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The Supreme Court Is Poised to Strike Down a Major Obama-Era Agency

October 21, 2019 in Economics

By Ilya Shapiro

Ilya Shapiro

Last week, the Supreme Court agreed to hear what could end up being the most consequential case of the term — in a year where the justices are already taking up employment discrimination, the Second Amendment, abortion, DACA, school choice, and other issues of higher political salience. In Seila Law LLC v. Consumer Financial Protection Bureau, the Court will decide the constitutionality of an agency long criticized not just by the business community and free-market-oriented politicians but also by constitutional scholars who see major problems with its structure as a single-director agency seemingly unaccountable to the president or anyone else.

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The lawsuit was brought by a law firm that assists in resolving personal-debt issues, among other legal work that puts it in the crosshairs of those who, like Senator Elizabeth Warren, want greater regulation of consumer-facing financial services. When the Consumer Financial Protection Bureau, which Warren helped design as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, began an investigation into the firm’s practices, Seila Law argued that the agency’s structure was constitutionally defective. A federal district court in Santa Ana, Calif., rejected that claim, and the U.S. Court of Appeals for the Ninth Circuit affirmed its ruling.

The CFPB is the most independent of independent agencies, with power to make rules, enforce them, adjudicate violations in its own administrative hearings, and punish wrongdoers. And yet a single director heads the agency, one who can be removed only “for cause” — malfeasance rather than, say, a change in presidential policy priorities. The CFPB doesn’t even need Congress to approve its budget, because its funding requests are rubber-stamped by another agency insulated from political control: the Federal Reserve. The CFPB has regulatory authority over 19 federal consumer-protection laws. This concentration of power in the hands of a single, unelected, unaccountable official is unprecedented and cannot be squared with the Constitution’s structure, or with its purpose of protecting individual liberty from government overreach.

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The Constitution created three co-equal …read more

Source: OP-EDS

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Elizabeth Warren's and Bernie Sanders' 'Free' College Idea Would Be a Disaster for International Students

October 20, 2019 in Economics

By Neal McCluskey, Catherine Straus

Neal McCluskey and Catherine Straus

Higher education is a major US export, a reality that presidential candidates calling for “free” public college have overlooked.

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Sens. Bernie Sanders and Elizabeth Warren in particular have placed the idea of offering “free college” among their signature issues, but when asked about the likely effect on international students the Warren campaign did not respond and the Sanders campaign did not provide comment in time for publication.

Unfortunately, both Democratic candidates’ plans pose a risk to our international trade in education and offer a major reason why the US shouldn’t rush into enacting a free college system.

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For a little perspective, in the 2017-18 school year, there were 891,330 international students studying in US colleges.

At the undergraduate level, the focus of free college, 442,746 out of 16.8 million students were international, or 2.6% of the total.

Exempting International Students From a Free College Plan Risks Losing Those Students

At specific schools, international students are even more important. At the University of California at Berkeley, international students comprised about 3,600 of 30,600 undergraduates in 2018, nearly 12% of enrollment. And many fields of study, especially technical subjects such as engineering and economics, draw heavily from international pools.

Ending tuition and fees for Americans would almost certainly lead to big revenue losses for institutions. Warren and Sanders would likely use the lure of federal matching funds to encourage states to boost their direct funding of colleges, and hence make them tuition- and fee-free.

In 2018, public colleges brought in more than $74 billion in tuition-and-fee revenue, minus state aid to students. With about 90% of public college students undergrads, free college would require $67 billion more annually. That’s a ton of revenue to make up for, especially since most states are strapped by medical and pension costs.

Oh, and the national debt is approaching $23 trillion.International students are already a favorite <a target=_blank href="https://ejournals.bc.edu/index.php/ihe/article/download/9993/8677/" …read more

Source: OP-EDS

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The Constitution Is a 'Promesa' to Keep

October 17, 2019 in Economics

By Ilya Shapiro

Ilya Shapiro

The U.S. Supreme Court heard oral arguments Tuesday in cases that might not get as much attention as the culture-war smorgasbord on the docket this term, but that implicate billions of dollars and, even more important, the vitality of our system of government. That’s what’s ultimately at stake in the five cases consolidated under the technocratic name Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment.

