Tariffs: Trump’s Big Blunder by David Montgomery

The decision to impose tariffs on steel and aluminum imports is a very bad one. Protection of U.S. industries from unfair competition has always been part of President Trump’s message. It is what worried me most about him as a candidate, but until now his approach has been to eliminate ways that government is holding U.S. industry back. Changing course and erecting tariff walls like this could destroy all the good he has done with those positive economic policies.

The losers from tariffs include everyone who uses the products subject to the tariff, or products made from them. In the case of steel and aluminum, that is everyone. Protectionism only benefits the small number of owners and possibly workers in the industries being protected and hurts everyone else.

The case for free trade is very simple. Everyone gains if the United States specializes in those goods that it is better at producing, and trades them for what others are better at producing. Tariffs cause us to produce things that we are not so good at, so that we end up with less in total.

Tariffs do this by erasing the difference between the price at which we can buy steel and aluminum on the world market and the price that U.S. steel and aluminum companies need to receive to remain profitable.

Industries want tariffs because it costs more to produce steel and aluminum here than it does to import it. That is why tariffs are bad policy. Homely examples are in this case quite accurate: I could cut my own grass, but if I spend the same amount of time doing something that I am very good at, I can earn enough to pay my lawn service and have a good bit left over.

Protectionism also harms all the U.S. industries that use the goods being protected. As the picture below shows, steel is required in all the major U.S. industries, and the same is true of aluminum. They are necessary to make the machines that produce everything from automobiles to paper, they are incorporated in all major appliances, we could not generate electricity or build structures without them.

The entire purpose of these tariffs is to raise prices so that steel and aluminum companies can make a profit and replace imports with domestic production. Sounds like a great idea. But the higher price of steel drives up the price of everything else that consumers use: housing because of higher construction costs, automobiles because manufacturing equipment and materials cost more, energy as power plants and pipelines become more expensive, military budgets are stretched further because guns, vehicles, ships, airplanes and structures cost more.

There are a number of phony arguments for protectionism: somebody (usually China) is not competing fairly, it will put Americans back to work, it will fix the trade deficit, and national security is threatened.

They not competing fairly, so we have to retaliate. This is the most common and legally defensible argument for tariffs – some other countries are selling goods to us for less than their cost to produce the goods. The more accurate form of this argument is – they are being stupid so we have to imitate them. If China insists on selling steel or aluminum to us for less than it costs them to make it, why not just let them give us that gift? We can put the resources that would be required to produce the same amount of iron and steel to work in more productive ways – like making things out of iron and steel that we can sell for a profit without government tariffs or subsidies.

It will put Americans back to work. There are many ways in which President Trump’s policies are doing this – regulatory reform that lowers labor costs and increases productivity, tax reform that restores incentives for investment, and reform of Obamacare that removes a big tax that employers must pay to hire workers. But tariffs and protectionism do not. They may preserve jobs for specific workers in specific industries, but at the expense of jobs for workers in other industries that no longer have access to imports and find their costs increased to levels at which they cannot compete. One study, by the Consuming Industries Trade Action Coalition (CITAC), concluded that President Bush’s steel tariff cost 200,000 workers in steel-consuming industries their jobs in 2002 because of higher steel prices.

It will fix the trade deficit. The trade deficit cannot be changed by tariffs. Right now, we are borrowing immense sums from other countries so that the government can spend more money than it brings in. Just like a family that borrows in order to spend more than it earns, borrowing from overseas lets the United States purchase more from abroad than it earns by selling goods abroad. That is, borrowing equals the difference between imports and exports, and that difference is known as the trade (or current account) deficit. Tariffs may change what we import (and export) but as long as we are borrowing immense sums from overseas, the trade deficit cannot go down.

It is necessary for national security. No doubt, China is subsidizing exports and driving American companies out of the steel, aluminum and other industries. That does not amount to a national security threat, any more than Asian countries producing our televisions. By giving these subsidies, China is building an economy that can only sustain itself by constant increases in government-led investment, to produce goods to be sold on foreign markets at prices that fall further and further below their costs to produce. That is not a strong economy.

Our consumers are attaining a higher standard of living than would be possible if China were not making these gifts. The Chinese people are getting less and less for themselves as their government pushes greater subsidies into export industries. The Chinese government brings its day of political reckoning closer and closer by limiting domestic consumption in order to continue expanding its white elephant industries.

Even if China can sustain this kind of growth for a while, we have no need of an industrial policy to defend ourselves in modern wars. There is little likelihood we will face another World War II where victory went to the country that could produce the most and best armaments. If we do need to mobilize again, imports of steel and aluminum are available from many friendly countries, and the technology and mineral resources remain here. The national security argument is nothing but a smoke screen for the traditional pleas of the metals industries for protection from a global market.

This is not the first time that the steel industry has cried for relief. In 1969, 1978 and 1984 and 2002 protection was extended to the steel industry by Presidents of different parties. Sometimes the economy moves in directions good for US metals, and the demand for protection fades. Then things change, imports rise and the plea for protection returns. Most recently this happened with the end of the recession, with construction and investment taking off and steel and aluminum imports growing. That made U.S. steel producers look for a way to get a bigger share of the growing market, and getting some help for the government was the easy solution. They are in essence asking for the same subsidies the Chinese give, but paid for by consumers who, of course, are the ones who suffer in China too.

Protectionism is the Achilles heel of populism, where the right-minded desire of ordinary people to reclaim their culture and economic opportunities is unprotected from the arrows of economic nonsense. The drop in the stock market is the predictable and reliable indicator of the overall damage that these tariffs will inflict on the entire economy. Republicans in Congress have to remind President Trump that these tariffs will harm the very people who elected him, and take action to end them if necessary. That is good politics and looking out for the common good.

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.

Firearms and Evil by David Montgomery

School shootings are a moral problem, that cannot be solved by campaigning against firearms. These atrocities must be recognized for what they are – instances of evil that are becoming more common in our secular, individualistic society.

Instead of facing the problem of evil, elected officials and political activists are exploiting mass shootings to push for phony solutions that fit their social agendas. This should infuriate everyone sincerely concerned about the past, present and future victims – and perpetrators.

For example, a bill was introduced in the Maryland Senate (Senate Bill 1062) to criminalize the possession of magazines that allow a firearm to fire more than 10 rounds without reloading. It is already illegal to buy or sell such magazines in Maryland, even though they are readily available in other states and were legal before Governor O’Malley pushed that legislation through. As a result many recreational shooters and hunters already own magazines that hold more than 10 cartridges. They are compatible with a number of rifles and pistols that are legal to purchase in Maryland, and some that are legal to own but may no longer be sold here.

The proposed legislation would make current owners of such magazines subject to as much as 3 years in prison. That is a more disruptive form of gun control than ever before attempted in Maryland, and it would do nothing to prevent mass shootings.

Nibbling away at the Second Amendment is a cause that many progressives support, and setting a precedent for confiscation of parts of firearms from their current owners is high on their list of milestones. The Florida shooting appears to have given those activists an incentive to give it a try.

