Category: Law
The earlier age of mass migration to America also brought political backlash
Gifts of the Immigrants, Woes of the Natives: Lessons from the Age of Mass Migration (2017). JOB MARKET PAPER
Abstract: In this paper, I show that political opposition to immigration can arise even when immigrants bring significant economic prosperity to receiving areas. I exploit exogenous variation in European immigration to US cities between 1910 and 1930 induced by World War I and the Immigration Acts of the 1920s, and instrument immigrants’ location decision relying on pre-existing settlement patterns. Immigration increased natives’ employment and occupational standing, and fostered industrial production and capital utilization. However, it lowered tax rates, public spending, and the pro-immigration party’s (i.e., Democrats) vote share. The inflow of immigrants was also associated with the election of more conservative representatives, and with rising support for anti-immigration legislation. I provide evidence that political backlash was increasing in the cultural distance between immigrants and natives, suggesting that diversity might be economically beneficial but politically hard to manage.
That is from Marco Tabellini, job market candidate at MIT.
Mind the gap bring back retail deregulate building
Mandatory parking requirements, sidewalks, curb cuts, fire lanes, on site stormwater management, handicapped accessibility, draught tolerant native plantings… It’s a very long list that totaled $340,000 worth of work. They only paid $245,000 for the entire property. And that’s before they even started bringing the building itself up to code for their intended use. Guess what? They decided not to open the bakery or brewery. Big surprise.
Here is much more, from Johnny at Granola Shotgun, one of the best pieces of the year, with superb photos, lovely twists and turns in the narrative, hat tip goes to Anecdotal.
Here are all posts by Johnny, “I’m an amateur architecture buff with a passionate interest in where and how we all live and occupy the landscape, from small rural towns to skyscrapers and everything in between. I travel often, conduct interviews with people of interest, and gather photos and video of places worth talking about. The good, the bad, and the ugly – it’s all fascinating to me.” — a new master of the medium.
The culture of harassment in Washington, D.C.
The sexual-harassment revolution is coming more slowly to Washington. Even the four female lawmakers who recently told the Associated Press of sexual harassment they faced from their male co-workers didn’t feel comfortable sharing the names of their harassers. “I’m not sure women in D.C. would be rewarded for their bravery [if they came forward], it’s just a different business,” Ellen says. “The thing about this town is that everyone is connected. The people who get ahead keep the peace and angle everything to their advantage.”
Add to that the tribal nature of politics: Most aides are terrified of doing anything that might bring bad press for their boss, or their side. “There’s an anti-snitch sorta thing — you don’t air your dirty laundry,” says Anne Gregory Teicher, a Democratic campaign manager. “It gives the other side power.”
And it doesn’t stop when the campaign is over. “Staffers are told from day one that they do not talk to press, full stop,” says Travis Moore, a former legislative director for the now-retired representative Henry Waxman, a California Democrat. As a Waxman aide, he says, “I spoke to a reporter once, on background, and I was incredibly nervous going into it … people are socialized not to ever talk about what’s wrong in the institution because it could reflect poorly on their member of Congress. There’s a culture that doesn’t accept criticism unless you’re talking about partisanship. It’s really bad for the institution.”
I heard similar rationales from the other women I reached out to. “We’re all a bit more scared. We don’t have platforms like big-name actresses do…”
Here is the full piece by Marin Cogan.