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The cases arose from the restructuring of Puerto Rico’s public debt under the Puerto Rico Oversight, Management, and Economic Stability Act of 2016 (“PROMESA,” the Spanish word for “promise”), which created a seven-member Financial Oversight and Management Board. PROMESA’s practical effect was to require the president to select the board’s members from nonpublic lists submitted to the president by House and Senate leaders, without subjecting those appointments to Senate confirmation. The president ultimately agreed to Congress’ directive and chose six board members from that secret list, plus one member himself. None of these appointees were ever subject to Senate confirmation.

The cases raise fundamental questions about government structure because the appointments clause of the U.S. Constitution (Article II: Section 2) requires all “officers of the United States” to be nominated by the president and confirmed by the Senate. After the board began restructuring Puerto Rico’s debt, certain investor-creditors, as well as the labor union that represents employees of the island’s electric utility, challenged the board appointment. As the name creditor, Aurelius Investment, would write in its response to the cert petition in the lead case, “The dubious constitutionality of this scheme was obvious from the beginning.”

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The U.S. Court of Appeals for the First Circuit, in February, ruled for the challengers but declined to invalidate any of the board’s actions, invoking the de facto officer doctrine. In so doing, the court: (1) effectively denied the challengers any meaningful remedy; (2) improperly expanded the power of Congress at …read more

Source: OP-EDS

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Time to Extricate from Ukraine

October 17, 2019 in Economics

By Doug Bandow

Doug Bandow

Recently Ukraine has been thrown into the spotlight as Democrats gear up to impeach President Donald Trump. More important, though, is its role in damaging America’s relations with Russia, which has resulted in a mini-Cold War that the U.S. needs to end.

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Ukraine is in a bad neighborhood. During the 17th century, the country was divided between Poland and Russia, and eventually ended up as part of the Russian Empire. Kiev then enjoyed only the briefest of liberations after the 1917 Russian Revolution, before being reabsorbed by the Soviet Union. It later suffered from a devastating famine as Moscow confiscated food and collectivized agriculture. Ukraine was ravaged during Germany’s World War II invasion, and guerrilla resistance to renewed Soviet control continued for years afterwards.

In 1991, the collapse of the U.S.S.R. gave Ukraine another, more enduring chance for independence. However, the new nation’s development was fraught: GDP dropped by 60 percent and corruption burgeoned. Ukraine suffered under a succession of corrupt, self-serving, and ineffective leaders, as the U.S., Europe, and Russia battled for influence.

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In 2014, Washington and European governments backed a street putsch against the elected, though highly corrupt, pro-Russian president, Viktor Yanukovych. The Putin government responded by annexing Crimea and backing separatist forces in Eastern Ukraine’s Donbass region. Washington and Brussels imposed economic sanctions on Russia and provided military aid to Kiev.

The West versus Russia quickly became a “frozen” conflict. Moscow reincorporated Crimea into Russia, from which it had been detached in 1954 as part of internal Soviet politics. In the Donbass, more than a score of ceasefires came and went. Both Ukraine and Russia failed to fulfill the 2016 Minsk agreements, which sought to end the conflict.

In excess of 13,000 people, mostly Ukrainians, are known to have died in this war, and some two million have been forced from their homes. The economy of eastern Ukraine has collapsed. Ukraine has suffered through painful economic dislocation and political division. Meanwhile, several …read more

Source: OP-EDS

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What Warren and Sanders Get Wrong About Wealth Inequality (And Capitalism)

October 17, 2019 in Economics

By Chris Edwards

Chris Edwards

Sen. Elizabeth Warren, D-Mass., and Sen. Bernie Sanders, I-Vt., are fueling their presidential campaigns by generating anger toward the wealthy.

