Category: Current Affairs

Boris Johnson’s suspension of Parliament

The betting markets have stayed in the 48-55 range for Brexit by year’s end, even after the suspension announcement.  That to me does not sound like “hard Brexit hell or high water.”

I would sooner think that Boris Johnson wishes to see through a relabeled version of the Teresa May deal, perhaps with an extra concession from the EU tacked on.  His dramatic precommitment raises the costs to the Tories of not supporting such a deal, and it also may induce slight additional EU concessions.  The narrower time window forces the recalcitrants who would not sign the May deal to get their act together and fall into line, more or less now.

Uncertainty is high, but the smart money says the Parliamentary suspension is more of a stage play, and a move toward an actual deal, than a leap to authoritarian government.

That said, I still do not like either Brexit or the suspension.

Shruti Rajagopalan update

Next week Dr. Shruti Rajagopalan (also an Emergent Ventures winner) will be joining Mercatus as a senior research fellow, focused on Indian political economy, property rights, and economic development.

Shruti earned her PhD from George Mason in 2013 and most recently she is an associate professor of economics at Purchase College, SUNY. She is also a fellow of the Classical Liberal Institute at NYU, and will be teaching at the newly-formed Indian School of Public Policy in New Delhi.

Welcome Shruti!

You can follow Shruti on Twitter here.

Is the trade war with China a carbon tax?

I know that in my Twitter feed I am told a “carbon tax is GOOD” and the “Trumpian trade war with China is BAD.”  But isn’t Trump’s trade war, at least indirectly, a tax on carbon emissions?

Most Chinese exports are manufactured goods, and they are produced in a fairly carbon-intensive manner.  Furthermore, it doesn’t seem that Vietnam is able to pick up the slack, so it is not just a case of substituting from one dirty carbon emitter to another.  It seems the trade war is genuinely restricting trade, and over time it will restrict the consumption and production of carbon-intensive goods.  China is by far the exporter with the most to lose.

Of course the targeting of these new taxes is far from ideal from an environmental point of view, nor are they contingent on emissions in the proper manner (still, China is hardly on the verge of being able to switch into clean manufacturing, and in that sense contingent may not matter so much).  And it is hardly the case that Trump has “green motives.”

Still, put aside all the imperfections — don’t we finally have a carbon tax — and a framework for improving it — that so many commentators have been wanting all along?  Won’t this give Elizabeth Warren the chance to really fine-tune the apparatus?

On these points I am indebted to some remarks from Ray Lopez.  And here is my earlier 2016 post “Tyrone on why Democrats should vote for Donald Trump.

Addicted to Fines

Governing: Like many other rural jurisdictions, towns in south Georgia have suffered decades of a slow economic decline that’s left them without much of a tax base. But they see a large amount of through-traffic from semi-trucks and Florida-bound tourists. And they’ve grown reliant on ticketing them to meet their expenses. “Georgia is a classic example of a place where you have these inextricable ties between the police, the town and the court,” says Lisa Foster, co-director of the Fines and Fees Justice Center. “Any city that’s short on revenue is going to be tempted to use the judicial system.”

… in hundreds of jurisdictions throughout the country, fines are used to fund a significant portion of the budget…In some extreme cases, local budgets are funded almost exclusively by fines. Georgetown, La., a village of fewer than 500 residents, was the most reliant on fines of all reviewed nationally. Its 2018 financial statement reported nearly $500,000 in fines, accounting for 92 percent of general revenues. Not far behind is Fenton, La., which reported more than $1.2 million in fines, or 91 percent of 2017 general fund revenues.

In To Serve and Collect (forthcoming Journal of Legal Studies) Makowsky, Stratmann and myself find that the allure of fine and forfeiture revenue can distort policing by shifting arrests towards crimes and misdemeanors with greater potential for revenue rather than greater social harm.

There is, however, some good news. The U.S. Supreme Court ruled that the Constitution’s ban on excessive fines applies to states and localities and that is putting pressure of them to reform. My co-author Mike Makowsky has a good suggestion:

The way governments allocate fine revenue also matters. The majority deposit it into their general fund, but many in Oklahoma, for example, route the money to separate police or public safety funds. That’s a mistake, says Michael Makowsky, an economics professor at Clemson University in South Carolina. “You want to separate officer incentives from the revenues they generate,” he says. One solution he proposes is to route fines and fees to state governments. States would then redistribute all the funds back as block grants based on population or other metrics, effectively removing incentives to issue tickets.

The Governing report is good and links to more data.

Would a payroll tax cut help avoid a recession?

Right now, probably not.  Here is an excerpt from my latest Bloomberg column:

The inclination in American politics is to cut the payroll tax on the worker side, not the employer side. That is the opposite of what should be done.