But criminalizing possession of high-capacity magazines in Maryland cannot possible reduce the likelihood or magnitude of mass shootings – let alone the other ways that evil men find to inflict harm on others. If a young man in Easton or Frederick or Bowie wanted to open fire on a school, it would take him less than two hours to drive to a state where purchase of higher-capacity magazines is perfectly legal. Intending to commit a crime of far greater proportions, he would hardly be deterred by the illegality of possessing it on his way to mass murder.

As many have already pointed out, existing law was quite sufficient to prohibit the Florida shooter from purchasing any firearm, if law enforcement had followed existing rules. That was also the case in many past shootings. But better enforcement and further tightening of restrictions on legal firearms purchases will have little effect as long as an even shorter drive puts a would-be shooter in a neighborhood full of illegal firearms for sale. As terrorist attacks in Europe demonstrate, cars and knives are also effective instruments for killing when firearms not available.

The introduction of bills like Senate Bill 1062 is an outrage not because of their potential effects on law-abiding gun owners, but because it will produce only wasted effort devoted to the wrong questions, no matter how it turns out.

That is because the evil that leads to school shootings is in the individual, and we can see how it arises. All the school shootings were perpetrated by loners, social outcasts, from broken homes, who were subverted by some evil ideology or philosophy. One writer points out that “Shooters have problems at school, family issues, violent behavior, and police encounters. They take medications, lack communication skills and show strange, unpredictable behavior. They indulge in violent video games and send disturbing messages through social media.”

These shooters did not become entranced with killing because they stumbled across a firearm; they searched out a firearm to carry out an evil intention fully formed without any reference to how it would be accomplished.

None of the mass murderers grew up going to church every Sunday with their parents. None had supportive families that showed their love, taught the difference between right and wrong, and brought their children up to believe in a higher power. None attended schools that included moral and spiritual development in their teaching, nor has there been a mass shooting at that type of school.

Those clamoring for action to prevent future mass shootings seem unable to recognize this. When they take a break from blaming firearms, the liberal media repeat that “the red flags were all there” to identify the Florida shooter, and then call for law enforcement to take preventative measures, advocate more social programs for disturbed youth, and demand tighter surveillance of social media. Unfortunately, all of those suggestions amount to looking for a very small needle in a very large haystack of disturbed youth who would be turned up by such profiling.

In all this, the fingerprint of liberal society becomes clear. The shooters are but one or two in a far larger number who fit the profile of an isolated and disturbed youth, yet most remain relatively harmless. All of them are nonetheless damaged by growing up without bonds of love or trust in anything good that is greater than themselves. Thus they become prey to the external evil of neo-Nazi and similar creeds and the internal evil of wishing for their own death accompanied by the deaths of others for whom they can feel no empathy.

Many of us see this as a logical consequence of liberal society. All around, liberalism is driving faith out of the public square and inculcating in its place a belief that nothing matters but an individual’s desires and feelings. Society is then not a community in which stable and permanent relationships (earthly and heavenly) give meaning to life but a place where isolated individuals pursue their own satisfaction.

For those children lacking a permanent community and belief in a power greater than themselves, the social group in school or neighborhood may seem a solution. But that simply makes the pain and isolation of being excluded from such an apparent source of meaning more intense. And exclusion does occur, because none of the members of the group see it as a community, but rather a playground for their own desires.

No wonder some succumb to a sense of loneliness so great that they only desire to kill and die. Firearms do not create that feeling, nor would some minor annoyances in obtaining firearms be sufficient to deter the very few who do become killers.

There are communities within this liberal realm of radical individualism that do provide the kind of upbringing and hope that give a child a reason to do good and avoid evil. They are almost all centered around churches, and despite all the attempts of liberalism to marginalize faith-based communities, they are saving their children from the evils of nihilism and despair. That is why it is worth continuing the battle to restore a core of faith to American democracy. And it is the only proven way to save as many as possible from the fate of the victims and the shooter in Florida.

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.

Sanctuary or Secession by David Montgomery

Several commentators, including Ben Stein, have suggested that the Sanctuary Cities are repeating the Secession crisis that led directly into the Civil War.  There is an enlightening comparison to be made, but the facts need to be straight first.

The Sanctuary Cities are not yet at the stage of secession, their actions so far amount to an attempt at nullification.  Likewise, the states that have declared marijuana to be legal in defiance of Federal law appear to me to be attempting nullification.

The famous Nullification Crisis was prompted by South Carolina, but it was over a tariff not slavery.  It occurred during the administration of Andrew Jackson, a President almost as famous for his populism as Donald Trump.  The very protective Tariff of 1828 was enacted during the presidency of John Quincy Adams, and it was very unpopular in the South and parts of New England.  

The more radical opponents of the tariff in South Carolina began to advocate that the state declare the tariff null and void within its borders.  The compromise Tariff of 1832 provided insufficient relief, and in 1832 a state convention in South Carolina adopted an Ordinance of Nullification that declared both tariffs to be unconstitutional and unenforceable in South Carolina.  

Congress responded by passing the Force Bill, which authorized the President to use military forces against South Carolina, and a compromise tariff that was acceptable to South Carolina.

Leading up to the Civil War, it was actually the Northern States that practiced nullification.   In the aftermath of the Fugitive Slave Law, which declared the right of owners to capture escaped slaves anywhere, Pennsylvania and twelve other Northern states passed laws making it “a crime for any person to forcibly remove a black person from the state with the intention of keeping or selling him as a slave.”  The Supreme Court ruled against all these attempts at nullification by states.   Nevertheless, abolitionists defied the law by refusing to turn over escaped slaves and preventing their capture.

I have not yet read about a sanctuary city or state trying to clothe itself in the righteousness of abolition, but I expect it any day.  Where our ancestors overthrew slavery by nullifying laws that required them to return slaves, sanctuaries are determined to overthrow … what? … by nullifying laws that require illegal entrants to be detained and possibly deported.

So one question is, what are sanctuary cities trying to accomplish? If it is to prevent convicted criminals from being deported, that is a foolish obstruction of justice.  What claim does someone who violates the law after arriving in the U.S. have on a right to live here?  Those who have earned a chance are the dreamers who have respected the law and worked hard since being brought here, not the criminals among them.  If the purpose is to undermine enforcement of U.S. immigration laws and create open borders within the sanctuary jurisdictions, that is another and much more serious matter.

The next historical nullification attempt should give the Sanctuary Cities more pause about whom they emulate.  After the Supreme Court declared segregated schools unconstitutional in Brown vs Board of Education (1954), at least ten Southern states passed what amount to nullification measures and refused to follow the Brown decision.  

The Supreme Court explicitly rejected these attempts at nullification in 1958.  In a unanimous opinion, it held that Federal law “can neither be nullified openly and directly by state legislators or state executive or judicial officers nor nullified indirectly by them through evasive schemes…”

The first Nullification Crisis led to granting the President power to intervene with force to enforce laws that states claimed to nullify, and the states backed down.  The Supreme Court held that Brown vs Board of Education could not be nullified, and President Eisenhower sent the soldiers of the 101st Airborne to escort the Little Rock Nine into Central High School.  His action was violently condemned by the Democrats who then held sway in the South.

There is a great deal for Sanctuary Cities to learn from this.  