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Warren is blasting America’s “extreme concentration of wealth,” while Sanders is condemning wealth inequality as “outrageous” and “grotesque.” Both want to hammer the rich with a new annual wealth tax.

Moderate candidates on the debate stage Tuesday night were right to call Warren’s and Sanders’ tax and spending plans unrealistic. The almost twin leftists are also oblivious that wealth inequality may reflect starkly different economic causes. As such, their broad-brush denunciations of wealth are a useless guide to public policy.

Consider three different causes of wealth inequality: cronyism, crowding out and capitalism.

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Cronyism

Cronyism means businesses gaining subsidies and narrow regulatory benefits at public expense. Farm subsidies, for example, cost taxpayers and go to the wealthiest farmers. Cronyism increases inequality and undermines the economy, and so Warren and Sanders are right to complain about it.

Crowding out

Crowding out refers to government social programs displacing private wealth-building. Social Security, for example, reduces incentives for private retirement saving, and the program’s heavy payroll taxes reduce the ability to save.

Crowding out mainly affects the non-wealthy, so it increases wealth inequality. Warren and Sanders want to expand social programs, but that would make this problem worse.

Capitalism

The two candidates are also wrong about capitalism. The explosion of new technologies in recent decades has made many entrepreneurs rich. The Forbes list of the wealthiest Americans includes many people such as Robert Pera, founder of Ubiquiti Networks, which brings low-cost internet to underserved and rural areas around the globe. Such billionaires help uplift the poor, so punishing them with a wealth tax — as Warren and Sanders propose — makes no sense.

The three causes of wealth inequality are evident in cross-country comparisons. Sanders complains that the United States has more wealth inequality “than any other major country on earth.” It is true that our Gini …read more

Source: OP-EDS

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How Can Us Politics Survive No Shared Understanding of the Economy?

October 15, 2019 in Economics

By Ryan Bourne

Ryan Bourne

We’ve all heard the sayings. Whether it’s former journalist CP Scott’s: “Comment is free, but facts are sacred”, or the late US Senator Daniel Patrick Moynihan’s “You are entitled to your opinion, but you are not entitled to your own facts”, it’s comforting to believe that certain realities are beyond reasonable dispute.

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Yet even basic “facts” about the economy in the US are today wrangled over. Republicans and Democrats there don’t just disagree about the wisdom of certain policy ideas or whether observed trends in certain metrics are worrisome. Each side has their very own data and account of the world, creating irreconcilable narratives about the state of the nation.

Left-wing Democratic Presidential candidates, such as Bernie Sanders and Elizabeth Warren, reach for academic work to claim there’s been income stagnation for four decades, spiralling inequality, a tax system becoming ever less progressive, and endemic poverty.

Republicans reject all these claims, themselves armed with studies from credible university professors and government sources. In a country riven by tribalism, and beset by segmented news consumption, economists fail even to provide politicians with a simple shared understanding of the state of the American economy.

Exhibit A comes from a conference in New York this past Monday. On the first panel, progressive economist Joseph Stiglitz (a Nobel Prize winner) claimed that earnings for ordinary American workers had not risen for 40 years. Just an hour later, former Director of the Congressional Budget Office, conservative Doug Holtz-Eakin, said this was totally wrong. Both could call on academic support.

Economists Emmanuel Saez and Gabriel Zucman have concluded that the bottom 50pc of Americans have seen no gains in real pre-tax income for four decades. Yet another study by Gerald Auten of the US Treasury and David Splinter of the Joint Committee on Taxation instead suggests the average real income of the bottom half of Americans has risen by nearly one-third since 1979, or two-thirds accounting for all taxes and benefits.

Such huge differences turn on assumptions about how to assess income, account for unreported income, or measure inflation – all methodological choices that no politicians will bother analysing.