In a recession, the usual problem is that too many people are seeking too few jobs. The reluctance lies on the side of the employer, not the worker. So cutting the taxes paid by the worker won’t help much. In contrast, cutting the taxes paid by the employer might at least boost the demand for workers and thus stimulate employment.

In the long run, according to economic theory, it does not matter whether you cut payroll taxes for workers or employers; eventually wages will adjust so that the true, tax-adjusted set of wage offers ends up the same. But for the purposes of fighting a near-term recession, it matters very much whose taxes are cut.

Do read the whole thing.  Do note, however, that I am not currently expecting a recession, I just don’t see enough pointers in that direction, and furthermore most of the time recessions do not happen.

A countercultural take on China

That is what I serve up in my Bloomberg column, note it is a reminder more than a modal prediction.  Here is one excerpt:

Is the rest of the world getting China wrong yet again? Maybe the country is not doomed to live out unending top-down rule. What is history, after all, but the realization of the wills of countless unpredictable human beings.

Past mistakes about China are too numerous to mention.

A list then follows.  And:

But has China suddenly become so predictable? Are events there now no longer contingent on the exercise of human will? Modern China is one of the most unusual and surprising societies humankind has created. There are no good models for it, nor are there data from comparable historical situations.

There is, unfortunately, a tendency for Westerners to impose superficial narratives on China and the Chinese, often based on scant observation.

To close:

For myself, I don’t have a coherent story about how the Chinese might move to greater liberty in the next 10 to 15 years. But I do think the actions of the current regime can be read as signs of vulnerability rather than entrenchment. Taiwan and Hong Kong, despite its current crisis, remain strong examples of the benefits of liberalization. Meanwhile, the notion of the internet — even with censorship — as a liberalizing force has been too quickly dismissed, especially in an America that has fallen out of love with Big Tech.

Which leads to a reality even deeper than China’s unpredictability: people’s continuing capacity to respond to current events and shape their futures for the better. As you listen, watch and read about China, keep in mind this essential human quality.

There is much more at the link.

The polity that is Poland

A new law that comes into effect in Poland this week will scrap income tax for roughly 2 million young workers.

It’s an attempt by the government to stop the dramatic brain drain Poland has experienced since it joined the European Union 15 years ago.

Prime Minister Mateusz Morawiecki said the tax exemption will bring new opportunities for young people “so they match those available in the West.” Poles under the age of 26 who earn less than 85,528 Polish zloty ($22,547) a year will be exempt from the country’s 18% income tax starting August 1. The allowance is generous, considering the average Polish salary stands at just below 60,000 zloty ($15,700) a year.

The government said 2 million people will qualify for the benefit.

Here is the full story. There are also baby bounties in Poland, and policies seem to be increasingly youth-oriented.  You can see this on the streets of Warsaw, which have more non-tourist young people than just about any other major city in Europe.

Is the future of Venice Chinese?

Pino Musolino, president of the Port Authority of Venice, told: “Venice port has long worked to seize the opportunities that China’s New Silk Roads strategy offers, with the aim of having positive spillovers on local business and job levels.”

On February 11, Venice signed a memo of understanding with Piraeus to improve overall capacities of the two seaports as important hubs in the Belt and Road scheme. The two port facilities had already set up a weekly ferry service last October. Venice port also has a new rail link to Duisburg, in western Germany, which is the European hub for the land-based Silk Road Economic Belt.

“In regard with the dualism between Venice and Trieste, the two ports actually service different markets,” Musolino emphasised.

“Our facility is the main gateway to industrial clusters in northern Italy, importing raw materials and exporting high-added-value products. For its part, Trieste is focused on Central and Eastern Europe.”

Musolino believes North Adriatic ports should combine their efforts to better manage increased Mediterranean trade resulting from the Belt and Road plan.

Here is the full article.

The culture that is San Francisco

The words “felon,” “offender,” “convict,” “addict” and “juvenile delinquent” would be part of the past in official San Francisco parlance under new “person first” language guidelines adopted by the Board of Supervisors.

Going forward, what was once called a convicted felon or an offender released from jail will be a “formerly incarcerated person,” or a “justice-involved” person or simply a “returning resident.”

Parolees and people on criminal probation will be referred to as a “person on parole,” or “person under supervision.”

A juvenile “delinquent” will become a “young person with justice system involvement,” or a “young person impacted by the juvenile justice system.”

And drug addicts or substance abusers will become “a person with a history of substance use.”

“We don’t want people to be forever labeled for the worst things that they have done,” Supervisor Matt Haney said.

The resolution is non-binding, was not signed by the mayor, and it is not clear it will be implemented.  Here is the full article.

Some of those terms seem quite reasonable to me, such as “person on parole,” which for many people would be the natural term in any case.  But here is my worry.  It is we who decide how powerful language is going to be.  The more we regulate language, the more we communicate a social consensus that it has great power.  And in return the more actual power we grant to those linguistic “slips” and infelicities which remain.  It is better to use norms to regulate the very worst speech terms, but not all of them.  By regulating too many parts of speech, and injecting speech with too much power, we actually grant more influence to the people and ideas we are trying to stop.