The first and last nullification crisis ended when the states backed down after President Jackson and President Eisenhower made it clear that they would use sufficient force to uphold the law.

The nullification practiced by abolitionists and endorsed by Northern States had a different outcome – it contributed to the confrontations that precipitated the Civil War.  The Declaration of Immediate Causes that South Carolina issued along with its secession ordinance in December 1860 stated that nullification attempts by the northern states were a cause of its action.  From there on, a series of confrontations led to an avoidable war in which 750,000 soldiers died on both sides.  Nullification inflamed tensions between slave and free states and made a gradual and peaceful abolition of slavery, such as Robert E. Lee and other slave and free state leaders tried to accomplish, impossible.

Thus I agree that there is an enlightening comparison between Sanctuary Cities and the secession crisis.  The Sanctuary Cities are turning the immigration debate into a confrontation between those who would nullify immigration laws and those who favor closing the borders and exporting them all, leaving no room for some compromise on legalizing the status of otherwise law-abiding and productive illegal entrants.   In this, they are just like the nullifying abolitionists whose moral fervor contributed to the disastrous outcome of the Secession Crisis and Orval Faubus who defied Federal law on desegregation.

Even I, firmly lodged in the middle group favoring some compromise, am outraged by sanctuary cities’ and states’ defiance of Federal law and willingness effectively to pardon convicted criminals and release them to continue their predation.  None of us want to face the choice between allowing that practice to continue and ending it by force.  One civil war was enough.

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.


I am Going Out on a Limb by David Montgomery

I am going out on a limb.  As I see it, people who idolize foulmouthed comics like Amy Schumer are having fainting spells over President Trump’s alleged comment about shithole countries. Outlets that happily quote obscene rants from Sarah Silverman put on their Victorian costumes and cover up the same words with **** when the President utters them.

Obscenities and profanity have become part of the common language of movies, cable TV and rap music blaring from rice rockets on the road.

If his critics use language just as crude as the President, what is the flap about?  I believe that what the President did is violate the diplomatic pretense that every country is as virtuous, well-governed and civilized as the Western democracies.  That may not be the behavior that some sensitive souls expect of the President, but it is a long overdue recognition of the fact that almost all the poor countries of the world are so because they are failed states, governed by violent thieves and riven with crime and corruption.  That is not a criticism of their people, almost all of whom are peaceful, Christian, desperately poor and deserving of a far better life.  It is a factual description of how they are governed and of the nature of the despots and elites that plunder and rule them.

Since even before Papa Doc Duvalier took over in 1957, Haiti has been governed by a sequence of corrupt rulers and their cronies.  Large parts of Mexico are no-go zones for Americans because of drug wars and crime and its economy has been hamstrung by cycles of socialist and xenophobic policies, not to mention persecution of the Catholic Church by anticlerical revolutionaries on a scale to rival ISIS.  Venezuela was driven from relative if unequally distributed prosperity to the brink of starvation by a socialist demagogue who destroyed its most important industry.   

Ecuador is ruled by a delusional demagogue.  Rwanda, Sudan, and the Congo are repeatedly riven with genocidal wars between tribes and ethnic groups.  Zimbabwe, the breadbasket of Africa when it was Southern Rhodesia, became unable to feed even its own people after decades of expropriation of white farmers and theft by Mugabe and his family.

Countries like Namibia and Botswana have improved their standard of living in almost miraculous fashion because they adopted the clean governments and economic freedoms that we expect in the West.

The Heritage Foundation annually publishes an Index of Economic Freedom that ranks countries in a number of dimensions of governance.  The countries that score lowest in these rankings are consistently found in the list of countries will lowest per capita incomes and lowest per capita income growth.   So why the official silence on this issue?

I believe that the silence furthers the agenda of international bureaucracies and is sustained by fear of appearing racist or xenophobic.  I spent two decades working with and criticizing the UN sponsored groups that develop forecasts of future greenhouse gas emissions.   These scenarios have to be adopted by other subsidiaries of the UN before they can be part of official pronouncements about future levels and impacts of climate change.  

In all these scenarios, the failed states of Africa, Latin America and Asia were assumed to have the fastest rates of economic growth of all countries, so that the point could be made that wealthier countries must give up fossil fuels immediately to make room for their poorer neighbors to grow into economic equality.  

Even when scenarios were admitted that did not assume all countries converge to equal levels of per capita GDP, the reason given for slow growth in poor countries was the Marxist fantasy that wealthy countries continue to exploit them.  No mention was made of internal failures of governance and institutions.

Rarely is it admitted that there is not a snowball’s chance in global warming hell of most currently-poor countries achieving rapid economic growth.  Pointing out in a UN workshop on emission scenarios that these countries are poor precisely because they are failed states run by oppressive dictators would lead to exactly the same reaction that greeted the President’s uncouth comment.  

Thus we have had exaggerated predictions of emissions growth based on the politically untouchable assumption that poor countries are all poised to take off into sustained growth. The underlying policy agenda as well as diplomatic courtesy was furthered by ignoring the fact that there are failed states unlikely to grow without fundamental institutional change.

More important than this minor aberration in UN forecasts, this pretense that the governments of poor countries are virtuous and accountable lies behind much of the failure of aid policy since WWII.  As Easterly and Collier amply document, aid policy toward developing countries has been a sham, in which donor agencies pretend that the funds they distribute through the corrupt governments of these countries are being put to good use, and the despots and thieves who run them pretend that the funds and supplies are being distributed to the poor when in fact they are lining the pockets of the ruling elites.

The rate of growth of per capita income in many of the poorest countries has been zero or negative in recent years, and those that did achieve sustained growth all did so by controlling violence and achieving a degree of political and economic freedom.  But the bureaucracies of foundations, government agencies that dole out aid, and the UN in particular have nothing to gain by requiring accountability.  Their metric is how much money they have sent out, not what change they have affected.  And that will not change until the fact that bad governments and failed institutions are the reasons for poverty is admitted.

So what is happening in U.S. policy that affects these countries in fact, not just in words?  Last week, Vice President Pence and Ambassador Haley broke the conspiracy of silence to demand that United Nations relief efforts recognize that Christian minorities being oppressed in these countries are as deserving as other recipients of UN aid, and USAID started moving funds and supplies to those communities directly.

Agencies like Catholic Relief Services, though they pursue some politically correct agendas of questionable value, recognize that the only way their help can be effective is if it is delivered directly at the community level, not through corrupt regional and national officials.  This approach is increasingly being adopted by privately-funded organizations working in poor countries.

But on top of this it is necessary for the international community to end its code of silence about the nature of failed states and the culpability of their rapacious rulers.  If President Trump’s words could lead to recognition that there really are failed states for which the description is accurate, they might lead to action that would actually do some good for the people suffering under those regimes.

A final reflection: if a citizen of Zimbabwe were to tell me that for all the faults of its leaders, he loves his beautiful country and cannot abide hearing it called a ****hole, I would apologize to him.  I am equally offended at what many say about my beloved country, and I am aware that Zimbabwe is a wonderful place to hunt and a very special place.  I would agree that the President’s alleged comment was a poor choice of words, and he should have talked about countries with ****head leaders and ****ty institutions that keep their people in poverty and desperate to come here.  

