paid family leave policy and other mother’s work entitlements. Throughout Western Europe, about 30 percent of legislators, senior officials, and managers are women. But in the United States, 43 percent of legislators, senior officials, and managers are female. Economists Francine Blau and Lawrence Kahn note than in other OECD countries, women are about half as likely as men to be managers, whereas women are approximately equally likely to be managers as men in the United States. 

The workplace is also less segregated in the United States than other OECD countries, and women are more likely to be professionals. Gender equal characteristics of the U.S. labor market would likely suffer if government paid leave is introduced.

2) Only 15% of workers have access to paid leave.

Advocates use a thoroughly misleading BLS statistic in order to create alarm. Rather than using a clear, straightforward figure, activists use a BLS statistic that does not count benefits that can be used as paid family leave. 

A majority of workers have access to functional paid family leave benefits, according to other federal data sources and national surveys. For example, the National Survey of Working Mothers found 63 percent of employed mothers said their employer provided paid maternity leave benefits. That is in line with Pew research which found that 63 percent of “Americans who took time off from work in the past two years for parental, family or medical reasons report that they received at least some pay during this time.”

These surveys estimate the number of workers recieving paid leave is almost 50 percentage points larger than the BLS figure. The BLS statistic is an extreme outlier, even among federal data sets like Census Bureau’s Survey of Income and Program Participation (SIPP), the Current Population Survey (CPS), and the Federal Medical Leave Act (FMLA) worksite survey. The BLS figure should be treated as an outlier, rather than relied upon to make a case for government paid leave.

3) Government paid leave is popular.

Polling on paid leave is used disingenuously. Americans often agree that working mothers and fathers should receive paid leave following birth or adoption of a child, but they disagree sharply about how it should be provided. And Americans do not think that paid family leave is a policy priority.

On a Pew list of 20 different policy topics, Americans ranked paid leave as last priority. A recent Pew poll found that only 12 percent of Americans thought the federal government should provide paid leave.

Of Americans that said employers should provide paid leave, about half said employers should not be required [by government] to provide it.

Of course, if pollsters reminded respondents that under a national program taxpayers would pay for paid leave, under a government mandate employees would pay for paid leave, and under either regime women would pay for paid leave in one way or another, Americans would look even less supportive.

With these government paid leave myths dispelled, the debate should be more honest and productive.

You can find the related Cato Daily Podcast on bad arguments for government paid leave below.

The death of a pedestrian who was struck by an Uber autonomous car Sunday night has led to questions about whether driverless cars are safe. However, it appears that the accident could not have been prevented no matter who was in control of the car.

Scene of the accident. Scroll left to see the poorly designed pedestrian path that the woman was apparently using before crossing the street.

According to police, a woman pushing a bicycle laden with shopping bags stepped from the roadway median into 35-mile-per-hour traffic. The Uber vehicle, which had a back-up human driver behind the wheel, did not have time to even brake before it hit her.

Transit agencies are in the habit of blaming the victims who are killed or injured when struck by light-rail trains. The reality is that accidents involving light rail are usually the result of poor design, and any design that puts 50- to 200-ton vehicles in the same streets as 1.5- to 2-ton vehicles and 0.1-ton pedestrians is a poor one.

In the same way, the real blame for the Tempe accident should be placed on poor street design. The above Google image shows the approximate location of the accident.

Rotate to the right to see a trail in an arroyo marked the “Shortcut from Mill Ave. to Lake View Dr.” This trail connects to the Canal Trail and some other trails east of Mill Avenue. Rotate to the left to see a paved continuation of this trail, which eventually connects to the Grand Canal Trail west of Mill Avenue. Zoom in to see a sign saying “No pedestrian crossing: Use crosswalk” with an arrow pointing to a crosswalk that is 500 feet to the right.

In other words, despite the pavement, pedestrians and cyclists using the canal trails aren’t supposed to cross the median strip. Instead, they are supposed to go on the sidewalk to the crosswalk on Curry Road. The pedestrian path across the median strip, however, is a tempting shortcut that saves close to two-tenths of a mile.

Aerial view of the paved paths in the median strip between north- and southbound Mill Avenue lanes with the probable path of the accident victim shown in red.

This means it would be natural for people traveling from the Grand Canal Trail to the Canal Trail to cross southbound Mill, use the paved path, then cross the northbound portion to get to the Loma Trail. I don’t know for certain, but it seems likely that this is what happened.

It’s hard for any kind of driver to stop when moving 35 miles per hour on a semi-limited access road and a pedestrian steps in front of you from out of nowhere in the dark. I don’t want to blame the victim, but I don’t think the car, whether controlled by a human or by a computer, is to blame either.

So the question that must be asked is why are there paved trails between the north and southbound lanes of Mill Avenue when there is no safe way for pedestrians to use those trails? We’ll know more soon, but I suspect this fatality is more due to bad urban design than to the autonomous car.

As was widely expected, on Sunday Vladimir Putin was once again reinstalled (reconfirmed, re-enthroned) in the Kremlin. The term “elected” cannot be used in this case since nothing that happened on March 18, 2018, or in the months leading to this date, qualifies for the internationally recognized basic standards of the term “election.” 

In full control of the Kremlin for more than 18 years, Putin has already been at the top of the Russian state longer than any other Russian or Soviet leader in the last century—including Leonid Brezhnev—and is now left to compete only with the three-decade reign of Joseph Stalin.

