Trump’s Budget and the Bay by David Montgomery

Although no details are yet available, President Trump’s 2018 Budget Blueprint “Eliminates funding for specific regional efforts such as the Great Lakes Restoration Initiative, the Chesapeake Bay, and other geographic programs. These geographic program eliminations are $427 million lower than the 2017 annualized CR levels. The Budget returns the responsibility for funding local environmental efforts and programs to State and local entities, allowing EPA to focus on its highest national priorities.“

I have mixed reactions to this proposal.  It can be argued that the Bay is a national and global asset, and that its benefits extend far beyond the 7 states in the Chesapeake Bay Watershed.   As seen in the picture below, the jurisdictions in direct contact with the Bay are Maryland, Virginia, Pennsylvania and the District of Columbia.  The watershed includes New York, Delaware and West Virginia where the headwaters of rivers and streams feeding into the Bay are located.

In more practical terms, the Federal government sets expectations for the Watershed Implementation Plans that the states must develop in order to comply with Federal Clean Water Act standards for the Bay, yet the states bear the cost of compliance with Federal standards.

There is nothing unique about this combination of Federal standards and state implementation, as it derives from the basic design of the Clean Air Act and the Clean Water Act.  The Federal government decides on what standards should be met for air and water quality, in part because emissions and effluents from one state almost always travel across state boundaries to affect other states.

It is left up to the states to create plans for achieving the standards set by the Federal government.  These plans are reviewed by the Federal government, usually by modeling how the specific provisions of the plan would affect future air and water quality.

Once the plans are approved, each state must implement the plans through whatever combination of legislation, regulation and economic incentives it chooses.  Thus the actions taken by each state form part of what should be a cooperative solution for the region and country as a whole.   Maryland benefits from reductions in emissions from coal-fired powerplants in upwind states like Ohio, West Virginia and Virginia, and those states benefit from improved recreational opportunities and less costly seafood from the Bay.

Many studies have been made by environmental economists of the benefits of improved air and water quality, and how those benefits are distributed across different regions and populations.   Thus there is probably a study of how the benefits of improvements in water quality of the Chesapeake Bay are distributed to residents of different states.  Recreational benefits, for example, are usually allocated by distance so that the Bay states themselves would gain most of those benefits.  Improved fisheries would benefit the entire market for seafood from the Bay, and also the watermen who live in the Bay states.  

Nevertheless, there is no broad provision in the Clean Air Act and Clean Water Act for allocating cleanup costs based on the distribution of benefits.  That distribution was no doubt in the minds of the members of Congress who enacted those two laws, and in the process for setting and meeting standards that they created, and it falls out of the laws as written.  In one case, Title IV of the Clean Air Act, Congress set up a trading program to limit emissions of acid rain precursors, and was specific that costs would be borne by the states where the emissions occurred.

Based on all this, I see no particular claim that the states in the Chesapeake Bay Watershed could make for funding of Bay cleanup by other states, any more than California could claim that it should be compensated for achieving smog goals in the South Coast Air Basin.

All this is consistent with the great principle of subsidiarity, that decisions should be made at the lowest level of government that can deal effectively with a problem.  

But on the other side of the coin, it is unclear that as individual states, each of the 7 watershed states has the incentive, information or ability to carry out its part in a cost-effective management system.  The so-called “headwater states” of New York, Delaware and West Virginia, are not on the Bay and get no direct benefit from its cleanup.  Pennsylvania borders part of the Upper Bay, but its share of effluents (largely from the Susquehanna) is claimed to be far greater than it share of the Bay’s waters.  

For this reason, there are a number of interstate agreements intended to coordinate action and planning across these states, in particular the Chesapeake Bay Watershed Agreement signed in 2014.  It is described as being a  “plan for collaboration across the Bay’s political boundaries [that] establishes goals and outcomes for the restoration of the Bay, its tributaries and the lands that surround them.”  It is administered by the Chesapeake Bay Program, which has an Executive Council composed of the governors of Maryland, Virginia, Pennsylvania, the mayor of the District of Columbia, the Chair of the Chesapeake Bay Commission, and the Administrator of EPA.   

Federal funding may not be necessary to clean up the Bay, but it can certainly be an effective lever for gaining cooperation in this multi-state activity.  Not only can such funding grease the wheels by sharing the cost of particularly contentious tasks, the threat of withholding federal funds can be an effective tool in gaining compliance with plans previously agreed by the states.  In particular, Pennsylvania frequently appears in the news as failing to meet its commitments or reduce effluents sufficiently for Maryland and Virginia to meet federal standards in their waters.

There is an alternative, but one that would also require some initiative from the Administration to bring about.  Unlike the Delaware River Basin Commission, all of the commissions and other agreements about Chesapeake Bay Cleanup are voluntary agreements of states based on each state’s own legislation.  The Delaware River Basin Commission is a formal Interstate Compact, ratified by the U.S. Congress and enforceable under Federal law on all members .  Creating a Chesapeake Bay Interstate Compact including the 7 watershed states would make plans and commitments enforceable by any member of the Compact against another member.  

The Delaware River Basin Commission (DRBC) has responsibilities for water supply that may or may not be useful for the Chesapeake Bay, but its management of pollution control and flood control would be.  The DRBC can itself finance and build waste treatment plants, and plan for the balance among different sources of effluents.  It also devises its own funding mechanisms.  A similar Commission for the Chesapeake would certainly be able to design and implement an effluent trading program for the entire watershed, which is the only way to make one effective.  In principle, there should be a way for the Commission to develop a single, comprehensive Watershed Implementation Plan binding on all its members.

This is not an entirely original idea, as I discovered after writing this article.  The Environmental Law Institute published a paper  that discusses the merits of an interstate compact for the Chesapeake Bay at much greater length.  I think that decisions on where effluents should be reduced, by what means, and at whose expense should be a responsibility of the 7 watershed states, and not require an external party like the federal government to impose them.  In line with the principle of subsidiarity, a watershed compact appears to me to be the lowest level of government capable of dealing with the problem effectively.  

Perhaps the proposed withdrawal of federal funding for Bay cleanup could provide the impetus for more effective coordination of the efforts of the responsible states.

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.


Dealing with Uncertainty with Climate Change by David Montgomery

Several weeks ago I attended a workshop put on by MIT climate researchers that dealt with current uncertainties in climate science and useful directions for climate research. I have worked with the folks at MIT since I was in graduate school, and specifically on the science and economics of climate change for just about 30 years. As usual, talking to them at this workshop suggested some new ideas that I wanted to share.

The general sentiment on climate policy among these researchers was that the best we can expect is a modest slowing of the rate of temperature increase.  Recent work from MIT also reveals that forecasts of the possible impacts of climate change still differ dramatically.  Combining these two insights reveals a large gap in our current understanding – we do not have a good handle on who is most likely to be affected, where and how, under realistic scenarios for temperature increase.   The immense popular and scientific literature on the effects of climate change has generally assumed no action to reduce emissions and no smart adaptation to avoid damages.  So the stories of melting icecaps, retreating shorelines, epidemics of tropical disease, heat waves, droughts and floods are largely intended to communicate what might happen if we do nothing.

At the other end of the scale, immense effort has gone into figuring out what it would take to keep global average temperatures from rising by more that 1.5 to 2ºC, levels that some believe would avoid all “dangerous human interference with the climate.”  