The importance of economic growth for Italy

That is the topic of my latest Bloomberg column, they chose an appropriate image, here is one excerpt:

Decay is another problem faced by Italy, including decay of its natural and cultural heritage. The city of Venice — a wonder of mankind and also a big money-maker as a tourist destination — is threatened by rising water levels. The Roman Coliseum is endangered by traffic fumes and exhaust. Solving those problems requires (again) extra money. As it stands, Italy has some of the worst-maintained cultural heritage in the Western world, and further decay could cut into Italy’s tourist income, producing another dangerous downward spiral.

There is much more at the link.

My Conversation with Masha Gessen

Here is the transcript and audio, here is the summary:

Masha joined Tyler in New York City to answer his many questions about Russia: why was Soviet mathematics so good? What was it like meeting with Putin? Why are Russian friendships so intense? Are Russian women as strong as the stereotype suggests — and why do they all have the same few names? Is Russia more hostile to LGBT rights than other autocracies? Why did Garry Kasparov fail to make a dent in Russian politics? What did The Americans get right that Chernobyl missed? And what’s a good place to eat Russian food in Manhattan?

Here is excerpt:

COWEN: Why has Russia basically never been a free country?

GESSEN: Most countries have a history of never having been free countries until they become free countries.

[laughter]

COWEN: But Russia has been next to some semifree countries. It’s a European nation, right? It’s been a part of European intellectual life for many centuries, and yet, with the possible exception of parts of the ’90s, it seems it’s never come very close to being an ongoing democracy with some version of free speech. Why isn’t it like, say, Sweden?

GESSEN: [laughs] Why isn’t Russia like . . . I tend to read Russian history a little bit differently in the sense that I don’t think it’s a continuous history of unfreedom. I think that Russia was like a lot of other countries, a lot of empires, in being a tyranny up until the early 20th century. Then Russia had something that no other country has had, which is the longest totalitarian experiment in history. That’s a 20th-century phenomenon that has a very specific set of conditions.

I don’t read Russian history as this history of Russians always want a strong hand, which is a very traditional way of looking at it. I think that Russia, at breaking points when it could have developed a democracy or a semidemocracy, actually started this totalitarian experiment. And what we’re looking at now is the aftermath of the totalitarian experiment.

And:

GESSEN: …I thought Americans were absurd. They will say hello to you in the street for no reason. Yeah, I found them very unreasonably friendly.

I think that there’s a kind of grumpy and dark culture in Russia. Russians certainly have a lot of discernment in the fine shades of misery. If you ask a Russian how they are, they will not cheerfully respond by saying they’re great. If they’re miserable, they might actually share that with you in some detail.

There’s no shame in being miserable in Russia. There’s, in fact, a lot of validation. Read a Russian novel. You’ll find it all in there. We really are connoisseurs of depression.

Finally there was the segment starting with this:

COWEN: I have so many questions about Russia proper. Let me start with one. Why is it that Russians seem to purge their own friends so often? The standing joke being the Russian word for “friend” is “future enemy.” There’s a sense of loyalty cycles, where you have to reach a certain bar of being loyal or otherwise you’re purged.

Highly recommended.

“You say you want a revolution…”

That was actually a conservative Beatles song of course, and these days the conservatism is popping up in the American lack of enthusiasm for the Hong Kong protestors.  That is the focus of my latest Bloomberg column, here is one excerpt:

Since the protests in Hong Kong started two months ago, I have been struck by the coolness of the American response. I am referring not just to President Donald Trump, who has reiterated that the dispute is an internal Chinese matter. Both the social media I sample and the people I know have been fairly quiescent. I haven’t seen that much cheering and rooting for the protesters, nor have the major Democratic presidential candidates made a show of stressing their dissent from Trump on this issue [there is one Elizabeth Warren tweet]…

The relative indifference may be especially hard to explain when it comes to Americans. After all, the U.S. owes its existence to a rebellion against the British Empire, and against especially long odds. America probably would not have won independence without direct French assistance, while Spain and other nations helped to distract the British on the broader global stage.

Remember the enthusiasm we used to have for the Soviet dissidents, or for Solidarity, also movements facing apparently long odds?  In sum:

…Americans are preoccupied with fighting each other over political correctness, gun violence, Trump and the Democratic candidates for president. To be sure, those issues deserve plenty of attention. But they are soaking up far too much emotional energy, distracting attention from the all-important struggles for liberty around the world.

It’s 2019, and the land of the American Revolution, a country whose presidents gave stirring speeches about liberty and freedom in Berlin during the Cold War, remains in a complacent slumber. It really is time to Make America Great Again — if only we could remember what that means.

There is more at the link, including a discussion of recent demonstrations in Russia as well.