Still, the solution to oppressive regimes and failed institutions cannot be migration on a global scale.  It has to be making things better where people now live, and that requires a complete rethinking about how to be prudent and effective contributors to their betterment.

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 Best and Worst of 2017 by David Montgomery

It was about one year ago, just after President Trump’s inauguration, that I wrote my first column for the Spy. That makes me think this the right time to reflect on the year, and I propose to do so by making a list of the best and worst of 2017. Doing so also allows me to put my marker down on topics I regret not having had time to write about at more length.

Except for the ones that I put in first place, I will list what I consider the 10 best or worst of 2017 in no particular order.

1. Since it is most recent, I start with tax reform. Passage of major tax reform legislation by both Houses of Congress is an historic event, and up to the last vote I still did not believe it would happen. Even so, this particular instance of tax reform just barely makes it into my top 10, because so many opportunities to do far better were lost.

The Tax Cuts and Jobs Act (TCJA) gives barely one-tenth of the income growth that the original proposal by Speaker Ryan and Chairman Brady would have achieved. As debates went on, parts of the bill that would have broadened the tax base and eliminated special treatment were dropped, and as that happened the revenue increases needed to fund broad rate reductions went away. Special interests used specious arguments to preserve their tax breaks, and in particular killed proposals to tax imports and exempt exports that would have raised revenue and stopped offshoring. Because these sources of revenue were thrown out, key incentives for investment had to be made temporary and thus almost useless.

Still, corralling enough votes to pass the legislation was up there with the greatest of legislative miracles. As a measure of how hard it was, the last reform of comparable magnitude occurred during the presidency of Ronald Reagan.

2. Another top 10 item has to be hearing the President use the phrase “Islamic terrorism” to describe the threat that we face. I am always cheered when accurate descriptions replace euphemisms. More importantly, there is no way we can protect ourselves at home or hope to win abroad if we refuse to admit who our opponents are and ignore the important clues their religion gives us about what motivates them and how they will conduct their campaign against us.

3. While efforts at tax reform have dominated the news, the Trump Administration has been making quiet but immense progress on regulatory reform. I am convinced that regulatory reform is the primary cause of rapid increases in employment and investment as well as rising stock market prices since the election. An estimate that I agree with puts the cumulative cost of government regulation at about 10% of GDP. In 2017 federal agencies issued only 3 new regulations while starting the process of eliminating 67 existing regulations. In addition, 1,579 regulations planned under President Obama have been delayed or withdrawn. That clearly belongs in any list of the 10 best. Regulatory reforms in 2017 saved over $500 million per year, while the Obama Administration is estimated to have imposed as much as $15 billion in costs during its last 8 months.

4. The changes that President Trump and Secretary Mattis made in rules of engagement for our warfighters in the Middle East are serious candidates in my mind for the best event of 2017. Freeing commanders and troops in the field from micromanagement by the White House and Pentagon lawyers has made possible in less than a year the reconquest of 95% of the territory that President Obama ceded to ISIS.

5. Just to show the list really is not in any order, Tucker Carlson comes to mind next. I had not watched him regularly until the night President Trump announced that he would name Neil Gorsuch to the Supreme Court. Watching Tucker Carlson give the demonstrators against Gorsuch enough rope to hang themselves with their incoherence and mindless repetition of memorized slogans was a delight. I have continued to find him a light in dark places.

6. Once again, mass killings by terrorists, madmen and racists made the news. But horror and evil also provide some with the opportunity to demonstrate heroic virtues. Stories emerged from the horrific events about teachers and other armed and unarmed citizens, as well as police, who ran toward the knives, gunshots and careening vehicles to save others. They are among the best of 2017.

7. Hard to decide whether this is a best or worst, but watching Hillary’s self-destruction by means of whining and fingerpointing had to be among the most amusing events of the year. I look forward every day to reading about her new additions to the list of people and events that are to blame for her losing the election.

8. In the same vein, I have greatly enjoyed watching left-wing agitators and their enablers in the news business deal with the revelation that they have been protecting and lionizing sexual predators in the film, news and politics industries.

9. I hope the Franciscans who manage the Roman Catholic role in the Status Quo in Jerusalem will forgive me for my delight at President Trump’s intention to move the U.S. embassy to Jerusalem. I see it as another dose of realism in foreign policy and recognition that Israel’s security requires maintaining control of the territories it conquered after being invaded by its neighbors in 1967.

10. By a wide margin, the most important event of the year, with the most salutary long term consequences for liberty and justice, has to be the appointment of Justice Gorsuch to the Supreme Court. May God bless and strengthen him.

Now for the worst (or dumbest)

1. The Republican debacle in dealing with Obamacare was infuriating and discouraging. After repeatedly voting in favor of very specific legislation to abolish Obamacare during the years when their votes did not matter, once they were in power Republicans in the House and Senate could not come close to agreeing on fundamental changes. In the end holdouts killed even modest reforms.

2. Republican failures in Congress were mirrored in the Washington Nationals annual post-season collapse – another example of how those in Washington DC can snatch defeat from the jaws of victory every time.

3. For most disgusting of 2017, I nominate Kathy Griffin, followed closely by Chelsea Handler, Amy Schumer and the other foul mouthed, alt-left celebrities who escalated their fantasies about doing in the President until even their sycophants in the media were repulsed by their bad taste.

4. There is a depressing similarity in the worst events of 2017. The boycott of the inauguration by Democratic Members of Congress will be remembered as a new low in respect for American institutions and tacit approval of the violence and destruction that those who could not accept Donald Trump as President inflicted on the nation’s capital.

5. It will be hard for me to forget all the ways in which division and hostility were made worse in 2017: sports figures kneeling during the National Anthem, protestors and politicians toppling statues and writing half the country out of our historical memory, and other insulting exhibitions of disrespect by small and uninformed groups of activists for the rest of us and for our national and regional symbols. I thought that only happened in communist countries and third-world dictatorships.

6. The constant barrage in the mainstream media of condemnations of the President. My choice for the worst example is an evening news segment during the peak period of revelations about sexual predators. It had a 10 second report on latest accusations against Matt Lauer, then used the next 5 minutes to repeat unsubstantiated accusations against the President. But I am sure that is a piker compared to programs I missed.

7. I would mention Snowflakes among the most annoying aspects of 2017, but at least they provide humor in YouTube skits about safe spaces and hiring millennials. The increasingly prevalent notion that the purpose of higher education is to make students feel good about themselves and to protect them from being upset by ideas they don’t like is, on the other hand, just plain infuriating. I remember being challenged to think and argue about ideas by hearing both sides of issues, but it seems that searching for truth has been replaced by wallowing in feelings.

8. Celebrities and politicians continue to support Black Lives Matter and other racist demagoguery inciting violence against police and rioting in the very communities where the people they ostensibly care about live. Not new in 2017, but not improving either.

9. Armed alt-left terrorists calling themselves Antifa appeared in 2017 to silence conservatives. They moved into towns and campuses where even moderately conservative events or speakers were scheduled, beat up those attending and shut down the events. We once knew this as the tactic of the brown-shirts of Fascism, but it is condoned by college administrations and local politicians who cancel events and refuse to protect their targets.