*Stalin*, by Stephen Kotkin
Definitely recommended, the volume covers 1929-1941, I am now on p.234. Here is one good “that was then, this is now” bit:
Stalin had fixed a covetous eye on Chinese Turkestan, or Xinjiang (“New Territory”). From January through April 1934, he fought a small war there. Renewal of a mass Muslim rebellion had spurred Comintern operatives to contemplate pushing for a socialist revolution, but Soviet military intelligence had pointed out that, even though the rebels commanded the loyalty of almost the entire Muslim population (90 percent), a successful Muslim independence struggle in Chinese Turkestan could inspire the Kazakhs and Kyrgyz in Soviet Turkestan or even the Mongols. Stalin had decided to send about 7,000 OGPU and Red Army soldiers, as well as airplanes, artillery, mustard gas, and Soviet Uzbek Communists, to defend the Chinese warlord. Remarkably, he allowed Soviet forces to combine with former White Army soldiers abroad, who were promised amnesty and Soviet citizenship. A possible Muslim rebel victory turned into a defeat. Unlike the Japanese in Manchuria, Stalin did not set up an independent state, but he solidified his informal hold on Xinjiang, setting up military bases, sending advisers, and gaining coal, oil, tungsten, and tin concessions. Some 85 percent of Xinjiang’s trade was with the USSR….Chiang Kai-Shek became dependent on Soviet goodwill to communicate with Xinjiang’s capital, Urumqi.
Here is excellent New Yorker coverage of the book from Keith Gessen. You can buy here on Amazon.
Why isn’t the Indian caste system more protested in the United States?
About one-sixth of India is Dalits, or “Untouchables.” And while Western criticisms of caste segregation are a long-standing observation about India, I hardly hear serious complaints over the last two decades or so. In contrast, the apartheid system of South Africa met with demonstrations, boycotts, campus activism, frequent dialogue, and so on. Why don’t we see some modified version of the same for the Indian caste system? No matter how you compare its relative oppression to that of South Africa, it still seems like a massive system of unjust and opportunity-destroying segregation, and an efficiency-loser as well. Here are a few hypotheses, not intended as endorsements but rather speculations:
1. The caste system is simply too difficult for most Americans to understand, whereas apartheid could be represented more readily in what I dare not call simple black and white terms.
2. Most of the Indians who migrate to the United States are higher caste or at least middling caste, and they sway American opinions of India in a way that South African migrants to the USA never did.
3. Libertarians don’t want to focus on the caste system because it persists without active government support being the main driver. Democrats don’t want to focus on the caste system because Indian-Americans are often leading supporters and donors. It doesn’t feel like a Republican issue either. So who is there to push this one for domestic ideological reasons?
4. Talking about the caste system makes harder the (justified, I should add) program of raising the status of non-minority whites in America.
5. Talking about the caste system would focus light on caste-based discrimination in the United States, and distract attention from other domestic issues.
What else? Overall I find this a disappointing topic to ponder. Perhaps all politics, like envy, really is local after all.
I am indebted to Sujatha Gidla for a useful conversation on this topic. My formal Conversation with her will be up in a bit, I still recommend her book on caste, Ants Among Elephants: An Untouchable Family and the Making of Modern India.
Room charges at the Ritz?
The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter.
Several prominent businessmen are among those who have been arrested in the days since Saudi authorities launched the crackdown on Saturday, by detaining more than 60 princes, officials and other prominent Saudis, according to those people and others.
The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”
Here is the WSJ piece, note that many of these people are being held at the Ritz-Carlton hotel in Riyadh, now being used as a kind of high-class detention center.
Could the Republican tax plan lead to bipartisan results?
That is the topic of my latest Bloomberg column, here is one bit:
If the bill succeeds in limiting these deductions, a logic is set in motion for future tax reforms. Let’s say the Republicans eliminate tax deductions for new mortgages above $500,000. That would become a sign that the homeowner and real-estate lobbies are not as strong as we might have thought. The next time tax reform comes around, legislators will consider lowering the value of the deduction further yet. After all, the anti-deduction forces won before and, in the new battle, those who expect to have future mortgages above $500,000 don’t have a stake anymore.
In other words, any squeezed deduction will remain a vulnerable target for more squeezing, or even elimination, over successive reforms.