Once we recognize that the best outcome of global action to reduce emissions is likely to be significant temperature increase and a good bit of damage, the uselessness of studies of no action and ideal action becomes clear.  What we need to understand are the risks posed by temperature increases of more than 2 degrees at a temporal and geographic scale that is useful for planning.  In addition to work done at places like MIT, reports of a United Nations organization known as the Intergovernmental Panel on Climate Change are useful references. The IPCC utilizes climate experts from around the world to write their reports, and I was a principal lead author of the second of their big reports on climate science and policy

The first step toward understanding our knowledge of climate risks is to realize how uncertain current forecasts of temperature increase and impacts really are. To make such a forecast there are several steps:

Predict future economic growth and technological breakthroughs in order to forecast greenhouse gas emissions

Compute how much temperature will increase based on predicted greenhouse gas emissions

Predict changes in precipitation (rainfall) and other geophysical and weather-related impacts

Assess how those changes will affect human populations

A forecast of total global emissions is sufficient to drive forecasts of temperature increase, since the major greenhouse gases have the same effects on temperature no matter where they are emitted (black carbon is different, but that is another story).  But different models give very different results for temperature even when they assume the same increase in emissions.  As a result, the lPCC has concluded that if the volume of greenhouse gases in the atmosphere reaches twice the level observed from 1850-1900, that will cause global average temperature to rise by between 1.5 and 4.5 degrees C above what it was back then. And the IPCC states that it cannot say whether the high, low or middle of that range is more likely (

Since the pre-industrial level is estimated to be 275 parts per million (ppm) of CO2 in the atmosphere, doubling is conventionally set at 550 parts per million.   Depending on the emissions forecast, we could reach that point between 2050 and 2075 or even later.   And somewhere between those dates, temperature increase would be between 2 and 5ºC.  The picture below may help clarify this.  It is from MIT’s 2015 Global Energy and Climate Outlook, and it shows predictions of greenhouse gas concentrations from a number of sources.  According to the MIT Outlook, we would hit 550 ppm around 2065, and at that point temperature increase could be 1.5 to 4.5ºC above pre-industrial levels.  According to more pessimistic forecasts, we could hit 550 ppm and expect 1.5 to 4.5ºC increases as early as 2050.  Forecasts that hit 550 ppm much later than 2075 assume very strong measures to reduce emissions in every country and are not very likely.

Although only total emissions matter for temperature, where they are generated matters for thinking about reducing emissions.  That is where pessimism about avoiding climate change comes from.  The chart below breaks a middle of the road forecast of emissions out across countries, based on their plans in accord with the Paris agreement.

Source: Energy Information Administration 2016 International Energy Outlook

Even if we do not make any additional efforts, emissions from the OECD countries (USA, Canada, UK, Europe, Japan, Korea, Australia, NZ etc.) will in total be stable or decline due to slow population growth and technological progress. China will be by far the largest single source, eventually surpassing all of us, and total emissions from India, the Middle East and Russia will be right behind.  By just 2040, the OECD will decline to 32% of global emissions, and will continue to shrink.   

Thus far the only countries that have made commitments to reduce their emissions in the next decade are in the OECD.  All of the rest of the world puts economic growth and strategic advantage ahead of climate in their national priorities.  Even if they adhered to the Paris Agreements now under review by the Administration, China would remain on this path until at least 2030 and then consider slowing the growth in its emissions.  India made no quantified commitment, nor did most of the rest of the non-OECD countries, which see no way to rise out of poverty without increasing emissions.

Putting this political realism together with the uncertainty of temperature response, we should be planning for more than 2ºC and possibly up to 5ºC temperature increase in the next century.  To do this in a systematic way, and to address the greatest risks first, we need to assign probabilities to the effects of temperature increases on a geographic scale that distinguishes places where there will be large and harmful changes from places where there will be lesser impacts.

That gets us to steps 3 and 4, where things get really hard.  One thing that all models agree on is that temperature change will not be uniform around the globe.  Therefore temperature forecasts need to be specific to different locations.  Unfortunately, the models differ widely on what will happen at any particular location.  Models generally agree that the greatest temperature increases will be in polar regions, but that the largest changes in precipitation and water availability will be in the tropics and further south.  Unfortunately, they do not agree on the critical details of where within the equatorial regions those changes will occur.

The pictures below show predictions of changes in rainfall for Southern Africa from 17 different models, stated for comparability as the change in rainfall for a 1ºC increase in global average temperature.  Forecasts need to be at this finer scale because effects of temperature on precipitation are even more localized than temperature changes themselves. So picking Botswana, we see that colors range from bright red to bright green, indicating that rainfall could either decrease (red) or increase (green) dramatically.  Not much use for planning water supply or flood protection or public health or where and what kind of crops to plant in the nation of Botswana, let alone in the Kalihari or the Okavanga Delta.

Source: “Regional climate change of the greater Zambezi River Basin: a hybrid assessment”

  1. Adam Schlosser & Kenneth Strzepek Climatic Change (2015) 130:9–19

Effects on the people who live in these places and their opportunity to make a living come next will differ, depending on which of these contrary forecasts come to be.  And those human impacts will depend on how capable the affected people and societies are of innovating and adapting to change, and on how their governments invest in and encourage actions in advance to reduce harm.

I take three important lessons from this.   First, potential future effects of climate change on people are much more uncertain than forecasts of future emissions and temperatures.  Impacts in the latter half of this century could be quite tolerable, if the 1.5ºC forecast is correct, because that is the temperature increase at which the IPCC foresees few harmful effects.  What the consequences of temperatures higher in the range might be is subject to all the remaining uncertainties about geophysical and human effects.  

Second, even though we can recognize the uncertainty, we cannot quantify the risks that different populations face.  That is, no one has connected the results of a full-sized general circulation model on the distribution of temperature to a disaggregated model of weather and geophysical effects in a way that would let us attach probabilities to the human impacts of climate change.  The study that produced the analysis of the Zambezi basin takes this calculation as far as rainfall, but only incorporates the variations across models of rainfall.  It does not bring in uncertainty of emissions, temperature increase or consequences of changes in rainfall for agriculture, disease, etc.  This is an active field of research, but not an easy one and one that should get high priority in funding climate research.  Without it, all we get are basically scientific anecdotes of what might happen, with no idea of how likely those events are or where it would be most cost-effective to prepare for them.

Third, none of this implies that the US and the rest of the OECD should do nothing to reduce their emissions, but what we do should be flexible and realistic.  It is not in our power to reduce emissions enough to prevent potentially dangerous climate change, nor can we compute the odds on how much damage our policies would avoid.  Even if we were able to forecast what policies would accomplish in reducing emissions, there is still that 1.5 to 5 range of possible temperature change and the huge disagreement about the regional effects of temperature change on weather and other impacts.   This convinces me that insistence on setting targets for reducing emissions in order to have certainty about emission reductions is badly misinformed.  We can, on the other hand, have confidence that a carbon tax set at a tolerable level will make a difference in emissions and will reduce the likelihood of the worst possible outcomes. That modest step seems to me to be one we should all be able to agree on, while concentrating on developing science and policies that could contribute to helping the most vulnerable areas and peoples to adapt to what is coming despite our best efforts.


David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.

The First Hundred Days by David Montgomery

I hate to become predictable, but it is hard to resist commenting on President Trump’s first 100 days on the occasion of his first 100 days. To start, my standard of excellence is not how many new policies a President puts in place but whether he does right with the opportunities he faces. In my moments of wishful thinking, I even imagine congratulating a President for doing nothing because nothing needed to be changed.

Unfortunately, this was not the case for President Trump. He inherited the slowest recovery from recession on record, diminished support for law enforcement, foreign policy that disheartened all who depend on American strength and support, international crises, a Supreme Court vacancy, a broken system of health insurance, regulatory overreach, taxes that were driving corporations to countries that tax smarter, and a monstrous budget deficit.

He also had majorities in the House and Senate, a thoughtful and well-respected Speaker of the House and a Senate Majority leader showing unexpected backbone. This nominally favorable legislative setting raises the curve for grading his accomplishments.

Might as well get the easy ones out of the way. Supreme Court choice: A+. Justice Gorsuch was a pre-eminent Appeals Court Judge and is a man of impeccable professional integrity and character. His judicial philosophy derives from respect for statutory law and the Constitution as written, demonstrated by the fact that out of some 2700 decisions he rendered, only one was overturned. The predictable opposition had only one message: progressives expect Supreme Court justices to make decisions based on their political and social agenda rather than the written law, and Judge Gorsuch adhered to the law. Justice Gorsuch was very clear on that, when he commented that any judge who is happy with the outcome of every case he tries is a bad judge. The law may not always give the victory to the most sympathetic party in the case, and the correct decision may have consequences down the line that the judge abhors, but Justice Gorsuch understands that his job is to understand and apply the law not to create it.

