Tuesday, March 14, 2017

One Weird Trick To Destroy Prosperity and Progress

On his first Monday on the job, President Trump invited business leaders to the White House, fed them breakfast, called them “great people,” and then lowered his protectionist boom. “If you go to another country” and cut U.S. jobs, “we are going to be imposing a very major border tax” on that product, he told the executives. During his campaign Trump defined “major” as 35%.
A couple days before, the new President shouted his dystopian vision of America to a quarter million or a million or whatever number of brave souls who braved a wet Washington day to hear his inaugural address. The wasteland of empty factories and unmet hopes and dreams stops today, he said to a smattering of applause, with the ghosts of Reed Smoot and Willis Hawley, the grandfathers of economic isolationism, flanking his either side.   
Trump has been channeling his inner Hoover since descending down his golden escalator.


Garbage In, Garbage Out at the Federal Reserve

The monetary matadors at the Federal Reserve have stared into the eyes of mild price inflation for years. They didn’t move a muscle for years and have finally twitched ever so slightly, a couple times in the last few months, with a promise of more.
It is the view of Fed Chair Janet Yellen that signs of overheating in the broader economy are “scarce.” The indispensable Grant’s Interest Rate Observer isn’t so sure and devoted its front page and then some of its March 10 issue to inflation and how it’s measured. After all, the price level is the North Star of central bank policy. 


100 Years Later, Was the Federal Reserve a Good Idea?

100 Years Later, Was the Federal Reserve a Good Idea?

With the Fed in its centennial year, Janet Yellen facing confirmation hearings in the Senate, and questions swirling over whether the Fed will enact “tapering,” many monetary scholars are asking: Was the Fed a good idea?

Not since the Great Inflation of the early 1980s has the Fed been so controversial. Its causal role in the housing boom and bust remains contentious. Other factors aside, the Fed was a poor overseer of the safety and soundness of the financial system. At best, the central bank was a passive bystander during the boom and early stages of the housing bust; it couldn’t even accept that we were in the midst of nationwide housing downturn. 


The Chances of a Global Meltdown

Are we headed for another global financial crisis? The market convulsions of the past week reflected a continuation of a market selloff that began on the first trading day of 2016. Investors have reasons to be fearful—but not terrified.
This year is likely to be one of financial crises in industries and countries around the world. Whether those turn into a global financial crisis is an open question, and the answer will likely turn on the health of the U.S. financial industry and broader economy. No crisis is global if American financial markets hold up. The best I can foresee, at this moment, is that a true global financial crisis is not likely.


Does Monetary Policy Have a Future?

Does Monetary Policy Have a Future?

I have chosen a provocative title, but it is fully justified. Fed officials are flying on autopilot, but the controls don’t work anymore, or at least not reliably. Fed watchers are largely clueless. The investment community and the economy may be collateral damage.
Let me begin by briefly reviewing the recent past. All through last year, Fed officials were signaling they would begin a program of rate increases. At first, there were going to be 8 increases of one quarter point. As the year progressed, the first increase faded into the future. Finally, in December 2015, the Fed finally hiked its new interest-rate targets by 25 basis points. In my opinion, the FOMC did so largely to keep its credibility.


Why Three Rate Hikes in 2017 May Not Be Enough

Why Three Rate Hikes in 2017 May Not Be Enough

The Federal Reserve is widely expected to increase the short-term interest rates it controls by 25 basis points. There have been a string of statements to that effect by Fed Governors and Presidents. And now Fed Vice Chairman Fischer and Chair Janet Yellen have added their voices to the chorus.
Most notable has been the change of heart by Governor Lael Brainard. She was a prominent dove prior to the election. Now she has turned hawk, in what may be one of the greatest conversions since that of St. Paul on the road to Damascus.


Were We Watching the Same Presidency? Obama Was Not a Restrainer

Were We Watching the Same Presidency? Obama Was Not a Restrainer

As we wait to see what shape President Donald Trump’s foreign policies will take, debate over former President Barack Obama’s legacy continues. Did Obama successfully end the war in Iraq, or did he help create the Islamic State by withdrawing U.S. troops too soon? Was it prudence or poor judgment that kept Obama from intervening in Syria’s civil war? The Obama era will have a deep impact on policy debates for years to come, serving as a template that will shape how decision-makers think about the use of military force. Getting the assessment right is crucial. Unfortunately, many seem to view it through the wrong lens.