And then:
The exact treatment in the House plan seems to be in flux, but the top rates from President Barack Obama’s tax reform are likely to stick in some manner. There even seems to be a rateof 45.6 percent on some earners, in the range of $1.2 million to $1.6 million a year. That is a far cry from Jeb Bush’s call in the Republican presidential primaries for a 28 percent top marginal rate, in the tradition of President Ronald Reagan. Some well-off Californians could possibly face a total marginal rate, all taxes considered, of over 62 percent.
You will recall that the Republican Party had in the past pressed strongly for reductions in the capital-gains rates, but that isn’t on the agenda now. Take that as a sign that Obama’s boost to those rates will stick.
If you solve for the equilibrium over time, maybe maybe you will get:
If we look at the Republican plan as a whole, it appears to be a recipe for a future tax code with many fewer deductions, lower corporate rates, higher income tax rates for the wealthy and a continuing inheritance tax. I’m not saying that the exact mix will or should make everyone perfectly happy, but is this not what a bipartisan tax reform compromise might look like?
My fear, of course, is that those deductions will not survive the next stage of the process. Stay tuned…
Should tuition waivers be taxed?
My overall opinion here is the same as with taxes on private university endowments: no. The federal government needs to stick to a budget, and broadening the tax base in this way would only postpone that needed development. At some margins, “starving the beast” is a good idea, even if it doesn’t always work.
That said, some tuition waivers should be taxed, in particular those that accrue to faculty members when their children attend the same college or university. That is simply a benefit to the well-off and well-educated, and it would not seem to fit the canons of optimal tax theory. If you wish, let the government make it easier to borrow money to go to school. In the meantime, treat this as in-kind pay to faculty and tax it.
What about tuition waivers that universities offer independently to deserving students, often graduate students? Even apart from the public choice considerations, I don’t see why the efficiency case for taxing these is so strong.
Let’s say I can either self-educate at great effort (but perhaps little upfront expense), or I can invest a lot of resources convincing someone I am worth taking under their wing and tutoring, for free. I will reflect glory on my tutor for many years to come. In equilibrium, the rates of return to these two strategies should roughly equilibrate.
Now, if I self-educate, few would say I should be taxed on the benefit I give to myself from all the reading and learning. It would be odd, to say the least, to call it “self in-kind compensation.” (On top of that, it would bankrupt me in particular.) Similarly, if I persuade someone to stuff book knowledge into my ears for free, why should I then be taxed? Haven’t I done more or less the same thing, just using an intermediary and applying the effort at a slightly different stage of the education process? Unlike the faculty member enrolling his or her children, it is not a surreptitious way of delivering in-kind income to somebody. Rather, the tuition waiver is helping someone make an investment more cheaply. What if I sit down and patiently explain to you why “buy and hold low cost diversified funds” are a better investment option? Should you be taxed on receiving that wisdom? Again, I say no, noting that you will be taxed on any later financial payoff from that wisdom. We needn’t count the input as a taxable form of income.
Similarly, when it comes to education, if the tuition waiver helps you earn more, you will be taxed on that income later on too.
Alternatively, you might think there are too many graduate students in the system, a kind of Malthusian crowding when it comes to queuing for jobs. That might describe the world even for a lot of STEM jobs (NYT). Nonetheless, even if a legal/tax solution is required (debatable), taxing tuition waivers as in-kind income seems like the wrong approach. That change falls most heavily on the graduate students judged by the school to be most qualified. Those are also the people most likely to be future innovators. Instead, a paring back of more general tuition and tax subsidies would fall on the graduate students more evenly and I suspect more efficiently.
Maybe I’ll write a separate post on the most likely incidence of taxing tuition waivers as in-kind income — it’s a tricky problem, a good test of your micro mettle.
Jason Furman on the House tax reform plan
Find the slides here, 44 pp., very useful. I found (what seems to be) #36 most interesting, namely to the extent interest deductibility remains, many corporations will face a negative marginal rate under the new reforms.
I do think Jason could have offered more praise to how the plan limits various inefficient deductions, a long sought-after goal.
Hat tip goes to Greg Mankiw.
