Category: Spencer P. Morrison

If Immigration Creates Wealth, Why Is California America's Poverty Capital?


California used to be home to America’s largest and most affluent middle class.  Today, it is America’s poverty capital.  What went wrong?  In a word: immigration.

According to the U.S. Census Bureau’s Official Poverty Measure, California’s poverty rate hovers around 15 percent.  But this figure is misleading: the Census Bureau measures poverty relative to a uniform national standard, which doesn’t account for differences in living costs between states – the cost of taxes, housing, and health care are higher in California than in Oklahoma, for example.  Accounting for these differences reveals that California’s real poverty rate is 20.6 percent – the highest in America, and nearly twice the national average of 12.7 percent.

Likewise, income inequality in California is the second-highest in America, behind only New York.  In fact, if California were an independent country, it would be the 17th most unequal country on Earth, nestled comfortably between Honduras and Guatemala.  Mexico is slightly more egalitarian.  California is far more unequal than the “social democracies” it emulates: Canada is the 111th most unequal nation, while Norway is far down the list at number 153 (out of 176 countries).  In terms of income inequality, California has more in common with banana republics than other “social democracies.”

More Government, More Poverty

High taxes, excessive regulations, and a lavish welfare state – these are the standard explanations for California’s poverty epidemic.  They have some merit.  For example, California has both the highest personal income tax rate and the highest sales tax in America, according to Politifact.

Not only are California’s taxes high, but successive “progressive” governments have swamped the state in a sea of red tape.  Onerous regulations cripple small businesses and retard economic growth.  Kerry Jackson, a fellow with the Pacific Research Institute, gives a few specific examples of how excessive government regulation hurts California’s poor.  He writes in a recent op-ed for the Los Angeles Times:

Extensive environmental regulations aimed at reducing carbon dioxide emissions make energy more expensive, also hurting the poor.  By some estimates, California energy costs are as much as 50% higher than the national average.  Jonathan A. Lesser of Continental Economics … found that “in 2012, nearly 1 million California households faced … energy expenditures exceeding 10% of household income.”

Some government regulation is necessary and desirable, but most of California’s is not.  There is virtue in governing with a “light touch.”

Finally, California’s welfare state is, perhaps paradoxically, a source of poverty in the state.  The Orange Country Register reports that California’s social safety net is comparable in scale to those found in Europe:

In California a mother with two children under the age of 5 who participates in these major welfare programs – Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program (food stamps), housing assistance, home energy assistance, Special Supplemental Nutrition Program for Women, Infants and Children – would receive a benefits package worth $30,828 per year.


… [Similar] benefits in Europe ranged from $38,588 per year in Denmark to just $1,112 in Romania.  The California benefits package is higher than in well-known welfare states as France ($17,324), Germany ($23,257) and even Sweden ($22,111).

Although welfare states ideally help the poor, reality is messy.  There are three main problems with the welfare state.  First, it incentivizes poverty by rewarding the poor with government handouts that are often far more valuable than a job.  This can be ameliorated to some degree by imposing work requirements on welfare recipients, but in practice, such requirements are rarely imposed.  Second, welfare states are expensive.  This means higher taxes and therefore slower economic growth and fewer job opportunities for everyone – including the poor.

Finally, welfare states are magnets for the poor.  Whether through domestic migration or foreign immigration, poor people flock to places with generous welfare states.  This is logical from the immigrant’s perspective, but it makes little sense from the taxpayer’s.  This fact is why socialism and open borders are fundamentally incompatible.

Why Big Government?

Since 1960, California’s population exploded from 15.9 to 39 million people.  The growth was almost entirely due to immigration – many people came from other states, but the majority came from abroad.  The Public Policy Institute of California estimates that 10 million immigrants currently reside in California.  This works out to 26 percent of the state’s population.

This figure includes 2.4 million illegal aliens, although a recent study from Yale University suggests that the true number of aliens is at least double that.  Modifying the initial figure implies that nearly one in three Californians is an immigrant.  This is not to disparage California’s immigrant population, but it is madness to deny that such a large influx of people has changed California’s society and economy.

Importantly, immigrants vote Democrat by a ratio higher than 2:1, according to a report from the Center for Immigration Studies.  In California, immigration has increased the pool of likely Democrat voters by nearly 5 million people, compared to just 2.4 million additional likely Republican voters.  Not only does this almost guarantee Democratic victories, but it also shifts California’s political midpoint to the left.  This means that to remain competitive in elections, the Republicans must abandon or soften many conservative positions so as to cater to the center.

California became a Democratic stronghold not because Californians became socialists, but because millions of socialists moved there.  Immigration turned California blue, and immigration is ultimately to blame for California’s high poverty level.

California used to be home to America’s largest and most affluent middle class.  Today, it is America’s poverty capital.  What went wrong?  In a word: immigration.

According to the U.S. Census Bureau’s Official Poverty Measure, California’s poverty rate hovers around 15 percent.  But this figure is misleading: the Census Bureau measures poverty relative to a uniform national standard, which doesn’t account for differences in living costs between states – the cost of taxes, housing, and health care are higher in California than in Oklahoma, for example.  Accounting for these differences reveals that California’s real poverty rate is 20.6 percent – the highest in America, and nearly twice the national average of 12.7 percent.

Likewise, income inequality in California is the second-highest in America, behind only New York.  In fact, if California were an independent country, it would be the 17th most unequal country on Earth, nestled comfortably between Honduras and Guatemala.  Mexico is slightly more egalitarian.  California is far more unequal than the “social democracies” it emulates: Canada is the 111th most unequal nation, while Norway is far down the list at number 153 (out of 176 countries).  In terms of income inequality, California has more in common with banana republics than other “social democracies.”

More Government, More Poverty

High taxes, excessive regulations, and a lavish welfare state – these are the standard explanations for California’s poverty epidemic.  They have some merit.  For example, California has both the highest personal income tax rate and the highest sales tax in America, according to Politifact.

Not only are California’s taxes high, but successive “progressive” governments have swamped the state in a sea of red tape.  Onerous regulations cripple small businesses and retard economic growth.  Kerry Jackson, a fellow with the Pacific Research Institute, gives a few specific examples of how excessive government regulation hurts California’s poor.  He writes in a recent op-ed for the Los Angeles Times:

Extensive environmental regulations aimed at reducing carbon dioxide emissions make energy more expensive, also hurting the poor.  By some estimates, California energy costs are as much as 50% higher than the national average.  Jonathan A. Lesser of Continental Economics … found that “in 2012, nearly 1 million California households faced … energy expenditures exceeding 10% of household income.”

Some government regulation is necessary and desirable, but most of California’s is not.  There is virtue in governing with a “light touch.”

Finally, California’s welfare state is, perhaps paradoxically, a source of poverty in the state.  The Orange Country Register reports that California’s social safety net is comparable in scale to those found in Europe:

In California a mother with two children under the age of 5 who participates in these major welfare programs – Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program (food stamps), housing assistance, home energy assistance, Special Supplemental Nutrition Program for Women, Infants and Children – would receive a benefits package worth $30,828 per year.


… [Similar] benefits in Europe ranged from $38,588 per year in Denmark to just $1,112 in Romania.  The California benefits package is higher than in well-known welfare states as France ($17,324), Germany ($23,257) and even Sweden ($22,111).

Although welfare states ideally help the poor, reality is messy.  There are three main problems with the welfare state.  First, it incentivizes poverty by rewarding the poor with government handouts that are often far more valuable than a job.  This can be ameliorated to some degree by imposing work requirements on welfare recipients, but in practice, such requirements are rarely imposed.  Second, welfare states are expensive.  This means higher taxes and therefore slower economic growth and fewer job opportunities for everyone – including the poor.

Finally, welfare states are magnets for the poor.  Whether through domestic migration or foreign immigration, poor people flock to places with generous welfare states.  This is logical from the immigrant’s perspective, but it makes little sense from the taxpayer’s.  This fact is why socialism and open borders are fundamentally incompatible.

Why Big Government?

Since 1960, California’s population exploded from 15.9 to 39 million people.  The growth was almost entirely due to immigration – many people came from other states, but the majority came from abroad.  The Public Policy Institute of California estimates that 10 million immigrants currently reside in California.  This works out to 26 percent of the state’s population.

This figure includes 2.4 million illegal aliens, although a recent study from Yale University suggests that the true number of aliens is at least double that.  Modifying the initial figure implies that nearly one in three Californians is an immigrant.  This is not to disparage California’s immigrant population, but it is madness to deny that such a large influx of people has changed California’s society and economy.

Importantly, immigrants vote Democrat by a ratio higher than 2:1, according to a report from the Center for Immigration Studies.  In California, immigration has increased the pool of likely Democrat voters by nearly 5 million people, compared to just 2.4 million additional likely Republican voters.  Not only does this almost guarantee Democratic victories, but it also shifts California’s political midpoint to the left.  This means that to remain competitive in elections, the Republicans must abandon or soften many conservative positions so as to cater to the center.