Cabinet: A. My friend Bill Rolle has already written about this in the Spy and said it well. President Trump’s cabinet is the first in a long time chosen entirely on the basis of merit. His appointees are all distinguished leaders, mature, experienced, and proven. Secretary Mattis, Secretary Tillerson, Secretary Sessions, and Administrator Pruitt stand out because they have responsibility for the most critical issues facing the nation and they are doing an absolutely superb job. Taking each in turn, these four have allowed battle field commanders to do their jobs, restored assertiveness in relations with other countries, supported rather than tore down police, and moved knowledgably to review harmful regulations.

I am not very happy with the Secretary of Commerce, I give him a D- in economics, but I don’t think we need a Department of Commerce in the first place. I am ecstatic about Ambassador Haley at the UN. I didn’t think anyone could top Ambassador Bolton but she does, by a mile.

Foreign Policy: A- because nobody can do better than that. In addition to having a Secretary of State who actually puts our national interest first and does not mince words with Russia and others who oppose us, President Trump’s unique combination of tweets and personal relationships seems to be succeeding. He signals his position on global issues very effectively. He appears to have succeeded in gaining some common ground with China on the clear and present danger of North Korea while at the same time vigorously opposing China’s imperial ambitions in the South China Sea. All the worries about his susceptibility to Putin’s charms should have been put to rest by his condemnation of Russia’s role in Syria. That is the right kind of reset.

Candidate Trump’s apparent isolationism was a clear negative to me during the primaries. As President, the challenges that he has faced and no doubt the good advice of Secretaries Mattis and Tillerson seem to have convinced him that American national security requires active, if self-interested, leadership of the free world.

And it is such a refreshing change to have a President who acts when required rather than threatening and then backing down. Note the contrast between meaningless redlines versus cruise missiles to get a message to Assad in Syria. The revelation that it was the battlefield commander who was empowered to decide whether to use the MOAB bomb in Afghanistan showed that he and Secretary Mattis understand delegation and fight to win.

Regulatory Policy: A. President Trump may have been a candidate whom no one gave any chance to win, but he was ready to roll on regulatory overreach. By the time he took the oath of office, the Executive Orders needed to reduce the burden of regulation were all ready to sign. His use of Executive Orders to minimize the burden of regulations is the mirror image of his predecessor’s determination to use Presidential authority to impose regulations where Congress did not act, and differs only in that President Trump is helping rather than hurting the economy. The Republican Congress has assisted greatly in this endeavor by use of the Congressional Review Act to undo some of the most burdensome of the midnight regulations issued just before President Trump took office.

Where executive action cannot undo regulations now in place, as appears to be the case of the Clean Power Plan, Administrator Pruitt is respecting the law and moving aggressively with new regulatory proceedings and legal strategies to make changes. Secretary Tillerson is taking a reasonable approach to agreements we have entered into on climate change, favoring continued participation while retracting unrealistic and tactically unwise commitments made by his predecessors.

Immigration: Overall C, with a range from A to F. I agree with the policies in the Executive Orders issued by President Trump. Every nation has a right to decide who should enter, and it is a serious national security risk to accept inadequately vetted entrants from countries where we know terrorists are being trained to attack the U.S. I am appalled that activist judges would block the President from exercising his fundamental responsibility to protect the country from this risk, but he gets an A for trying.

At the same time, I agree that the first Executive Order was badly drafted and that ICE agents were not properly trained to carry it out. That created temporary inconvenience for a number of travellers and gave President Trump’s critics an opening they exploited immediately. Bad execution hurt the Presidency. F on implementation.

It is a slow process, but facts show that we are making progress in securing our borders to make sure that criminals as well as terrorists are excluded. President Trump is moving as he promised to use the leverage he has available to stop local governments from protecting criminals who are in the country illegally, and I cannot see why “sanctuary cities” should be given any more respect than was the University of Mississippi when President Eisenhower used the power of the Federal government to end segregation. Catch and release has ended, and realistic steps are being taken to have adequate enforcement and judicial resources to expel criminals convicted of serious crimes other than illegal entry.

The President appears to be making progress on his campaign promise about a wall, despite the continued opposition of editorial cartoonists. Given Mexico’s poor governance, which political correctness seems to demand we ignore, I cannot see a better solution to preventing entry of criminals, drugs and terrorists and putting the coyotes and their human trafficking out of business. Where I part company is that I am convinced it is both economically beneficial and consistent with American values to do away with all of our current immigration quotas. After securing the borders so that our immigration policy is enforceable, we should accept every entrant who can demonstrate a clean record, no ties to terrorism, ability to support himself or herself, and willingness to assimilate into a single American identity.

That is the other reason for my low grade. The President, any President, should be explaining that properly vetted immigration is beneficial to the economy and essential to American exceptionalism, not denigrating people based on their national origin. He is too prone to give in to the labor union propaganda that immigrants take away American jobs. Immigration from the Americas is our best hope for sustained economic growth and for growth in the congregations of our churches.

Health care and tax reform: Incomplete. Who knew that the big problem in Congress would be among Republicans rather than across the aisle? What a change in having a President who wants to sit down with opposing factions to work out a deal, rather than sitting in his ivory tower at 1600 Pennsylvania while lesser beings do their messy work. As I write, it appears that despite the dire predictions and my own lecturing of the Freedom Caucus, there is a compromise health care bill coming up, and prospects that the House and Senate will be able to move a tax reform bill thereafter.

If that happens, we will have to give substantial credit to President Trump as well as Speaker Ryan for working effectively with all parts of the Republican Party. It is bad enough that we have an ideologically gridlocked Congress, in which Democrats are driven by the belief that their billionaire progressive contributors will replace them if they compromise in any way.

It would be a disaster if Republicans were also so ideologically divided that they could not govern, but it appears that the President and the Speaker may be providing an example of how apparently irreconcilable factions can be convinced that half a loaf is better than none. And who better than President Trump to wave the half a loaf in the air and brag about getting the whole thing?

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.

ISIS, Christianity, and Easter by David Montgomery

It was a beautiful Easter Sunday on the Eastern Shore.  We attended church, greeted friends, and celebrated the resurrection of Our Lord in peace and freedom.  It was also a good time to remember that for many of our brethren in the church universal, attending an Easter service was an act requiring deep faith and true courage.   Christians are the most persecuted people of faith around the world, with persecution against Christians reported in 102 countries, according to the Pew Research Center .

Open Doors estimates that more than 7,000 Christians were killed for faith-related reasons worldwide in 2015.  That is almost double the number in 2014, and more than triple the 2100 martyred in 2015.  These numbers do not include the countries where persecution is worst, North Korea, Syria and Iraq, because no accurate records exist.  To fill that gap, a report to the State Department by the Knights of Columbus states that “The Syriac Catholic Patriarch of Antioch, many of whose flock lived on the Nineveh plain or in Syria, reports that 500 people were killed by ISIS during its takeover of Mosul and the surrounding region. In Syria, where the organization Aid to the Church in Need has reported on mass graves of Christians, Patriarch Younan estimates the number of Christians “targeted and killed by Islamic terrorist bands” at more than 1,000.

Melkite Catholic Archbishop Jean-Clément Jeanbart of Aleppo estimates the number of Christians kidnapped and/or killed in his city as in the hundreds, with as many as “thousands” killed throughout Syria.“

The Islamic State (ISIS) is explicit in its intention to destroy Christianity by killing Christians who will not convert to Islam and making slaves of Christian women.  IS did so repeatedly during its takeover of the Nineveh Plain in Iraq.  Likewise in Syria, ISIS has decimated Christian communities.  After surviving for 2000 years since the Apostle Philip brought the gospel to Asia Minor, Christianity is rapidly disappearing in the Middle East.

Before the Iraq War in 2003, there were about 1 million Christians in Iraq out of a population of 25 million. By September 2014, only 300,000 Christians remained in the country.   Many were killed or driven out by ISIS, but the Moslem-dominated government of Iraq has itself allowed brutal repression and actively stolen the houses and property of Christians.