The official numbers of the Central Electoral Commission (CEC) gave Putin 76.7% of the vote with a turnout of 67.5%, making up almost 52% of Russia’s electorate. According to the CEC, the official number of people who voted for Putin was 56.4 million. However, Sergei Shpilkin, the renowned expert in electoral statistics, has estimated that ballot stuffing this year amounted to at least 10 million. In each of the three previous cases of “presidential elections” (in 2004, 2008, 2012) Shpilkin and his colleagues calculated the number of added (falsified) votes at between 8.8 and 14.6 million. 

Whatever the actual level of Putin’s public support, the official numbers provide Putin with a level of legitimacy that Russian presidents never had before. The real question that now arises is how he is going to use it.

The general consensus is that Putin’s policy on the domestic front would be a still further tightening of his grip on the last remnants of civil society, a further destruction of the already almost-fully-destroyed rule of law, meager—if any—meaningful economic reforms, and definitely a new level of ideologization of Russian society based on anti-liberal, conservative, Orthodox religious values. Russia’s level of political rights and civil liberties in previous years has been sliding down to non-free status. Now its status is just one notch above the very bottom in Freedom House’s political freedom index, meaning that it is close to the level of the totalitarian regimes of Cuba and North Korea. Given Putin’s persistence and Russia’s rapid political deterioration, it is rather hard not to expect that Russia will soon sink to the lowest level in the political freedom index.

As for Putin’s possible foreign policy in the coming years, we can get a hint of it based on a number of his recent statements, comments, and interviews. It appears that Putin’s traditional interest in disturbing Russia’s immediate neighbors and grabbing pieces of land in Moldova, Georgia, and Ukraine has been visibly redirected towards Belarus, since Mr. Lukashenko’s dictatorship—lacking any serious foreign allies except for Russia—seems to be particularly vulnerable to absorption. In addition, the Russian “czar” has started to look for more ambitious targets beyond the borders of the former Soviet republics. Recently, his attention has been directed towards his key adversary—the United States—and the most irritating part for him within the United States, its democratic political system. In the documentary movie “The World Order, 2018,” which was prepared by the Kremlin propaganda team before the March presidential vote, Putin firmly articulated his two approaches to the United States: to be emphatically positive towards president Trump and to show strong “disappointment with the unpredictable [democratic] political system” of the United States.

Otherwise, in his interview with NBC anchor Megan Kelly, Putin appeared even more decisive—by naming (unprecedentedly) five times the most crucial problem for him and his key partner (president Trump): namely, the United States political system and the United States Congress. He blamed Congress for all of America’s alleged crimes, such as intervention into Russian internal affairs, different accusations of Russia, proclaiming Russia as an enemy, and the introduction of sanctions against Russia—something that Putin has never done before. It remains to be seen what particular instruments he is ready to apply towards this enemy—intervention into congressional elections this Autumn, cyber-attacks, propaganda, blackmail, or otherwise. But having seen Putin’s approach for years, it is hard not to foresee that one of the main targets of his aggressive foreign policy—either open, or clandestine, or both—in the coming years is going to be the democratic political system of the United States, with the United States Congress at its center.

A snowstorm has shutdown most of D.C. today, but Congress is working to pass a budget to keep the government open. Again.

As I’ve written before, there’s more at stake in the budget than just keeping the government up and running. For several years, Congress has refused to fund federal prosecutions of state-legal medical marijuana (a.k.a. “cannabis”) distribution through a rider to the annual budget known as the Rohrabacher-Blumenauer (originally Rohrabacher-Farr) Amendment.

Attorney General Jeff Sessions has previously asked Congress for the funds to go after the people who provide relief to terminally ill and chronic pain patients with cannabis. He’s already made his intentions clear to the Department of Justice that he wants more marijuana prosecutions. As Politico explained in an article today, Rep. Pete Sessions (R-TX)—no relation—has done his best to oblige the Attorney General’s request through his position on the House Rules Committee.

Both Sessions are remarkably out of step with not just American sentiment, but Republican feelings on medical cannabis:

Despite its perceived association with the political left, medical marijuana is not just a blue-state issue. Ten of the 29 states with legal medical marijuana—and 115 electoral votes—went for Donald Trump in the 2016 election. More than 200 million American residents, roughly 62 percent of the population, live in states where medical marijuana is legal. Nationwide, according to a 2017 CBS poll, 71 percent of Americans—including 63 percent of Republicans—oppose federal interference with state-legal marijuana. Perhaps most telling, a 2017 Quinnipiac poll found that 94 percent of American voters approve of adult medical marijuana use if prescribed by a doctor.

There is no guarantee that the Rohrabacher-Blumenauer will be in the final budget agreement before the Friday deadline. In the midst of the opioid crisis and with so much public (and corroborating scientific) support for medical cannabis as an opioid alternative, failure to attach the rider could be calamitous for suffering patients and an inexplicable unforced error by the Republican majority.  

President Trump’s announcement of new tariffs on imported steel and aluminum drew swift warnings from free traders, including here at the Cato Institute, that such naked protectionism will lead to job losses and reduced prosperity. But don’t just take our word for it. A new study released this week by the Coalition for a Prosperous America (CPA), a protectionist interest group, concludes that the tariffs will result in both net employment losses and reduced economic activity. While the CPA highlights the study’s finding that tariffs will lead to 18,859 new jobs in “iron and steel nonferrous metals,” it also concedes that these will be more than offset with losses in other sectors, including over 10,000 jobs in construction and nearly 7,500 in manufacturing, for a net loss of 411 jobs. Additionally, the study finds that the tariffs will leave Americans marginally poorer, predicting a decrease in U.S. GDP of $1.4 billion. 

