Category Archives: Uncategorized

Gerrymandering Misunderstood

The Washington Post has a short article about gerrymandering with a deeply flawed graphic. By that, I mean the graphic implies that the most partisan district lines are the ideal.  How crazy is that? One hand at the Post is writing (for decades) that partisanship has gotten out of control, but the other hand says that partisanship in extreme districts is the answer.

This chart’s “1. Perfect representation” system is deeply flawed — it has 5 extreme incumbents who will never face a challenger. Not perfect at all. It looks a lot like the incumbency-protection gerrymander in California from 2002-2012. It is the kind of system the monopoly parties love, candidates hate, and where people are irrelevant.

Two Wrongs, One Right on Obama’s Immigration Action

If the road to Hell is paved with good intentions, what is the destination for the road paved with bad intentions? Federal Court, it seems.

President Obama’s action on immigration reform – granting temporary legal status to millions of illegal immigrants – was an overreach of his authority, and worse, intended to create a political fight rather than a policy solution. After insisting for six years that the only path forward was a huge “comprehensive” law, Obama dropped a dozen incremental White House memorandums in late November. Then it ran into a little problem called the Law. On Monday, U.S. District Judge Andrew S. Hanen suspended the Obama actions until a federal lawsuit, filed by 26 states, is resolved.

The President made two mistakes in taking executive action. First was a simple overreach of his authority. He has no right to make a carpet grant of legal status, let alone issue work permits to people in the country illegally. Second was choosing to wage partisan warfare over an issue that has been begging for compromise leadership. The one thing Obama has on his side is economics – granting legal status to migrant workers will, in fact, be good for the U.S. economy, for immigrants, and even for American citizens.

Why did the President never offer his incremental reforms as legislation? Why not consult with Congress? Why not compromise? Why make the legal status a temporary three years?  Why, at every turn, frame the issue as a partisan impasse and blame Republicans? The answer is that the White House is driven by politics. It has consistently used false choices and red herrings when discussing immigration. Now the double talk is being exposed.

At the crux of this issue is the idea of granting a work permit to migrants. A work permit is the middle ground compromise — it’s not deportation (obviously) nor is it a path to citizenship. Those latter two options are the false choices constantly debated over the past decade. Ironically, when comprehensive reform was considered in Congress in 2007, Senator Barack Obama was among the many Democrats  who stripped the work visa idea from the legislation in order to poison the consensus. They wanted to keep the fight going, to polarize the electorate rather than change policy. And he infuriated Ted Kennedy.

Now the migrant work permit is the centerpiece of Obama’s overreach. It’s one thing to defer action and not deport a man. It’s altogether a different to have the machinery of government produce a work permit for that man. The White House wants the media to believe that spending hundreds of millions of dollars processing paperwork and issuing work permits is a blanket non-action, but it’s an unbelievable fiction. Judge Hanen knows it, and he knows that once the work permits were issued it would create an impossible mess. He was right to stop it before the case is fully resolved, and the White House is insincere to pretend it’s no big deal.

The White House rationale for executive action has been its “limited resources.” But on Christmas day, the New York Times reported that DHS “was immediately seeking 1,000 new employees to work in an office building to process ‘cases filed as a result of the executive actions on immigration.’ The likely cost: nearly $8 million a year in lease payments [for a new operations center just outside of Washington, DC] and more than $40 million for annual salaries.” Limited resources is such a flimsy excuse.

The shame of it is that immigration is an issue ripe for compromise and consensus. If the President would have offered to work with Congress on legislation that rejects the false deportation-vs-citizenship choice, and instead offered legal status & work visas, we would be talking about the very real benefits of immigration to the U.S. economy. The President could have chosen to appear shoulder to shoulder with George W. Bush in a joint call for compromise – like Ted Kennedy once did with Bush on education reform. Obama could cite a dozen, or a hundred, Republican leaning economists who support work permits for migrants; support green cards for engineers, scientists and entrepreneurs; support streamlining the DHS; and even support allowing more than a million new legal immigrants to come to the United States each year. Here’s my own case for greater immigration.

Is it too late for Obama to offer bi-partisan compromise? I sure hope not. Or has that whole “post-partisan” road been a fiction, too?

The Good Country for Libertarians

Commentary magazine featured my essay on its December cover, The Good Country, which reports some astounding empirical correlations between U.S. troop deployments with economic and social development indicators in countries around the world. This finding is difficult from some to accept, particularly those who believe that the United States is too militaristic and meddlesome in the affairs of other countries. I’d like to challenge my Libertarian friends to think more carefully about what “The Good Country” means — because the simple interpretation is misleading.


Three key sections from the article are copied here. The first is the core claim, cited on the cover, and with some additional supporting evidence:

In country after country, prosperity—in the form of economic growth and human development—has emerged where American boots have trod.

… Indeed, from 1950 to 2010, more than 30 million U.S. troops were deployed around the world, the vast majority to allied countries, stationed in permanent bases, and cooperating in peace. They were building, not destroying.

… [A]llied countries with a greater U.S. troop presence experienced better outcomes on measures of life expectancy and children’s mortality. This effect held even for countries growing at the same rate. Furthermore, it held during two distinct eras, pre- and post-1990. Life expectancy worldwide increased by 10 years between 1970 and the present. But it improved more quickly in countries that hosted American troops, and more slowly elsewhere. The worldwide mortality rate of children dropped from 132 to 55 per 1,000 live births during the same period, but again, the results were better among America’s allies.


At a minimum, the “troops effect” challenges our priors. Almost everything thinks that when the military is deployed, that means war.  In fact, since 1950, combat was the exception not the rule, even in Iraq and Afghanistan. Second key paragraph:

Contrary to conventional wisdom, most troop deployments were not to countries at war—the sole exception being the years from 1966 to 1970, the height of the war in Vietnam. In the 1980s, 300,000 American forces were stationed in European allied countries, 100,000 in Asian allied countries, 5,000 in Turkey (a NATO ally), and 9,000 in Panama.

And finally, the third key point is that these alliance relationships worked because of demand for U.S. troops, not just the supply.

It would be a mistake to read the evidence about the positive impact of troop deployments as a clarion call for, simply, more. … Let’s think about this from the economist’s perspective of supply and demand. A strategy of pushing troops to poor, unstable countries is not the way this policy works.

The lesson in all of this for libertarians, even pacifist libertarians, is that America’s foreign policy should emphasize alliances more than monster-hunting. This is an essay — indeed a worldview — that libertarians should embrace and extend. I would like to think it would drive a wedge between pacifists (who surely support a policy of preventing war) and isolationists (who are willing to let war ravage the rest of world so long as it does not touch our shores).

If you really think the presence of American forces throughout the Pacific from 1945-1990 did nothing to prevent a follow-up war between China, Korea, Japan, and the rest, I think you are beyond reason. Contrast that with the experience of Europeans post-WW1 and post-WW2.  A pacifist recognizes the failure of the post-WW1 disengagement and embraces the continued presence of US forces in Europe after WW2, including former foes Italy and Germany as well wartime allies France and Britain. It worked: No WW3.

Gruber and the Decline of Democracy

Jonathan Gruber is an MIT economist who helped designed the Affordable Care Act. During the years after its passage, he gave many public talks, often in academic settings in which he was recorded saying rather dreadful things about the “stupidity of the American voter.” Some of my fellow economists, notably those who think ACA is bad policy, have defended Gruber on various grounds, mostly emphasizing academic freedom/honesty and the effect that his public humiliation this week dissuades policy scholars from public service.

I think Grubergate has at least four important lessons, and none of them are favorable to Gruber.

1. Gruber’s straight talk is not equivalent to other controversial academic statements, such as the time when Larry Summers commented on differences of IQ distribution and gender. Gruber’s taped comments admit to an effort at deception. This is morally different, and deserves condemnation. Aristotle and Kant would condemn him, common sense condemns him, and we should as well. Indeed, the deception was multifaceted: first the byzantine design of the ACA was intentionally deceptive for CBO scoring, policymaker awareness, and public understanding, second the campaign to sell the legislation was deceptive. Arnold Kling gives Gruber way too much leeway by focusing on the PR campaign because that’s not why Gruber was paid the “big bucks” but that misses the point. To understand why this is such a big deal, pay attention to those who supported the ACA (unlike Arnold, Tyler Cowen, Bryan Caplan, and I), namely Ron Fournier who calls it a “foundation of lies.”