Likewise, in Syria Christians have been devastated by civil war and IS persecution.   Islamic State militants have ensured that large swaths of the country have now become “Christian-free zones.”

It is not just the Middle East.  According to the Guardian newspaper, “persecution increased in 24 countries last year, with Kenya, Sudan, Eritrea and Nigeria entering the top 10 of its country-by-country league table. North Korea has headed the list for the past 13 years; up to 70,000 Christians are held in gulags, with tens of thousands of people banished, arrested, tortured and/or killed,” repeating Emperor Nero’s persecution of Christians for refusing to worship the insane leader of the state.

The story goes on and on, with documented killings of Christians for practicing their faith in dozens of countries and restrictions on the ability of our brethren to practice their faith in more than half the world.  From the abduction of 270 Nigerian schoolgirls, the beheading of 21 Egyptian Coptic Christians in Libya, the killing of 147 people on a university campus in Kenya to the Palm Sunday bombing of the Coptic Church in Egypt, it goes on.   Yet there is practically a news blackout on such widespread persecution of Christians, especially when it is perpetrated by Moslem governments in addition to the obvious jihadis.

Commentators and politicians warn us not to characterize these atrocities as a battle of civilizations. They claim that many Christians suffer because of living in failed states where violence is endemic, which is true.  Boko Haram comes to mind.  Yet there is clearly organized persecution in Moslem countries that singles out Christians. Or, they say, it is just due to sectarian violence in which the U.S. has no national interest.  All these excuses cover up the explicit and undeniable intention of Islamic terrorists to establish a global Caliphate in which all Christians will be subject to Islamic law and Moslem domination, if they are even allowed options other than conversion or death.    

There also seems to be collective amnesia about the fact that this is not the first time we have faced this threat.  Our brethren who are dying for their faith show us what we could be facing here and now but for the Catholic heroes who turned the tide in a 300-year struggle between Christian Europe and the Moslem Ottoman Empire, a struggle that Moslem forces were on the verge of winning several times.  Their names included the Knights of Malta, Pope Saint Pius V, Juan Carlos of Austria, and King Jan III Sobieski of Poland.

In the 16th Century, Christendom was fractured as the Reformation split Catholic from Protestant states, and states of different Protestant sects fought each other.  Not only that, but the Venetians and others closest to the Moslem invaders were so intoxicated with the money they could make doing business with Islam that they discounted any possibility of war.

Islam saw its opportunity to reconquer the territory it lost after the victory of Charles Martel at the Battle of Tours in 732.  The Ottoman Empire was the center of Islamic power in the 16th century, and its goal was to bring all of Europe as well as the Levant under Ottoman control and sharia law.

By 1560 the Ottomans controlled Africa all the way to Tunisia.  With its fortresses manned by an order of Crusader Knights, Malta remained the lone bastion in the Mediterranean.  In March 1560 a Turkish armada of 193 vessels and some 20,000 to 40,000 soldiers sailed from Constantinople.  Malta had a total of 9,000 defenders including 500 Knights Hospitallers, who became known as the Knights of Malta.  Turkish forces besieged the island from May until September, but the Knights held out and, aided by a relief force from Spain, drove the Turks away on September 11, 1565.  The last of the Crusader Knights won their last battle.

The Ottoman fleet returned to Turkey, but 6 years later launched an even more massive assault on Christian Europe.   On October 7, 1571 the fleet of the Catholic League, lead by the charismatic 24-year-old Don Juan of Austria defeated the Turkish fleet that was sailing to capture Cyprus and then continue to Rome.

Pope Saint Pius V (1504-1572) was in some ways like Pope Francis, in that he was austere and dedicated to reforming the Vatican bureaucracy and religious orders, educating laymen, and caring for the poor.  But he was also a traditionalist and a consummate diplomat, who brought together the forces of the papal states, Venice, Genoa, the Savoyards, Spain and Sicily to form the Holy League.  After the massacre of the inhabitants of Famagusta by the Ottoman troops to which they surrendered, Pope Pius appointed young Don Juan to lead his fleet.

The Ottoman fleet held 328 ships, 208 of which were galleys, 77,000 fighting men and sailors, and 50,000 Christian slaves manning the galleys.   The Catholic League had 206 galleys, 40,000 free Christian oarsmen and sailors, and 28,000 soldiers.  Don Juan attacked when he sighted the Ottoman fleet, and putting a wedge of heavy gunships in front of his fleet, he inflicted significant damage before the Ottoman fleet could engage.  The battle then turned into a ship-to-ship melee, and appeared to be going against the Holy League on its left flank until the wind changed and pinned the Ottoman fleet against the shoals.  The slaves in the galleys revolted, and the Ottomans abandoned their ships.  In the middle, the commander of the papal galleys rammed the Ottoman flagship, and Catholic forces stormed the flagship and killed the Turkish commander.  With victories in the center and left, the Holy League fleet turned on the remaining Ottoman ships and drove them off.

The Sultan lost 170 of his 208 galleys and 12,000 Christian slaves were freed.  The Ottoman navy was gone, ending the threat by sea.  But the threat by land remained.

On September 11 and 12, 1683 King Jan III Sobieski of Poland broke the Ottoman siege of Vienna, and the 300-year struggle between Christendom and the Moslem invaders was ended.  The Turkish invasion was again aided by fighting between Catholics and Protestants in the Habsburg Austro-Hungarian Empire, leaving few troops to defend against the Turks.  Prior to the battle, Grand Vizier Ali Mustafa’s army of 150,000 had fought its way from the Bosporus and only Vienna stood between him and his goal of Rome.  The city of Vienna, defended by 15,000, refused his promise to leave the city unharmed if its citizens would convert to Islam, and the siege began on July 14.   

During the Turkish buildup for this invasion, Pope Innocent XI brokered a mutual defense treaty between the Hapsburg Empire and Poland.  As it happened, the Turks attacked Vienna and King Jan III Sobieski of Poland honored his obligations.  He commanded the combined army of about 70,000 troops against an Ottoman Army twice his size.  The defenders of Vienna were starved and exhausted, and Sobieski attacked immediately on arriving at Kahlenberg Mountain.  The battle was ended by the largest cavalry charge in history, when the Polish Winged Hussars (heavy lancers) routed the Turks.  Europe remained free of the Moslem threat for over 300 years.

Many lessons come from this history: the meaning of 9/11 to Islamic terrorists, the constant impetus in Islam to reconquer Europe and the Mediterranean, the inability of the West to unify against its greatest threat, the blindness caused by pursuit of business with despots, the role of the Church in holding an adequate alliance together, and the remarkable victories of faithful men.

The history of Christendom is not just a history of martyrs, of whom there are more every day. It is also the history of heroes who defended and saved Western Civilization. As well as praying for the intercession of the new martyrs, let us pray that such heroes will continue to step forward and protect us.

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.

Why Is Civility So Controversial? By David Montgomery

I am so intrigued by the responses to my column last week that I cannot resist returning to the subject. Coincidentally, Nicholas Kristof wrote a very similar column last week – and he is about as far away from me politically as it is possible to be. In response to an article in which he interviewed Trump voters, Kristof received a tweet saying ( “I absolutely despise these people …Truly the worst of humanity. To hell with every one of them.”

There are a few contrasts between comments to Kristof and comments to me. For one thing, I did not get any complaints about my plea for civility from readers at my end of the political spectrum. Kristof and I were both attacked from the left. The animosity that these comments reveal not just toward politicians, but toward anyone who voted for Trump or, in our case, Andy Harris is truly shocking.

Even though I don’t take them personally, I find the reactions to my column more distressing than the reactions to Kristof’s. After all, Kristof is a New Yorker, and he probably does have a very large number of readers who truly do not know anyone who voted for Trump.

That cannot be the case for anyone who lives in Talbot County or even, I will risk a guess, in Chestertown. After all, Trump won a solid majority on the Eastern Shore, and only about one-third voted against Andy Harris. So it is very likely that those who are expressing their hatred and venom toward Trump and Harris supporters have quite a few of us as neighbors. That makes me wonder how those who make such disparaging statements about Trump voters are managing to get along with most of the people they encounter here.