California became a Democratic stronghold not because Californians became socialists, but because millions of socialists moved there.  Immigration turned California blue, and immigration is ultimately to blame for California’s high poverty level.



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America's Farmers Don't Depend on Illegal Immigration


Liberals frame the debate over illegal immigration as a dilemma: either America grants amnesty to aliens or the economy will collapse.  Some even imply that Americans will starve to death because of higher food prices – who will pick America’s fruits and veggies if not illegals? Bruce Goldstein, president of a nonprofit called Farmworker Justice, boldly claims that if we were to deport all illegal aliens, “our agricultural system would collapse.”  Collapse.

This is nonsense.  American agriculture will not collapse without illegal labor.  Why?  Because there are plenty of technological solutions and American workers available to pick up the slack.  It is time to put this myth to bed.

Agriculture is not a labor-intensive industry, and it has not been for decades.  Less than 2 percent of Americans work in agriculture, according to the World Bank.  This figure has declined since 1960, when roughly 6 percent of Americans worked on farms.  If trends continue, we can expect the number to continue to fall.  This is because of the wonders of mechanization: machines now do everything from threshing wheat to milking cows.  The bottom line: Most farmers do not “benefit” from cheap illegal labor, since their labor costs are minimal to begin with. 

The “exceptions” to this rule are fruit and nut farms, located primarily in California.  Crops like raspberries and almonds are notoriously difficult for machines to pick.  There are many reasons for this, including the fact that berries require a “soft touch” – they ripen at different times, and bushes are tough for machinery to navigate.  These labor-intensive farms are the main agricultural culprits when it comes to hiring illegal workers.  After all, they have the most to gain.

But realistically, even labor-intensive agriculture does not depend upon illegal labor.  Orchards could get by without illegal workers since only four percent of American agricultural workers are illegal aliens, according to a report in National Review.  Likewise, only one in six workers in California’s nut orchards is an illegal alien.  Removing illegals from the system would be inconvenient for them, but it would not drive them out of business – the remaining employees would simply have to work a few hours of overtime per day.

Without Aliens, Who Will Pick the Crops?

There are two ways for the agriculture industry to replace illegal workers: they can either hire Americans or invest in better technology.

At this moment, there are roughly 23 million unemployed Americans, some of whom have experience in agriculture.  On top of this, America has a massive problem with seasonal unemployment for its college students.  Either way, there are more than enough Americans to fill the potential labor shortage.  The only reason Americans are not working in agriculture is because they are out-competed by cheap illegal workers.  Data from the Bureau of Labor Statistics reveals that millions of Americans – of all races – currently work as janitors, laborers, and agricultural workers.  If farmers were required to pay market wages, they would not have a problem finding employees.

The counterpoint: If farmers hire Americans, the price of food will go up!  Yes – but not by much.  Higher labor costs can result in higher prices only to the degree that labor impacts the product’s cost.  For example, higher wages for train conductors does not appreciably impact rail shipping costs because there are so few conductors per unit of freight – rail is capital-intensive.  Contrast this with some retail outlets that spend 70 percent of their revenue on labor costs.

Agriculture – even fruit and nut orchards – is relatively capital-intensive – i.e., the labor costs aren’t all that significant per unit of produce.  Proof is in the numbers.  A 2011 report published by the Federation for American Immigration Reform found that the agriculture industry was one of America’s most profitable sectors and could easily afford to pay its workers 20-30 percent more without significantly impacting profits.

Furthermore, research conducted by Philip Martin, a leading expert on farm labor and migration issues, found that labor costs are negligible compared to the retail cost of produce.  In 2006, Martin found that only 5-6 cents of every dollar spent on produce is due to labor costs.  Therefore, if illegal aliens were removed from the labor force entirely, and labor costs rose by up to 40 percent to attract American workers, labor would still only account for 7-9 cents.  Over the course of a year, this works out to just $9.00 extra for the average household.  This is nothing, especially when you remember that illegal immigration costs America between $115 billion and $140 billion annually.

The second option, improving technology and embracing mechanization, is the strategy employed by America’s wheat, corn, and dairy industries.  Ever had trouble affording flour or milk?  Probably not.  Thank mechanization for this fact, not illegal aliens.

Although adopting new technology can be expensive, it brings costs down in the long run.  And as it turns out, there is a good argument to be made that the American fruit and nut industry’s addiction to cheap illegal labor has stifled technological development and kept prices artificially high.  Farmers should and could mechanize – today.  The technology exists.  If only America’s fruit farms would embrace it.  For example, an American company called “Abundant Robotics” has developed a fruit-picking robot that can harvest apples and peaches.  Other companies have developed machines that are able to pick much smaller, more delicate fruit, like grapes and strawberries.

America’s farmers do not rely on illegal alien labor.  This is a myth cooked up by the pro-illegal immigration lobby to further its agenda.  Nothing more.  Meanwhile, America pays the price.

Liberals frame the debate over illegal immigration as a dilemma: either America grants amnesty to aliens or the economy will collapse.  Some even imply that Americans will starve to death because of higher food prices – who will pick America’s fruits and veggies if not illegals? Bruce Goldstein, president of a nonprofit called Farmworker Justice, boldly claims that if we were to deport all illegal aliens, “our agricultural system would collapse.”  Collapse.

This is nonsense.  American agriculture will not collapse without illegal labor.  Why?  Because there are plenty of technological solutions and American workers available to pick up the slack.  It is time to put this myth to bed.

Agriculture is not a labor-intensive industry, and it has not been for decades.  Less than 2 percent of Americans work in agriculture, according to the World Bank.  This figure has declined since 1960, when roughly 6 percent of Americans worked on farms.  If trends continue, we can expect the number to continue to fall.  This is because of the wonders of mechanization: machines now do everything from threshing wheat to milking cows.  The bottom line: Most farmers do not “benefit” from cheap illegal labor, since their labor costs are minimal to begin with. 

The “exceptions” to this rule are fruit and nut farms, located primarily in California.  Crops like raspberries and almonds are notoriously difficult for machines to pick.  There are many reasons for this, including the fact that berries require a “soft touch” – they ripen at different times, and bushes are tough for machinery to navigate.  These labor-intensive farms are the main agricultural culprits when it comes to hiring illegal workers.  After all, they have the most to gain.

But realistically, even labor-intensive agriculture does not depend upon illegal labor.  Orchards could get by without illegal workers since only four percent of American agricultural workers are illegal aliens, according to a report in National Review.  Likewise, only one in six workers in California’s nut orchards is an illegal alien.  Removing illegals from the system would be inconvenient for them, but it would not drive them out of business – the remaining employees would simply have to work a few hours of overtime per day.

Without Aliens, Who Will Pick the Crops?

There are two ways for the agriculture industry to replace illegal workers: they can either hire Americans or invest in better technology.

At this moment, there are roughly 23 million unemployed Americans, some of whom have experience in agriculture.  On top of this, America has a massive problem with seasonal unemployment for its college students.  Either way, there are more than enough Americans to fill the potential labor shortage.  The only reason Americans are not working in agriculture is because they are out-competed by cheap illegal workers.  Data from the Bureau of Labor Statistics reveals that millions of Americans – of all races – currently work as janitors, laborers, and agricultural workers.  If farmers were required to pay market wages, they would not have a problem finding employees.

The counterpoint: If farmers hire Americans, the price of food will go up!  Yes – but not by much.  Higher labor costs can result in higher prices only to the degree that labor impacts the product’s cost.  For example, higher wages for train conductors does not appreciably impact rail shipping costs because there are so few conductors per unit of freight – rail is capital-intensive.  Contrast this with some retail outlets that spend 70 percent of their revenue on labor costs.

Agriculture – even fruit and nut orchards – is relatively capital-intensive – i.e., the labor costs aren’t all that significant per unit of produce.  Proof is in the numbers.  A 2011 report published by the Federation for American Immigration Reform found that the agriculture industry was one of America’s most profitable sectors and could easily afford to pay its workers 20-30 percent more without significantly impacting profits.

Furthermore, research conducted by Philip Martin, a leading expert on farm labor and migration issues, found that labor costs are negligible compared to the retail cost of produce.  In 2006, Martin found that only 5-6 cents of every dollar spent on produce is due to labor costs.  Therefore, if illegal aliens were removed from the labor force entirely, and labor costs rose by up to 40 percent to attract American workers, labor would still only account for 7-9 cents.  Over the course of a year, this works out to just $9.00 extra for the average household.  This is nothing, especially when you remember that illegal immigration costs America between $115 billion and $140 billion annually.

The second option, improving technology and embracing mechanization, is the strategy employed by America’s wheat, corn, and dairy industries.  Ever had trouble affording flour or milk?  Probably not.  Thank mechanization for this fact, not illegal aliens.