2. The shaming of Jonathan Gruber will not dissuade competent, intelligent scholars from policy work. It might dissuade antidemocratic snobs. Good riddance, I say. Maybe I am too moralistic, but Gruber offends me. He offends the idealism I shared with young men and women who serve in the U.S. military. His disdain for honest dealing literally breaks the honor code we live by in the armed forces, and one I suspect most Americans live by in their daily lives.

3. Gruber’s analysis is not technically “correct albeit overly cynical” as Tyler thinks.  It is an oxymoron to defend someone’s honesty when they are being honest about deception. What Gruber represents is a trend in legislative complexity, a trend that elites justify for getting their policies enacted but which strikes me as undemocratic in the most fundamental way possible. Citizens of a republic are rightly hostile to the bureaucratic state, and not because they are less intelligent than their representatives. It is because they have an innate sense of self-dealing, exactly the kind of dangerous legal corruption that Public Choice warns us about. We should see this as a case study in government failure. I’m thinking of Jonathan Rauch’s demosclerosis.

Glenn and I wrote BALANCE as a warning about how great power declines. We emphasize things like centralization and government failure. I doubt any ruler is fully aware of causing his country’s demise, nor do I suspect Gruber is aware that he is complicit in it here. But I think that is precisely what is at stake. Simple laws are better laws. And I have much more faith in democracy than any kind of elite rule. The corruption of democracy is what worries me.

4.  There is a case now before the Supreme Court about the design of the ACA’s subsidies. The law is clearly written that subsidies for buying insurance are available to consumers who utilize exchanges established by the states. A concern expressed by Gruber and other architects was that some states would be reluctant to establish exchanges, but the architects wanted the program to have a facade of federalism, so they engineered a huge incentive to make it happen – the states-only subsidies. What these wise fools did not expect was that the hyper-partisan ACA would be rejected by many Republican-leaning state legislatures. Consequently, the federal government faced a large demand for a centralized exchange set up as Its catastrophic failure was only fitting justice, a fitting return for hubris of elite complexity. Well, now Gruber says the subsidies were intended for the federal exchange as well. Do you believe him? He is lying, and that seems obvious if you study the case. I do not think the Supreme Court will reward this revisionist dishonesty.

It will be sweet justice and sweeter policy for the ACA to fail. It will nudge the Congress to free the health care market once and for all. If only all such elitist law met such a demise. Unfortunately, our generation has many more fights against dysfunctional complexity ahead, and few will be this easy.


Highlights on Inequality

Highlights of my summer reading on the hot topic of income and wealth inequality:

Tyler Cowen’s July 19, 2014 essay in the NYT

Policies on immigration and free trade, for example, sometimes increase inequality within a nation, yet can make the world a better place and often decrease inequality on the planet as a whole.


…We have evolved a political debate where essentially nationalistic concerns have been hiding behind the gentler cloak of egalitarianism. To clear up this confusion, one recommendation would be to preface all discussions of inequality with a reminder that global inequality has been falling and that, in this regard, the world is headed in a fundamentally better direction.

Income Inequality and Local Government in the United States, 1970-2000.  Boustan, Ferreira, Winkler, and Zolt (NBER 16299, Aug 2010):

“[R]ising income inequality is associated with larger increases in tax revenues and faster growth in public expenditures at municipal, school district and state levels.” 

Income Inequality and Poverty is a classic NBER piece from Martin Feldstein (w6770, Oct 1998): 

The first part of this paper argues that income inequality is not a problem in need of remedy. The common practice of interpreting a rise in the gini coefficient measure of inequality as a bad thing violates the Pareto principle and is equivalent to using a social welfare function that puts negative weight on increases in the income of high income individuals. The real distributional problem is not inequality but poverty.

Gordon’s Misperceptions paper (NBER 15351, Sep 2009):

The rise in American inequality has been exaggerated both in magnitude and timing. Commentators lament the large gap between the growth rates of real median household income and of private sector productivity. This paper shows that a conceptually consistent measure of this growth gap over 1979 to 2007 is only one-tenth of the conventional measure.

Gordon usefully accounts for the misperception, a large portion being the flawed use of “households” as a unit of comparison during a time of major social transformation of household composition. The proportion of grandparents living alongside their progeny and even fathers living with mothers is dramatically different in 2014 than it was as recently as 1984, let alone 1954. 