It is very hard to see how anyone can live on the Eastern Shore without having acquaintances who voted for Trump and Harris. Maybe there are enclaves in which everyone living there has the same political views, and it is certainly possible to associate socially only with people who agree with you. (But not, contrary to the claims of one reader, at any country club I know of). When we go into a club or a store or to church or to a local concert, we can never be sure whether the person we are talking to voted for Trump or Clinton.

So in a community like ours, we have more than abstract ideas about how a democracy works to make political civility desirable. It seems to me we should avoid attacking those who voted differently for the same reason we avoid road rage: you never know when you will find the person you just vilified sitting next to you at lunch or in church.

My wife and I have many friends who supported Hilary Clinton, and I do not think our political disagreements have changed the way we feel about each other in the slightest. My dearest friends disagree with me about Clinton and Trump; I do not respect them any the less for it, and I do not see any sign they respect me any the less.

Although there are attitudes that I find illogical or comical or offensive, and I do not hesitate to write about them, I hope I have not shown contempt for anyone because of their political point of view.

Since I am under the instruction to “love my neighbor,” I know that would be wrong. But there are also practical reasons for civility. Unless we are happy to see our country divided into irreconcilably hostile political camps, we need to try to convince others that our own point of view is reasonable and defensible. Sometimes that requires humor, sometimes being outrageous is a useful way to make a point, but for the most part, overt hostility is not a useful method of persuasion.

Listening to those who disagree with you and treating them as you expect to be treated is not just a nice thing to do; it is a necessary first step toward reaching agreement on anything. Just because I am convinced that I am right and you are wrong does not exempt me from listening to you carefully and responding respectfully to your arguments. The more we disagree, the harder I have to work to understand. There is no way I can say anything to you that might change your mind unless I make the effort to understand why you take the position that you do. Then I can start to see where we disagree about facts, or where I may be able to point out a flaw in your logic. (Footnote, I acknowledge Saint Thomas Aquinas as my source for that observation). That is also why you, my hypothetical adversary, need to try to explain your position in a way that makes sense to me. This, of course, is a counsel of perfection, which we never attain. But I believe it is better to strive for it than for the opposite.

I made a comment last week something like “You lost the election, stop acting out.” I seem to have irritated some, but I stand by that comment. Many recent elections were won by candidates who were just as offensive to me as Trump and Harris are to some of my readers. But I did not think I could accomplish anything by telling all and sundry about how unhappy I was. The only effective thing I could think to do was suck it up and get out the votes for the next time. That involved convincing some of those who were in the majority in the last election to change their minds. I believe it is foolish to expect to change someone’s mind by telling them what worthless and deplorable people they are. That, in fact, is one of the major ways Clinton managed to lose.

Then again, it occurs to me that Clinton’s “deplorables” comment may have been a miscalculation rather than a foolish blunder. Remembering how polarized the electorate seems to be, it probably is easier to capture votes from the middle than from the other pole. If this be true, there is a great temptation to go after some of the middle by demonizing the opposite side and making all sorts of inaccurate claims about their positions or character. When combined with the insulting belief that those contested voters can be turned by means of signs and short slogans, this approach drives out civil discussion. Even worse, it purposely chooses further polarization over civil discourse.

So maybe I give my fellow voters too much credit when I say it is more effective to try to convince others in a civil and rational way. But I would rather hold on to that belief than hold on to the politics of resentment and discord.

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.

Civility on the Eastern Shore by David Montgomery

I have devoted much of my time since retiring to the Eastern Shore to the proposition that neighbors can have civil and intelligent discussions of important issues. Therefore, I am disappointed and appalled by the behavior of my neighbors at the recent Town Hall meeting with Congressman Harris. It was an evening where shouting took the place of civility and slogans took the place of intelligence.

I was not surprised to see personal attacks, slogans, and repetition of urban myths as well as thoughtful and challenging comments in response to my columns. I experienced as much from members of Congress when I was called to testify before them. It has become the new normal in these venues. But the possibility that our Congressman cannot meet with his constituents on the Eastern Shore without being shouted down is not tolerable.

When did the losers of an election decide that they should get out in the streets to show their displeasure when an official they voted against shows up? I would like to repeat for the demonstrators at Congressman Harris’s meeting the same thing I tried to tell the Freedom Caucus – what you want is irrelevant when you don’t have the votes. Get out and work for what you want, express your point of view logically and see whom you can convince. What do you expect to accomplish by shouting incomprehensible slogans and shutting off any possibility of rational discussion? It is not going to give the Congressman any fewer votes in the next election, nor does it give the majority who voted for him any reason to listen to your points of view.

What has happened to the idea of coming into a meeting with well-formulated questions and logically presented and supported alternative points of view? Is the left so intellectually impoverished that all it can do is hold up signs, recite slogans and make noise? Is it better to get pictures of your signs in the newspapers or to get quotations of comments and questions that are actually relevant to how the Congressman votes?

I was a young man during the age of protests – of segregation, of the war in Viet Nam, of censorship, and of any number of perfectly silly grievances. I am sure many then had the illusion that by manning the barricades, they would inspire workers and students (the usual fantasy coalition) to replicate the French Revolution or Paris Commune. Of course, that never happened. Yet there still seems to be a myth that if a few people come out to mouth slogans and shout down anyone they disagree with, that will bring about the political change they cannot achieve through the normal politics of discussion and debate.

That has not happened in the United States. When millions listened to Martin Luther King in Washington, they heard a thoughtful message about common values and goals. That reached hearts and minds, and changed votes and laws. When Barack Obama promised reconciliation and hope, whites and blacks listened and voted together. When Donald Trump spoke to a forgotten working class and promised to recognize their suffering and remedy it, he won the election. And in Trump’s case, he got his message across despite facing the same kind of disruption that is now destroying civility on the Eastern Shore. Mob tactics were not what achieved these outcomes, nor could they prevent them. The candidates may or may not have been telling the truth, but what they said, not what demonstrators did, determined the outcome.

The politics of incivility and misbehavior do not win in the United States. But they have worked in other countries, and their consequences have been awful Do you remember how Nazi Germany, Fascist Spain and Italy, and Peronist Argentina were taken over? By the same tactics of filling minds with slogans, mobilizing crowds to cow the opposition, and shouting down disagreement. The choice to trample on civil dialog and rational presentation of positions on public issues leads in only one direction – toward a political apparatus that uses the mob to negate the desires and potential votes of the majority, that silences discussion, and that pressures elected officials and voters into conformity with the program of the most violent and unrestrained.

And before the replies start coming in about how offensive President Trump was and is, remember that the politics of disruption and silencing are being undertaken by only one faction – the progressive and supposedly freedom-loving left. Liberal college campuses are the ones where riots drive out conservative speakers; none of Hilary Clinton’s appearances were cancelled due to security concerns about attacks or riots; conservative comedians don’t think it is funny to suggest assassination.

I am resigned to the way the universities where I studied have betrayed their principles of open discussion and tolerance, but I am not willing to give up on the Eastern Shore. We are neighbors, we come from many backgrounds, we know different things, and we can sit face to face and discuss the issues of public policy on which there is such wide disagreement. We have discussion clubs, policy forums at the Avalon Theater and many similar events sponsored by Republican, Democratic, and completely nonpartisan organizations. We have the Spy! All these give us an opportunity to listen, think and speak – a remarkably useful sequence in which to approach divisive topics. I recommend them over packing into a college auditorium to drown out the speaker.

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.


An Open Letter to the Freedom Caucus by David Montgomery

To my friends in the Freedom Caucus who would not agree to a replacement for Obamacare: I share your values and most of your policy preferences, but your legislative tactics are irresponsible and stupid. This is not Israel, where a tiny and extreme party can obtain major policy concessions as a condition for joining a coalition. Your unwillingness to reach a compromise simply guarantees the outcome that you like least.

I cannot understand your motivation. Obamacare is not just a step toward socialized medicine to be opposed in principle; it is a growing catastrophe of rising premiums and reduced choice. I agree that my first preference would be to turn the clock back and prevent Obamacare from being created in the first place. But you can’t be foolish enough to think that you could achieve the same result by bludgeoning your Republican colleagues into total repeal after it has been in effect for 7 years.

Until now, the Democrats that designed and voted for Obamacare owned it, making Obamacare one of the issues that put you in office. But you have very nicely relieved Democrats of the onus of fixing Obamacare and saddled the Republican Party with blame for all its problems. Faced with a Democratic majority that will not agree to any Republican proposals, compromise among Republicans is indispensable. We cannot let Obamacare explode and expect out-of-power Democrats to take the blame. Getting moving toward replacing Obamacare is a political necessity. Otherwise, all you will accomplish in the remaining two years is proving that Republicans can only oppose, and that we are not fit to be put in charge of the country.

What set of moral absolutes could lead you to oppose changes in Obamacare that were clearly moving in the right direction? Even those of us who believe, for example, that the intentional killing of an unborn child is always gravely immoral will vote for legislation that restricts abortion even if it does not do away with Roe vs Wade completely. I share the principles that lead you to oppose Obamacare root and branch, but I cannot see how anyone with the responsibility of elected office could refuse a good compromise in favor of the status quo. This is the same self-serving ego gratification that progressives get from voting for useless gun control laws – it may make you feel good but it makes matters objectively worse. At this point, I would not vote for a single one of you, and would do my best to support primary challengers who understand that a Republican representative should aim to achieve the best outcome possible in a flawed system.

I am glad that Speaker Ryan is not the tyrant that Nancy Pelosi was. But it is frustrating that you take such advantage of Speaker Ryan’s wish to maintain democracy and respect for all members’ opinions within the Republican delegation. Until now, I have thought that Steve Bannon would provide a useful reminder of conservative principles to a President who is more a negotiator than committed conservative. But I would want his head on a platter if he had anything to do with a plot to replace Speaker Ryan with a leader of the Freedom Caucus.

How would you expect a more conservative (and less experienced and nowhere near as bright) leader to achieve more of your agenda? You drove Speaker Boehner out with complaints that he was not taking a hard enough line in opposing the Obama Administration on budgets and debt. Now there seems to be a wish to drive out Speaker Ryan. Is your idea that an uncompromising conservative could whip the Republican delegation into line behind your ideas, in the same way that the uncompromising leftist Nancy Pelosi did?

That is surely wishful thinking. Leaving aside the question of who would want to be elected as a Republican if they were going to be forced to vote for a bill they never read, you don’t have Nancy’s tools. She did not succeed in browbeating her colleagues by sheer nastiness. She controlled the pursestrings of campaign finance, and her purse was filled by George Soros and his friends. No matter what the liberal media claim, we Republicans have no such sugar daddies. You in the Freedom Caucus were elected by a popular groundswell and spent far less on your campaigns than your Democrat opponents. The Republican National Committee and the House and Senate Campaign Committees are run in a pretty democratic way, compared to the authoritarian thought police who dole out money to Democrat candidates. So you will fail to impose your ideas on a Republican delegation that is both more centrist and more realistic than you.

It is nearing midnight on the political clock, and you need to get the message now. You will double-down on disaster if you decide to follow your perverse victory on Obamacare with the same stance on tax reform. Speaker Ryan and Chairman Brady have crafted a tax reform package that will reduce the burden of taxation on American businesses and families, fix the perverse tax policies that drive companies and investment overseas, and stimulate much faster economic growth. Whose side will you be on? Is it really that important to remind the world that you stand for lower taxes and reduced spending and are not happy that tax reform is revenue neutral? Will you help the Democrats stop tax reform or will you vote for a great tax package even though it does not achieve the full Conservative agenda of reducing taxes and cutting spending?

We have a historic opportunity to put the United States back on the right track, with majorities in the House and Senate and a President able to sit down and negotiate. Are you enjoying the gloating of the progressives that the Trump Administration is a failure before even 100 days elapse?

Stop acting like snowflakes who need time off from exams to weep when they do not get what they want in politics. Man up, and take your responsibilities not just to the Republican Party but to the people of the United States seriously. If you remain intransigent, all you will do is return power to those who want to restrict our religious freedom, tax us into submission, and let other countries rule the world. Call President Trump and ask him to sit down with you, Speaker Ryan and Secretary Price to work out a new deal on replacing Obamacare. It is almost too late.

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.

Good or Bad Climate Policy by David Montgomery

A series of recent letters to the Chestertown Spy have castigated our Representative, Andy Harris, for sponsoring HR637, a bill that would change the way greenhouse gases can be regulated. The bill is a necessary step toward sensible and effective climate policies, and the depth of misunderstanding of the nature of greenhouses gases and the Clean Air Act evident in the letters makes them the subject of this column.

HR637 has 120 co-sponsors, and its purpose is to stop the Environmental Protection Agency from using the Clean Air Act to regulate greenhouse gas emissions. To do so, it changes the language of the Clean Air Act to remove the six greenhouse gases from EPA’s jurisdiction. The six are methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, carbon dioxide.

There are three reasons why I think the bill co-sponsored by Andy Harris is a good idea: 1. No one is harmed by breathing any of these compounds at concentrations they could reach in the atmosphere whether regulated or not. 2 Reliance on the Clean Air Act is a terrible way to deal with global warming. 3. There are much less costly and more effective ways to address global warming — like the carbon tax that I discussed several weeks ago.

First, we can all breathe freely if these compounds are unregulated. Leaving aside the personal animus expressed in many of the letters, their common error is in believing that the six compounds that would be removed from the list of “air pollutants” are themselves hazardous to human health. The repeated claim that “they will impact our crops, livestock, seafood, soil and waters that are the bounty of our Chesapeake Bay region, not to mention our lungs!” is simply untrue. The only reason that EPA is regulating those compounds is their suspected contribution to global warming.

A little history helps here.

In 2009, EPA issued a finding that these 6 compounds “endanger” public health and welfare due to their contribution to global warming. This is the “endangerment finding,” famous in some quarters and infamous in others. Nowhere in the endangerment finding does EPA mention any direct impacts of these compounds on health. That is because the current and future concentrations of these compounds in the atmosphere are far, far below any threshold at which they could be harmful. And some, like the two fluorocarbons and methane, are harmless propellants that have been used in hairspray. The only property that has led EPA to regulate them is their effect as greenhouse gases.

To make this perfectly clear, EPA is required under the Clean Air Act to regulate emissions of hazardous air pollutants. EPA’s current list includes 187 hazardous air pollutants. None of the greenhouse gases appear on this list. Nor are they in the list of criteria air pollutants (particulate matter, ground-level ozone, carbon monoxide, sulfur oxides, nitrogen oxides, and lead) for which EPA is required to establish ambient air quality standards. If these compounds did pose dangers cited by the letter writers, they would have to be on one of these lists.

Second, the Clean Air Act was never intended to deal with problems like global warming. EPA relied on the endangerment finding to issue a rule requiring existing electric power plants to reduce their emissions of carbon dioxide. EPA also issued a rule in 2016 to regulate methane emissions from oil and gas production as greenhouse gases. These rules will significantly increase costs of natural gas and electricity to consumers and do little to slow the pace of global warming. They are just targets of opportunity, singled out because the Clean Air Act does not give EPA the authority to utilize cost-effective, economy-wide policies that could achieve much greater results at much lower cost.

President Obama declared that “if Congress won’t act on global warming, I will use existing regulatory authorities to take action.” EPA chose the Clean Air Act to support its moves on global warming. But under the Clean Air Act, EPA can only issue performance or technology-based standards for particular categories of sources. So the methane rule applies only to oil and gas wells, and requires reductions in methane emissions that could be — and in fact are being — achieved at far lower cost by addressing leakage from transportation and use of natural gas. The Clean Power Plan is itself before the Supreme Court because of challenges upheld by the lower courts that EPA went beyond what the Clean Air Act allows in designing the rule. In particular, EPA based requirements not on what is technically feasible and economically justified “within the fence” of a power plant, but expected power plants to pay for emission reductions by others.

This kind of emission trading is in itself a very good idea, because it allows the market to find the most cost-effective ways to reduce emissions. But under the Clean Air Act, the extent of that market is tightly circumscribed, so that EPA may have exceeded its authority even with the small amount of offsets it allowed in the Clean Power Plan. Even if the courts uphold the Clean Power Plan, its narrow focus on electric power plants means that there are widespread opportunities to reduce emissions more cost-effectively that it cannot touch.

Third, there is a far better way to do all this. The Obama Administration’s devotion to regulation has done little or nothing for the environment, but it has put a stranglehold on economic growth. The Administration also issued rules for new car fuel economy that auto manufacturers cannot meet unless car owners sacrifice affordability and performance and other rules that require amounts of ethanol in gasoline that can harm older cars as well as boat and farm engines.

HR 637 is an important step toward dismantling this regulatory approach to climate policy, and it clears the way for building a consensus for a less intrusive and more effective one. Once this regulatory jungle is cleared away, my preference would be for a carbon tax set at a level that gives the best balance between risks to the US economy from global warming and the cost of reducing emissions. Another wise and cost-effective approach could be a technology strategy emphasizing basic and applied research to develop breakthrough clean energy technologies we cannot envision today.

What is most important is to settle on a policy that has sufficient political consensus to last from one Administration to another. One thing that this election should have proven to anyone is that the regulation that one Administration can impose, the next can undo. Global warming is a process that evolves slowly over time, that we do not understand well enough to predict with any confidence, and that will have to be addressed in a consistent manner for many decades to come. In particular, we will not get the kind of research and innovation necessary for a low carbon future unless we put in place long lasting policies that provide adequate rewards for innovation. Getting rid of hastily contrived and excessively costly regulations is a good first step. HR637 does not mean that global warming will not be dealt with, but it does ensure that global warming will no longer be dealt with quite so badly.

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.

What You Wished You Didn’t Need to Know About Tax Reform by David Montgomery

I have mentioned tax reform in two columns so far, and it seems time to dig deeper into the topic. Long before the election, Paul Ryan started to develop a comprehensive proposal for tax reform. The last major tax reform package was passed in the Reagan administration, though each succeeding President has pushed taxes up (D) or down (R). Ryan’s proposal, taken up by his successor as chief tax writer in the House, Chairman Brady, would reduce personal and corporate income tax rates and fundamentally change how taxes on business are calculated and who pays them.

There are a number of reasons why this kind of tax reform is needed. Burdensome and badly designed taxation is a major contributor to the slow recovery from the recession. Since 2008 investment has fallen from its average of 4.4% of GDP between 1960 and 2008 to 2.8% of GDP last year. The United States taxes business income twice, once in the corporate income tax and then again when what is left shows up in personal investment income. This puts US taxes on investment higher than in all but four of our major economic competitors, and only two out of 173 countries have higher corporate taxes than in the U.S.

These high tax rates not only slow economic growth, in the long run they are self-defeating. We have seen this clearly as large companies move their headquarters overseas, are purchased by foreign companies, or merge with foreign companies in order to move their income to countries where taxes are lower. This not only moves jobs overseas, but erodes the base from which corporates taxes are collected.

Not only that, but when U.S. companies move overseas, they often find that their new host countries refund their taxes on the goods they manufacture overseas and sell back to the United States. Companies that remain in the USA are at a double disadvantage. They have to pay US taxes on goods they export and then find that their goods are taxed again when they arrive in the foreign country.

The Brady-Ryan plan fixes these problems. By reducing the corporate tax rate from 39.6% to 20%, it moves the US down from imposing the world’s highest taxes on business to the middle of the pack. To remove the remaining biases against manufacturing in the USA, businesses will no longer be able to deduct the cost of goods they import from their taxable income, and at the same time businesses will no longer pay any taxes on income from the goods they export. This “Border Adjustment” will give US manufacturers the same advantages in global competition that most of our competitors already give to manufacturers in their territory.

To further simplify the tax code, depreciation and all the special tax breaks that go with it will be eliminated. Investments will just be another expense to be deducted from income in the year they are incurred. Also, businesses will no longer be able to deduct interest payments. The purpose of this change is to eliminate the bias in favor of borrowing rather than going to the stock market to raise funds for investment, which has enriched banks and made many businesses much more vulnerable to bankruptcy than they would be with less debt to service.

Incentives for individuals to invest will also be increased, by exempting 50% of income from capital gains, dividends and interest income from personal income tax. Thus while businesses will not be able to deduct interest or dividends, double taxation of investment income will be greatly reduced by the combination of lower tax rates at the corporate level and exemption of 50% of investment income to individuals.

Personal income tax rates will be reduced and simplified for all incomes. Taxes will go to zero for many taxpayers now paying a 10% rate on some of their income. Going up the ladder, instead of the current 7 tax brackets there will be just three. The maximum rate in the lowest bracket will be 12% instead of the current 15%, in the next the maximum rate will be 25% instead of 28%, and the highest rate will be 33% instead of 39.6%. The obnoxious AMT that is reaching further into the middle class will be repealed.

Of particular interest to the retirees, farmers and small businesses on the Eastern Shore, the Plan will repeal the Death Tax completely and limit to 25% the maximum tax rate on small businesses that “pass through” income and expenses to their owners.

All of this will be good for the economy and good for consumers. The Tax Foundation, an independent research institution, estimates that after 10 years GDP will be 9.1% larger than it would be with the current system and that an additional 1.7 million jobs will be created. Naturally, this added growth also increases tax revenue.

The problem is how to get a major tax reform package like this passed. It would be very nice to have bipartisan agreement that we do not need to settle for lower economic growth and that tax reform is necessary – not sufficient, but still necessary – to get back to historical levels of economic performance. It would not even take much bipartisan agreement – just 8 of the 10 Democratic senators running for re-election in states that President Trump won in a landslide would be enough to overcome the roadblock of 60 votes.

However, the plan is constructed to make that unnecessary. Under the current budget process – which still exists even as the deficit balloons – a Budget Resolution is passed each year setting out overall spending and revenue targets in some detail. After the Budget Resolution is passed and Congress acts on authorizing expenditures, there is a second step to bring those actions back in line with the Budget Resolution. This “Budget Reconciliation Bill” is privileged with limited debate and requires only a majority vote for passage. It is possible to add the entire tax reform plan to the Reconciliation Bill, as long as it is “revenue neutral” – that is, any loss in revenue from one provision is balanced by an increase in revenue from another.

So far so good. This is where the devil is in the details of arguments over who benefits. Democrats describe the Plan as another example of “trickle-down” economics and claim that it short-changes or harms middle- and lower-income taxpayers. Businesses obviously favor all the provisions that reduce their taxes, but they unite with Democrats in decrying the “Border Adjustment” provisions. Companies like Walmart that import most of the goods that they sell do not like the choice of buying more expensive substitutes made in the USA or seeing their taxes go up substantially. Others worry that either of those choices will raise prices paid by consumers.

The easy solution to some of these objections would be to lower rates further in the two lowest brackets or eliminate the Border Adjustment. This is where the need to stay revenue neutral in order to avoid a 60-vote hurdle comes back to bite us. The Border Adjustment provides about $1 Trillion of revenue over 10 years and meaningful rate reductions are impossible without it.

Fortunately, it is quite likely that some of the impact of the Border Adjustment will be borne by the countries from which we import and to which we export. The argument for this very desirable outcome is that the value of the dollar will automatically adjust to get rid of any upward pressure on consumer prices.

The basis of this argument is the clearly correct observation that unless the value of the dollar goes up, the border adjustment will create a very large incentive to increase exports and a very large incentive to reduce imports. If this happened, the U.S. trade deficit would decline drastically. This is where a counter-intuitive but well-established hypothesis comes into play.