Have the Saudis created a coup-proof society?
You might wish to read James T. Quinlavin from 1999 (pdf), who also covers Syria and Iraq, here is one bit:
While observers have pointed to the apparent fragility of this balance for decades, the longevity of the balancing act is both a tribute to the Saudi rulers and evidence that their tools are more effective than generally recognized.
Ibn Saud’s personal conquest of Arabia, supported by a community of trust of about sixty men willing to fight against the odds, began with the recapture of the family seat in Riyadh. From there Ibn Saud went on to conquer the Nejd, the traditional heartland of Arabia, relying on both war and marriage to personalize his alliances and conquests. Marriage, even to bereaved relatives of defeated opponents, provided Ibn Saud an effective means of monitoring his enemies. The tribes of the Nejd made up the human core of Saudi Arabia, while Ibn Saud’s numerous progeny comprised the dynasty’s human core. Today the al-Sauds rule from a base within a family group that is not monolithic. Bonds of personal loyalty rather than of an “abstract notion of citizenship” extend from the family to the tribal groups. Only nontribal Saudis define their relation to the Saudi rulers in the latter terms.
Here is another:
To varying degrees, Saudi Arabia, Iraq, and Syria have come to concentrate key capabilities of offense and defense in parallel military forces. The total military power of the state is reduced, however, when these forces are not made available when needed.
Ahmed Al Omran on Twitter, a former WSJ correspondent, is monitoring current developments. If you are wondering, Saudi stocks have rebounded.
Should we tax the endowments of wealthy universities?
This NYT story has some background detail:
The House Republican tax plan released on Thursday includes a 1.4 percent tax on the investment income of private colleges and universities with at least 500 students and assets of $100,000 or more per full-time student. It would not apply to public colleges.
The endowments are currently untaxed, as they are considered part of the nonprofit mission of the colleges. The new tax, if it passed, would bring in an estimated $3 billion from 2018 to 2027, one of many new revenue sources Congress is considering to pay for broad tax cuts.
Note that this would apply to about 140 schools, and also that private foundations already pay tax on their investment income. Greg Mankiw writes:
If my rough calculations are correct, the tax would cost schools like Harvard between $1,000 and $2,000 per student every year.
I am opposed to this change, mostly because I don’t like to see the government deciding to go after a new source of wealth for its tax base. The focal point of non-interference ceases to be focal, and excesses and politicization too often follow. Slippery slope!
But if you are otherwise not so keen on this Brennan-Buchanan argument, what exactly are the grounds for opposing this? It taxes the relatively wealthy, and it taxes income from wealth. It taxes finance. I haven’t heard anyone oppose the tax on the investment income of private foundations, other than diehard anti-tax types. That tax has hardly vanquished the private foundation form. On top of all that, university endowments seem to have long time horizons, and to play the g > r game pretty well. As early as 1958, Paul Samuelson taught us we can transfer resources out of g > r games at no real cost.
So, you’ll hear a lot of caterwauling on this one, but the only good arguments against it are the libertarian ones. Broadening the base isn’t always good. Don’t be suckered by the “give up education for tax cuts for millionaires” non-rigorous rhetoric you will hear. With or without those tax cuts, you still have to ask yourself whether this tax hike is a sensible way of paying off our huge and growing debt.
I wonder if there are people who think a corporate income tax falls mainly on capital, but that this levy would fall mainly on students. Actually…I don’t wonder.
Appear before the judge on your birthday
Using all French court decisions from 2002–2014 with 6 million decisions, we estimate significant impact on sentence lengths, but mainly for those defendants present at trial—equivalent to 3.5 days reduction. The average sentence length is 95 days. Focusing on the three-month threshold (the median sentence length), defendants are 1.6% less likely to be sentenced above this threshold on their birthday. Including controls for gender, crime, age, and nationality, the effect is 1.1% and remains statistically significant at the 5% level. Disaggregating the components of the sentence length reveals the impact is greatest on probation sentences–defined as the prison sentence people get in case of violation of their probation. Notably, individuals with drug offenses—but not violent offenses—benefit from this judicial leniency. They are 5% less likely to have sentences above three-months if sentenced on their birthday and appearing at trial.