Those same tensions underpin different political narratives on inequality. French economist Thomas Piketty famously concluded that the pre-tax income share of the top 1pc of Americans nearly doubled between 1979 and 2015, increasing …read more

Source: OP-EDS

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Trump's Syria Conundrum Is a Sign That America Has Too Many Alliances

October 15, 2019 in Economics

By Ted Galen Carpenter

Ted Galen Carpenter

A key drawback of Washington’s growing global list of allies and security clients is that some of them hate each other more than any enemies of the United States. The current turmoil associated with President Donald Trump’s decision to withdraw American military personnel from northern Syria highlights the problem. That deployment served as a symbolic barrier discouraging Turkey from attacking the Syrian Democratic Forces (SDF), the Kurdish-dominated militia that had worked with the United States to combat ISIS.

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That collaboration has been a sore point in relations between Washington and Ankara for years. Turkish President Recep Tayyip Erdoğan considers both the SDF and the Kurdistan Workers Party (PKK)—a Marxist insurgent group that has been waging a secessionist war in southeastern Turkey for over three decades—to be terrorist organizations.

As a result, the Trump administration had been on an increasingly shaky diplomatic tightrope, endeavoring to placate both Ankara and the SDF. In November 2017, Trump tried to ease the Erdoğan government’s seething resentment by pledging to stop providing weapons to the SDF. His concession, though, had minimal effect. In August 2018, Erdoğan accused the United States of a “stab in the back” for continuing to support the Syrian Kurds.

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Critics who accuse Trump of giving Ankara a “green light” to launch the current military offensive against the SDF ignore the inherent dilemma in U.S. policy. Washington has certainly treated the Syrian Kurds as de facto allies in the fight against ISIS. But Turkey is more than a de facto ally—it is a formal U.S. treaty ally and a fellow member of the North Atlantic Treaty Organization (NATO).

It is certainly possible to criticize that relationship, and I am on record (along with other critics) for advocating Turkey’s expulsion from NATO for a growing list of domestic and foreign policy misdeeds. But until the Alliance takes such action, the United States has both moral and legal obligations to Ankara. Washington cannot simply disregard Ankara’s …read more

Source: OP-EDS

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America’s Ill-Fated Syria Intervention: The Lessons Washington Must Learn

October 15, 2019 in Economics

By Christopher A. Preble, Doug Bandow

Christopher A. Preble and Doug Bandow

News that Turkey had sent its military into northeast Syria, after receiving a tacit green light from President Trump, marked a grim low point in U.S. involvement in the lengthy, multisided Syrian civil war. The fate of Kurdish forces who battled ISIS and civilians sheltered in refugee camps have generated understandable concern. But there has been too little reflection on how we arrived at this unhappy place. Americans should learn from the experience and pledge to avoid similar debacles in the future.

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The many problems with U.S. intervention in Syria began with an extraordinarily ambitious, and ultimately irreconcilable, set of goals. U.S. officials wanted to take advantage of the Arab Spring reform movements that erupted in early 2011 to oust Bashar al-Assad’s regime, while also thwarting Russian and Iranian ambitions in Syria and beyond. Both the Obama and Trump administrations relied on some violent extremists to defeat other radical groups, especially the Islamic State, which sought to establish its so-called Caliphate. Supporting regime change in Damascus undercut efforts to counter ISIS. Moreover, as ISIS gained strength, the United States enlisted the help of—and armed—Kurdish fighters, which contradicted promises to NATO ally Turkey. Particularly worrisome to Ankara was U.S. support for fighters associated with the Kurdistan Workers’ Party (PKK), a Marxist-Leninist organization which the U.S. government still lists as a terrorist organization.

In other words, successive administrations adopted policies toward a new and informal partner which conflicted with the long-held security concerns of a treaty ally of nearly sixty-eight years. In recent months, President Donald Trump has reiterated his desire to withdraw all U.S. forces from Syria and hinted that he might give in to Turkish President Recep Tayyip Erdogan’s demand that the United States withdraw support from the Kurds along Turkey’s border. In both cases Trump encountered fierce resistance from within his administration and throughout the Washington foreign-policy establishment, and he retreated from that pressure. The White House’s latest announcement suggests that he still wants to wash his hands of the entire Syria imbroglio.