Although adopting new technology can be expensive, it brings costs down in the long run.  And as it turns out, there is a good argument to be made that the American fruit and nut industry’s addiction to cheap illegal labor has stifled technological development and kept prices artificially high.  Farmers should and could mechanize – today.  The technology exists.  If only America’s fruit farms would embrace it.  For example, an American company called “Abundant Robotics” has developed a fruit-picking robot that can harvest apples and peaches.  Other companies have developed machines that are able to pick much smaller, more delicate fruit, like grapes and strawberries.

America’s farmers do not rely on illegal alien labor.  This is a myth cooked up by the pro-illegal immigration lobby to further its agenda.  Nothing more.  Meanwhile, America pays the price.



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Why Lowering Taxes Is Pointless


The Republican’s proposed Tax Cuts and Jobs Act is the archetypical tax reform bill: it lowers taxes but increases the Code’s complexity.  High taxes are bad, but a complex tax code is worse.  America deserves better.

This is not to say that high taxes are not a problem.  They are.  America is one of the most heavily taxed jurisdictions in the developed world, and high taxes are the main reason why so many firms move their head offices out of America and into low-tax jurisdictions like Canada and Ireland.  The corporate inversion epidemic is made in Washington, D.C.  High taxes also hurt individuals: according to the Tax Foundation, taxes cost Americans more out-of-pocket earnings than do shelter, clothing, and food combined.  Tax cuts are a must.

The Tax Cuts and Jobs Act largely delivers on this front.  The legislation will slash the corporate tax rate from 35 to 20 percent, reduce the number of individual income tax brackets, and double the basic personal deduction, which will let people shield more of their income from Uncle Sam.  And perhaps most importantly, the bill will remove loopholes that allow illegal aliens to collect some $23 billion in tax credits annually.

Not only that, but the act will likely generate economic growth.  The Tax Foundation, a nonpartisan public interest group, estimates that the Republican plan will create up to 1 million new jobs and increase GDP by 3.9 percent “over the long term.”  It also estimates that the average after-tax income for a middle-income family will grow by $2,598 over the next ten years as a direct result of the legislation.  This is good news, and it is consonant with research from the Council of Economic Advisers, which found that reducing the corporate tax rate from 35 to 20 percent will increase America’s GDP by 3 to 5 percent over the coming decade.

All that being said, Congress missed the mark.  The biggest problem with America’s tax system is complexity, not high rates.

Most people agree with this statement.  According to a 2017 Gallup poll, 51 percent of Americans think they pay too much in taxes.  The rest think they pay a fair amount.  Although America is divided over the tax rate, everyone agrees that complexity is a problem: fully 90 percent of Americans think the tax code is too difficult for ordinary people to understand.  Reducing tax complexity is something everyone agrees on and something America desperately needs.

The U.S. Tax Code has nearly tripled in length from President Ronald Reagan’s substantive reforms in 1986, and as of 2016, the Code proper is 2,650 pages long.  This works out to a staggering 3.7 million words.  To make matters worse, there are a further 70,000 pages of tax forms, instructions, and regulations taxpayers must also comply with.  On top of all that, there are innumerable court decisions that govern the way tax legislation and regulations are interpreted – ordinary people cannot easily access or understand them.

In all honesty, it is doubtful that any American alive today, including the very best New York tax attorneys, has read every piece of relevant tax law.  And even if someone has, there is no way he can remember how everything fits together.  The Code is just too long and too complex.

Complexity hurts American in a number of ways.  First, it costs money: American people and businesses spend big bucks hiring accountants and lawyers simply to comply with the Tax Code.  In fact, America spent an absurd $409 billion on tax compliance in 2016 – a record high.  This works out to roughly 7 billion wasted hours filing taxes, which is equivalent to 3.7 million people working full time for a year.

The high costs associated with filing taxes also hurts America by favoring big multinational corporations over local businesses.  Think about it.  Accountants and tax lawyers are expensive, and so are the potential consequences of filing an incomplete or incorrect tax return.  This puts many small businesses in a bind: either they shell out big money to tax specialists or they risk missing out on the plethora of obscure tax deductions.  If unlucky, the tax man may even pay them a visit.  Either way, complexity benefits big companies who can afford to deal with said complexity relative to local businesses.  Complexity is regressive.

Finally, complexity breeds corruption.  The more complex the Tax Code, the more places there are to hide goodies for special interests and donors.  For example, you can deduct up to $10,000 in taxable income for repairs to your whaling boat if you have one (and yes, whaling is mostly illegal).  Likewise, men are allowed to deduct up to $14,500 in taxable income for surgical operations to make them look like women.  Women can probably do the same in reverse, although it has not yet been litigated.  Deductions like these would not be available if the Code were simpler.

The Tax Cuts and Jobs Act is a decent stab at tax reform, but if Congress is serious about reform, it must focus on simplification, not cuts.

The Republican’s proposed Tax Cuts and Jobs Act is the archetypical tax reform bill: it lowers taxes but increases the Code’s complexity.  High taxes are bad, but a complex tax code is worse.  America deserves better.

This is not to say that high taxes are not a problem.  They are.  America is one of the most heavily taxed jurisdictions in the developed world, and high taxes are the main reason why so many firms move their head offices out of America and into low-tax jurisdictions like Canada and Ireland.  The corporate inversion epidemic is made in Washington, D.C.  High taxes also hurt individuals: according to the Tax Foundation, taxes cost Americans more out-of-pocket earnings than do shelter, clothing, and food combined.  Tax cuts are a must.

The Tax Cuts and Jobs Act largely delivers on this front.  The legislation will slash the corporate tax rate from 35 to 20 percent, reduce the number of individual income tax brackets, and double the basic personal deduction, which will let people shield more of their income from Uncle Sam.  And perhaps most importantly, the bill will remove loopholes that allow illegal aliens to collect some $23 billion in tax credits annually.

Not only that, but the act will likely generate economic growth.  The Tax Foundation, a nonpartisan public interest group, estimates that the Republican plan will create up to 1 million new jobs and increase GDP by 3.9 percent “over the long term.”  It also estimates that the average after-tax income for a middle-income family will grow by $2,598 over the next ten years as a direct result of the legislation.  This is good news, and it is consonant with research from the Council of Economic Advisers, which found that reducing the corporate tax rate from 35 to 20 percent will increase America’s GDP by 3 to 5 percent over the coming decade.

All that being said, Congress missed the mark.  The biggest problem with America’s tax system is complexity, not high rates.

Most people agree with this statement.  According to a 2017 Gallup poll, 51 percent of Americans think they pay too much in taxes.  The rest think they pay a fair amount.  Although America is divided over the tax rate, everyone agrees that complexity is a problem: fully 90 percent of Americans think the tax code is too difficult for ordinary people to understand.  Reducing tax complexity is something everyone agrees on and something America desperately needs.

The U.S. Tax Code has nearly tripled in length from President Ronald Reagan’s substantive reforms in 1986, and as of 2016, the Code proper is 2,650 pages long.  This works out to a staggering 3.7 million words.  To make matters worse, there are a further 70,000 pages of tax forms, instructions, and regulations taxpayers must also comply with.  On top of all that, there are innumerable court decisions that govern the way tax legislation and regulations are interpreted – ordinary people cannot easily access or understand them.

In all honesty, it is doubtful that any American alive today, including the very best New York tax attorneys, has read every piece of relevant tax law.  And even if someone has, there is no way he can remember how everything fits together.  The Code is just too long and too complex.

Complexity hurts American in a number of ways.  First, it costs money: American people and businesses spend big bucks hiring accountants and lawyers simply to comply with the Tax Code.  In fact, America spent an absurd $409 billion on tax compliance in 2016 – a record high.  This works out to roughly 7 billion wasted hours filing taxes, which is equivalent to 3.7 million people working full time for a year.

The high costs associated with filing taxes also hurts America by favoring big multinational corporations over local businesses.  Think about it.  Accountants and tax lawyers are expensive, and so are the potential consequences of filing an incomplete or incorrect tax return.  This puts many small businesses in a bind: either they shell out big money to tax specialists or they risk missing out on the plethora of obscure tax deductions.  If unlucky, the tax man may even pay them a visit.  Either way, complexity benefits big companies who can afford to deal with said complexity relative to local businesses.  Complexity is regressive.

Finally, complexity breeds corruption.  The more complex the Tax Code, the more places there are to hide goodies for special interests and donors.  For example, you can deduct up to $10,000 in taxable income for repairs to your whaling boat if you have one (and yes, whaling is mostly illegal).  Likewise, men are allowed to deduct up to $14,500 in taxable income for surgical operations to make them look like women.  Women can probably do the same in reverse, although it has not yet been litigated.  Deductions like these would not be available if the Code were simpler.

The Tax Cuts and Jobs Act is a decent stab at tax reform, but if Congress is serious about reform, it must focus on simplification, not cuts.