10. In 2017, 125 police officers were killed in the line of duty, 8 in documented ambush attacks. That is my choice for the worst news of 2017.

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.

On Feelings and the Genetic Fallacy by David Montgomery

Now that my wife is mobile again after having both knee joints replaced, it is time for me to return to the pages of the Spy.  During this time off, so to speak, I have discovered a few excellent authors and interesting publications.  They gave me ample ideas for future columns and it is difficult to choose where to start.

Possibly the most enjoyable discovery was that there are still writers of the kind of science fiction that I grew up enjoying.  For the last few years – perhaps decades – most new science fiction I encountered was produced by social justice warriors using the genre as a vehicle for political lectures.  To my delight I have discovered there are still writers who have good and bad guys that fit in my moral universe, heroic battles, and imaginative technology and future societies.  Maybe they do contain political points, but at least they are ones I agree with and they are wrapped into lively narratives and good writing.  For those who share my tastes, I recommend checking out Vox Day and Rolf Nelson.  More of that later.

A more edifying but similar discovery was books and columns written by James Schall, a professor of philosophy at Georgetown and a Jesuit.  Just today I read his essay “On Feelings” in The Catholic Thing, and it expressed ideas that I have tried to articulate with far less success or clarity.   A similar essay appeared in Crisis, another online publication that I discovered with delight.  It dealt with the genetic fallacy, defined as accepting or rejecting an idea “based on whether we find its source … agreeable to us.”

Both these essays dealt with one of my worst fears, the replacement of reason by expressions of feelings in personal and political discourse.These two essays deepened my understanding of that problem, and I hope I can add something by putting them together.

Fr. Schall’s essay is by far the deeper of the two.  He attacks the basic presumption of contemporary culture that “feelings” are the supreme arbiter of what is good and true.  He starts by observing that the word “feel” has replaced the word “think” in common speech – as in “how do you feel about tax reform” as opposed to “what do you think about tax reform.”  Feelings, he points out, are a category that allows no useful discussion or way to find a middle ground.  If you tell me that my favorite beer tastes like “warmed over Jell-O” to you, I need only answer “I still like it.”  

Feelings about issues or facts do not lead to discussion or enlightenment in the way that thoughts do.  The educational establishment seems to be encouraging this abandonment of rational thought by worrying that low grades will make a student feel bad and creating “safe spaces” where so-called students never hear a statement that makes them feel uncomfortable.

The crucial question Fr. Schall asks is are we ruled by our feelings or do we rule them?  He leads into this by observing that it is not sufficient to say “I am angry at Charlie” but that “we need also to know whether or not such feelings are reasonable or not in the circumstance in which they arise.”  And if we do pursue that inquiry into the reasonableness of our feelings, we quickly realize that “our feelings are under the guidance of our reason.”  

Reason, to those of us who have not succumbed to the post-Modern rejection of rationality, is “measured by a standard that is not subjective.  The standard was not created solely out of one’s own interests.”

Thus, Progressives appeal to feelings not reason when they accuse Republicans of “killing people” with changes to health care and of being “racists” for just about everything.  They shut off judgment of policies by objective standards and substitute subjective feelings.  This would not be so bad if more people were used to the discipline of examining their feelings critically and rationally, but once feelings are made the sole arbiter of truth and morality there is no room for thought or discussion.

Which leads directly into the other essay, about the genetic fallacy.

We commit the genetic fallacy whenever we use our feelings about the speaker rather than our rational minds to determine whether a particular statement is true, false or odious.  That does not just lead to ignorance and error, when those we like are wrong and those we hate are right.  It also works the other way around.  Those who identify statements with the speaker rather than as independent propositions that can be tested with facts and logic will also be tempted to view anyone they disagree with as odious and evil.  

Take for example, how Larry Summers was driven out as president of Harvard University when he offended a group of women by offering the technical and testable hypothesis that the observable rarity of great female mathematicians could be due to a smaller variance of female mathematical ability around a mean no different from that of men.

As Nicholas Senz, author of the essay on the genetic fallacy puts it, “the genetic fallacy reinforces our belief that our opponents are fundamentally corrupt, that nothing will come forth from them but error and vice, that every word that comes out of their mouths is a lie, including ‘and’ and ‘the’ (to quote Mary McCarthy).”  

He gives some very amusing and telling examples.  One is a 2015 HuffPost/YouGov poll that found support for universal health care dipped significantly when respondents were told Donald Trump favored it versus when they were told that Barack Obama had praised it.  

These examples also show what fools the genetic fallacy can make us.  It allows us to be easily manipulated by those who make up stories about who supports a position they oppose.  Donald Trump could easily achieve the outcome he wants by publicly endorsing the opposite position and counting on his enemies to give him what he wants.  Feelings about the speaker are no substitute for thinking about the substance of matters.

Thus the genetic fallacy causes those who practice it to reject valid statements and points of view – even Satan tells the truth when it is to his advantage – and to find personal relations poisoned by the feeling that any speaker with whom they disagree is odious.

There are, of course, many times when we have to rely on the authority of someone whom we trust in order to establish a fact or decide what is right.  None of us can be an expert on everything.  We Catholics practice deference to authority all the time.  But we are also trained, if catechized well, to expect that authority to explain and justify its position through reasoned argument.  We can see that now in the efforts of some bishops to convince Pope Francis to explain more clearly how his statements on marriage and other issues are consistent with the established doctrines of the Church.  None of us can afford to accept uncritically every statement from someone we like, or to dismiss automatically statements from anyone we dislike.  

What the science fiction and philosophical writings I enjoyed during my “vacation” from writing have in common are authors who reject most of current culture and just about everything that we read about the current climate of intolerance and irrationality in higher education.  Instead they utilize reason and logic, distinguish good and evil, analyze or ridicule popular sentiments that lack logical or factual support, and make heroes of those who put others before themselves.  That they all come from and write within a Christian, and often Catholic, tradition is no accident.

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.

Tax Reform Not Perfect but Good for All Americans by David Montgomery

If you only watch channels like CBS or CNN or read the Washington Post, you are no doubt convinced that the Republican tax reform bill announced yesterday has the sole purpose of taking money from the poor and middle class and handing it to businesses and the rich. There is a fundamental error behind that thinking. Tax policy is not just a zero-sum game – changes in tax law can make the pie larger or smaller as well as influencing who gets a bigger slice. And increasing the size of the pie is the whole purpose of the proposed tax reforms.

Nancy Pelosi is already complaining that the reduction in the corporate income tax rate from 35% to 20% is the largest reduction ever made in corporate taxes. She does not mention that the 35% rate American businesses now pay is the highest of any developed country, and the 20% rate will put us back into the middle of the pack. But what she and the other Progressives try to conceal is that tax reform will eliminate the incentive that American businesses now have to move their assets, factories and patents overseas, giving jobs and tax revenue to other countries and eliminating them here.

The corporate rate reduction is the most important part of the proposal for encouraging investment in the United States, and without it tax reform would be meaningless. In addition, the proposal will reverse the incentives that have caused American corporations to leave their foreign earnings on the books of their overseas branches in order to avoid taxes. In an arcane section at the end, the proposal will put a one-time tax on all past earnings held overseas, just as if they had been brought back. Thereafter, U.S. companies will be able to bring those earnings back for investment or dividends in the United States without paying taxes, thus freeing up more funds for investment here.

Finally, high corporate taxes have motivated many companies to register patents overseas and charge themselves high royalties that go to their foreign affiliates that pay little or no tax. The proposal will put a 20% additional tax on payments to foreign affiliates to eliminate the possibility of sheltering income from patents and other intangible assets. That provision is not as strong or effective as the abandoned border tax adjustment, but it will be a help to keep R&D at home.

The result of this reform of business taxation is not just higher profits for those companies. It will help everyone who owns shares of U.S. businesses in their 401(k) retirement funds, not just wealthy executives. Possibly more important to businesses on the Eastern Shore, tax reform will also limit to 25% the maximum tax rate that must be paid by owners of small businesses on the earnings of their C or S corporations that flow through to their personal taxes.

The effects of these changes in business taxation have been grossly misrepresented by the opponents of tax reform. The loudest claim by left-wing economists is that the proposals are “just another example of the discredited trickle-down theory.” Contrary to every principle they teach, these progressive true-believers speak as if heavy taxes have no effect on wages or job growth. They also have an odd reading of history. In the past eight years, we have seen an explosion of regulation and higher and higher taxes on business – and still, wage and job growth are stalled. Seems to me that pretty much proves the trickle-down theory – tax and regulate businesses to death and wages and job opportunities will fall. Relieve business of taxes and regulation and wages and job opportunities will grow.

Independent studies of the effects of the Ways and Means proposal show how this would work. First of all, all income groups will benefit from the personal tax reductions. Poorer working people will pay no tax, and every income group will pay less. With the increased standard deduction, most families will no longer need to itemize deductions, and this means more than saving time and money on tax preparation.

There is a great deal of self-interested and deceptive agitation against limiting deductions of state and local income taxes and mortgage interest. These deductions mean a lot to real estate agents and mortgage brokers who get more business from the subsidy to home purchases and to state and local governments that get less pushback against tax increases because they are tax deductible. And most of the increased revenue that would come from limiting these deductions will be paid by those in the highest income groups. With the increased standard deduction and personal exemptions, these deductions become meaningless because the standard deduction is a bigger benefit to most low and middle-income taxpayers. So this is not taking money out of the pockets of the middle class, it is fixing a subsidy to the rich. According to the Tax Foundation, 88% of the benefit of the state and local tax deduction goes to taxpayers with incomes over $100,000. Even the Treasury Department has labeled the deduction a perverse subsidy to the rich.

The Tax Foundation also estimates that the specific reforms just announced by the Ways and Means Committee will increase U.S. employment by about 1 million jobs after 10 years of increased economic growth, increase wages by 3.1%, and make middle-income families better off by about $2500 annually.

Maryland fared even better, with an increase of over 18,000 jobs and increased income for a middle-income family of $3,250. The proposed set of tax reforms are a rare example of a policy that is good for all Americans. Not perfect: keeping the border adjustment, reducing personal taxes on investment income further, and making expensing of all investment permanent would have given about three times the benefits, but good enough to deserve bipartisan support.

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.



Semper Fidelis by David Montgomery

My less conservative friends sometimes tell me “how Europeans think about the United States,” usually mentioning that we are obsessed with sex and more recently claiming that we are war-mongers intent on global dominance. The claim about sex (from the French, of all things!) most often refers to the adherence of many American Evangelicals and Catholics to traditional Christian teaching about abortion, divorce, homosexuality, and the nature of marriage. That is true, and the comment is only interesting because of what it reveals about the state of Christianity in Europe.

The European view of America as a militarist society intent on global domination is false and offensive, and therefore deserves a response from all of us who know how wrong it is.

A recent article in the usually level-headed Economist magazine is typical, though it is more personal and offensive than most in its derogation of the character of the men and women who serve in our armed forces. Its author uses the pseudonym “Lexington” (appropriate as the place where British fired on American militia) and claims to have been a war correspondent. To deepen the insult, the title he gave the article in the print edition was “Semper fidelis.”

The article itself is a lengthy recital of the author’s prejudices about American military personnel and the present Administration. “Lexington” accepts uncritically every accusation leveled at American forces or President Trump and invents whatever “facts” his ideology tells him should be true.

“Lexington” makes two idiotic claims: the American public suffers from a romantic illusion about the character of American soldiers, sailors, airmen and Marines, and we irrationally support the intention of our government to dominate the world through military force.

A few excerpts will convey the tone, without subjecting my readers to the sick entirety of the article.

“No soldier expects the beloved chumps back home to understand what he gets up to. He just needs to feel appreciated.”

This based on Lexington’s dismissal of the cards and letters posted on bases in Iraq thanking our soldiers for “being over there to keep us safe.” He calls their senders “chumps” on the grounds that ISIS and Al Qaeda are fighting a defensive war, not threat to us a home. The vulnerability of all of the Levant to jihad, and its meaning for the West, seems never to have occurred to him.

“In 1990, 40% of young Americans had a military veteran for a parent; in 2014 only 16% did. But this dissonance has not, as the general implied, caused Americans to underappreciate the forces. To the contrary, it has encouraged, as [General Kelly’s] remarks also indicated, a highly romanticised view of military service, which is inaccurate and counter-productive at best.”

The romanticized view being that soldiers risk their lives and perform heroic actions for our benefit. Not denying that this is what soldiers in fact do, “Lexington” attacks their motives:

“Members of the armed forces are often patriotic. But many see their service primarily as a way to make a living…”

After all this denigration of the American soldier, Lexington does an about-face to express outrage at President Trump’s (quoted without context) words to the widow of a Special Forces sergeant killed in Niger. What I hear in the now famous phrase that “he knew what he signed up for” is President Trump paying the ultimate compliment to Sergeant Johnson’s courage and sacrifice – he knew that he might die and he went anyway. But Lexington’s bias makes him hear it in the worst possible way.

“Lexington” then claims that what he views as “uncritical soldier worship” and “America’s unthinking reverence for its fighters” lets our generals and politicians plan for global domination:

“Most obviously, it gives the Department of Defence an outsize advantage in the battle for resources with civilian agencies. Today’s cuts to the State Department, whose officers are not noticeably less patriotic or public-spirited than America’s soldiers, are a dismal case in point.” Nonsequitur of the first order, but a nice revelation of bias.

“The fact is, America’s foreign-policy doctrines envisage a degree of global dominance, based on military might….”

Thus a European intellectual looks down on the American public as romantic fools demeans our military as no better than mercenaries, and then plays to the prejudice of his European readers by confirming their suspicion that we aspire to create a new Roman Empire with our mercenary legions.

The Catholic Church is not immune to this disease. A disturbing article recently appeared in the Jesuit magazine La Civita Cattolica, written by its editor and another close associate of Pope Francis. The Jesuits make the same broad accusations about how we start wars and plan to dominate the world, but blame it on an alliance of Protestant fundamentalists and wayward Catholics.