The Threat from Federal Debt


The Threat from Federal Debt

Donald Trump railed against rising government debt on the campaign trail, but we don’t know yet how he will tackle the problem as president. The debt lurks behind many issues on his plate, including Obamacare repeal, tax reform, defense spending, the border wall, and his upcoming budget. A vote on the statutory debt limit is also coming up.
Trump faces tough choices because President Barack Obama left him with a fiscal mess. A river of red ink under President George W. Bush turned into a torrent under Obama. Federal debt held by the public soared from $5.8 trillion in 2008 to $14.2 trillion in 2016. As a share of gross domestic product (GDP), the debt almost doubled from 39 percent to 77 percent.
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A Challenging Road Ahead for Our New US Trade Representative

A Challenging Road Ahead for Our New US Trade Representative

Robert Lighthizer, appearing today at a hearing focused on his qualifications to lead the Office of the U.S. Trade Representative (USTR). The Senate Finance Committee will evaluate his ability to fulfill USTR’s mission, which emphasizes working “toward opening markets throughout the world to create new opportunities and higher living standards for families, farmers, manufacturers, workers, consumers, and businesses.”
Many nations have trade-distorting policies. Eliminating distortions would benefit U.S. exporters, not to mention people in those countries. The USTR rightly should strive to achieve reforms overseas. However, the USTR should never lose sight of a basic economic reality:


Ending the Reign of the Administrative Law Judge

Ending the Reign of the Administrative Law Judge

The system of checks and balances that the Constitution established is an essential safeguard against government overreach. Yet, the ever growing administrative state often undermines fundamental checks and balances. “Fourth branch” agencies frequently take on legislative, executive, and judicial roles simultaneously. And to make matters worse, administrative officials are much less accountable to the people than their counterparts in the traditional three branches.
One especially alarming example of the breakdown of essential separation of powers within the administrative state is the Securities and Exchange Commission’s use of administrative law judges (ALJs). ALJs adjudicate most of the SEC’s enforcement actions. They have the authority to impose significant civil penalties and can bar respondents from working in the securities industry.


Several House Republicans Introduce a Bill to Legalize Young Immigrants

Several House Republicans Introduce a Bill to Legalize Young Immigrants

Eleven House Republicans are pushing new legislation to provide a pathway to legal status for young immigrants who entered the United States as children—commonly known as “Dreamers.”* Congressman Carlos Curbelo (R-FL) and ten other Republican members introduced Recognizing America’s Children (RAC) Act today (PDF). The bill will benefit the United States economy and provide certainty for a group of young people who are deserving of a humane approach.


Please Stop the Tyranny


Please Stop the Tyranny

While the newest federal agency, the Consumer Financial Protection Bureau (CFPB), has been controversial for many reasons, its most troubling feature may simply be its unconstitutional structure. Its sole director reports to no one but himself, and, under the terms of Dodd-Frank, can be removed by the president only for cause. And it receives its funding not through Congress, but through the Federal Reserve. Not even the Fed has the authority to challenge its spending, however. Instead, the law says the Fed “shall” give the CFPB the funds it requests, up to 12 percent of the Fed’s total operating expenses. As of 2015, that meant the CFPB could demand up to $443 million in one year.


Dire Fears of Trump Deregulation

By Thomas A. Firey

Four decades ago, the United States began a dramatic change in domestic policy, repealing swaths of economic regulation and abolishing whole agencies charged with managing sectors of the U.S. economy.
If you mention this “deregulation” today, most people think it refers to wild Reagan administration efforts to undo environmental, health, and safety protections. In fact, the deregulation movement predated Ronald Reagan’s presidency, had broad bipartisan support, and had little to do with health, safety, or environmental policy. Rather, deregulation targeted regulations that directed business operations in different sectors of the American economy: which airlines could service which routes, what railroads could charge what amounts for their services, how telephone service would be billed and what technologies would be used, how the power industry was organized, and much more.


CBO: Full Repeal Would Cover More People than House GOP’s ObamaCare-Lite Bill

A new Congressional Budget Office report projecting the effects of the House Republican leadership’s American Health Care Act weakens the case for the bill’s ObamaCare-lite approach, and strengthens the case for full repeal. The CBO projects that over the next two years, the AHCA would cause average premiums to rise 15 percent to 20 percent above ObamaCare’s already high premium levels. The report raises the prospect that insurance markets may collapse under the AHCA, just as they are collapsing under ObamaCare. It makes unreasonable assumptions about Medicaid spending; more reasonable assumptions could completely eliminate the bill’s projected deficit reduction. Finally, the CBO projects more people will lose coverage under the AHCA than under full repeal.