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There Are Way Too Many Prosecutors in the Federal Judiciary

October 14, 2019 in Economics

By Clark Neily

Clark Neily

It’s no secret that federal judges do not, by and large, look like the rest of us. They are whiter than average, more male, and more likely to have attended elite schools and worked at big law firms. But there’s another quirk of the judiciary that hasn’t gotten nearly the attention it deserves: the wild imbalance between judges who used to represent the government in court and judges who used to challenge the government in court.

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According to conventional wisdom, the surest way to become a federal judge is to first be a prosecutor. But is that really true? Until now, no one had ever examined the professional background of every sitting federal judge to see whether former prosecutors are in fact overrepresented on the federal bench. So we at the Cato Institute did, and they are—massively. But our study didn’t just look at former prosecutors. We also broadened our scope to compare judges who served as courtroom advocates for the government in any capacity—criminal or civil—versus the judges who cut their teeth litigating against the government as public defenders, other criminal defense attorneys, and public interest lawyers.

Focusing just on former prosecutors versus former criminal defense attorneys (including but not limited to public defenders), the ratio on the federal bench is 4 to 1. Expanding the scope to include all former courtroom advocates for the government (but not other kinds of government lawyers, such as agency heads and general counsels), and comparing that to former public defenders, private criminal defense attorneys, and public interest lawyers, the ratio jumps to an astonishing 7 to 1. President Donald Trump’s judicial nominees, many of whom are committed originalists and supporters of constitutionally limited government, reflect these same ratios.

What this means is that if you enter the federal legal system as an adversary of the government—including as a criminal defendant or a civil-rights plaintiff—the likelihood that the judge in your case will have previously served as an advocate for government is approximately 50-50. Meanwhile, the odds of drawing a judge who worked as a criminal defense attorney or public interest lawyer against the government (and never as a government advocate) are about 1 in 16. From the standpoint of someone whose liberty—or even life—hangs in the balance, those are suspicious and troubling odds.

Of course, the fact …read more

Source: OP-EDS

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China's Xi Jinping and North Korea's Kim Jong-Un, Frenemies at Best

October 14, 2019 in Economics

By Doug Bandow

Doug Bandow

Shortly after presiding over a grand celebration of the 70th anniversary of the creation of the People’s Republic of China, President Xi Jinping is expected to receive North Korea’s Kim Jong-un. In June, Xi visited Pyongyang, the first trip to North Korea by a Chinese leader since Hu Jintao in 2005.

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If this upcoming meeting occurs, it will be the two leaders’ sixth in two years. Many American policymakers take a cynical view of the latest North Korean-Chinese snuggle. Attitudes in Washington have been steadily hardening against the PRC. Even before President Donald Trump’s trade war, some officials and analysts viewed the Democratic People’s Republic of Korea as Beijing’s puppet. In their view, Chinese officials have turned North Korean provocations on and off at will.

In truth, the PRC’s influence is much less. The historical relationship between the two governments is fraught, with abundant competition, derision, and antagonism ever since the two opened diplomatic relations 70 years ago.

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As Kim Il-sung’s regime teetered near defeat in late 1950, after the U.S. intervened in the Korean War, China entered to block an American victory. Beijing effectively took over the conflict, leaving Kim on the sidelines, a slight he never forgot. The DPRK never gave its larger neighbor credit for preventing an allied victory, even though hundreds of thousands of Chinese soldiers died, including Mao Zedong’s son, who is buried in North Korea. Today the Victorious Fatherland War Museum still largely ignores China’s role while glorifying Kim’s leadership.

Kim later consolidated power, balancing the U.S.S.R. and China. Along the way he wiped out the pro-PRC faction, much to Beijing’s annoyance. Mao Zedong also criticized Kim for turning a Communist state into a quasi-monarchy when the latter made his son, Kim Jong-il, his successor. Despite Chinese officials’ claims that the two nations’ relations are as close as lips and teeth, dissatisfaction long was evident on both sides. The Xi regime was irritated that after supporting …read more

Source: OP-EDS