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There Can Be No Compromise on Immigration Reform


On October 8, the White House released a list of “Immigration Principles and Policies” that President Trump says “must be included” in any legislation legitimizing President Obama’s Deferred Action for Childhood Arrivals executive order (DACA).  Trump is cutting a deal: Congress gets DACA if Trump gets immigration reform. 

The million-dollar question: is it a good deal?  No, unfortunately.

Before getting into the details, it is worth briefly reviewing DACA and highlighting Trump’s key demands.

Summing up DACA: President Obama signed an executive order in June 2012 that let all illegal aliens who arrived in America before they were age 16 apply for legal work permits, Social Security numbers, and driver’s licenses and made them eligible for earned income tax credits.  The order gives recipients most of the privileges associated with citizenship.  Enrollment must be renewed every two years.  Since 2012, nearly 800,000 illegal aliens have taken advantage of the program – most of them adults.  Basically, DACA is renewable amnesty.

Depending upon how broadly Congress legislates on DACA, somewhere between 800,000 and 3.5 million people could be granted de facto amnesty and given a pathway to citizenship.  Remember: not everyone who can enroll in DACA is enrolled.  This is an enormous number of people, comparable in scale to the Reagan-era amnesty.

On the other side of the equation are President Trump’s demands. In exchange for DACA, Trump wants funding for the wall (the House Homeland Security Committee has already allocated $10 billion toward the wall); an extra 10,000 ICE officers, 1,000 immigration lawyers, and 370 judges to help clear the deportation backlog; legislative penalties for “sanctuary cities”; an E-Verify system to bar illegals from the job market; passage of the RAISE Act; and a number of other minor concessions.

Of these reforms, the RAISE Act is the most significant.  Very briefly, the RAISE Act is an immigration reform bill sponsored by Senators Tom Cotton (R-Ark.) and David Perdue (R-Ga.).  The act would not only cut legal immigration into the U.S. by roughly 50 percent, but break the cycle of chain migration by giving priority to economically valuable immigrants rather than those with family connections.  If passed, the RAISE Act would be the most significant piece of immigration legislation since the Immigration and Nationality Act of 1965, which ushered in the era of mass migration.

It is difficult to overstate the economic benefits of the RAISE Act, which are twofold.  First, the legislation would reduce overall immigration levels significantly.  Second, it would better calibrate the type of immigrants arriving in the U.S.

Reducing the overall level of immigration is important because America’s economy does not need additional labor.  The labor market is over-saturated as is.  Real unemployment remains high, and there is no sense exacerbating the problem.  Furthermore, fewer immigrants would help improve working conditions and wages for U.S. citizens.  This has already begun in a few locations – the logic is sound and empirically valid.  And fewer low-skilled immigrants means fewer people on welfare.

The act also ensures that America gets high-quality, skilled immigrants by prioritizing people with valuable skills.  This is the type of immigrants most likely to help expand the economy in the long run – immigrants whom U.S. policy should have been targeting for decades.

Trump Should Not Surrender on DACA

All that being said, President Trump should not trade DACA for the RAISE Act – nor for the other assorted goodies.  Why not?  It all boils down to political asymmetries.

There is little doubt that President Trump’s demands are more valuable than DACA on paper: DACA would grant residency to, at most, 3.5 million people, whereas the RAISE Act would cut immigration by 500,000 people per year.  Therefore, it should not take long for the benefits of ongoing immigration reduction to outweigh the one-time costs associated with preserving DACA.  Furthermore, the RAISE Act would prevent a wave of chain migration in the wake of a DACA amnesty, setting aside another major concern.

However, this assumes that the RAISE Act will last.  It will not, and herein lies the political asymmetry.

The Democratic Party lost the war of ideas decades ago and now depends upon immigrant voters to survive.  In fact, a report from the Center for Immigration Studies shows that immigrants vote left by a ratio of at least 2:1, and the gap is widening.  This has major political consequences – especially since there are now over 40 million legal immigrants in America.  For example, the last presidential election Democrats won without immigrant voters was that of Lyndon B. Johnson back in 1964 (excluding Ross Perot’s vote-splitting antics in 1992).

Democrats need immigration, and they know it.  Should the RAISE Act pass, the Democrats will work night and day to repeal it.  Eventually, they will succeed.  After all, the RAISE Act is just a piece of ordinary legislation.  Conversely, a DACA amnesty will not be reversible – given how bitterly divided America is over the deportation of illegal immigrants, the likelihood of successfully stripping residency or citizenship rights from amnesty recipients is basically nil.  Amnesty is permanent; immigration reform is not.  The same goes for just about everything else on President Trump’s list – with the exception of the wall, perhaps.

There can be no deal on DACA and no compromise on immigration reform until the Democrats stop playing identity politics and begin putting Americans first.  President Trump would be wise to acknowledge this.

On October 8, the White House released a list of “Immigration Principles and Policies” that President Trump says “must be included” in any legislation legitimizing President Obama’s Deferred Action for Childhood Arrivals executive order (DACA).  Trump is cutting a deal: Congress gets DACA if Trump gets immigration reform. 

The million-dollar question: is it a good deal?  No, unfortunately.

Before getting into the details, it is worth briefly reviewing DACA and highlighting Trump’s key demands.

Summing up DACA: President Obama signed an executive order in June 2012 that let all illegal aliens who arrived in America before they were age 16 apply for legal work permits, Social Security numbers, and driver’s licenses and made them eligible for earned income tax credits.  The order gives recipients most of the privileges associated with citizenship.  Enrollment must be renewed every two years.  Since 2012, nearly 800,000 illegal aliens have taken advantage of the program – most of them adults.  Basically, DACA is renewable amnesty.

Depending upon how broadly Congress legislates on DACA, somewhere between 800,000 and 3.5 million people could be granted de facto amnesty and given a pathway to citizenship.  Remember: not everyone who can enroll in DACA is enrolled.  This is an enormous number of people, comparable in scale to the Reagan-era amnesty.

On the other side of the equation are President Trump’s demands. In exchange for DACA, Trump wants funding for the wall (the House Homeland Security Committee has already allocated $10 billion toward the wall); an extra 10,000 ICE officers, 1,000 immigration lawyers, and 370 judges to help clear the deportation backlog; legislative penalties for “sanctuary cities”; an E-Verify system to bar illegals from the job market; passage of the RAISE Act; and a number of other minor concessions.

Of these reforms, the RAISE Act is the most significant.  Very briefly, the RAISE Act is an immigration reform bill sponsored by Senators Tom Cotton (R-Ark.) and David Perdue (R-Ga.).  The act would not only cut legal immigration into the U.S. by roughly 50 percent, but break the cycle of chain migration by giving priority to economically valuable immigrants rather than those with family connections.  If passed, the RAISE Act would be the most significant piece of immigration legislation since the Immigration and Nationality Act of 1965, which ushered in the era of mass migration.

It is difficult to overstate the economic benefits of the RAISE Act, which are twofold.  First, the legislation would reduce overall immigration levels significantly.  Second, it would better calibrate the type of immigrants arriving in the U.S.

Reducing the overall level of immigration is important because America’s economy does not need additional labor.  The labor market is over-saturated as is.  Real unemployment remains high, and there is no sense exacerbating the problem.  Furthermore, fewer immigrants would help improve working conditions and wages for U.S. citizens.  This has already begun in a few locations – the logic is sound and empirically valid.  And fewer low-skilled immigrants means fewer people on welfare.

The act also ensures that America gets high-quality, skilled immigrants by prioritizing people with valuable skills.  This is the type of immigrants most likely to help expand the economy in the long run – immigrants whom U.S. policy should have been targeting for decades.

Trump Should Not Surrender on DACA

All that being said, President Trump should not trade DACA for the RAISE Act – nor for the other assorted goodies.  Why not?  It all boils down to political asymmetries.

There is little doubt that President Trump’s demands are more valuable than DACA on paper: DACA would grant residency to, at most, 3.5 million people, whereas the RAISE Act would cut immigration by 500,000 people per year.  Therefore, it should not take long for the benefits of ongoing immigration reduction to outweigh the one-time costs associated with preserving DACA.  Furthermore, the RAISE Act would prevent a wave of chain migration in the wake of a DACA amnesty, setting aside another major concern.

However, this assumes that the RAISE Act will last.  It will not, and herein lies the political asymmetry.

The Democratic Party lost the war of ideas decades ago and now depends upon immigrant voters to survive.  In fact, a report from the Center for Immigration Studies shows that immigrants vote left by a ratio of at least 2:1, and the gap is widening.  This has major political consequences – especially since there are now over 40 million legal immigrants in America.  For example, the last presidential election Democrats won without immigrant voters was that of Lyndon B. Johnson back in 1964 (excluding Ross Perot’s vote-splitting antics in 1992).