The House GOP Leadership’s Health Care Bill Is ObamaCare-Lite — Or Worse

By Michael F. Cannon

During the presidential campaign, Donald Trump promised legislation that “fully repeals ObamaCare.” Monday night, the Republican leadership of the House of Representatives released legislation it claims would repeal and replace ObamaCare. Tuesday afternoon, Vice President Mike Pence will travel to Capitol Hill to pressure members of Congress to support the bill. On Wednesday, two House Committees will begin to mark-up the legislation. House and Senate leaders are hoping for quick consideration and a signing ceremony, maybe by May, so they can move on to other things, like tax reform and confirming Supreme Court nominee Judge Neil Gorsuch.
Everyone needs to take a step back. This bill is a train wreck waiting to happen.
The House leadership bill isn’t even a repeal bill. Not by a long shot. It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago. The ObamaCare regulations it retains are already causing insurance markets to collapse. It would allow that collapse to continue, and even accelerate the collapse. Republicans would then own whatever damage ObamaCare causes, such as when the law leaves seriously ill patients with no coverage at all.


Monday, March 13, 2017

Pipelines or Property Rights?




Last January, Senators Bob Menendez and Maria Cantwell offered an amendment to the Keystone Pipeline bill stipulating that “Land or an interest in land for the pipeline and cross-border facilities described in subsection (a) may only be acquired from willing sellers.” You might think that Senate conservatives—always (loudly) mindful of private property rights—would be inclined to sign on. Alas, only Senators Kelly Ayotte and Rand Paul broke Republican ranks to vote “yes.”
Earlier this month, Tom Steyer’s NextGen Climate charged that Senate Republicans were “willing to completely abandon their own principles in order to kowtow to their Big Oil backers.” While conservatives certainly won’t relish lectures about principles from the likes of Mr. Steyer, in this case, he has a point. TransCanada—the company building the Keystone XL Pipeline—is using eminent domain to seize private property in a fashion that would send conservatives around the bend were those methods employed in other contexts.


Federalism, jurisdiction, and resistance

MODERATION IN PURSUIT OF JUSTICE
Washington State Supreme Court


One of the most striking features of the opposition to the Trump administration’s initial executive order against migrants from seven majority-Muslim countries as well as all refugee claims is how important state governments were to it. The lawsuit that led to a nationwide injunction against the order was filed by the state of Washington, later joined by Minnesota. Seventeen other states joined a brief supporting Washington and Minnesota. This is strange on its face. Setting aside the disputed question of how much unilateral authority the president has over immigration policy relative to Congress and the federal judiciary, it at least seems clear that immigration policy is a federal matter, not the business of the states. Individual persons affected by the ban might sue on the basis of religious discrimination, national origin discrimination, or lack of due process, but why are the states involved?


Revitalizing Liberalism Means Revitalizing Civic Norms

MODERATION IN PURSUIT OF JUSTICE


In my previous essay, I wrote about the value of factions, and how liberalism’s strengths come from diversity and disagreement. I mentioned that diversity is hard because it asks us to tolerate views that we abhor. As Will Wilkinson has argued, the United States has been slowly sorting itself into two competing tribes that come with rather different sets of values.
A stark challenge for liberalism is managing this level of disagreement. Of course, we have a set of procedures that are designed for just that—they are embodied in the Constitution. The liberal order is built upon the rule of law, and so we might expect the Constitution to carry us through potential dark times and see us through to the other side. I want to suggest that a reliance on the law won’t be good enough.


Thinking about the Social Cost of Carbon




On Tuesday, the House Science Committee held a hearing to examine the Social Cost of Carbon (SCC). The SCC is an estimate of the total impactmost of which will occur in the futurefrom an additional ton of CO2 emitted today. To advance its climate agenda, the Obama Administration built an interagency working group (IWG) to calculate the SCC (presently $39 per ton) and used the value to justify regulating greenhouse gas emissions. The SCC faces an uncertain, but probably bleak, future as a regulatory tool under the Trump Administration, and it is not clear that it deserves a better fate. But it is still worth thinking about the statements offered to the committee and what SCC calculations tell us about the scale of climate risks. 


$54 Billion for What?


WHERE NATIONAL DEFENSE MEETS FISCAL RESPONSIBILITY
President Donald Trump, Army Chief of Staff Gen. Mark Milley, and Vice President Mike Pence, salute members of the United States Army during the 58th Presidential Inauguration Parade. Via Wikimedia Commons.


Sunday night, reports emerged that the Trump administration would soon announce a massive increase in defense spending. Monday morning, the president made the announcement that his administration would soon release a budget blueprint that included a $54 billion increase in defense spending—offset by cuts to the Department of State, foreign aid, and a variety of domestic discretionary program. President Trump referred to it as a “public safety and national security budget” in his remarks. But the statement gave little indication of what threat the additional $54 billion was necessary to counter.


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