The authors claim that “Religion has had a more incisive role in electoral processes and government decisions over recent decades, especially in some US governments. It offers a moral role for identifying what is good and what is bad” and has led our government into a moral crusade against Islam.

They blame this development on “evangelical fundamentalism” to which American Catholics have become allied. Though I am a Roman Catholic now, I was brought up in that tradition, and I can state with confidence that their account of its history and leaders is completely fictional. Nor can I figure out how to reconcile the claimed political dominance of evangelicals and orthodox Catholics like me with our inability to stop abortions, redefinition of marriage, etc.

Nevertheless, the authors go on to describe the terrible effects of our domination of American politics. They accuse us of “stigmatization of enemies who are often ‘demonized’” – in particular, “the migrants and the Muslims.” Further, “Within this narrative, whatever pushes toward conflict is not off limits. It does not take into account the bond between capital and profits and arms sales. Quite the opposite, often war itself is assimilated to the heroic conquests of the “Lord of Hosts” of Gideon and David. In this Manichaean vision, belligerence can acquire a theological justification…”

Here we see two common prejudices of the European intellectual community. First the Marxist view that our military ventures are really being arranged by capitalists to profit on arms sales, and have nothing to do with actual defense of the West against Islamic terrorists and jihadists. The fundamentalists and their Catholic allies help convince the masses to support this military expansion by giving it a religious justification.

The authors in the Jesuit magazine conclude their diatribe with “We must not forget that the geopolitics spread by Isis [sic] is based on the same cult of an apocalypse…. So, it is not just accidental that George W. Bush was seen as a ‘great crusader’ by Osama bin Laden.”

Thus we end with the conclusion that there is no real difference between Islamic terrorists and U.S. foreign policy. Sadly, the liberal Catholic magazine Commonweal endorses the Jesuit’s article, characterizing it as “giving voice to how non-American Christians and Catholics around the world are perceiving the U.S. situation.” Another European point of view is revealed.

Were it not for the position of the authors in the informal hierarchy of the Vatican, the silliness, inconsistency and historical inaccuracy of the article would make it just another example of bad editorial judgment in the world of Jesuit publishing. As things stand, the article serves as another example of the depth and pervasiveness of prejudice against America among the European intellectual elite.

Where for Lexington it was our “uncritical soldier worship” that supports imperial ambitions, for the Jesuit authors it is the power of fundamentalist religious leaders. That smart Europeans could be so deluded about the United States is a staggering thought.

I write on this topic today to urge my readers not to be deceived by these European prejudices or to see European disdain for American values and accomplishments as a sophisticated worldview worthy of emulation. Europe as a whole is in decline, and the moral basis of its decline is clearly apparent in these attitudes toward all things American.

We are an exceptional country, with not only the most effective and disciplined but the most generous fighting forces in the world. Even when misguided, as it may have been to intervene in Vietnam and Iraq, there is no notion of world domination behind our use of military force. Perhaps an unrealistic belief in the power of democracy to improve the lives of citizens of every nation, but not a wish to rule them.

Our military personnel face fear, hardship, and death in order to protect the innocents in the countries where they serve from Islamic terrorists and tribal warlords. They provide humanitarian aid while watching their backs, and must distinguish instantly between whom to protect and whom to kill. And they are our first line of defense against militant and expansionist Islamic movements and countries. European second-guessers who question their motivations and self-sacrifice deserve only our contempt.

We need to celebrate the sacrifices and accomplishments of our Soldiers, Sailors, Airmen, and Marines — and remember them when we stand up for the National Anthem on November 11.

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.

Sport that Unifies by David Montgomery

I do not understand how there can be a shred of sympathy or support for professional football players who kneel during the National Anthem. Leaving aside the vagueness of whatever message they are trying to send, their implicit claim that employees have a right to make personal political statements on company time while acting as representatives of the company is nonsense.

By now, the strength of my political, religious and moral convictions should be pretty clear, as well as my willingness to speak my mind. But I knew exactly what rules I had to obey when I was in front of clients or could be identified with the company that employed me. Any political activity or symbolism was way out of bounds as a matter of principle. I was never to speak about subjects on which I had less than complete professional qualification except in personal and private conversations. The opinions and feelings of my clients were to be treated with respect at all times, as a matter of common decency and of self-preservation. My employers were always adamant about maintaining a considerate and courteous image, and I knew that I had many competitors who would be happy to exploit any distance that I let develop between clients and myself.

I certainly would have been disciplined if I started a public presentation on trends on gasoline prices by praying for the babies that would die in abortions that day. Nor would I ever expect to be invited back. Yet I doubt that the professional athletes taking a knee to publicize “Black Lives Matter” are stating convictions any stronger than mine about abortion.

Nor do I see being unfairly attacked by a political figure as a mitigating factor in perpetuating bad behavior. I have been there. Senator McCain once rose in the Senate to accuse me of being paid off by oil companies to reach the conclusions I published about a bill that he had introduced. But I did not start every subsequent public appearance by repeating that the McCain-Lieberman bill would cost 3 percent of GDP and do nothing to solve climate change. Yet professional football players doubled-down on disrupting the National Anthem in order to get back at President Trump for calling them out about their protests.

If they really cared about the ills they protest, football players might try doing something that actually has a cost. They might, for example, collectively donate their salaries from one game to an organization that does something to create safer communities or to keep black youth from committing the crimes that bring them to the attention of police.

Or, if a player feels so strongly that he cannot play football without expressing himself, he might just refuse to play until the wrong he protests is righted. That, at least, would show more respect for paying customers than acting in a way that diminishes their enjoyment of the game. A game, by the way, that they paid top dollar and possibly waited for years to attend.

I know what it is like to be told to keep quiet. I had an employer inform me that I could not write opinion pieces for a newspaper without prior review and censorship, that anything I said in public belonged to them. I left that company, voluntarily, shortly thereafter. I did not continue publishing and expecting no consequences. Yet professional football players seem to expect their teammates and employers to tolerate whatever they feel like doing.

To be clear, I am convinced that NFL players who “take a knee” or refuse to come on the field for the National Anthem are cheating their fans.

Not long ago, my wife (a Navy veteran) and I attended the Navy-Air Force football game. That was the kind of experience football is supposed to be. No protests, no disruption, everyone standing and veterans saluting while we sang the National Anthem — in tune and with respect, by the way – and everyone present feeling a sense of brotherhood and shared enjoyment. We watched young men, all of whom had the much higher calling of preparing to serve their country, give everything they had to win the game. Navy pulled way ahead by the half, Air Force figured out the Navy offense well enough to stop one or two drives and caught up, then went ahead. Then Navy scored the winning touchdown with 16 seconds on the clock.

The Navy quarterback, by my count, ran for at least two touchdowns and well over 100 yards, and still threw a perfect pass to end the game. He does not expect to sign for $435,000 or $10 million when he graduates, and he comes to the game expecting to do nothing but play the best football he can for his team and the crowd.

While there, I did not think about the difficulties of getting true tax reform, or the polarization of American politics, or any of the other depressing political topics of the day. I did think about this column, I confess, as I was conscious of that day and that game being a time when I was part of the kind of country I remember, one where everyone acknowledged they were part of a bigger whole.