In other words, the debate is no longer whether these tariffs will be harmful to the U.S. economy—the protectionists have effectively run a white flag up the pole on that question—but rather the magnitude of the damage. 

Also worth noting is that the CPA study presents a best-case scenario, using assumptions that are, if not questionable, perhaps overly optimistic. For example, the model’s apparent assumption of full employment—by no means obvious given that recent sizeable monthly employment gains have not led to a reduction in the unemployment rate—appears in tension with the study’s claim that steel and aluminum will see relatively restrained cost increases of 6.29 percent and 2.5 percent owing to “available U.S. capacity and competition.” Presumably, any increase in production to partially offset the decline in imports will require additional workers, which may be no easy task in a full employment economy. Furthermore, the study makes no mention of the impact of retaliation that is sure to follow from U.S. trading partners in response to Trump’s tariffs. The study’s finding that the tariffs will result in 464 new agriculture jobs, for example, is hard to square with retaliation threats from the European Union which include targeting American exports of corn, cranberries, rice, orange juice, and tobacco. 

In contrast, a recent analysis conducted by the Trade Partnership consulting group found that retaliation would contribute to net U.S. job losses of over 468,000. Even absent retaliation, the Trade Partnership found a net loss of 146,000 jobs in a previous study—one that the new CPA report was conducted in response to. 

The exact amount of the employment decline or loss in economic welfare, however, is almost a second order question on the steel and aluminum tariffs. Directionally, a consensus has been reached, with both free traders and protectionists in apparent agreement that they will cause harm to both jobs and the overall economy. Thus far, President Trump has not heeded the warnings of free traders and appears determined to proceed with his act of self-sabotage. Perhaps he will lend an ear to his fellow protectionists.  

Can the government force private parties to speak against their own interests and disparage the products they offer? The answer is yes when potential consumer harms are significant (think tobacco labels and other safety warnings) or there’s informational asymmetry (securities offerings)—and indeed fraudulent offerings (the prototypical snake oil) are prohibited altogether. But mandated disclosure regimes are proliferating far past these sorts of traditional disclosures, stretching the First Amendment to the breaking point regarding commercial speech.

A recent example of this phenomenon involves Nationwide Biweekly Administration, whose business is saving customers a significant amount on their mortgages by structuring smaller biweekly payments in place of traditional monthly payments—allowing for an extra reduction of principal each year. To market its services, Nationwide uses public information to send potential customers mailers illustrating how much they might save over the life of their loans. Despite front-and-center statements that Nationwide is “not affiliated, connected, or associated with, sponsored, or approved by the lender listed above,” California decided that this information was insufficient to guarantee that consumers wouldn’t be confused. The state required the company to state on solicitations that they are “not authorized by the lender.”

Nationwide challenged this requirement in court, arguing that the state’s message itself was misleading (by implying that lenders have any power to “authorize” Nationwide’s actions) and forced the company to disparage its own services by suggesting that they were somehow not permitted to offer them. But the federal district court, and then the U.S. Court of Appeals for the Ninth Circuit, approved the mandated disclosure, citing the Supreme Court case of Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio (1985).

Zauderer held that “purely factual,” “uncontroversial” disclosures could be required to directly combat consumer deception. While this is a lower form of constitutional scrutiny than most speech restrictions receive, it’s not without teeth. The government still needs to prove actual deception—and once that hurdle is crossed, those compelled government scripts must be both purely factual and uncontroversial, and take care not to burden the speaker any more than necessary.

The Ninth Circuit opted to ignore the Court’s instructions, conflate the prongs of the test, and eliminate the need to justify its reasons for compelling government-mandated scripts by declaring that, “in the interest of administrative simplicity, the state may reasonably decide to require disclosure for a class of solicitations that it determines pose a risk of deception.”

If that new and unfounded legal standard is allowed to stand, Zauderer means nothing at all, and governments can mandate almost any controversial or self-disparaging script for almost any reason. Mom ‘n’ Pop car lots could be required to announce in bold script that “the safety of this car has not been guaranteed by [insert car maker here].” Walmart could lobby a locality to require its competitors to display Walmart’s prices alongside their own, just in case consumers are unaware that retail prices fluctuate between sellers. Generic drug manufacturers could be required to insist in large type that “the safety of this drug is not guaranteed by the company that originally developed it,” and Sprint and T-Mobile could be forced to proclaim that their advertisements are “not authorized by Verizon.”

Speech compulsion violates the sphere of freedom protected by the First Amendment just as speech restrictions do, so Cato has filed an amicus brief supporting Nationwide’s request that the Supreme Court take up Nationwide Biweekly Administration v. Hubanks review and reverse the Ninth Circuit’s deeply flawed decision.

During his campaign, President Trump promised to target the “bad hombres” in the United States illegally. But Immigration and Customs Enforcement (ICE) statistics indicate that his administration has cast a much wider net. More than one in four immigrants that ICE arrested last year had no criminal convictions at all, and of the rest, their convictions were mostly victimless crimes—largely traffic infractions, immigration offenses, and drug offenses. Almost 90 percent were for nonviolent crimes. ICE cannot justify its broad crackdown based on these figures.

Figure 1 shows immigrants arrested by ICE by whether they had a criminal conviction (top left) and the distribution of the convictions by type of conviction (bottom right). ICE statistics only provide a list of all convictions that the entire population of criminal aliens committed, meaning that they only show the distribution of convictions, not the distribution of immigrants based on their most serious offense. That said, a majority of all convictions were for crimes with no private victims (i.e. not the government or “society”). Just 11 percent were violent crimes (just one percent were homicide and sexual assault).

Figure 1: Immigrants Arrested by ICE by Criminal Conviction and Distribution of Criminal Convictions

Immigrants and Type of Convictions

Source: Immigration and Customs Enforcement

Figure 2 shows the distribution within each broad category of convictions. Most violent crimes were assaults, which include simple assaults defined by the FBI to include assaults “where no weapon was used or no serious or aggravated injury resulted” and include “stalking, intimidation, coercion, and hazing” where no injuries occurred. The FBI excludes simple assault from its definition of violent crime, but ICE fails to break down this category, so we cannot. The plurality of property crimes were larcenies, which include “thefts of bicycles, motor vehicle parts and accessories, shoplifting, pocket-picking, or the stealing of any property or article that is not taken by force and violence or by fraud.”

Almost two-thirds of the “possible victims” category includes DUIs, which usually don’t have a victim but impose the threat of injury on people. This category also includes some nebulous categories like “privacy,” “threats,” and disturbing the peace, which are undefined in the ICE report. Nonviolent sex crimes include statutory rape as well as lude behaviors in public. Fraud and forgery could have victims or they could be crimes where immigrants allow their family members to use their identities to obtain work in the United States. Family offenses include “nonviolent acts by a family member (or legal guardian) that threaten the physical, mental, or economic well-being or morals of another family member” that aren’t classified elsewhere (e.g. violating a restraining order). Kidnapping convictions generally arise from custody disputes over children, so I included them in this category.

Figure 2: Distribution of Convictions of Criminal Immigrants Arrested by ICE

Source: Immigration and Customs Enforcement

Nearly 80 percent of nonviolent offenses were traffic infractions that were not DUIs, immigration offenses such as entering the country illegally, or “vice” crimes (drugs, sex work, or alcohol). Immigration “crimes” include illegally entering the country, reentering after a deportation, falsely claiming U.S. citizenship, and smuggling. Obstruction offenses mainly include parole and probation violations or failure to appear in court.

Cato Institute research has previously shown that illegal immigrants are less likely to end up incarcerated in the United States than U.S.-born individuals of the same age. A new paper by my colleague Alex Nowrasteh concludes that illegal immigrants in Texas are significantly less likely to commit a variety of crimes than U.S.-born adults. Illegal immigrants are not generally threats to Americans. Only certain serious criminals who happen to be immigrants are.

ICE provides a public service when it apprehends and removes immigrants from society who are threats to Americans. It fails the public when it deports other people and, by reducing the number of peaceful people in the society, actually increases the proportion of criminals. This strategy will not make Americans safer—indeed, it will make them less safe. Congress should again require ICE to focus on serious criminals.

Table: FY 2017 Total ERO Administrative Arrests Criminal Convictions

Criminal Category Criminal Convictions Traffic Offenses - DUI


Dangerous Drugs




Traffic Offenses






Obstructing Judiciary, Congress, Legislature, Etc.


General Crimes




Obstructing the Police


Fraudulent Activities


Weapon Offenses


Public Peace


Sex Offenses (Not Assault or Commercialized Sex)


Invasion of Privacy


Stolen Vehicle




Family Offenses




Sexual Assault


Stolen Property


Damage Property


Flight / Escape




Health / Safety






Commercialized Sexual Offenses




Source: Immigration and Customs Enforcement

On the unhappy 15th anniversary of the start of the Iraq War, the Charles Koch Institute’s William Ruger and Boston University’s Andrew Bacevich offer important and timely op eds.

Writing in the New York Times, Ruger sees Iraq as “just the worst in a string of failures” of U.S. foreign policy in the past quarter century, a range of missions that have cost nearly 7,000 American troops killed, tens of thousands wounded, and trillions of dollars spent, with precious little to show for it. “Underlying all of these failures,” Ruger writes, “is the view, endorsed by both parties, that we need an active military presence around the globe to shape what happens almost everywhere.” He calls for an “alternate approach to the United States’ role in the world,” a “constructive but realistic mind-set [that] would put our safety first while expanding America’s opportunities to engage productively with the world.”

Bacevich takes the occasion of this sad anniversary to comment on the disconnect between the American people and the elites who sold the war. He attributes Donald Trump’s victory in the 2016 election to the “blood sacrifice vote” – the “communities that paid a high price for the Iraq War in terms of casualties.” Hillary Clinton prevailed among those who preferred to let “someone else’s sons and daughters do the fighting.” It is the sort of scathing critique that Bacevich has come to be known for, but it is no less accurate or insightful for having been written before.

Trump voters, Bacevich posits, supported him, despite the fact that they suspected his “America First” campaign to be “all but devoid of substantive content”:

because Trump said aloud what they themselves knew: that the Iraq War had been [a] monumental error for which they, and pointedly not members of the political elite, had paid dearly. In short, a vote for Trump offered them a way to express their disdain for establishment politicians whose dishonesty they considered far more odious than Trump’s own pronounced tendency to shave the truth.

I’ve written before of how the yawning gap between the foreign policy elite and the people who fight the wars and pay the bills paved the way for a person like Donald Trump to win the presidency (see especially here and here). But I do think it worthwhile to dwell, for a moment, on Iraq as a particularly important step along the process that turned that gap into a chasm.

We should also recall the arguments of those who actually made the case against war in 2002 and 2003. Donald Trump wasn’t one of them. But there was the advertisement in the New York Times paid for and signed by 33 respected academics. They concluded that the Bush administration had not presented conclusive evidence, and that a war against Iraq lacked sufficient justification. They disputed claims that the war would end quickly. “Even if we win easily,” they said, “we have no plausible exit strategy.” The statement envisioned a long-term U.S. presence because Iraq was “a deeply divided society” and would take “many years to create a viable state.” Lastly, the signatories of the New York Times advertisement saw the war in Iraq as a dangerous distraction from the more urgent concern: al Qaeda and transnational terrorism.

Within the Beltway, most foreign policy experts either endorsed Bush’s war, or kept their silence. Scholars at the Cato Institute, however, were particularly active in their opposition. Cato’s Chairman, William Niskanen, came forward with one of the earliest arguments against war with Iraq, in December 2001, in a debate at the institute with former CIA Director James Woolsey, and in a follow-up article in the Chicago Sun-Times under the headline “U.S. Should Refrain from Attacking Iraq.”

Other Cato scholars joined in. Ted Galen Carpenter challenged the war boosters’ optimistic predictions of a short and cheap engagement. “The inevitable U.S. military victory,” Carpenter predicted, would “mark the start of a new round of headaches.” “Iraq [is] a fissiparous amalgam of Sunnis, separatist Shiites and Kurds,” noted Gene Healy in the magazine Liberty. “Keeping the country together will require a strong hand and threatens to make U.S. servicemen walking targets for discontented radicals.”

In December 2002, Cato published a full-length study making the case against war. Authors Ivan Eland and Bernard Gourley concluded:

The United States deterred and contained a rival superpower, which had thousands of nuclear warheads, for 40 years; America can certainly continue to successfully deter and contain a relatively small, relatively poor nation until its leader dies or is deposed. An unprovoked attack on another sovereign state does not square with—and actually undermines—the principles of a constitutional republic.

This isn’t entirely self-serving. I joined Cato in early February 2003; by then, the die was pretty much cast. But I did manage to fire off one warning before the war started. And it still isn’t too late to learn the proper lessons from the Iraq War, and the problems with primacy, the underlying the foreign policy philosophy that gives rise to Iraq-type wars.


The front page of Monday’s New York Times featured a story about a dirty little police practice colloquially known as “testilying.” Testilying is the name police officers coined to describe lying in official statements, such as sworn affidavits, about particular facts to make a criminal case appear stronger. It happens most often in officer assertions of probable cause to conduct a search of a person or their property without a warrant. For example, an officer could say that contraband was “in plain sight” after he pulled a driver over, giving him the probable cause to suspect a criminal act and thus bypass the warrant requirement of the Fourth Amendment.

The most generous rationalization for this behavior is something like, “The suspect was guilty of a crime, I knew he was guilty but I couldn’t legally prove it, so I found a way around the rules and discovered the criminal evidence I needed to make an arrest.” Put simply, the ends (an arrest for criminal behavior) justifies the means (an unconstitutional search). But, very often, what the officers “know” is wrong and they violate the rights of perfectly innocent people. Even when they are right, illegal searches and the lies to cover them up corrupt the law in order to enforce it. That’s not how policing is supposed to work. Police are supposed to protect our rights, not violate them to make an arrest.

And as the Times story explains, the lie is not only used against people who are breaking the law:

There had been a shooting, Officer Martinez testified, and he wanted to search a nearby apartment for evidence. A woman stood in the doorway, carrying a laundry bag. Officer Martinez said she set the bag down “in the middle of the doorway” — directly in his path. “I picked it up to move it out of the way so we could get in.” The laundry bag felt heavy.

When he put it down, he said, he heard a “clunk, a thud.”

Officer Martinez tapped the bag with his foot and felt something hard, he testified. He opened the bag, leading to the discovery of a Ruger 9-millimeter handgun and the arrest of the woman. But a hallway surveillance camera captured the true story: There’s no laundry bag or gun in sight as Officer Martinez and other investigators question the woman in the doorway and then stride into the apartment. Inside, they did find a gun, but little to link it to the woman.

It took over a year for the woman, Ms. Kimberly Thomas, to clear her name with the help of surveillance video. In a way, she was very fortunate to even get that chance.

“There’s no fear of being caught,” said one Brooklyn officer who has been on the force for roughly a decade. “You’re not going to go to trial and nobody is going to be cross-examined.” The percentage of cases that progress to the point where an officer is cross-examined is tiny. In 2016, for instance, there were slightly more than 185 guilty pleas, dismissals or other non-trial outcomes for each criminal case in New York City that went to trial and reached a verdict. There were 1,460 trial verdicts in criminal cases that year, while 270,304 criminal cases were resolved without a trial.

The presumption that an officer will be able to swear a false affidavit and never be challenged in court is a casualty of a criminal justice system that has grown absolutely dependent on plea bargains. The justice system’s overreliance on plea bargains removes the safeguards and incentives that are supposed to hold the government and its officers accountable for lies and petty abuses.

You can read the whole piece here.

More than seven decades ago, litigation over the Emergency Price Control Act of 1942 left courts with an embarrassing black eye that would affect decisions for decades. In Bowles v. Seminole Rock & Sand Co. (1945), the Supreme Court decided to give controlling deference to administrative agencies’ interpretations of their own regulations. In Auer v. Robbins (1997), the Court unanimously doubled down on Seminole Rock. As the late Justice Antonin Scalia noted in a 2013 case when it seems he began having a change of heart, “[f]or decades, and for no good reason, [courts] have been giving agencies the authority to say what their rules mean.”

These “interpretations,” for which there are no standardized processes, can come in informal contexts, as was the case in Garco Construction v. Speer, where the government’s deferred to “interpretation” that didn’t come around until litigation was well underway. This year, the Supreme Court had a golden opportunity to finally do away or at least curb this problematic doctrine, but alas it was an opportunity it failed to seize, today denying Garco’s petition for review (which Cato had supported with an amicus brief).

There are a multitude of arguments for overturning Seminole Rock and Auer. Even when the cases were decided, the Court gave little justification for the doctrine beyond administrative and judicial convenient. To the contrary, giving agencies the authority to interpret (and reinterpret) their own rules violates principles of separation of powers, as well as the Administrative Procedure Act. As Justice Clarence Thomas pointed out in 2015, the doctrine combines “the power to prescribe with the power to interpret,” and the separation of those two powers was one of the primary goals of the Founders. Justices John Roberts, Scalia, Sam Alito, Thomas, and Neil Gorsuch have all written opinions questioning – or outright rejecting – the doctrine’s scope on that ground alone.

Further, the APA provides that it is for the reviewing court to “determine the meaning or applicability of the terms of an agency action,” and that all legislative rulemaking go through public notice-and-comment procedures. With Seminole Rock/Auer, however, agencies have been enabled to get around these requirements by simply “promulgat[ing] vague and open-ended regulations that they can later interpret as they see fit.” Even where regulations are not so vague, though, this doctrine rears its ugly head. In Duquesne Light Holdings v. Commissioner of Internal Revenue, in which Cato just today filed an amicus brief, a regulated entity followed controlling regulations to the letter, but was nonetheless penalized tens of millions of dollars after the Third Circuit deferred to the IRS’s countertextual reading of its own regulations.

It seemed that Garco Construction was a great vehicle for adjusting Seminole Rock/Auer deference. Garco Construction won a contract to build housing on an Air Force Base in Montana. The contract, and its prior contracts, allowed Garco to use employees who had criminal records. Base regulations, however, allowed officials to refuse entry to any workers who had any outstanding “wants and warrants.” After Garco began work on its contract, base officials suddenly began running full background checks on all workers, and refusing those with any criminal record, not just those with an outstanding want or warrant (whom Garco didn’t employ). This change forced the contractors to hire, train, and transport new workers who could pass the suddenly tightened rule. The contractors requested reimbursement of these costs, but were denied by the government.

Garco was never given a reason for the sudden change – until litigation seven years later, when base officials justified the denials by testifying that they interpreted “wants and warrants” to mean, as Justice Thomas pointed out in his dissent from denial of certiorari, “wants or warrants, sex offenders, violent offenders, those who are on probation, and those who are in a pre-release program.”

Justice Thomas, who was joined by Justice Gorsuch, is right. Garco Construction would have been a good case to reconsider Seminole Rock, “as it illustrates the problems that the doctrine creates … an agency was able to unilaterally modify a contract by issuing a new ‘clarification’ with retroactive effect.” “This type of conduct ‘frustrates the notice and predictability purposes of rulemaking, and promotes arbitrary government.’” In declining to hear the case, the Court has “passed up another opportunity to remedy ‘precisely the accumulation of governmental powers that the Framers warned against.’”

Perhaps the other justices shied away because Garco involved the military, which generally gets more deference than other governmental institutions. But regardless, this issue isn’t going away and, as Justice Thomas put it, “Seminole Rock deference is constitutionally suspect.”

The seven-year saga of Madden v. Midland began as a dispute over a four-figure consumer debt. But billions of dollars’ worth of loans, and the future of consumer lending markets, now hang in the balance.

Madden began in 2011 as a lawsuit based on a claim of usury. The plaintiff, Saliha Madden, a New York resident who had defaulted on $5,000 worth of credit card loans. The balance owed was later acquired by Midland Funding, a debt collector headquartered in California. Midland attempted to collect the debt with a default interest rate of 27 percent. Although the loan contract stipulated that it would be governed by Delaware law, which does not have a usury cap, Madden sued Midland, alleging unfair debt collection practices under federal law and usury under New York law — which considers interest rates above 25 percent usurious.

The Southern District Court for New York ruled in favor of Midland, rejecting the claim of unfair collection practices and finding that the National Bank Act pre-empted the application of state usury law. But the Second Circuit Court of Appeals — which covers Connecticut and Vermont as well as Madden’s home state of New York — reversed the District Court ruling, finding that the National Bank Act pre-emption did not apply to Midland because Midland is not a national bank. Therefore, the opinion went, applying state usury law in this instance would not hinder any national bank’s powers. The Second Circuit thereby remanded the case back to the District Court, which in turn found that New York law should apply since applying Delaware law, which provides for no usury limit, would “violate a fundamental public policy of the state of New York.”

Should the District Court’s decision stand, Madden would jeopardize the long-standing judicial precedent of “valid-when-made,” which holds that non-usurious debt remains valid when acquired by a third party, even if the interest rate implied in the latter transaction is usurious. Not surprisingly, the uncertainty sparked in the aftermath of the Second Circuit’s ruling has prompted policymakers to turn to a legislative fix to restore the “valid-when-made” precedent by making it federal law governing consumer credit markets.

U.S. courts have long recognized the potential that usury caps might make the credit market more illiquid. The Supreme Court’s 1833 ruling that cemented the valid-when-made doctrine stated that:

by converting a sale on a discount into a loan on usury, and thus rendering null and void the act of endorsing it, a contract wholly innocent in its origin and binding and valid upon every legal principle is rendered at least valueless in the hands of the otherwise legal holder, and a party to whom the provisions of the act against usury could never have been intended to extend would be discharged of a debt which he justly owes to someone.

Back then, private promissory notes were used as collateral for transactions, both within and across state lines. But, as the notes changed hands, acquirers might discount them more steeply than the original lender, sometimes exceeding state usury limits. Valid-when-made ensured that the original validity of a loan would not be affected by changes in its implicit interest rate in subsequent transactions.

More recently, courts have tended towards a liberal interpretation of the National Bank Act, holding that it pre-empts state usury laws in all cases and not just for national banks. Georgetown law professor Adam Levitin has argued that this interpretation is inappropriate and that the pre-emption should only apply to national banks, which are subject to a specific federal statute.

Levitin states that a broader pre-emption only goes back to 1978. This date is significant because the late 1970s marked a turning point in U.S. consumer credit markets as banks started to consolidate and expand beyond state boundaries, credit card use became widespread, and loan securitization took off. The case Levitin cites, in fact, concerned a credit card dispute and the applicability of different state usury statutes. As trade in loan instruments grew and participating institutions became more varied, allowing for valid-when-made to overrule state usury laws was important to ensure these transactions could take place.

Note that the elements which gave rise to the change in judicial doctrine are in and of themselves positive. A secondary market for loans enables financial institutions to offload risky assets and free up capital to lend to new borrowers. Securitization, for its part, achieves this while also creating diversified instruments and thereby lowering loan risk. Both tend to lower the cost of credit to borrowers.

Last month, the House of Representatives passed the Protecting Consumers’ Access to Credit Act with bipartisan support. The bill, now with the Senate Banking Committee, acknowledged that “the valid-when-made doctrine, by bringing certainty to the legal treatment of all valid loans that are transferred, greatly enhances liquidity in the credit markets by widening the potential pool of loan buyers and reducing the cost of credit to borrowers.” Legislative change will, it is hoped, put an end to any lack of clarity as to the ability for consumer loans to be subsequently transferred across firms and states. The freedom to transact is essential for consumer lending markets to operate efficiently. To understand this, we must move from legal to economic principles.

The interest rate on any loan is composed of two parts. The first part represents the time value of money, that is, the fact that access to funds today is more valuable than access tomorrow, or next year. Secondly, there is a risk premium that compensates the lender for delays and potential non-repayment of the loan. Other things equal, the greater the likelihood of non-repayment, the higher the risk premium and so the total interest rate.

When loans are backed by collateral, such as a house or a car, the interest rate can be lower because lenders can always recoup at least some loan value by seizing the collateral. Collateral also acts as a signal: only borrowers with confidence that they will repay would place their possessions as guarantee. Consumer credit, such as credit card debt, is typically unsecured, so it carries a higher risk premium.

More variable earnings, a higher chance of unemployment, propensity to incur unexpected costs, and the absence of a financial cushion to fall back on are all credit risk factors. Because they are more common among lower-income households, loan interest is viewed by some as regressive: those of lesser means will pay more for a given amount of credit. This is how modern proponents of usury laws have often justified them.

Yet, as with other price controls, the consequences are often the opposite of those intended. A high interest rate is the only way that a high-risk borrower can compete for funds with a lower-risk borrower. In the absence of adequate compensation for additional risk, lenders eschew the high-risk borrowers — who are often those most in need of credit. Not only that, but credit risks can change as a loan matures. If a borrower fails to repay on time, her credit score will change and interest rates on future borrowing will adjust upwards.

This is what happened to Madden: her default created additional monitoring and collection costs, and it also revealed information about her likelihood to repay future borrowing. In the eyes of any lender, Madden had become a higher-risk borrower than previously anticipated. Her interest rate went up.

Last year’s Second Circuit decision surely made Madden happy, but it is unlikely to benefit future borrowers who find themselves in her position. Riskier applicants are more likely to be among those rationed out of the borrower pool. There is, in fact, already evidence that Madden has changed the fortunes of borrowers in the three states covered by the Second Circuit’s ruling. Those with low credit scores saw loan volumes decline by half in the months after the ruling; for similar borrowers elsewhere in the country, loan volumes more than doubled.

Madden has thrown consumer lending markets in the three states affected into disarray, so it is appropriate for Congress to provide clarity through legislation and ensure access to credit is available to those who can and are willing to pay for it. Not just legal precedent but economic reality demand a move in this direction.

[Cross-posted from]

Saudi Arabia’s prodigal son returns to Washington this week, beginning a tour through the United States apparently aimed at drumming up investment in the country. Mohammed bin Salman (MBS) is young with big ideas: he wants to reform Saudi society and wean the Saudi economy off oil. He also wants to build up Saudi as a foreign policy player – with or without the United States – and cement Saudi dominance in the Gulf.

It’s small wonder then that profiles and articles about the prince typically either laud him as a great reformer or simply criticize his foreign policy blunders. The truth is an accurate portrayal of Muhammed bin Salman must include both. And policymakers and businesses should be wary of the potential pitfalls of his proposed reforms, even as they hope for their success.  

The Crown Prince’s social reforms are a welcome step in the right direction, though they will be difficult to complete. Thus far, there has been a crackdown on the religious police, robbing them of much of their power over morality issues. Cinemas have been permitted to screen movies for the first time in decades. Women can now attend sporting events, and legal changes are in progress that will allow them to drive.

Likewise, the innovative economic reforms that MBS has proposed – notably using an IPO of Aramco stock to shift the government’s primary income source away from oil and towards investment gains, paired with an attempt to reform the domestic economy and attract inward investment – could potentially reshape and improve the state of the Saudi economy.

There is no doubt that U.S. policymakers should welcome these changes and encourage Saudi Arabia to continue down this path.

Unfortunately, on the flip side, the assertiveness shown by MBS at home has been matched by an extremely bellicose foreign policy. The young prince’s foreign policy overreach has already helped to create the world’s worst humanitarian crisis in Yemen. The Saudi blockade of Qatar has been spectacularly ineffectual and has hardened into stalemate.  

Worse, both incidents reflect the prince’s worst quality: his hardline stance on Iran and his willingness to see Iranian tentacles behind every crisis, no matter how unrealistic this view is. In his interview on CBS’ 60 Minutes, for example, he blames Shi’ite Iran for the rise of Al Qaeda and other Sunni militant groups and for the civil war in Yemen. His fixation on Iran risks destabilizing the Middle East still further. 

Nor are the bad parts of MBS’ record limited to foreign policy. He has cracked down heavily on corruption inside Saudi Arabia, a seemingly praiseworthy campaign that in reality saw him imprison other prominent royals and businessmen in the Ritz Carlton hotel until they agreed to sign over many of their assets to the state. And the prince has ruthlessly centralized power into his own hands, shifting Saudi Arabia from a relatively consensual system of government within the royal family, to a system of one-man rule closer to that of Egypt or Syria.

Policymakers – and indeed, businesses and potential investors – should also be wary of the flaws and potential problems in MBS’ ambitious reform plans. Reform is a slow process, and thus far, there have been no moves to fix some of the worst injustices in the Saudi system, notably the guardianship system for women and ongoing repression of Saudi Shi’ites.

Economic reform is certainly not guaranteed to work either; as with many other oil-rich states, Saudi Arabia will find it brutally hard to wean itself off of oil. Some of the biggest developments in the reform plan thus far are fantastical. The proposed high technology city of Neom sounds impressive till one questions why tech companies would choose to relocate to somewhere with Saudi Arabia’s poor climate, workforce, legal and regulatory systems.

Meanwhile, the much-touted IPO of Aramco will only be able to happen on Western exchanges if substantial changes are made to Aramco’s record-keeping, transparency and perhaps even ownership structure.

And none of this is to mention the issue that combines business and national security concerns in one tight package: civilian nuclear power. Though MBS is seeking U.S. cooperation in building civilian nuclear plants ostensibly to reduce Saudi dependence on domestic oil production, he is also open about the fact that he sees civilian nuclear energy and enrichment capabilities as a potential path to a Saudi nuclear weapon.

For all these reasons, policymakers and investors should be wary of profiles which portray Mohammed bin Salman as either a great reformer, or a callow youth. His proposed reforms for Saudi society are in many ways far-sighted; they carry the potential to fix many of the country’s underlying structural and social problems and should be encouraged.

But at the same time, we can’t overlook his many mistakes and poor choices in domestic and foreign policy, nor ignore the risks inherent in his ongoing reform plans. Being an apparently genuine reformer doesn’t absolve MBS of his aggressive foreign policy steps or domestic authoritarian tendencies.

A complete picture of the young prince’s record suggests caution on the part of investors – and pushback on foreign policy and domestic crackdowns by policymakers – remains by far the best choice.

The Trump administration is proposing to privatize two airports owned by the federal government in Virginia, Dulles and Reagan National. William Murray discussed some of the advantages in the Washington Post, and noted that Australia provides a good model for such reforms.

Policymakers can also look to Europe, which has embraced airport privatization since Margaret Thatcher privatized London’s Heathrow in 1987. Today half of Europe’s commercial airports are private, including the main airports in Antwerp, Birmingham, Brussels, Budapest, Copenhagen, Edinburgh, Glasgow, Lisbon, Liverpool, Naples, Rome, Vienna, and Zurich.

Some of the advantages can be:

  • Self-financing without government subsidies.
  • Higher productivity, more innovation, reduced delays, and better service.
  • More competition between airlines and for gate space, to the benefit of passengers.
  • Airport expansion as aviation demand rises with fewer political/bureaucratic/funding roadblocks.

Airports Council International says there is “no denying the tangible benefits” of market-based reforms in Europe’s airport industry, including “significant volumes of investment in necessary infrastructure, higher service quality levels, and a commercial acumen which allows airport operators to diversify revenue streams and minimize the costs that users have to pay.”

Privatizing D.C.’s airports would be back to the future. The main airport serving D.C. during the 1930s was the private Washington-Hoover Airport in Virginia. The main airports serving many U.S. cities at the time were private, including the airports in Los Angeles, Philadelphia, and Miami.

What happened to America’s private-sector commercial airports? In city after city, they were pushed aside by government airports, which benefited from a range of subsidies.

Today, Dulles and National are operated by the same government authority. For what reason? Economists of all political stripes believe that monopoly is inferior to competition with respect to efficiency, innovation, and customer service. So, at minimum, the Trump administration should push to split the two D.C. airports into separate entities and induce them to compete against each other.

Better yet, Dulles and National should be privatized separately, either by share offerings or sales to airport operating companies.


More on airport privatization here. More on the general benefits of privatization here.