Democrats need immigration, and they know it.  Should the RAISE Act pass, the Democrats will work night and day to repeal it.  Eventually, they will succeed.  After all, the RAISE Act is just a piece of ordinary legislation.  Conversely, a DACA amnesty will not be reversible – given how bitterly divided America is over the deportation of illegal immigrants, the likelihood of successfully stripping residency or citizenship rights from amnesty recipients is basically nil.  Amnesty is permanent; immigration reform is not.  The same goes for just about everything else on President Trump’s list – with the exception of the wall, perhaps.

There can be no deal on DACA and no compromise on immigration reform until the Democrats stop playing identity politics and begin putting Americans first.  President Trump would be wise to acknowledge this.



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Imposing Sanctions on Venezuela Will Only Make Things Worse


The Trump administration is considering imposing sanctions on Venezuela by blocking their oil from U.S. ports. Likewise, UN ambassador Nikki Haley criticized the regime of Nicolas Maduro, and confirmed that oil sanctions “are not off the table.” This is tactical escalation: last month President Trump advocated for a more finely-targeted approach by limiting Venezuela’s access to American financial institutions, now oil is in the crosshairs. This is regrettable: sanctions on Venezuelan oil will likely do more harm than good, and will punish the wrong people.

To be clear: Venezuela is a horrible place to live, and the government is solely to blame. Their corruption, incompetence, and ideological fervor has transformed South America’s richest economy into a poverty-stricken backwater. Against all the odds, the socialist government has managed to create starvation in a land of rich soils and year-round growing seasons- -people are literally breaking into zoos to eating zebras to survive. Likewise, they have impoverished a nation that sits on the world’s largest oil reserves: not even Saudi Arabia’s brutal despots are this foolish.

Nevertheless, imposing sanctions on Venezuelan oil is a bad idea. The main reason for this is that sanctions are generally ineffective if imposed on fungible goods, meaning that said goods are completely interchangeable on international markets. Oil is a fungible good. Therefore, apart from the initial logistical disruption, boycotting Venezuelan oil will likely have little impact on their exports — Venezuela will simply sell more to Europe, China, and South America, while we buy more from Saudi Arabia. Remember, Europeans do not condemn Venezuela’s socialist dictatorship, and China is actively courting South Americans as allies and trading partners. Without Europe and China on-board, an oil embargo will have little chance at succeeding.

For the sake of argument, assume the sanctions are effective, and Venezuela’s economy is completely ruined by America’s import ban. Would it matter? Venezuela’s ruling class is insulated from the general population, and cares little about their wellbeing. The fact is that most autocrats would rather let millions starve to death than relinquish their power — we have seen this before in North Korea, Cuba, and the USSR. Venezuela is no different: brutal street battles have been fought, people are starving, and still the government continues trying to manifest its socialist utopia. Sanctioning Venezuelan oil will not impact the government aristocracy, it will simply impoverish ordinary people.

Many historical examples prove this point. Recall how our sanctions on Syria caused starvation, and contributed to the rise of ISIS, but had literally zero impact on the welfare of Bashar al-Assad, or the rest of the ruling elite. Sanctions made Syria poorer, not its ruling class. The same was true in Cuba and Iran. Worth reading is this report from the Foundation for Economic Education: it looks at the impact of sanctions in the Balkans, and finds that sanctions do not work, they just further concentrate power in the hands of the ruling class.

There are also broader political ramifications worth considering. Economics and politics are intertwined:  attacking an authoritarian regime economically plays into said regime’s political narrative, and can strengthen said regime. Simply put: sanctions will empower President Maduro. Consider the case in the former USSR. Every time America engaged in economic warfare against the USSR, no matter how much damage it did, it gave credence to the Soviet government’s narrative: the U.S. is an evil empire trying to destroy the USSR and harm its people. America played right into their hands. And of course, the same thing happened in North Korea and Cuba — the political strength of their regimes was intimately tied to their economic hardship. The same will be true in Venezuela: sanctions will unite Venezuelans against a foreign “enemy”, and this will do more harm than good.

Finally, sanctions can be counterproductive because they limit the organic spread of Western values. Western values terrify dictatorships. Why? Because freedom is natural. Desirable. It spreads all by itself. This is why authoritarian regimes expend great time and energy to scrub the internet of Western influences — they do not want their people “getting any ideas”. These values do not just spread through popular culture, they spread through commercial connections. When we do business with foreigners, we give them a glimpse of what it is like in America. They experience a little bit of freedom, and wealth. The spread of free markets, and the riches they generate, is what ultimately opened up China, and it is what continues to reduce the power of the Communist Party. By imposing sanctions, America will end up helping Maduro, doing his dirty work for him. The best way to liberalize Venezuela is to increase economic ties with them.

Sanctions have a mixed record, to put it lightly. Sometimes they are effective, but often they are entirely counterproductive, and end up strengthening the foreign regime. The Trump administration must be careful not to make things worse — especially since Venezuela will collapse on its own. Instead, he should focus on growing the economy and avoiding foreign excursions, as he promised.

The Trump administration is considering imposing sanctions on Venezuela by blocking their oil from U.S. ports. Likewise, UN ambassador Nikki Haley criticized the regime of Nicolas Maduro, and confirmed that oil sanctions “are not off the table.” This is tactical escalation: last month President Trump advocated for a more finely-targeted approach by limiting Venezuela’s access to American financial institutions, now oil is in the crosshairs. This is regrettable: sanctions on Venezuelan oil will likely do more harm than good, and will punish the wrong people.

To be clear: Venezuela is a horrible place to live, and the government is solely to blame. Their corruption, incompetence, and ideological fervor has transformed South America’s richest economy into a poverty-stricken backwater. Against all the odds, the socialist government has managed to create starvation in a land of rich soils and year-round growing seasons- -people are literally breaking into zoos to eating zebras to survive. Likewise, they have impoverished a nation that sits on the world’s largest oil reserves: not even Saudi Arabia’s brutal despots are this foolish.

Nevertheless, imposing sanctions on Venezuelan oil is a bad idea. The main reason for this is that sanctions are generally ineffective if imposed on fungible goods, meaning that said goods are completely interchangeable on international markets. Oil is a fungible good. Therefore, apart from the initial logistical disruption, boycotting Venezuelan oil will likely have little impact on their exports — Venezuela will simply sell more to Europe, China, and South America, while we buy more from Saudi Arabia. Remember, Europeans do not condemn Venezuela’s socialist dictatorship, and China is actively courting South Americans as allies and trading partners. Without Europe and China on-board, an oil embargo will have little chance at succeeding.

For the sake of argument, assume the sanctions are effective, and Venezuela’s economy is completely ruined by America’s import ban. Would it matter? Venezuela’s ruling class is insulated from the general population, and cares little about their wellbeing. The fact is that most autocrats would rather let millions starve to death than relinquish their power — we have seen this before in North Korea, Cuba, and the USSR. Venezuela is no different: brutal street battles have been fought, people are starving, and still the government continues trying to manifest its socialist utopia. Sanctioning Venezuelan oil will not impact the government aristocracy, it will simply impoverish ordinary people.

Many historical examples prove this point. Recall how our sanctions on Syria caused starvation, and contributed to the rise of ISIS, but had literally zero impact on the welfare of Bashar al-Assad, or the rest of the ruling elite. Sanctions made Syria poorer, not its ruling class. The same was true in Cuba and Iran. Worth reading is this report from the Foundation for Economic Education: it looks at the impact of sanctions in the Balkans, and finds that sanctions do not work, they just further concentrate power in the hands of the ruling class.

There are also broader political ramifications worth considering. Economics and politics are intertwined:  attacking an authoritarian regime economically plays into said regime’s political narrative, and can strengthen said regime. Simply put: sanctions will empower President Maduro. Consider the case in the former USSR. Every time America engaged in economic warfare against the USSR, no matter how much damage it did, it gave credence to the Soviet government’s narrative: the U.S. is an evil empire trying to destroy the USSR and harm its people. America played right into their hands. And of course, the same thing happened in North Korea and Cuba — the political strength of their regimes was intimately tied to their economic hardship. The same will be true in Venezuela: sanctions will unite Venezuelans against a foreign “enemy”, and this will do more harm than good.

Finally, sanctions can be counterproductive because they limit the organic spread of Western values. Western values terrify dictatorships. Why? Because freedom is natural. Desirable. It spreads all by itself. This is why authoritarian regimes expend great time and energy to scrub the internet of Western influences — they do not want their people “getting any ideas”. These values do not just spread through popular culture, they spread through commercial connections. When we do business with foreigners, we give them a glimpse of what it is like in America. They experience a little bit of freedom, and wealth. The spread of free markets, and the riches they generate, is what ultimately opened up China, and it is what continues to reduce the power of the Communist Party. By imposing sanctions, America will end up helping Maduro, doing his dirty work for him. The best way to liberalize Venezuela is to increase economic ties with them.

Sanctions have a mixed record, to put it lightly. Sometimes they are effective, but often they are entirely counterproductive, and end up strengthening the foreign regime. The Trump administration must be careful not to make things worse — especially since Venezuela will collapse on its own. Instead, he should focus on growing the economy and avoiding foreign excursions, as he promised.



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Trump Must Keep His Promise: Repeal DACA


Both the president and Congress are struggling to commit to a stable course of action regarding President Obama’s Deferred Action for Childhood Arrivals (DACA) program.  Do they scrap it or keep it?  Although there are legitimate arguments favoring either option, DACA should nevertheless be repealed.

Very quickly, what is DACA?  It is an executive order signed by President Obama in June 2012 that allowed all illegal aliens who arrived in America before they were aged 16 to apply for legal work permits, Social Security numbers, and driver’s licenses and made them eligible for earned income tax credits.  Enrollment must be renewed every two years.  Since 2012, nearly 800,000 illegal aliens have taken advantage of DACA – most of them adults.  Essentially, DACA grants participants the rights and privileges normally associated with legal entry into America.  It is renewable amnesty.

There are three main problems with DACA.  The first is that it undermines the rule of law in a fundamental way.  In signing DACA, President Obama overstepped his authority and violated the division of powers as laid out in the Constitution.  DACA was and is a usurpation of legislative power; it is a knife in Congress’s back.  This republic was constructed according to a number of axioms, one being that different arms of government have different parts to play and that each arm checks and balances the others.  Congress is the seat of legislative authority.  Representatives make, amend, and repeal laws and have power over the purse.  The office of the president is the seat of executive authority: the president enforces the law and serves as our commander-in-chief.

President Obama signed DACA because Congress was unwilling to legislate on the subject – as was Congress’s prerogative.  The president does not have the right to create stopgap legislation like DACA, and the fact the DACA has remained this long is a testament to Congress’s weakness.  Ironically, even Obama was, at least theoretically, aware of this.  In 2011, Obama himself said, “For me to simply through executive order ignore those congressional mandates would not conform with my appropriate role as president.”  America agrees.  Trump must scrap DACA to restore some semblance of balance to government.

The second problem with DACA is that it created an enormous incentive for people to enter America illegally – as might be expected with any other form of amnesty.  DACA sent a clear message to the millions or poor who would migrate to America: beat the border patrol, and you will (eventually) be allowed to stay.

Amnesty is not a solution; it is part of the problem – it transforms America into a giant lure.  The evidence for this is overwhelming: it is no secret that DACA caused an unprecedented spike in youth migration into America.  Likewise, consider that Reagan’s 1986 Immigration Reform and Control Act, which granted 2.7 million people legal status, sparked the beginnings of the greatest tidal wave of illegal immigration in this nation’s history.  Now compare this to the approach President Eisenhower took when he deported nearly 3 million illegal migrants: no more came for some thirty years.  Incentives matter.

Lastly, President Trump is right to scrap DACA on economic grounds.  Why?  It boils down to supply and demand.  Consider the apple market: if the supply of apples increases, what happens?  The price of apples goes down.  What happens if a stiff frost kills off most the apples, leading to a shortage?  The price of applies rises, since there are fewer apples to go around.  Labor markets work the same way: more workers means lower wages, while fewer workers means higher wages.

DACA adds some 720,000 legal workers into America’s market.  These people compete with American workers, driving down wages and increasing unemployment rates.  This is axiomatic: even the pro-DACA Cato Institute acknowledges this fact, saying American companies will begin “recruiting, hiring, and training” Americans to fill the void.

Theory aside, there is ample evidence for this fact.  For example, before Hurricane Harvey, President Trump’s crackdown on illegal aliens had already caused wages for construction workers to rise by 30 percent (half of Texas’s construction workers were illegal aliens).  In light of recent events, their wages will likely rise even higher – but we can still attribute a significant portion of said rise to labor market constrictions.  Likewise, towns in Maine were forced to hire American workers after the availability of visas for temporary foreign workers declined.  What happened?  Unemployment decreased, wages increased, and working conditions improved in order to attract American workers.

Illegal workers have thoroughly distorted America’s labor markets and hurt the bulk of her citizenry.  Illegal immigration is bad for the economy.  This is an empirical fact, not a point of contention.

For five long years, DACA has enshrined the rights of illegal aliens and put them above those of American citizens.  It is a slap in the face to Congress, the rule of law, and the common man.  President Trump must scrap DACA – and if he will not, Congress should.

Both the president and Congress are struggling to commit to a stable course of action regarding President Obama’s Deferred Action for Childhood Arrivals (DACA) program.  Do they scrap it or keep it?  Although there are legitimate arguments favoring either option, DACA should nevertheless be repealed.

Very quickly, what is DACA?  It is an executive order signed by President Obama in June 2012 that allowed all illegal aliens who arrived in America before they were aged 16 to apply for legal work permits, Social Security numbers, and driver’s licenses and made them eligible for earned income tax credits.  Enrollment must be renewed every two years.  Since 2012, nearly 800,000 illegal aliens have taken advantage of DACA – most of them adults.  Essentially, DACA grants participants the rights and privileges normally associated with legal entry into America.  It is renewable amnesty.

There are three main problems with DACA.  The first is that it undermines the rule of law in a fundamental way.  In signing DACA, President Obama overstepped his authority and violated the division of powers as laid out in the Constitution.  DACA was and is a usurpation of legislative power; it is a knife in Congress’s back.  This republic was constructed according to a number of axioms, one being that different arms of government have different parts to play and that each arm checks and balances the others.  Congress is the seat of legislative authority.  Representatives make, amend, and repeal laws and have power over the purse.  The office of the president is the seat of executive authority: the president enforces the law and serves as our commander-in-chief.

President Obama signed DACA because Congress was unwilling to legislate on the subject – as was Congress’s prerogative.  The president does not have the right to create stopgap legislation like DACA, and the fact the DACA has remained this long is a testament to Congress’s weakness.  Ironically, even Obama was, at least theoretically, aware of this.  In 2011, Obama himself said, “For me to simply through executive order ignore those congressional mandates would not conform with my appropriate role as president.”  America agrees.  Trump must scrap DACA to restore some semblance of balance to government.

The second problem with DACA is that it created an enormous incentive for people to enter America illegally – as might be expected with any other form of amnesty.  DACA sent a clear message to the millions or poor who would migrate to America: beat the border patrol, and you will (eventually) be allowed to stay.

Amnesty is not a solution; it is part of the problem – it transforms America into a giant lure.  The evidence for this is overwhelming: it is no secret that DACA caused an unprecedented spike in youth migration into America.  Likewise, consider that Reagan’s 1986 Immigration Reform and Control Act, which granted 2.7 million people legal status, sparked the beginnings of the greatest tidal wave of illegal immigration in this nation’s history.  Now compare this to the approach President Eisenhower took when he deported nearly 3 million illegal migrants: no more came for some thirty years.  Incentives matter.

Lastly, President Trump is right to scrap DACA on economic grounds.  Why?  It boils down to supply and demand.  Consider the apple market: if the supply of apples increases, what happens?  The price of apples goes down.  What happens if a stiff frost kills off most the apples, leading to a shortage?  The price of applies rises, since there are fewer apples to go around.  Labor markets work the same way: more workers means lower wages, while fewer workers means higher wages.

DACA adds some 720,000 legal workers into America’s market.  These people compete with American workers, driving down wages and increasing unemployment rates.  This is axiomatic: even the pro-DACA Cato Institute acknowledges this fact, saying American companies will begin “recruiting, hiring, and training” Americans to fill the void.

Theory aside, there is ample evidence for this fact.  For example, before Hurricane Harvey, President Trump’s crackdown on illegal aliens had already caused wages for construction workers to rise by 30 percent (half of Texas’s construction workers were illegal aliens).  In light of recent events, their wages will likely rise even higher – but we can still attribute a significant portion of said rise to labor market constrictions.  Likewise, towns in Maine were forced to hire American workers after the availability of visas for temporary foreign workers declined.  What happened?  Unemployment decreased, wages increased, and working conditions improved in order to attract American workers.

Illegal workers have thoroughly distorted America’s labor markets and hurt the bulk of her citizenry.  Illegal immigration is bad for the economy.  This is an empirical fact, not a point of contention.

For five long years, DACA has enshrined the rights of illegal aliens and put them above those of American citizens.  It is a slap in the face to Congress, the rule of law, and the common man.  President Trump must scrap DACA – and if he will not, Congress should.



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Switzerland's Carbon Capture Plant Is a Giant Waste of Money


On May 31, 2017 the world’s first commercial atmospheric carbon-capture plant opened for business in Hinwil, Switzerland.

The plant, designed and operated by a Swiss company called Climeworks, is different from existing carbon-capture facilities because it filters carbon dioxide out of the ambient atmosphere using proprietary technology, rather than from industrial exhaust, which is quite common.

Climeworks claims their facility will be able to remove 900 tons of carbon from the atmosphere every year. Furthermore, its modular design will allow it to be scaled up as the demand for carbon dioxide increases. 

What do they plan to do with said carbon? Some of it will be pumped into nearby greenhouses to help the plants grow better, some will be used in carbonated beverages, and the rest will be sequestered deep underground in Swiss mines. The point? To stop climate change. Whether or not this is a worthy goal is beyond the scope of this article, but for the sake of argument, assume that climate change is a clear and present danger–even an existential threat. Does this project make sense?

No.

First of all, given the quantity of carbon Climework’s plant is able to filter from the atmosphere, it would take some 250,000 such facilities to meet even the relatively modest carbon sequestration goals recommended by the Intergovernmental Panel on Climate Change–that is 1% of total emissions by 2025. Presumably building these would cost a lot of money (although in fairness, Climeworks had not disclosed the cost of its project).

Also, in order for the company to be profitable, the carbon must be sold to greenhouses and pop manufacturers. Has it occurred to any of these “environmentalists” that the moment the lettuce is shipped out of the greenhouse, or the can of Sprite is opened that the carbon dioxide simply returns to the atmosphere. This plant will mostly just move carbon around, and is therefore useless.

The only way this facility actually removes carbon from the atmosphere is via sequestration, which is clearly not profitable. This means taxpayers will inevitably be on the hook for this “business” venture. Of course, carbon is used in oil wells, but more than enough of that is harvested locally from exhaust–no one needs Swiss atmospheric carbon.

Finally, Climeworks, and the entire green technology industry for that matter, appears to have forgotten that trees exist.  Yes, trees. Trees naturally remove carbon from the atmosphere, and give us beautiful breathable oxygen. They basically do exactly what Climeworks does, except they are free–or dirt-cheap at the very least.

The best part is that trees are also very good at what they do. Depending on the climate and the type of tree, they can remove enormous amounts of carbon from the atmosphere, and lock it away for centuries. In numerical terms, it only takes 98 “mature” trees (trees that can grow at least 20lb per year) to remove one ton of carbon dioxide from the atmosphere, and this number is for Canadian trees, which are not particularly verdant.

This means that Climeworks’ facility does the work of just 88,200 trees per year. This is nothing, in the grand scheme of things: there are non-profit groups that will plant saplings for pennies, and at most, dollars. One relatively large tree-planting charity estimates that their all-in costs are roughly $1 per tree.  If this is the case, then Climework’s facility has a fair market value of just $88,200.

Of course, given the scale of the project, and the research that went into designing the proprietary technology, the Hinwil facility probably cost millions.

Interestingly, planting trees is not even the best, or most economical way to tackle the “problem” of atmospheric carbon levels. A better option would simply be to stop clearing vast swathes of virgin land for new agricultural and urban development. Take Australia for example: they could meet their obligations to the Paris Climate Agreement by doing nothing other than prohibiting new land-clearing  projects. The cost would be negligible when compared to switching to renewable energy.

The same is true in America, Russia, Indonesia–all over the world, as it turns out.

But of course, cheap, commonsense approaches like this lack the sex-appeal that green technology proponents crave. Not coincidentally, they also lack the wealth-redistribution component that has made welfare billionaires like Elon Musk rich. And that gets to the heart of the matter: green energy schemes are not about helping the environment, and never were. They are about getting rich. This is why the focus is always on expensive solutions, like thickening the Arctic ice sheet by refreezing it with thousands of wind turbines for a cool $500 billion–yes, that is a real idea.

Climeworks’ carbon-capture facility is no different than any of the other failed climate fixes. It is just an expensive way to do nothing.

Spencer P Morrison is a JD candidate, writer, and independent intellectual with a focus on applied philosophy, empirical history, and practical economics. Author of America Betrayed and Editor-In-Chief of the National Economics Editorial.

 

On May 31, 2017 the world’s first commercial atmospheric carbon-capture plant opened for business in Hinwil, Switzerland.

The plant, designed and operated by a Swiss company called Climeworks, is different from existing carbon-capture facilities because it filters carbon dioxide out of the ambient atmosphere using proprietary technology, rather than from industrial exhaust, which is quite common.

Climeworks claims their facility will be able to remove 900 tons of carbon from the atmosphere every year. Furthermore, its modular design will allow it to be scaled up as the demand for carbon dioxide increases. 

What do they plan to do with said carbon? Some of it will be pumped into nearby greenhouses to help the plants grow better, some will be used in carbonated beverages, and the rest will be sequestered deep underground in Swiss mines. The point? To stop climate change. Whether or not this is a worthy goal is beyond the scope of this article, but for the sake of argument, assume that climate change is a clear and present danger–even an existential threat. Does this project make sense?

No.

First of all, given the quantity of carbon Climework’s plant is able to filter from the atmosphere, it would take some 250,000 such facilities to meet even the relatively modest carbon sequestration goals recommended by the Intergovernmental Panel on Climate Change–that is 1% of total emissions by 2025. Presumably building these would cost a lot of money (although in fairness, Climeworks had not disclosed the cost of its project).

Also, in order for the company to be profitable, the carbon must be sold to greenhouses and pop manufacturers. Has it occurred to any of these “environmentalists” that the moment the lettuce is shipped out of the greenhouse, or the can of Sprite is opened that the carbon dioxide simply returns to the atmosphere. This plant will mostly just move carbon around, and is therefore useless.

The only way this facility actually removes carbon from the atmosphere is via sequestration, which is clearly not profitable. This means taxpayers will inevitably be on the hook for this “business” venture. Of course, carbon is used in oil wells, but more than enough of that is harvested locally from exhaust–no one needs Swiss atmospheric carbon.

Finally, Climeworks, and the entire green technology industry for that matter, appears to have forgotten that trees exist.  Yes, trees. Trees naturally remove carbon from the atmosphere, and give us beautiful breathable oxygen. They basically do exactly what Climeworks does, except they are free–or dirt-cheap at the very least.

The best part is that trees are also very good at what they do. Depending on the climate and the type of tree, they can remove enormous amounts of carbon from the atmosphere, and lock it away for centuries. In numerical terms, it only takes 98 “mature” trees (trees that can grow at least 20lb per year) to remove one ton of carbon dioxide from the atmosphere, and this number is for Canadian trees, which are not particularly verdant.

This means that Climeworks’ facility does the work of just 88,200 trees per year. This is nothing, in the grand scheme of things: there are non-profit groups that will plant saplings for pennies, and at most, dollars. One relatively large tree-planting charity estimates that their all-in costs are roughly $1 per tree.  If this is the case, then Climework’s facility has a fair market value of just $88,200.

Of course, given the scale of the project, and the research that went into designing the proprietary technology, the Hinwil facility probably cost millions.

Interestingly, planting trees is not even the best, or most economical way to tackle the “problem” of atmospheric carbon levels. A better option would simply be to stop clearing vast swathes of virgin land for new agricultural and urban development. Take Australia for example: they could meet their obligations to the Paris Climate Agreement by doing nothing other than prohibiting new land-clearing  projects. The cost would be negligible when compared to switching to renewable energy.

The same is true in America, Russia, Indonesia–all over the world, as it turns out.

But of course, cheap, commonsense approaches like this lack the sex-appeal that green technology proponents crave. Not coincidentally, they also lack the wealth-redistribution component that has made welfare billionaires like Elon Musk rich. And that gets to the heart of the matter: green energy schemes are not about helping the environment, and never were. They are about getting rich. This is why the focus is always on expensive solutions, like thickening the Arctic ice sheet by refreezing it with thousands of wind turbines for a cool $500 billion–yes, that is a real idea.

Climeworks’ carbon-capture facility is no different than any of the other failed climate fixes. It is just an expensive way to do nothing.

Spencer P Morrison is a JD candidate, writer, and independent intellectual with a focus on applied philosophy, empirical history, and practical economics. Author of America Betrayed and Editor-In-Chief of the National Economics Editorial.

 



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Dear NEA: Art Is a Bad Investment


Donald Trump’s proposal to scrap federal funding for the National Endowment for the Arts (NEA) and the Corporation for Public Broadcasting has again put him in the cross-hairs of liberal ire.

His opponents point out that arts funding represents but a tiny fraction of the federal budget – just one-tenth of one percent – and that cutting it would have a big impact on local communities, without meaningfully reducing America’s deficit.

They also argue that funding the arts makes economic sense.  In fact, Patricia Harrison, the president and CEO of the Corporation for Public Broadcasting, goes so far as to claim that “public media is one of America’s best investments.”  Still others argue that investing in non-profit art makes economic sense because it makes America’s workforce more creative, and creativity drives economic growth.

But is any of this true?  Does it really make economic sense for the federal government to invest in the arts?

No.  Gargoyles and Corinthian columns may be great aesthetic investments, but saying they make financial sense is simply untrue.  The claim is based on bad economics and even worse psychology.

The first argument supporters of the NEA or Public Broadcasting inevitably bring up is that non-profit art has a stellar return on investment.  Artist David Byrne, who led the charge condemning Trump, argues that the $741 million provided to the NEA is leveraged into $135 billion in spin-off economic activity.  No, he did not make this number up; it actually comes from a study conducted by the non-profit America for the Arts.  All told, Byrne argues that every $1 invested in non-profit art turns into $182, as if by magic.

If true, it appears that non-profit art is one of the most lucrative investments one could make.  In fact, it is a miracle that Wall Street has not already snapped up every local theater and art gallery in America.  Get in while you can, folks.

Sadly, this is all nonsense, just bad economics dressed up to fool the American public.  How?  The calculation is based on the broken windows fallacy.

Here is how the broken windows fallacy works: pretend someone smashes your window with a baseball (hopefully accidentally).  Now what?  You have to buy a new window pane.  It costs you $500, which you pay to the hardware store owner.  Unlucky you, lucky him; now he is $500 richer.  He takes this money and buys an expensive jacket for $500.  This enriches the tailor, who in turn buys a $500 pair of shoes, and so on and so forth.  On the surface, it looks as though the broken window was actually good for the economy: it forced you to spend, which ended up generating subsequent economic activity.  Your $500 purchase generated at least $1,000 in subsequent spending.

This is exactly how America for the Arts calculated the spillover effects of government funding for the NEA.  They said a $10,000 investment in a theater would attract theater-goers, who would then spend money on local restaurants, and these local restaurants would hire more cooks, etc.  On the surface, it looks like a good investment.  But it is not.  Why?

This line of reasoning looks at only one half of the equation: the spending.  We often forget that the initial money came from somewhere.  In our first example, you bought the window because you had to – but this also prevented you from spending the $500 on your own jacket or shoes.  The economic activity was simply redirected, not created.  This is what the broken windows fallacy is all about.  The same is true of funding the arts: the government acquired the money via taxation, which means that it came from someone else, who is unable to spend his money on a meal at a restaurant or a night at the theater.

Funding the NEA redistributes wealth to artists.  It does not create it.

It is also worth noting that the same ripple effect could be calculated for government welfare payments, or the funding of balloon factories.  Yet very few would argue that we should buy billions of balloons to expand the economy.

Moving on to the second point, liberals often claim that the NEA, and Public Broadcasting, make Americans more creative, and this makes us richer.  While it is unquestionably the case that creativity drives long-term economic growth, it is not the case that art installations, whether they be theaters or art galleries, make people more creative.  Why not?  Because of something called domain-specificity.

Domain-specificity it is the notion that people compartmentalize their skills and reasoning, to a degree.  For example, chess masters have amazing memories when it comes to chess – they can often remember the setup, sequence, and outcome of particular games for decades.  However, many are also absent-minded in their personal lives.  Likewise, they may be good at chess but horrible at other abstract strategy games, like go or pente.  The same thing happens with creativity: engineers who go to the theater are not more creative than those who enjoy solving Sudoku puzzles in their spare time.  Therefore, investments in art are unlikely to make America more creative as a whole.

If it is found that art does increase general creativity, then this would be a valid argument.  However, it would still not support funding the NEA, which provides grants to local artists.  A much more efficient way of distributing said funds would be through some sort of public Netflix-like program, or expanding the scope and content of PBS.  Either way, the NEA would not be a good investment.

From an economic standpoint, arguments in favor of federal funding for the arts are doomed to failure.  But that is not to say that there are not compelling reasons to invest in public art.  For example, many Americans would prefer to spend extra to decorate public buildings, lest we end up constructing more brutalist monstrosities, like Boston’s City Hall.

So there is a case to be made for federal arts funding – just not an economic one.

Spencer P Morrison is a J.D. candidate, writer, and independent intellectual with a focus on applied philosophy, empirical history, and practical economics.  He is the author of America Betrayed and editor-in-chief of the National Economics Editorial.

Donald Trump’s proposal to scrap federal funding for the National Endowment for the Arts (NEA) and the Corporation for Public Broadcasting has again put him in the cross-hairs of liberal ire.

His opponents point out that arts funding represents but a tiny fraction of the federal budget – just one-tenth of one percent – and that cutting it would have a big impact on local communities, without meaningfully reducing America’s deficit.

They also argue that funding the arts makes economic sense.  In fact, Patricia Harrison, the president and CEO of the Corporation for Public Broadcasting, goes so far as to claim that “public media is one of America’s best investments.”  Still others argue that investing in non-profit art makes economic sense because it makes America’s workforce more creative, and creativity drives economic growth.

But is any of this true?  Does it really make economic sense for the federal government to invest in the arts?

No.  Gargoyles and Corinthian columns may be great aesthetic investments, but saying they make financial sense is simply untrue.  The claim is based on bad economics and even worse psychology.

The first argument supporters of the NEA or Public Broadcasting inevitably bring up is that non-profit art has a stellar return on investment.  Artist David Byrne, who led the charge condemning Trump, argues that the $741 million provided to the NEA is leveraged into $135 billion in spin-off economic activity.  No, he did not make this number up; it actually comes from a study conducted by the non-profit America for the Arts.  All told, Byrne argues that every $1 invested in non-profit art turns into $182, as if by magic.

If true, it appears that non-profit art is one of the most lucrative investments one could make.  In fact, it is a miracle that Wall Street has not already snapped up every local theater and art gallery in America.  Get in while you can, folks.

Sadly, this is all nonsense, just bad economics dressed up to fool the American public.  How?  The calculation is based on the broken windows fallacy.

Here is how the broken windows fallacy works: pretend someone smashes your window with a baseball (hopefully accidentally).  Now what?  You have to buy a new window pane.  It costs you $500, which you pay to the hardware store owner.  Unlucky you, lucky him; now he is $500 richer.  He takes this money and buys an expensive jacket for $500.  This enriches the tailor, who in turn buys a $500 pair of shoes, and so on and so forth.  On the surface, it looks as though the broken window was actually good for the economy: it forced you to spend, which ended up generating subsequent economic activity.  Your $500 purchase generated at least $1,000 in subsequent spending.

This is exactly how America for the Arts calculated the spillover effects of government funding for the NEA.  They said a $10,000 investment in a theater would attract theater-goers, who would then spend money on local restaurants, and these local restaurants would hire more cooks, etc.  On the surface, it looks like a good investment.  But it is not.  Why?

This line of reasoning looks at only one half of the equation: the spending.  We often forget that the initial money came from somewhere.  In our first example, you bought the window because you had to – but this also prevented you from spending the $500 on your own jacket or shoes.  The economic activity was simply redirected, not created.  This is what the broken windows fallacy is all about.  The same is true of funding the arts: the government acquired the money via taxation, which means that it came from someone else, who is unable to spend his money on a meal at a restaurant or a night at the theater.

Funding the NEA redistributes wealth to artists.  It does not create it.

It is also worth noting that the same ripple effect could be calculated for government welfare payments, or the funding of balloon factories.  Yet very few would argue that we should buy billions of balloons to expand the economy.

Moving on to the second point, liberals often claim that the NEA, and Public Broadcasting, make Americans more creative, and this makes us richer.  While it is unquestionably the case that creativity drives long-term economic growth, it is not the case that art installations, whether they be theaters or art galleries, make people more creative.  Why not?  Because of something called domain-specificity.

Domain-specificity it is the notion that people compartmentalize their skills and reasoning, to a degree.  For example, chess masters have amazing memories when it comes to chess – they can often remember the setup, sequence, and outcome of particular games for decades.  However, many are also absent-minded in their personal lives.  Likewise, they may be good at chess but horrible at other abstract strategy games, like go or pente.  The same thing happens with creativity: engineers who go to the theater are not more creative than those who enjoy solving Sudoku puzzles in their spare time.  Therefore, investments in art are unlikely to make America more creative as a whole.

If it is found that art does increase general creativity, then this would be a valid argument.  However, it would still not support funding the NEA, which provides grants to local artists.  A much more efficient way of distributing said funds would be through some sort of public Netflix-like program, or expanding the scope and content of PBS.  Either way, the NEA would not be a good investment.

From an economic standpoint, arguments in favor of federal funding for the arts are doomed to failure.  But that is not to say that there are not compelling reasons to invest in public art.  For example, many Americans would prefer to spend extra to decorate public buildings, lest we end up constructing more brutalist monstrosities, like Boston’s City Hall.

So there is a case to be made for federal arts funding – just not an economic one.

Spencer P Morrison is a J.D. candidate, writer, and independent intellectual with a focus on applied philosophy, empirical history, and practical economics.  He is the author of America Betrayed and editor-in-chief of the National Economics Editorial.



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