Esther and I were on the Gold side, which those who attend Navy football know put us in the middle of Air Force fans. While others in America are defining themselves into more and more divided identity groups, we felt kinship even with the Air Force fans around us. We knew that we shared interest in football, good feelings toward the teams, dedication to our country and respect for its symbols.

That is what the overpaid NFL players who take a knee are stealing from their fans. They have taken away the opportunity of spending an afternoon enjoying sports and being part of a community with common interests. With all this whining about safe spaces in colleges and searching for microaggressions in every kind of normal behavior, you would think that we could at least watch sports without having political theatrics forced upon us.

And the owners need to acquire the backbone of other employers who insist their employees show respect to their customers and make that a requirement for anyone who wants to wear their uniform.

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.

Better than Baseball by David Montgomery

Although October has been depressingly familiar for Washington baseball fans, it has been just the opposite for political observers. While Congress continues to dither, the President has been moving ahead to reverse the expansion of the Administrative State. And he has done so by using his executive authority to force Congress to do the work assigned to it by the Constitution.

In the case of immigration, the President sent a letter to Congress with a comprehensive plan for strengthening enforcement of immigration laws and screening out those who would be a threat or a burden. And he has been explicit about the message he wants Congress to hear: If you care so much about those who are now in the United States illegally, pass a law to change their status. I do not have the authority to do that on my own. Quite a contrast to President Obama’s “I’ve got a pen and I’ve got a phone. And that’s all I need.”

In the case of Obamacare, the President sent the liberal press all atwitter by terminating subsidies to insurance companies losing money under Obamacare. Again, he sends a message to Congress that they must fix the structural problems in Obamacare and not rely on the public purse to hide them.

Third, his EPA Administrator has declared that the Clean Power Plan put into effect by his predecessor is illegal, because it goes beyond what Congress authorized EPA to do in the Clean Air Act.

In taking these actions, the President is fulfilling what I saw as the most important of his campaign promises, to stop government agencies from issuing regulations that make new laws never passed by Congress. That is, he is challenging and attempting to rein in the Administrative State.

I admire the subtlety in President Trump’s cancellation of subsidies to insurance companies for many reasons. The subsidies make the insurance companies fat and happy and motivate them to work against his goal of reforming ACA. His action shows that the excessive delegation of authority made by Congress in ACA can be used to reduce as well as increase the administrative state. And he tosses the political problems back to Congress in a way that should send the message that Congress cannot avoid political responsibility for legislation by leaving all the details up to bureaucrats.

The critical flaw in the Clean Power Plan that took it to the Supreme Court is its insistence that electric utilities pay others to reduce emissions on their behalf in order to satisfy regulatory requirements. This is contrary to the explicit language in the relevant parts of the Clean Air Act that such requirements be feasible for the regulated companies to meet on their own.

I am known as an advocate of emission trading where appropriate, but only when applied through Constitutional processes in which its suitability for a particular task is examined openly, not by an agency using legal casuistry to require something prohibited by the clear wording of the law.

Likewise, I fully support the goal of open borders for all who qualify to be future citizens, but equally, strongly opposed President Obama’s refusal to enforce a clear requirement of the law – not to mention his willingness to accept the lazy and criminals along with those who support themselves and obey the law.

There are much broader issues at stake here than just these specific abuses of powers delegated by Congress in regard to immigration, environmental regulation, and Obamacare. It is the growing role of unaccountable administrative agencies in creating rules and regulations that go far beyond anything considered or authorized by Congress. Philip Hamburger calls this the “Administrative State” and describes its influence by saying “Americans must live under a dual system of government—one part established by the Constitution and another circumventing it.” The Trump Administration has been trying to rein in the Administrative State since its first day in office through its deregulation initiatives.

First, the Administration and Republicans in Congress are reversing the flood of regulations issued by his predecessors. Economically significant rules are defined as those with an annual cost of $100 million or more, and during the Obama Administration, almost 500 of these regulations with an estimated burden of $890 billion were issued. The burden of regulation accelerated under Obama, but it has been growing since the 1970s. Between 1995 and 2016, Congress passed 4260 public laws but the Executive Branch issued 88,899 new final rules. Since regulations have rarely expired or been repealed, this adds up to a growing cumulative burden. These regulations proliferate – 27 new regulations for every new law – because Congress delegates its legislative responsibilities to administrative agencies, which have proceeded without hindrance beyond what Congress intended.

In comparison, under President Trump agencies have pulled or suspended 860 pending regulations, and the number of economically significant regulations still in process fell to 58.

One of President Trump’s first actions was to require all agencies to re-examine their past regulations and eliminate two existing rules for each new one they issue. His Executive Order also required agencies to reduce the burden of existing regulations by an amount at least as large as the cost of any new regulations. Some of my colleagues in the field of environmental economics complained about this order on the grounds that costs should be weighed against benefits and not be the sole criterion. Although I agree with the principle, I am unconcerned about the application because among the regulations issued under the Obama Administration there are ample to choose from that do no net good.

This is also an area where Congress has done good, by exercising its authority to disapprove regulations and especially those issued by a lame-duck President. Voting under the Congressional Review Act, which limits debate on disapproval resolutions, Congress repealed 14 midnight regulations issued in the last days of the Obama Administration.

These actions are the beginning of an effort, with a clear populist base, to rein in the Administrative State that has grown in power and size for decades. Visible actions to limit and repeal unnecessary regulations only address part of the problem of the Administrative State. Like the iceberg, most of the Administrative State is hidden. Wayne Crews of the Competitive Enterprise Institute has called this “regulatory dark matter,” which he defines as “thousands of executive branch and federal agency proclamations and issuances, including guidance documents, memoranda, bulletins, circulars, and letters, that carry practical (if not always technically legally) binding regulatory effect.” None of these show up in the counts of regulations in the Federal Register, and they are subject to none of the public comment and appeal processes that apply to published regulations.

This is also a target of the Administration, and a particularly difficult one since decisions behind these memoranda and guidance letters and individual rulings are not made in open regulatory processes. They are made day to day by permanent bureaucrats buried in agencies and often difficult or impossible for their political superiors to reach and control.

One of the reasons for the expansion of the Administrative State before President Trump was the deference of the courts to decisions of regulatory agencies that did the proper paperwork, no matter how vague the facts or casuistical the legal arguments justifying them.

This is the major uncertainty about whether President Trump will succeed. Courts have already shown a willingness to block his Executive Orders that they never showed to his predecessors. Thus the question is whether courts will defer as readily to an Administration that wants to reduce the Administrative state as to one that wants to expand it. As Philip Hamburger put it “The courts often defer to the executive—both to its interpretations of law and to its fact-finding” and he decries this as depriving those who challenge regulations of due process.

What really matters here is the attitude of 5 Supreme Court justices. Some, like Justice Stephen Breyer, have attitudes toward actions of regulatory agencies that appear to go even further and sound more like admiration than deference. Once again, the key to Making America Great Again may be less in what regulations the President abolishes than in whom he appoints to the Supreme Court.

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.



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