Most economists are convinced that the trade deficit has little or nothing to do with wages and taxes in the US versus China, India, Mexico or Europe. Instead, it is the magnitude of government borrowing that determines the size of the trade deficit. And in accounting terms, this is absolutely correct. If the United States is borrowing from other countries every year, that means that we are consuming more than we produce and are running up debts to pay for it. When the government spends more than it takes in, and everyone else spends all they earn and possibly a little more, we have to import more than we export in order to balance the accounts.

Remembering that the Border Adjustment is part of a Plan that is revenue neutral, it will not change the government deficit and therefore the trade deficit cannot change. This means that the dollar must appreciate by just enough to negate any incentive for more exports or less imports. If this happens, Walmart will find that the dollars it saves on buying imports will be just what it needs to pay its additional taxes due to the Border Adjustment. If that happens, there is nothing to drive consumer prices up and everyone is happy.

I doubt that everything will be quite that simple. Many European countries adopted very similar border adjustments when they adopted their Value Added Taxes, or VATs. Those countries did experience a brief period of inflation, in which some but not all of the higher taxes on imports were passed on to consumers. This produced no major disruptions or long-term problems. I think we are likely to have the same experience, as the dollar will increase but not enough to fully offset any pressure on prices. As long as wages keep up and the Federal Reserve responds appropriately, it is my opinion that the long run benefits of tax reform will outweigh these transition costs for just about everyone.

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.

Trump, Better and Worse by David Montgomery

President Trump’s address to a joint session of Congress last week proved to me that he is the President I was looking for. I did not agree with all the policy prescriptions, but it was a magnificent speech. His delivery was natural, clear and inspiring. He spoke to his base, in simple and understandable terms. He described how far he had come in 40 days toward accomplishing what he had promised and he took responsibility for his blunders.

In tone and substance, the President reached out for reconciliation and proposed ways for Republicans and Democrats to work together for the common good. On infrastructure, immigration and health care, his approach should make Democrats – especially the ten senators who will be running for reelection in states he won in a landslide – hesitate to continue saying no to everything.

From first to last, President Trump spoke about unity. Referring to recent threats and desecration of Jewish monuments, he called for us to stand united in condemning hate and evil. He talked of the greatness of the United States, and our unity and strength. He said again that we all bleed the same blood, salute the same flag, and in my words are made by same God. After laying out his plans and goals, he concluded by acknowledging that we can only get there together.

I found it particularly refreshing to listen to a Presidential speech with not a single mention of the politics of identity, a theme that was present in every speech made by his predecessor. President Trump addressed us as a single nation, where our identity as children of God first, then as citizens of the United States, are all that matter, not differentiation by race, color, religion, culture or all the newly-invented identities of gender and preference.

There were some specifics in his proposals and goals that I particularly liked, and others that I was not so happy with.

President Trump was absolutely correct to state that businesses in the United States face the highest tax rates in the world and that it is critical to cut those taxes if we are to return to historical rates of economic growth. This is the centerpiece of the tax reform package developed by Speaker Ryan and Chairman Brady of the House Ways and Means Committee, along with a reduction in taxes on the middle class. The President also discussed how the United States is being taken advantage of by other countries that tax the goods we export to them and rebate taxes to their companies that export to us. In doing so, he came very close to endorsing another key provision in the tax reform proposals, which is to treat our imports and exports in exactly the same way that other countries treat theirs. This so-called border tax adjustment would no longer allow companies take a deduction for the cost of goods they import and then resell, and it would stop taxing revenue from exports. This means that if a company wants to sell here, they will do well to invest here, and these tax changes would put American businesses on the same footing as their competitors.

I emphasize this because eliminating handicaps in the tax system is a far better approach to trade than erecting tariff barriers or creating “buy America” programs. Many Republicans, as well as all economists, were very unhappy with the way Candidate Trump played up job loss caused by imports and threatened to erect trade barriers. Trade barriers always hurt the consumer, and if his speech indicated a willingness to substitute tax policy for trade restrictions, it is a welcome change.

As I discussed in a previous column, I agree that we need to scrutinize carefully all entrants from countries that spawn Islamic terrorism, and that getting reliable background information from countries of origin is critical to doing so. But for immigration from other countries, especially Asia and Latin America, we need to open our doors in a prudent way. His proposal to move to a merit-based system of granting permanent resident status is a good start, but we need to go much further. First, we should repeal the 1917 and1965 Immigration Acts and eliminate all quotas. I would instead give a temporary green card to anyone who passes a strengthened vetting process and accepts a condition that they will be ineligible for public assistance for some period of time. During that time, every applicant for residence should be required to learn English and have no criminal record. If all goes well, at the end of that time, they would become permanent residents eligible for citizenship and all other benefits.

I believe that if we remove quantitative restrictions on immigration, it is critical that we make sure that we admit only immigrants willing to work, assimilate and contribute to the economy. Instead of allowing immigrants to go immediately on welfare, we should let our communities and churches do their job of aiding and integrating them. I would happily increase my contributions to Catholic Charities, our Annual Diocesan Appeal and the Society of Saint Vincent dePaul to support immigrants who are in need thru no fault of their own. This return to the old-fashioned notion of taking care of each other would make charity meaningful again, as we would have to make personal decisions to welcome strangers rather than voting to spend someone else’s money on them. This approach would also favor assimilation and discourage the creation of separate identities.

I am not so happy about the President’s fascination with infrastructure. Infrastructure spending has been dominated by boondoggles designed to put a project in every Congressional district and award members of the appropriations committees. Democrats and too many Republicans see these projects as a right of their office. I was in charge of evaluating these kinds of expenditures while at the Congressional Budget Office, and we found that nowhere near as much spending is needed as the road lobby and others claim. Estimates of substandard highways and bridges, for example, often include a large number of structures that simply have lanes or shoulders a little narrower than current standards. Infrastructure spending needs to be approached critically and with a tight purse. Keeping costs down also requires avoiding the Buy American requirements the President recommended.

I was disappointed that along with the need for infrastructure investment for future generations, President Trump did not mention two much clearer threats to our economic future: the crises of spending on welfare and social security. No matter what is done to cut spending elsewhere in the budget, the national debt will continue to rocket upwards unless spending on these programs is cut. Action is needed on all three to secure our future: prudent infrastructure spending, cutting welfare, and reforming Medicare and Social Security.

On the other hand, I thought the President’s presentation of the need to repeal and replace Obamacare was astute. He made it clear that this action is not a matter of partisan politics but of necessity. Obamacare is not just bad policy. It is in crisis, with insurance companies pulling out and costs of insurance policies skyrocketing.

Even without more specifics of the repeal and replace proposal, I was very pleased with his comment that legal reforms are needed to protect from unnecessary costs. This is another important drain to the swamp. Malpractice suits play a huge role in generating excessive testing and treatment as well as creating astronomical malpractice insurance and settlement costs that are all passed on to patients. Institutional change of this type can play a huge role in making medical care more affordable.

It was also wonderful to hear the President talk with sympathy about the cycle of violence that plagues our cities, and to do so without blaming it on the police. Again, his message was of unity: the police are also members of the community, and divisive rhetoric has to stop. I would put it more strongly: activists, mayors and State’s Attorneys whose actions have prevented police from providing effective law enforcement in poor neighborhoods have only inflicted greater suffering on those they hypocritically claim to champion. But in this case, the President toned down his message.

Finally, I was both touched and pleased by the way the President recognized those who sacrifice to protect our freedom. I thought his tribute to Senior Chief Ryan Owens was appropriate and heartfelt. My heart went out to Senior Chief Owens’s wife, whose appreciation and grief was open and sincere. It has been eight years since our President showed such deep and open respect and affection for our troops.

It is a shame that her courage and the President’s tribute have been met by despicable attacks from the President’s detractors. The supercilious left could only make fun of him and the widow of Senior Chief Owens for showing emotions they do not share and cannot understand.

I am confident that the President meant it when he ended by asking God to bless the United States of America. This is the President I hoped for.

David Montgomery was formerly Senior Vice President of NERA Economic Consulting. He also served as assistant director of the US Congressional Budget Office and deputy assistant secretary for policy in the US Department of Energy. He taught economics at the California Institute of Technology and Stanford University and was a senior fellow at Resources for the Future.