One puzzle for me is that Gordon claims “there was no increase in inequality after 1993 in the bottom 99 percent of the population” which is at odds with the observation made by Kevin Murphy and, separately and more recently, Peter Lindert (more below). My instinct, which might be wrong for many reasons, is that wage inequality spans the wage spectrum rather than being top-driven. Further, I suspect a big explanation is the regulatory suppression of labor demand. Put it this way: would you support drying up the demand for low-skill labor?  You may think “never” but if you agree with minimum wage laws, then you don’t just want to suppress such demand which drives down equilibrium wages, you want to outlaw such demand. Secondly, every dollar of extra regulatory cost per worker is a much bigger wedge on low-paying employment than on high-paying employment. But by all means, layer on the paperwork with the best of intentions.

Making The Most of Capital in The 21st century, Peter Lindert (NBER 20232, June 2014)

On the cause of Great Leveling of inequality (1913-1973), Lindert suggest three superior theories to the one considered by Piketty, as the war/chaos/pessimism does not logically square with the universal leveling among defeated, victorious, and non-participating nations in WW1, WW2, and the Cold War. Lindert suggests (1) decline of the rate of labor force growth globally, (2) an acceleration of labor force productivity / public education, and (3) a shift away from labor-saving bias in technological change.

Lindert notes that many advanced economies did not experience a rising income gap after 1973, notably Germany, Switzerland, France, and Japan. That tells you something important. If you recognize that the top 1% are innovators and supermanagers – not inheritors of great wealth (a fact Piketty himself acknowledges) – then you must also realize this sliver of earners operate globally but realize income in a few countries. The founders and stock option holders of Google, Apple, MSFT are primarily American. The near-frontier economies with per capita incomes at 80% of the United States such as Japan, France, and Switzerland enjoy the consumption of the computer revolution, but they have in a sense exported the inequality that is a byproduct of its development. In other words, income inequality in the modern era is inescapably global.  I think this reinforces Tyler’s message.

Lastly, don’t miss this short review of Piketty’s CAPITAL by Chris DeMuth. It is pithy, light-hearted and insightful.

Yet Mr. Piketty has no interest in expanding capital ownership: It doesn’t even make his list of inferior alternatives, and he dismisses capitalized pensions with a few uncharacteristic rhetorical slights. Like others on the left, he seems to have concluded that the only way to promote economic equality is confiscatory taxation—redistribution of capital returns rather than wider distribution of capital ownership. After Marx’s idea of comprehensive state ownership of the means of production proved to be hellacious and tyrannical, progressive attentions turned in a different direction. They would leave ownership—with all of its risks and tribulations—alone, and control its rewards through taxation and regulation.



What I’m Reading

HUMANE Act proposed by a GOP Senator and DEM Congressman should give us hope that immigration reform is possible in an incremental, bipartisan fashion.

Does Inequality Matter?  I keep thinking about a village of nine people, incomes equal (Gini coefficient = 0) when a poor migrant arrives with no income. He joins the village and is treated charitably.  But suddenly there is inequality. The Gini coefficient rises by ten percent. Which begs the question: is the measure of inequality a useful way to think about poverty, or economics of a society generally?

Ideas for Renewing American Prosperity. This is a reprint of articles from the WSJ’s anniversary issue (125 years), which included essay by many colleagues  at Hoover.

Exit Strategy note … the man who invented the term “Exit Strategy” was Clinton Sec. of State, Warren Christopher.  His papers are now part of the Hoover Institution Archives.

What is the right number of new Americans?

America welcomes over one million legal immigrants every year, thanks to the most open & generous policy in the world. That’s a good thing. But is 1.1 million in 2013 the right number?  Is there too much of a good thing?

Keep in mind: we are talking about legal immigration. These are the people playing by the rules, waiting in line, getting their green cards, and doing what it takes to qualify for U.S. citizenship. But if 1.1 million is helping to boost our economy and enrich our culture — America is a nation of immigrants, after all — why not 1.3 million?  Seriously, why not add 200,000 green cards just for foreign scientists, engineers, and entrepreneurs?

I asked these questions to a panel of nearly 40 top scholars, conservative, liberal, centrist, and nonpartisan. The answers appear in this new publication from the Hoover Institution that our team put together over the past few months. It’s called Peregrine and I could not be more proud of the result.  Please take a look.