For the United States, the birthday effect shows up only for the “days” component of the sentence, not for the “months” component.
That is all from a paper by Daniel L. Chen and Arnaud Philippe, via Robert Dur.
SALT fact of the day
In 2014 nearly 90% of the benefits of the state and local deduction as a whole flowed to those with incomes over $100,000.
So limiting the value of this deduction is obviously a good idea, right? No one is suggesting that this “tax hike” will ruin blue state coastal economies? Everyone is on board? Good, glad to hear that.
That is from The Economist.
Medicaid, asthma, and ADHD caseloads
There is a new NBER working paper on these topics, by Anna Chorniy, Janet Currie, and Lyudmyla Sonchak, here is the abstract:
In the U.S., nearly 11% of school-age children have been diagnosed with ADHD, and approximately 10% of children suffer from asthma. In the last decade, the number of children diagnosed with these conditions has inexplicably been on the rise. This paper proposes a novel explanation of this trend. First, the increase is concentrated in the Medicaid caseload nationwide. Second, nearly 80% of states transitioned their Medicaid programs from fee-for-service (FFS) reimbursement to managed care (MMC) by 2016. Using Medicaid claims from South Carolina, we show that this change contributed to the increase in asthma and ADHD caseloads. Empirically, we rely on exogenous variation in MMC enrollment due a change in the “default” Medicaid plan from FFS or MMC, and an increase in the availability of MMC. We find that the transition from FFS to MMC explains most of the rise in the number of Medicaid children being treated for ADHD and asthma. These results can be explained by the incentives created by the risk adjustment and quality control systems in MMC.
The economics of medical diagnoses remain a drastically understudied area.
Transcript of my Conversation with Brink Lindsey and Steve Teles
Due to popular demand, we are releasing a transcript of the Conversation with Lindsey and Teles.
We talk about liberaltarianism, how bad is crony capitalism really, whether government affects the distribution of wealth much, universities as part of the problem, whether IP law is too lax or too tough, why Steve didn’t do better in high school, the British system of government, Charles Murray, the Federalist Society, Karl Marx, Thailand, the Coase Theorem, and Star Trek, among other topics. Here is one bit:
COWEN: What’s the most important idea in the book that you understand better than he [Brink Lindsey] does?
TELES: Well, so there is a division of labor here. Brink did a lot more work on the cases than I did, although we talked about them all and I did a lot more work on the political analysis. We draw a lot on great, really seminal article by Rick Hall at University of Michigan called “Lobbying as Legislative Subsidy.” And I think that idea is dramatically under appreciated. The idea that what lobbyists are essentially doing is providing information, that information is scarce, it is a source of power. And one thing that we add is, if the state isn’t providing information itself, it essentially has to get it from outside. And when they get it from outside, it imports the overall inequality and information gathering and processing that’s in civil society. And that can be a very strong source of inequality in policy outcomes. I think Brink understands that, but this is my wheelhouse so I think probably if you were gonna push me, I’d say I understood it better that he did.
And this:
LINDSEY: One can see the whole sort of second wave feminist movement since the 60s as an anti rent-seeking movement, that white men were accumulating a lot of rents because of the way society was structured, that they were the breadwinner and there was a sexual division of labor, and they received higher pay than they would have otherwise because they were assumed to be the breadwinner, and women were just sort of kept out of the workforce in direct competition with men in many roles. The last half century has been an ongoing anti rent-seeking campaign and the dissipation of those rents especially by less skilled white men has been a cause of a great deal of angst and frustration and political acting out in recent years.
Here is a link to the podcast version of the chat, plus further explanation of my interview method for the two. Better yet, you can order their new book The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality.