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American Enterprise Institute: Freedom, Opportunity, Enterprise
Updated: 42 min 51 sec ago

Trump should declare victory on China and retreat - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

1 hour 45 min ago

In any “trade war,” the most important thing to remember is the limit of the martial metaphor. When a foreign company sells Americans something they choose to buy, it is not an act of aggression. Trade negotiations aren’t a zero-sum game in which one country wins and the other has to lose.

The point is being forgotten right now, and not just by protectionists. Practically everyone is saying that President Donald Trump is losing, surrendering, caving or capitulating to China. But “losing” may be a victory for the American economy, given some of the alternative outcomes.

That’s not to say that the “China hawks” in the administration — there’s that martial language again! — are wrong about everything. Chinese tariffs against American exports, theft of intellectual property, forced technology transfer: All are legitimate American grievances. The hawks appear to be focused on getting long-term policy change on all these issues.

The doves, on the other hand, seem to be more interested in extracting promises of a rapid reduction in the U.S. trade deficit with China. Looking narrowly at those competing objectives, the hawks have the better of the argument, both because promises that the bilateral deficit will fall are worth little and because that deficit is not in itself especially important.

So you can see why even some people who have in the past generally been free-traders, such as Republican Senator Marco Rubio, have been urging President Trump to “stay strong” and ruing administration concessions.

But the hawks and their new allies are acting as though we are bound either to get what they want or what the doves want. If those were the only choices, they might be right. There are, however, other possibilities. One is a standoff that yields new tariffs on both sides, which would harm both countries’ economies. Even worse would be an escalating trade war that undermined the global trading system as a whole.

That last scenario does not have to be likely to be alarming. And the administration’s hapless conduct of trade diplomacy so far raises that probability.

A well-considered strategy for fighting Chinese mercantilism would have started very differently. President Trump would have kept the U.S. in the Trans-Pacific Partnership, an agreement that was partly designed for that very purpose. Instead he attacked it during his campaign, savagely if vaguely: It amounted to “a rape of our country,” even though he never identified any feature of it to which he objected. He withdrew from it once in office. Last month he said he might rejoin it, then seemed to change his mind again a few days later.

A strategy against Chinese mercantilism would have used the World Trade Organization. Instead Trump has criticized it, mused about leaving it, and imposed tariffs outside it.

Trump’s tariffs on steel and aluminum, and the manner of their implementation, have also undermined the fight against Chinese mercantilism. First he threatened unilateral tariffs that covered many countries that share our interests with respect to China. His aides insisted there would be no exemptions; then exemptions were granted for most imports, but only on a temporary basis. The message the world received: We are not interested in working with you on trade matters, but we also can’t be assumed to be serious about following through on what we say about them.

If would-be allies had any remaining confidence in our trade policies, our handling of the China dispute has sapped it. The administration’s negotiators plainly don’t agree with one another, and the president has not settled their disagreements. All in all the administration’s actions are isolating the U.S. rather than China.

The president has great confidence in his deal-making ability, but little demonstrated knowledge about trade policy, conflicting impulses and infighting aides (two of whom, Commerce Secretary Wilbur Ross and trade czar Peter Navarro, do not appear to understand the basics of national accounting). The possibility that we will stumble into truly damaging trade conflict cannot be dismissed. Take that possibility into account, and the doves have reached the right conclusion: It would be best for the administration to find a way to declare victory and get out of this trade battle.

Equities have risen on the news of Trump’s “surrender.” The market appears to think that for Trump to hang tough would be more likely to harm than help the economy. With good reasons to agree and no strong reasons to disagree, we should trust that judgment.

Trump is proving to be the most fearlessly pro-life president in history - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

2 hours 44 min ago

President Trump’s critics were apoplectic last week when the president referred to MS-13 gang members as “animals.” Of course, no one should be dehumanized. Yet many of the same people expressing outrage that Trump would dehumanize vicious gang members have no problem dehumanizing innocent, unborn children.

Trump has stood up for the humanity of the unborn child like no president in recent memory. And this is why so many Christian conservatives stick with him. Witness the foot-stomping standing ovation the president received Tuesday night at the annual Campaign for Life gala of the pro-life Susan B. Anthony List. Not only was Trump reportedly the first president to address this incredible organization in its 26-year history, he used the occasion to deliver on yet another pro-life promise, one that his Republican predecessors could not, or would not, fulfill: He announced a new rule to stop indirect taxpayer funding of abortion through the Title X family planning program.

“When I ran for office, I pledged to stand for life, and as president, that’s exactly what I have done,” Trump declared. “Today, we have kept another promise. My administration has proposed a new rule to prohibit Title X funding from going to any clinic that performs abortions.”

Any organization receiving Title X funds will be required to establish a bright line of both physical and financial separation between its family planning activities and any program or facility that performs or refers women for abortions. Since 1976, federal law has prohibited use of federal funds for abortion. But today, Planned Parenthood clinics that receive federal family planning funds often essentially refer women for on-site abortions. Under Trump’s Protect Life Rule, this will no longer be permitted.

The Protect Life Rule is a victory pro-life Americans have been awaiting for three decades. President Ronald Reagan first issued a version of the rule in 1988, but pro-abortion groups challenged it in court. The George H.W. Bush administration fought them all the way to the Supreme Court and won: In 1991, the court upheld the Reagan rule in Rust v. Sullivan. But the ruling came too late; Bill Clinton soon took office and withdrew the rule.

When George W. Bush was elected, he failed to reinstate the rule during his eight years in office. My former White House colleague Yuval Levin recently wrote that the reinstatement effort “was abandoned in the spring of 2006, in a deputies-level policy gathering that was one of the most contentious meetings I ever witnessed in government.”

In the Trump administration, there were apparently no “contentious” meetings or hand-wringing over the impact on Capitol Hill. He just did it. This fearlessness when it comes to the cause of life is what warms the hearts of Christian conservatives and makes them loyal to the president.

The left is, of course, outraged. Sen. Dianne Feinstein (D-Calif.) called Trump’s action “despicable,” and the New York Times editorial page complained that the rule “could devastate groups like Planned Parenthood.” That is, unfortunately, a gross overstatement, as Planned Parenthood gets three-quarters of its federal funds through Medicaid, which would not be impacted. But it is music to pro-life ears. And despite Democrats’ anger, the new rule should have broad public support. A Marist poll released in January found that 60 percent of Americans oppose using tax dollars for abortion, while only 36 percent approve.

Since taking office, Trump has taken many steps to ensure our tax dollars are not used to subsidize the taking of innocent human life. He got a record number of conservative judges confirmed during his first year; allowed states to defund Planned Parenthood; defunded the pro-abortion United Nations Population Fund; restored and expanded the Mexico City policy banning taxpayer funds for groups that perform abortions overseas; and exempted organizations with moral objections against providing abortifacient drugs from the Obamacare Health and Human Services mandate. He is, as SBA List President Marjorie Dannenfelser put it Tuesday, “the most pro-life president in our nation’s history.”

“Every life is sacred, and . . . every child is a precious gift from God,” Trump declared Tuesday night. “We know that every life has meaning and that every life is totally worth protecting.” Trump is doing everything in his power to protect those lives. That is why pro-life conservatives stick with him.

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The budget resolution: Content, timeliness, and enforcement - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

4 hours 19 min ago

The federal government is running very large annual budget deficits, and those deficits will grow in the future as the U.S. population ages and health spending continues to grow more rapidly than the economy. The current federal budget process is not helping Congress grapple with this significant challenge. Also, it does not facilitate an orderly and timely decision-making process. Congress wastes too much time on small and irrelevant matters even as it fails to focus enough attention on issues of real budgetary consequence.

There are many aspects of the current process that need to change. Today, you have asked us to focus on the role of the congressional budget resolution and how it might be changed in a reformed process. In my testimony, I make three suggestions for changing the role of the budget resolution.

  • First, the budget resolution should become the legislative vehicle for establishing and amending statutory caps on discretionary spending.
  • Second, passage of a budget resolution by both houses should automatically lead to passage of a statutory increase in the federal debt limit.
  • Third, the budget resolution should be modified to include a focus on the federal government’s medium and long-term fiscal outlook.

Read the full testimony here.


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AEI Resident Fellow James Capretta testifies today on the budget resolution - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

5 hours 14 min ago

In testimony today at 10:00am before the Joint Select Committee on Budget and Appropriations Process Reform, AEI Resident Fellow and Milton Friedman Chair James Capretta will propose possible options to ensure the budget resolution’s impact and influence on the congressional budget and appropriations process. He proposes three suggestions for changing the role of the budget resolution:

  • The budget resolution should become the legislative vehicle for establishing and amending statutory caps on discretionary spending [because it] would make the budget resolution a much more serious legislative vehicle than it is today. Investing this authority in the budget resolution would also bring the executive branch into budget negotiations with Congress earlier…which might help prevent the kind of end-of-year political standoffs that now regularly occur.
  • Passage of a budget resolution by both houses should automatically lead to passage of a statutory increase in the federal debt limit. Like the statutory caps on discretionary spending, tying debt limit increases to passage of the budget resolution…would have the potential to reset the debt limit to a level consistent with Congress’ budgetary plans…[and] would likely draw the executive branch into the budget process earlier in the year.
  • The budget resolution should be modified to include a focus on the federal government’s medium and long-term fiscal outlook. …while there are many uncertainties in long-term projections, there is little doubt that the gap between taxes and spending will widen significantly in the coming years if nothing is done… Further, for some federal programs, it will be important to make changes soon…so that current participants in the programs can be protected from the changes and…adjustments [can] be phased in slowly and gradually to minimize disruption.

Read the full testimony here.

To arrange an interview with James Capretta, please contact AEI Media Services at mediaservices@aei.org or 202.862.5829.

Elections have spread throughout the world. But has democracy? That’s a different question. - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

5 hours 17 min ago

Democracy has steadily expanded throughout the Middle East and Africa for the past thirty years. Or has it? The answer depends on how one defines democracy. Elections have undoubtedly spread around the world for the last thirty years. Whether this has led to an expansion of democracy, though, is another question.

Political scientists Nic Cheeseman and Brian Klaas point out a paradox in the opening line of their book “How to Rig an Election:” “There are more elections than ever before, and yet the world is becoming less democratic.”

But again, how does one define democracy? Scholars’ definitions of democracy typically fall into two categories: minimalist (also called procedural or electoral) and maximalist (which include rights and norms). Data collectors make a choice of definition best suited for the substance of the questions they think it may be used for. This is standard practice.

Data collected using a minimalist definition tend to show a growth in democracy, such as in the graph above. Other data, such as that used by Freedom House, use a maximalist definition and tend to find “crisis” and “decline.” Both are right because different data capture different information.

The minimalist data provide evidence that historically foundational aspects of democracy, like elections, are globally scalable. Maximalist data signal that the significance of elections in contemporary democracies is diminishing. This is not to say that elections are not important; they most certainly are.

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But the entire world now has elections and half of them occur in dictatorships. Authoritarians are masters of adaptation for survival purposes. They join international organizations such as the UN and WTO. They adopt market economies and create media empires. They have legislatures, judiciaries, political parties, and hold elections. In both their politics and economies, they cheat to win. Above all else, the logic of political survival in dictatorships demands that the ruling group retain a monopoly on political power by any means possible.

Dictators are creative. They have found that holding rigged elections lengthens and strengthens tenure. It grants legitimacy to power, sometimes bolstered by congratulations from (small-d) democrats. Elections, even rigged ones, create a feedback loop that informs who should be rewarded, watched, or repressed. It also creates competition among regime elites and stimulates economic activity. All of this is good for authoritarian continuity, but not necessarily for democracy.

A commonly overlooked aspect of democratic elections is uncertainty. If the outcome of an election is known beforehand — such as in recent elections in Russia, Egypt, and Venezuela — the formality only serves dictatorship. If the election outcome is truly uncertain, it serves the cause of democracy.

Over time, faith in democratic elections has eroded. A refrain often heard among radical activists in democracies is that “if elections changed anything they would be made illegal.” Perhaps this sentiment relates to the rise of populists, but I am more interested in how elections can be made to serve their original purpose, especially now that they exist everywhere — including dictatorships.

A good start would be a universal declaration of executive term limits. Even better if people enforced them.

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Media bias in education coverage? | In 60 Seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

5 hours 32 min ago

AEI’s Frederick Hess discusses how his recent study found that mainstream media was more favorable to education proposals by the Democrat-led government in 2009, than the Republican-led government in 2017.

Legalize child migrants and build a wall - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

5 hours 33 min ago
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The fate of the Dreamers is an issue that has come back to life in Congress, thanks to aggressive action by a small group of House Republicans. Why now? “We’re boiling over,” said Representative Fred Upton of Michigan. “It’s got to get done.”

The 16-term Republican is right. Congress needs to resolve the status of the young migrants brought to the U.S. illegally as children.

Momentum had ground to a halt — until about 20 or so House Republicans recently defied Speaker Paul Ryan and tried to force a series of votes on immigration policy over his objections, using a parliamentary procedure. The group needs just a handful of additional GOP members in order to go around the speaker and compel a floor debate on immigration.

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However it happens in Congress — the parliamentary move, a single bill supported by House leadership — what Republicans should offer is obvious: Legal status for the Dreamers and additional security for the southern U.S. border. Donald Trump is president, so that security must include some system like the “border wall,” one of his central campaign promises.

Cold War II: Should the US embrace high-tech industrial policy to counter China? An AEIdeas online symposium - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

7 hours 44 min ago

In a long essay in National Review this month, Michael Lind issues a call to arms. We are in a new Cold War with China, and must respond accordingly. Geopolitics and geo-economics must be one; the neoliberal Washington Consensus of the post-Cold War era no longer cuts it. Here’s what he says we need in its place:

Instead of letting state-capitalist nations such as China or profit-seeking multinationals restructure the U.S. economy to promote their own goals, the American republic needs a national industrial strategy of its own. To be precise, it needs to return to the time-tested and successful Hamiltonian industrial strategy of using whatever means are necessary — tariffs, subsidies, procurement, tax breaks, even overseas-development loans to countries that purchase U.S. manufactured exports — to ensure that strategic industries necessary to U.S. military power are introduced to America or remain here. . . .

With its Made in China 2025 initiative, the Chinese government has announced a push for Chinese leadership in ten key industries, including advanced information technology, aviation, rail, pharmaceuticals, and others. This should be a Sputnik moment for the U.S., inspiring Americans to identify and promote not specific companies but key “dual-use” industries important in both defense and civilian commerce.

To discuss this thesis, I asked five experts on economics, innovation, and China to answer this question: “Does China’s bid to become the world’s leading technological and economic superpower necessitate a more state-directed economic program on the part of the US? And if so, what should this new national economic policy entail?”

US President Donald Trump takes part in a welcoming ceremony with China’s President Xi Jinping in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj

Robert Atkinson, President of the Information Technology and Innovation Foundation, and co-author with Michael Lind of “Big is Beautiful: Debunking the Myth of Small Business.” 

The fact that this question is framed the way it is — do we need a state-directed economy instead of our current system — points to the very problem facing the United States in its geo-political/economic challenge with China. In the United States, the choice is almost always framed as either become like China — heavy-handed and mercantilist — or remain a pure and unadulterated free market, shining city on a hill, sullied only by crony-capitalist inspired deviations like the Export-Import Bank.

In fact, China is not so much a state-directed economy as a state-enabled one. China generally lets its “capitalist” companies make the investment decisions they want and then supports them with purloined technology, massive subsidies, and a protected domestic market. And ever since Alexander Hamilton’s first report on industrialization, the United States has employed domestic policies to industrial restructuring.

The problem today is that too many on the right are committed to an Ayn Rand vision of unfettered, noble capitalists where markets alone maximize economic welfare. And too many on the left are committed only to a project of ensuring that discriminated identity groups are privileged.

The reality is that if we are to avoid losing not only most of our existing advanced industries (such as aerospace, biopharmaceuticals, computers, internet, and semiconductors) but also our leadership in emerging industries (such as artificial intelligence, 3-D printers, grid-scale batteries, drones, robotics, electric vehicles, and quantum computing), America needs its own national advanced industry strategy.

In innovation-based industries where success depends on robust profits to continually reinvest in the next cycles of innovation, massively subsidized Chinese competitors, enjoying protected markets and purloined foreign technologies, represent an existential threat to US advanced industry companies. Some will say, “Who cares? After all, computer chips, potato chips, what’s the difference?” Try fighting a war with “potato chips.” Try supporting millions of high-wage jobs with “potato chips.”

One final point: Picking winners does not, and should not, mean picking individual companies, Qualcomm or anyone else. It does mean picking critical industries and technologies and supporting them with robust investments, particularly in pre-competitive, public-private R&D partnerships. If that is picking winners or “industrial policy” so be it.


Claude Barfield, resident scholar and former consultant to the office of the US Trade Representative.

For those of us of a certain age (old), Michael Lind’s call for a new industrial policy and support for leading-edge national champions brings back a cascade of (bad) memories. Periodically, the US goes through a period of panic, fearful that some other nation is catching up with us technologically, portending dire future results both economically and militarily. Three decades ago, it was a resurgent Japan; today it is a rising China, which unlike Japan is a potential future foe.

Here are lessons from two episodes in the 1980 and 1990s. First, in echoes to today, the semiconductor industry (and more specifically DRAM, or low-end “dumb” chips) were the object of intense pressure for government intervention, subsidy, and protection in order to counter future Japanese dominance. There were two significant results: First, under the 1987 US-Japan semiconductor agreement, which set a high floor price on imported DRAMS, the US ended up transferring some $4 billion from US businesses and consumers to the Japanese semiconductor industry. Second, through the auspices of Sematech, a government-business consortium, the federal government poured hundreds of millions of dollars to advance manufacturing of semiconductors, with little result to show for its largesse — except to provide a cover for semiconductor companies to meet and “discuss” market conditions without fear of antitrust action. The military component was a central culprit: A Defense Science Board report had argued (with stunning inaccuracy) that DRAM chips were key to the future of the semiconductor industry.

Then, briefly, there is the ill-fated attempt by the Clinton administration — using national security in part as a defense of its action — to create a flat-panel television screen industry out of whole cloth. The purported goal was an independent high-tech supply of advanced screens for US fighter and bomber pilots — even though these screens would never amount to even a tiny percent of the total market. Japan controlled some 90 percent of the world market, with the Koreans beginning to challenge them. The Clinton administration proposed to spend several billion dollars to create a group of flat-screen plants around the country, and it laid out an ambitious agenda to reach the goal of some 10–15 percent of the world output. Luckily, in 1995, a new Republican Congress buried this wildly unrealistic program. As with semiconductors, national security had been invoked to gain support for an economically irrational program.

Expect the same as the panic over Chinese techno/military advances proceeds apace. But Samuel Johnson’s dictum still holds: “Patriotism (read today: national security) is the last refuge of a scoundrel.”

Vice President Mike Pence laughs as US President Donald Trump holds a baseball bat as they attend a Made in America product showcase event at the White House in Washington, US, July 17, 2017. REUTERS/Carlos Barria

Amar Bhide, Professor at the Fletcher School of Law and Diplomacy at Tufts University, and author of “The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World.

Technological advances impel an irrepressible expansion of the state. The invention of the automobile, for example, necessitated driving rules and a system of vehicle inspections, and air travel required a system to control traffic and certify the air worthiness of aircraft.

Modern technology created new forms of pollution that didn’t exist in agrarian economies. Governments had to step in, in one way or the other, to make it unrewarding to pollute. Likewise, antitrust laws to control commercial conduct emerged after new technologies created opportunities to realize economies of scale and scope — and realize oligopoly or monopoly profits. These opportunities were largely absent in preindustrial economies.

Technology also expands the government’s bedrock responsibility of protecting the nation against external threats. Military aircraft required the establishment of an Air Force and the internet defenses against cyber-attacks.

Reciprocally, governmental agencies with more responsibilities and resources have catalyzed the new technologies. Efforts to hunt down submarines prompted the development of ultrasound detection, which was then used in industries to detect flaws in metal structures and in medical diagnosis. IBM’s prowess in data processing has its roots in a project to automate Social Security disbursements. The US Defense Advanced Research Projects Agency (DARPA) famously seeded the internet.

But because some expansion of government is good doesn’t mean a lot must be great. Efforts to promote nebulous goals of technological primacy or industrial competitiveness, rather than fulfill a specific agency mandate, tend to be wasteful or worse. For instance, ultrasound units for battlefield use that DARPA funded in 1996 were enthusiastically adopted by civilian paramedics and physicians who used the compact devices to perform lifesaving procedures where emergencies occurred. In contrast, an earlier National Science Foundation (NSF) program in 1974 to keep US companies from falling behind in ultrasound technology was totally ineffective.

Investing in tomorrow’s markets or technologies requires acting on hunches and adapting to unexpected developments. Government agencies expected to act fairly, openly, and defensibly are ill-suited to do this. Moreover, no one — astute entrepreneurs, experienced venture capitalists, and storied high-tech firms included — can reliably pick winners. Google (now Alphabet) has promoted several failed offerings — remember Google Video Player, Google Buzz, Google Wave, and Google Answers?

Therefore, putting many independent experiments in play raises the odds that one will work. When government gets into the game of placing bets — for instance on new battery technologies — innovators who don’t have the savvy, credentials, and connections with politicians or the scientific establishment are at a severe disadvantage. Yet history shows that it’s often the non-conformist outsiders who play a pivotal role. Would Ed Roberts have been able to secure a government grant to build the world’s first personal computer — a virtually useless toy when it was introduced in 1974?

Entrepreneurial “leaps into the dark” are best sustained by great caution in expanding the scope of government intervention — the private virtue of daring can be a public vice. The US chief justice has often repeated the maxim: “If it is not necessary to decide an issue to resolve a case, then it is necessary not to decide that issue.” Similarly, if it is not necessary to intervene to promote innovation, it should be considered necessary not to intervene. The government should focus on things that private enterprise simply cannot provide and stay away from promoting activities that would allegedly be undersupplied.  If nothing else this maxim frees up resources for crucial public goods — our crumbling roads and bridges, for instance.

An authoritarian regime in China may think it can succeed where techno-nationalist savants in Japan’s Ministry of Trade and Industry repeatedly failed. But this is a bad example for us to copy.

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Derek Scissors, resident scholar and chief economist of the China Beige Book.

I was a China critic before it was cool. An important reason not to allow Qualcomm to be acquired was competition with the People’s Republic. Even so, the US becoming more statist in response to PRC statism is a mistake. Instead, we should double down on our advantages, by sharpening competition and protection of property rights.

The PRC seeks to match or surpass the US technologically and economically through state intervention. The Chinese state spends heavily, primarily through its banks, in what are identified as strategic sectors. It conditions access to the Chinese market on transfer of technology. At best, it permits theft of foreign intellectual property (IP), at worst it suborns it.

The US should retaliate. With China effectively closing its market through protection of state-owned enterprises and coercive technology transfer, the US is not obligated by any reasonable standard to open our market fully to Chinese goods, services, capital, or people. Moreover, Chinese firms benefiting from theft of US IP should face severe sanctions.

But retaliate, do not imitate. That the PRC has harmed the US does not mean statism works. As the Bank of International Settlements measures it, from the end of 2000 to the end of the third quarter of 2017, Chinese government debt increased by a factor of 20. Under Presidents Bush, Obama, and Trump — none known for fiscal responsibility — US government debt rose by a still-excessive factor of 3.7.

At the end of Q3-17, US credit to the non-financial sector had the same ratio to gross domestic product as it did at the end of the Q3-10: 2.5:1. The Chinese ratio climbed from 1.8:1 to just above the American level. China is also an aging, resource-depleted, and still poor country.

We should not let them drag us down with them. We need to reward and protect innovators, from advanced technology to tweaks in a garage. Washington’s role should be to enforce the law and support basic research — not, as Beijing does, to decide what sectors are important and support the biggest companies.

Related and more fundamental, the US needs more competitors, not national champions. Qualcomm, Intel, Boeing, and a few others must be protected from foreign control for now, but have become too important. If federal money is spent, it should be on seeding competitors for some products or services now made exclusively by one company. Competition will beat the state, yet again, if we let it.


Scott Sumner, Director of the Program on Monetary Policy at George Mason University and author of the economics blog The Money Illusion.

Back in the 1980s, many experts insisted that Japan’s economy was about to surpass the US. Pundits such as Lester Thurow argued that we needed to adopt a Japanese-style “industrial policy,” featuring more government intervention and/or mercantilism. In fact, the long Japanese boom was about to come to an end, as Japanese GDP per capita (PPP) peaked at about 75 percent of US levels in the early 1990s, and then fell back modestly. The US went on to dominate the global high tech sector, as Japanese firms such as Sony fell behind even South Korean competitors like Samsung. Picking “national champions” is not a good way to create successful high tech firms.

Today we hear the same sort of claims about China, a country with a per capita GDP barely 1/4th of US levels. Admittedly China is growing quite fast, and will reach significantly higher income levels in the next few decades. But China has little chance of overtaking the US in per capita GDP, or in the commanding heights of high tech, unless it changes its economic structure to become more market oriented. Rather than the US copying China, it makes more sense for China to move its economy in a more free-market direction. Indeed, I expect it to do so.

There is a very strong correlation between GDP per capita and economic freedom. The few countries that have a higher per capita GDP than the US are usually either oil rich countries with tiny populations or places that score even higher than the US in terms of economic freedom, such as Singapore and Switzerland. This isn’t to say there is no role for the government in promoting economic growth — funding of basic research can be helpful — but rather that we should not change our fundamental economic model to become more interventionist, at a time when the more statist developed economies in Europe and Asia have been falling behind the more market-oriented economies in those regions.

Free-market capitalism has never been particularly popular with intellectuals, but the world has yet to discover a more effective economic model.

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The FBI overstated the ‘going dark’ problem, and the facts on encryption remain the same - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

9 hours 14 min ago

In 2016, FBI Director James Comey testified twice before Congress regarding concerns that new technology was allowing criminals to “go dark” — that the use of encryption was making it difficult for law enforcement agencies to access evidence. The FBI used its investigation into the 2015 San Bernardino terror attack to highlight its desire for “backdoor” access to encrypted technologies, as the bureau was unable to access the iPhone owned by one of the attackers, Syed Rizwan Farook. The evidence that needed to show Farook and Tashfeen Malik had planned and executed the attack that killed 14 and injured 22 more was protected by the unbreakable encryption on the iPhone, according to Comey’s testimony.

The FBI seal and motto are seen at of the J. Edgar Hoover Federal Bureau of Investigation (FBI) Building in Washington, US, REUTERS.

The FBI requested that Apple assist in its efforts to break into the phone, and the subsequent court order and the FBI’s public battle with the company generated headlines. Since this public demand for encryption-breaking tools by law enforcement, there have been persistent questions about whether the FBI had exhausted all its legitimate options for recovering data from this crime scene. Or was it easier to ask the court for special access from the device manufacturer to gain access to the device, rather than go through the internal technical operations needed to retrieve the desired information?

A recent report by the Department of Justice’s Office of the Inspector General states that the FBI didn’t use all the technical tools at its disposal, both with its own internal experts or from third-party vendors before rushing Apple into court to accuse it of being part of the “going dark” problem. The FBI’s legal battle with Apple became a poster child for the “going dark” challenge and became a priority for Comey and many others at the FBI.

This debate harkens back to the debate over the Clipper Chip in the 1990s, when the US government considered and ultimately rejected proposals that there be two separate keys to each electronic device’s encryption code — one set for authorized agencies approved by the attorney general. It also raises the question of how government can want to help us keep our data sequestered through cumbersome privacy regulations on one hand, while also desiring broad-access encrypted communications on the other.

More encryption has become a key offering for many smartphone manufacturers due in part to the public outcry over the Snowden disclosures. Apple’s creation of a new operating system that has both a passcode-protected entry (and now offers facial recognition security) and allows for the encryption of device data was a response to their customer base wanting enhanced device security.

See also:

The DOJ’s inspector general concluded in its report on the San Bernardino case that the FBI’s own internal communications issues with its Operational Technology Division caused miscommunications and a lack of understanding of the FBI’s capabilities that could have helped access the data on the iPhone taken from the San Bernardino crime scene. The report notes that searching for all possible solutions to gain access to the device had just begun when the FBI demanded from Apple necessary and appropriate aid in its search for criminal evidence. Since the FBI has noted its internal communication issues, the government — understanding the capabilities within the agency to recover evidence — has withdrawn its previous statements that it could not access the data. The FBI had also dropped its legal demands for a backdoor to one of Apple’s products.

According to a recent Washington Post report, the FBI had also been grossly exaggerating the scale of the “going dark” problem. The FBI claimed “investigators were locked out of nearly 7,800 devices connected to crimes last year when the correct number was much smaller, probably between 1,000 and 2,000.” The FBI recently made public that it was using three separate databases that led to the conflated number, most likely due to double or triple counting the number of locked devices in criminal cases.

Civil society advocates are concerned about the government pursuing a “crypto war.” The continued failures of law enforcement to execute on accurate information are going to be the undoing of any trust the American public has in giving authorities the leeway they want to solve criminal cases in the era of advanced technology. In 2015, some of the preeminent national security leaders in the US, Mike McConnell (former NSA director and director of national intelligence), Michael Chertoff (former homeland security secretary), and William Lynn (former deputy defense secretary) urged that government embrace ubiquitous encryption, saying it “provides essential security . . . [and] if law enforcement and intelligence organizations face a future without assured access to encrypted communications, they will develop technologies and techniques to meet their legitimate mission goals.”

They’re right. Once manufacturers grant any form of request for an encryption backdoor, we are all more vulnerable, not just to government surveillance but also to scammers, phishing, cyber criminals, and clever individuals who know how to manipulate the backdoor to compromise security. The right to privacy is accompanied by the ability to encrypt information for the individual user. These don’t have to be conflicting goals in our legal system.

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The Effectiveness of Education and Employment Programming for Prisoners - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

10 hours 14 min ago

Key Points 

  • Research has shown that education and employment programming for prisoners improves postprison employment and delivers a positive return on investment.
  • Education programming for prisoners has generally produced favorable outcomes for prison misconduct and recidivism. The effects of employment programming on prison misconduct and recidivism have been mixed.
  • Based on existing evidence, policymakers could consider reinstituting Pell Grant eligibility for prisoners, designing employment interventions with a continuum-of-service delivery from prison to the community, and exploring employer incentives for hiring individuals with criminal records, such as tax credits or fidelity bonds.

Read the full PDF.

Executive Summary

Inmates in American prisons are undereducated and underemployed. Compared to adults in the US, prisoners are at least three times more likely to be without a high school or general educational development (GED) diploma and four times less likely to have a postsecondary degree. Studies have consistently found that unemployment rates for prisoners, both before and after prison, are as high as 65 percent. And, even among those who are able to find a job, relatively few achieve consistent full-time employment.

nmate and convicted murderer Aisha Elliott studies during her class at the Taconic Correctional Facility in Bedford Hills, New York April 8, 2016. Reuters

Would increasing prisoner access to programming lead to greater educational attainment and more employment? And, if US prison systems could improve educational and employment outcomes for prisoners, to what extent would it reduce prison misconduct and recidivism? This report addresses these questions by reviewing the available evidence on the effectiveness of education and employment programming for prisoners.

Prison-based education programming generally includes adult basic education, which focuses on helping inmates earn a secondary degree, as well as postsecondary education opportunities such as career/technical program certificates, associate degrees, and even bachelor’s degrees. The literature indicates that, on the whole, prison-based education programming improves postprison employment, reduces prison misconduct and recidivism, and delivers a strong return on investment (ROI). Recent research suggests that postsecondary education programming, in particular, may be more effective in improving employment and recidivism outcomes. Although education programming only modestly reduces recidivism, it has generated relatively large cost-avoidance estimates by delivering low-cost programming to a large volume of offenders.

While inmates are confined, the primary type of employment programming is prison labor. Community-based programs such as work release are often available for inmates following their release from prison. Despite having little or no effect on recidivism, participation in prison labor has generally been found to improve prison misconduct and postprison employment outcomes. Work release has also been found to increase employment for released prisoners, and it has demonstrated the ability to reduce recidivism, albeit modestly. While prison labor and work release each deliver a positive ROI, employment programs that offer a continuum-of-service delivery from prison to the community have produced the most promising employment, recidivism, and ROI results.

Significantly expanding the delivery of education and employment programming would be limited by (1) the lack of physical space to provide interventions in many correctional facilities and (2) the fact that many prisoners have brief stays in prison that preclude participation in programming. Still, better education, employment, and public-safety outcomes for prisoners could be achieved by further enhancing employer incentives to hire individuals with criminal records, fully restoring prisoner Pell Grant eligibility, and ensuring that more employment interventions provide a continuum-of-service delivery from prison to the community.


When individuals enter prison, approximately two-fifths do not have a high school degree or general educational development (GED) diploma.1 With recent data showing that 12 percent of adults lack a secondary degree,2 the rate for US prisoners is more than three times higher. But the disparity between prisoners and the rest of the population appears to be even greater for postsecondary education. Among adults in the US, 42 percent have an associate degree or more,3 which is more than four times higher than for prisoners.4

Data have long shown that increases in educational attainment are associated with less unemployment and higher earnings.5 Regardless of their educational attainment, however, the employment prospects for released prisoners are already weakened due to the stigmatizing effects of a felony record.6 Research has further indicated that many prisoners have unstable work histories.7 Perhaps it is no surprise, then, that we see relatively high unemployment rates for individuals both before and after their time in prison.

A handful of studies have shown that pre-prison employment rates (in the year before coming to prison) for prisoners are no higher than 35 percent.8 These studies have generally found that post-release employment rates increased shortly after prisoners were released from prison but later declined,9 eventually returning to pre-prison employment levels within a few years.10 The most recent study on postprison employment for released prisoners found that nearly two-thirds did not find a job (or at least one with an employer who reported it to the unemployment insurance system) in their first two and half years after release from prison. And, even among the minority of prisoners who found employment after release, relatively few achieved consistent full-time employment.11

The evidence is clear that prisoners tend to be undereducated and underemployed. What if US prison systems placed a greater emphasis on improving educational and employment outcomes for prisoners? Would it improve other outcomes such as recidivism or prison misconduct? If so, to what extent? And, if US prison systems invested in more education and employment programming, would the benefits outweigh the costs?

This report addresses these questions by providing an overview of the available evidence on the effectiveness of education and employment programming. In the following section, I begin by briefly reviewing the risk and protective factors for recidivism. Next, I review the bodies of research on education programming and employment programming. I conclude by summarizing the evidence on the effectiveness of education and employment programming and offering recommendations for correctional policy and practice.

Read the full report.


  1. Grant Duwe and Valerie Clark, “The Effects of Prison-Based Educational Programming on Recidivism and Employment,” Prison Journal 94, no. 4 (September 2014): 454–78.
  2. Camille L. Ryan and Kurt Bauman, Educational Attainment in the United States: 2015, US Census Bureau, March 2016, https://www.census.gov/content/dam/Census/library/publications/2016/demo/p20-578.pdf.
  3. Ryan and Bauman, Educational Attainment in the United States.
  4. Duwe and Clark, “The Effects of Prison-Based Educational Programming on Recidivism and Employment.”
  5. US Bureau of Labor Statistics, Current Population Survey, 2018, https://www.bls.gov/emp/ep_chart_001.htm.
  6. Jared Bernstein and Ellen Houston, Crime and Work: What We Can Learn from the Low-Wage Labor Market (Washington, DC: Economic Policy Institute, 2000).
  7. Christy Visher, Nancy La Vigne, and Jeremy Travis, Returning Home: Understanding the Challenges of Prisoner Reentry, Urban Institute, Justice Policy Center, January 2004, https://www.urban.org/sites/default/files/publication/42841/410974-Returning-Home-Understanding-the-Challenges-of-Prisoner-Reentry.PDF.
  8. Grant Duwe and Valerie Clark, “Nothing Will Work Unless You Did: The Predictors of Postprison Employment,” Criminal Justice and Behavior 44, no. 5 (February 2017): 657–77; Jeffrey Kling, “Incarceration Length, Employment, and Earnings,” American Economic Review 96, no. 3 (June 2006): 863–76; Robert Lalonde and Rosa Cho, “The Impact of Incarceration in State Prison on the Employment Prospects of Women,” Journal of Quantitative Criminology 24, no. 3 (September 2008): 243–65; Becky Pettit and Christopher Lyons, “The Consequences of Incarceration on Employment and Earnings: Evidence from Washington State” (working paper, University of Washington, Seattle, WA, 2002); and William Sabol, “Local Labor-Market Conditions and Postprison Employment Experiences of Offenders Released from Ohio State Prisons,” in Barriers to Reentry? The Labor Market for Released Prisoners in Post-Industrial America, eds. Shawn Bushway, Michael Stoll, and David Weiman (New York: Russell Sage Foundation, 2007), 257–303.
  9. Lalonde and Cho, “The Impact of Incarceration in State Prison on the Employment Prospects of Women.”
  10. Kling, “Incarceration Length, Employment, and Earnings”; Pettit and Lyons, “The Consequences of Incarceration on Employment and Earnings”; and Sabol, “Local Labor-Market Conditions and Postprison Employment Experiences of Offenders Released from Ohio State Prisons.”
  11. Duwe and Clark, “Nothing Will Work Unless You Did.”

With Kim Jong Un, There’s No ‘Win-Win’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 23:46

North Korea, the world’s nuclear-armed auto dealership from hell, is turning up the high-pressure sales tactics. After months of charm that had secured Kim Jong Un a summit with President Trump in Singapore next month, Mr. Kim has now pivoted without warning. Pyongyang canceled meetings with South Korea, complaining of military exercises with the U.S., which Washington promptly called off at Seoul’s request. North Korea is also threatening to scrap the Singapore parley unless denuclearization is taken off the agenda.

There’s no need for Kremlinology here. These are standard North Korean shakedown techniques, honed to perfection by three generations of regime negotiators. Mr. Kim is probing for pre-emptive concessions before his big get-together with Mr. Trump. Such techniques have proved successful in the past, which is why today North Korea is for all intents and purposes a nuclear state. If the U.S. wants a different outcome this time, it is going to have to adopt a radically different approach.

The most important thing for American negotiators to understand is that North Korea is a “revisionist state”—one that is deeply aggrieved by, and fundamentally opposed to, the current configuration of the international chessboard. It regards South Korea as an illegitimate monstrosity that must be wiped off the map so the Kim family can gather the whole Korean race (the “minjok”) under the peninsula’s true “independent socialist” government.

Read the full piece here. 

Venezuela needs a new government after rigged election keeps socialist criminal Maduro in power - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 20:06

U.S.-Venezuela relations – already at a low point – worsened Tuesday when President Nicolas Maduro ordered the top two U.S. diplomats to leave Venezuela following his fraudulent re-election Sunday.

Maduro expelled U.S. Charge D’affaires Todd Robinson and his deputy, Brian Naranjo, after accusing them of trying to sabotage the presidential election and conspiring against his government. The U.S. officials were given 48 hours to leave Venezuela.

U.S. State Department spokeswoman Heather Nauert called the charges against the two American diplomats “false allegations.”

Maduro’s socialist regime forfeited any remaining shred of legitimacy by staging the farcical election in open defiance of an opposition boycott and international censure.

Ironically, the Venezuelan people managed to have their say: about 70 percent of eligible voters refused to cast ballots in this phony election, signaling to the country’s security forces and to the international community that Venezuela must be rescued from Maduro’s illegal regime.

Venezuela’s National Electoral Council, which is comprised of Maduro loyalists, claimed that 46 percent of eligible voters cast ballots, giving Maduro a two-thirds landslide victory. However, a Council source told Reuters that the actual turnout was 32 percent as polls were closing on Sunday.

This woefully low participation came despite organized efforts by the regime to entice supporters to vote by promising food and basic goods and threatening government employees with the loss of employment or benefits for failing to participate.

Leading up to the election, the “Lima Group” of 14 Western Hemisphere governments condemned Maduro’s authoritarian government and called for the suspension of Sunday’s vote, which it said lacked the guarantees of “a free, fair, transparent, and democratic process.”

Early this month, the European Parliament voted overwhelmingly to demand that Venezuela suspend the election, citing insufficient guarantees for the integrity of the election.

The Trump administration is standing with the Venezuelan people in pressing for an end to Maduro’s illegitimate rule.

Just before the fraudulent election, the Trump administration ratcheted up pressure on the regime. On Friday, the Treasury Department imposed financial sanctions against a key regime henchman and accused narco-kingpin, Diosdado Cabello.

Immediately after the discredited balloting and Maduro’s pyrrhic victory, President Trump signed a sweeping executive order intended to choke off financing to the regime. These strong measures build on a year-long campaign of Treasury Department sanctions targeting dozens of regime leaders for corruption, criminality and repression.

Moving against Cabello suggests that the Trump administration has ruled out a soft landing for Maduro and his cronies. Apparently, Secretary of State Mike Pompeo rejected arguments by career diplomats that sanctioning Cabello would undermine hopes for a negotiated solution.

The fake election is further proof that the criminal regime in Caracas – which is micromanaged by Cuba – will never bargain away its hold on political power. Maduro has illegally looted billions of dollars from his own people, giving him no standing to negotiate Venezuela’s future.

The Maduro regime is not content to hunker down in Venezuela. Its leaders are deeply engaged in drug trafficking that fuels mayhem in Central America and are providing financing and safe haven to Colombian guerrilla forces deep in Venezuelan territory.

Moreover, criminal associates with access to billions of dollars are financing destabilizing political movements and the Hezbollah terrorist network in the region.

Recognizing that negotiating with or tolerating a narco-state is not a realistic option, the Trump administration must crack down on the Venezuelan regime by persuading other countries – particularly in Europe – to join in sanctioning Maduro and his backers.

Attorney General Jeff Sessions should consider consolidating the dozens of cases against Venezuelan officials and publishing indictments to prove to the international community that Maduro is the head of a criminal syndicate, not a government.

U.S. officials should make very clear that Washington will hold the principals of this conspiracy accountable and consider leniency for those who abandon the regime.

The Trump administration also should break diplomatic relations with Maduro and, instead, recognize members of the democratically elected National Assembly as the legitimate representatives of the Venezuelan people.

The Assembly should declare the presidency vacant and instruct security forces to restore democratic order. The Assembly should also ask the United Nations, the Organization of American States, and nations around the world to withdraw diplomatic recognition of Maduro and work with democratic leaders to restore constitutional rule and launch a humanitarian relief effort.

With the support of the international community, the National Assembly’s members also should prepare transparent plans for designating an interim leader, organizing new elections and rebuilding Venezuela.

The United States and key Latin American countries should convene an international conference to promote sanctions and the recovery of stolen assets that would be made available to finance post-Maduro relief and reconstruction.

Venezuela’s desperate masses and members of the security forces have witnessed firsthand the criminality, illegitimacy and unpopularity of Maduro and his cronies. The international community should be prepared to react constructively if a popular uprising ensues in the coming weeks and security forces support a return to democracy.

Clearly, if the Venezuelan people stand up, the United States and the international community should stand with them.

Iraq’s election may have had widespread voter fraud - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 18:04

Wednesday marks the deadline in Iraq for reporting incidents of voter fraud. Iraqis from across the political spectrum all say that incidents of cheating were higher this time than in any of Iraq’s previous elections, and most blame irregularities and problems with a new electronic voting system. While it is a truism that Iraqis disappointed in their results often imagine cheating rather than acknowledge their own failures to appeal to a broader electorate, there is enough anecdotal evidence and real questions about the system to merit investigation.

Facebook (and Whatsapp) remain the major ways many Iraqis consume news. In recent days, an Arabic article titled the “Lying Boxes” has been widely circulated among both Kurdish and Arab, Sunni and Shiite political leaders. It provides a deep dive into accusations that the electronic voting system employed for the first time this month was a complete failure on multiple fronts.

The Independent High Election Commission, a body that long ago lost its independence and is now staffed by apparatchiks from the major parties, contracted with a mysterious and little-known Korean company to provide ballot boxes that scan votes and uplink them to a central database upon the closure of polls. That Korean company had little track record, has little behind it but a webpage, and the single international election Iraqis say it previously managed in Kyrgyzstan ended in disaster.The company provides no photos of its operations in Kyrgyzstan, leading to further questions about whether its claims of operations there are true. There is also a question why the IHEC contracted with a company office in Poland and signed the contract in Turkey if Miro System is truly is based in South Korea beyond simply a name on a registry absent an address.

The alleged problems get worse. Iraqi leaders also say a preliminary audit by the United Nations of the elections management system, the data archive system, and the survey/statistical system had failed. Nevertheless, the IHEC went forward. On election day, some candidates say the receipts produced by the boxes did not match figures uploaded to the central count, and some candidates say some boxes returned zero votes for themselves when they were where the candidates themselves voted. Nor do the USB serial numbers from the boxes necessarily always match.

While the IHEC has reportedly received upward of 1,000 complaints, it appears disinclined to order a manual recount, let alone to cancel the elections, for two reasons. First, they and much of the Iraqi political class fear violence could occur if a recount strips some politicians (especially from Muqtada al-Sadr’s list) of seats. And second, because they do not want to cast doubt on the legitimacy of electronic voting. Many Iraqis shrug and say that cheating benefited some disenfranchised others, but most people will be brought into a ruling coalition one way or another.

This is wrong-headed, and the IHEC should order a partial, random manual recount (perhaps of 25 percent of the ballot boxes) if nothing else as a backup internal audit to enhance confidence in elections now and in the future. If the IHEC does not do so, many Iraqis think, it will be because they fear they’ll have a major problem on their hands if the audit shows a real discrepancy between the ballots cast and the automated count from the scan.

Such a discrepancy would either indicate software problems or perhaps hacking. But the conspiracies now circulating (some Kurds blame Turkey or Masoud Barzani’s dominant Kurdistan Democratic Party for some of the bizarre results coming out of Iraqi Kurdistan, while others blame Gulf states for hacking to benefit Muqtada al-Sadr as their new anti-Iranian tool) erode confidence in Iraqi democracy far more seriously. There is no indication the flash drives and data transfers were secure.

It’s always possible that allegations of voting box irregularities are the result of sour grapes on the part of those lists and parties who did worse than expected, but the idea that an audit would undercut confidence in future elections is wrong-headed; indeed, the reality is the opposite. It is positive that Iraqi elections are unpredictable and Iraqis wish to hold incumbents and the broader political class to account, but that too does not justify the possibility of cheating and manipulation.

One Iraqi politician from a major political bloc found it ironic that the only item the U.S. and Iranian embassies appeared to agree on in Baghdad was to ignore the allegations of voter fraud for the sake of stability. This is unacceptable.

The future confidence in Iraqi democracy is far more important than the inconvenience of a manual recount. The political jockeying can continue (a handful of seats may be in question, especially in Iraqi Kurdistan and perhaps with some of the Shiite-dominated lists as well), but no future government will be fully legitimate in voter eyes if questions over the authenticity of results are swept under the rug.

As Ronald Reagan said in a different context, “Trust, but Verify.” Iraqi voters deserve verification.

Trump’s looming trade war against the EU is a (terrible) solution in search of a problem - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 16:54

There are good reasons for current tensions in the transatlantic partnership. Whether it is the Iran Deal or the location of the US Embassy in Israel, the Trump administration sees the world differently than most of America’s European partners — and they have the political mandate to act accordingly.

That hardly justifies picking fights with Europeans based on shoddy or nonexistent reasoning. A case in point: the threat of imposing tariffs on steel and aluminum imports from the EU (and the UK). Even if the administration is seeking to revive the US steel industry and even if there is a problem of overcapacity in the global steel industry, it has little to do with Europe. The EU produces distinctly less steel than a decade ago and the UK’s production is just half of what it was in 2007.

US President Donald Trump meets with Britain’s Prime Minister Theresa May during the World Economic Forum (WEF) annual meeting in Davos, Switzerland January 25, 2018 REUTERS/Carlos Barria

“If you look at the European Union, it’s very solidly against us in terms of trade,” President Trump said in early April, referring to the bilateral trade deficit that the United States is running with the EU. Insofar as he was referring to the differences in regulatory practice, the president had a point. If one wants to boost US exports to the EU, the two sides will need to address the existing non-tariff barriers through an agreement like the now-defunct Transatlantic Trade and Investment Partnership.

However, the US trade deficit is not a reflection of Europe’s trade practices or regulation. Rather it reflects the fact that the United States remains, for a multitude of reasons — from its favorable business environment, large internal market, and low savings rate — an importer of capital from the rest of the world. Whether the administration thinks that is a good thing or a bad thing, tariffs are not going to change it.

If President Trump’s pronouncements usually make European leaders hyperventilate, the EU has been distinctly constructive in dealing with the threat of a trade war emanating from the White House. That will almost certainly change the moment tariffs are put in place, but for now the EU is offering the United States a helping hand.

Last week in Sofia, the president of the European Commission Jean-Claude Juncker suggested that in exchange for an unlimited exemption from the proposed tariffs, the EU would deepen its work with the United States on energy, especially on imports of liquefied natural gas; enhance regulatory cooperation and reciprocal market access, especially for industrial products; liberalize government procurement; and, most importantly, work with the United States on reforming the World Trade Organization in order to curb the genuinely abusive trade practices, especially of China. All of those proposals are helpful and would advance US interests.

Earlier this year in Davos, President Trump said that America First did not mean America alone. If his current bluster translates into an unjustified and by any account unnecessary trade war with our closest partners, much more than the sincerity of that statement will be in doubt.

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Empowering veterans in civilianhood: Reshaping the narrative through the VET OPP Act - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 14:47

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Chairman Arrington, Ranking Member O’Rourke, and distinguished members of this subcommittee:

Thank you for the opportunity to appear here today, as you consider tangible measures to uplift our nation’s veterans in their transition from war to work and successful civilian lives. It is an honor.

Veterans are the unacknowledged permanent ambassadors of national service. How we publicly portray veterans directly relates to how society conceptualizes military service, including what happens to an individual during that service. In an all-volunteer force, reputation is key to the attractiveness of joining a profession that can end in death or permanent disability.

To encourage young men and women to join its ranks, the Department of Defense relies heavily on programs and benefits provided by the Department of Veterans Affairs. Those who choose to wear the nation’s uniform, as well as those who choose not to, are influenced by how well Congress and the VA care for veterans’ post-service reputations and for their physical bodies.

The types of legislation that Congress passes, and the programs and benefits the VA prioritizes, powerfully shape the veteran narrative. Crucially, it influences veterans’ own perception of their identity and worth in the post-service context.

From Citizen-Soldiers to Soldiers-Citizens: Creating Identity

The proposed Veterans’ Education, Transition, and Opportunity Prioritization Plan Act of 2018, or VET OPP Act, reflects how veterans grow their post-service civilian identity in a whole-health manner. It recognizes that having a fourth high-level, prominent institutional VA mechanism—a Veterans’ Economic Opportunity and Transition Administration, headed by its own under secretary—can light the pathway to success for post-service veterans, similarly to how Department of Defense mechanisms involving training, sense of purpose, and a shared community shape young civilians into successful soldiers.

Currently, approximately half (50.3 percent) of active duty enlisted personnel are 25 years old or younger. Somewhat fewer (43.8 percent) of the entire military force are in that age bracket.1 Developmentally speaking, this is the “emerging adulthood” period—a period of rapid development involving key struggles surrounding personal identity. The military offers concrete answers to common existential questions, reinforcing them through experience, during this normative period.

The positive self-regard cultivated during military service becomes a focal point of the psychological changes that often distinguish the period of transition out of the military. Research from Columbia University reveals that veterans experience grief-like symptoms at the loss of their previous military identity which in turn augments all the stressors of a life transition, when facing the initial instability of civilian life and lacking the order and purpose that characterized their service.2

The media and the public overwhelmingly call this experience of veteran transition stress PTSD and erroneously believe that the majority of all post-9/11 veterans have a mental health disorder. Unfortunately, since funded research at VAs and military treatment facilities prioritizes PTSD research, and since the preponderance of well-intentioned veteran legislation post-9/11 emphasizes mental health disorders, the public, potential employers, and veterans themselves are trapped in the inaccurate and harmful “broken veteran” narrative cycle.3

Identity, Education, and Employment: Pathway to Veteran Success

Currently, over half of employers believe that veterans do not have successful careers after leaving the military. Half do not think that veterans pursue a college or vocational school degree, but 62 percent believe veterans need to acquire more hard and soft skills before they are ready for non-military roles.4 Veterans themselves tend to agree that they need “soft” or communication skills. Both veterans and employers nearly unanimously agree on the benefit of internship or apprenticeship programs for veterans as they seek to reenter the civilian workforce. And post-9/11 veterans especially see education as crucial to their continued success.

The VA currently has a suite of educational assistance, vocational rehabilitation and employment, and education and career counseling programs, as well as broadly defined shared transition assistance program (with the Departments of Labor, Defense, and Homeland Security), which make accessible all the tools veterans need to progress from war to work. But these are at the bottom of the totem pole within the Veterans Benefits Administration (VBA). The VA’s nearly century-old structural design impedes its own ability to help veterans achieve that success. Its outdated manufacturing-economy outlook, which informs VBA’s 1917-based disability model sees a service-connected condition only through the terms of a permanent earnings loss, and works as a perverse incentive against veterans entering the workforce. With all of the VBA’s energies directed towards its backlog of nearly half a million disability claims, its institutional resources are concentrated on the disability system to the unsurprising neglect of its education and economic programs. One small example: If you visit the VA’s Office of Employment and Economic Impact website, within VBA, it tells you that “it is no longer available” and to maybe check out the Department of Labor. Coincidentally, a majority of veterans report that navigating the VA’s administrations and benefits is their top challenge in transition to civilian life.5

The very VA economic opportunity programs veterans stand most to profit by are operating with the proverbial millstone around their necks.


In the 21st century information age, education iskey to employment, and employment is the door to a successful transition to civilian life. Education and employment combined give veterans the crucial tools to reforge civilian identities stronger even than their military ones. The psychic rewards of work, productivity, and a career cannot be underestimated, which is corroborated by the trueveteran narrative: Veterans, it turns out, are immensely successful. Empirical data shore that up by showing how veterans with increased levels of education are wealthier, healthier, and more civically engaged than even their civilian peers over the life course. Additional research establishes the links between these outcomes, and reduced rates of dependence, disability, and criminality.

This is the veteran narrative that should predominate. The goal of the nation’s veteran economic opportunity programs should be to enable soldiers to be fully functional members of society, animated by a strong civilian identity. As early as the Revolutionary War, General George Washington had felt intuitively that veterans needed to maintain a sense of self after military service, recommending in his Farewell Orders to the Armies of the United States that veterans funnel their energies as soon as possible into active pursuits, and “prove themselves not less virtuous and useful as Citizens, than they [were] persevering and victorious as soldiers.”

The VET OPP Act can trigger this shift, as Congress elevates and frees already existing VA economic opportunity and transition assistance programs through shifting them structurally into a fourth VA administration. Our nation ought to provide transitioning servicemembers with the means and opportunity to succeed in their civilian lives and to invest their talent and ability in the American economy.

Thank you again for the honor of this opportunity. I look forward to answering any questions from the committee.

1 Department of Defense, Office of the Deputy Assistant Secretary of Defense for Military Community and Family Policy (ODASD) (MMC&FP) (2015). Demographics One Source: Profile of the Military Community. http://download.militaryonesource.mil/12038/MOS/Reports/2015-Demographics-Report.pdf.

2 Meaghan C. Mobbs, George A. Bonanno. “Beyond War and PTSD: The Crucial Role of Transition Stress in the Lives of Military Veterans.” Clinical Psychology Review 59 (2018) 137-144.

3 Rebecca Burgess, “Economic Opportunity, Transition Assistance, and the 21stCentury Veteran: The Case for a Fourth VA Administration,” AEI, March 2018, http://www.aei.org/publication/economic-opportunity-transition-assistance-and-the-21st-century-veteran-the-case-for-a-fourth-va-administration/.

4 Edelman Insights, “2017 Veterans’ Well-Being Survey: Focus on Employment, Education, and Health,” October 2017, https://www.slideshare.net/EdelmanInsights/2017-veterans-wellbeing-survey.

5 Corri Zoli, Rosalinda Maury, and Daniel Fay, Missing Perspectives: Servicemembers’ Transition from Service to Civilian Life, Institute for Veterans and Military Families, Syracuse University, November 2015.

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Business tax rates after tax reform - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 14:42

In a new AEI Economic Perspectives paper, Jason DeBacker and Roy Kasher of the Darla Moore School of Business at the University of South Carolina explore how the new tax law has changed the tax treatment of investment. In general, both effective marginal and average tax rates have come down, though debt-financed investment is now treated less favorably than it was under the old regime. Average rates are important here, among other reasons, because of how they affect locational decisions; a big selling point of the rate reductions is precisely to draw firms and investment toward the United States.

Read all about it here.

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Only 54 US companies have been on the Fortune 500 since 1955, thanks to the creative destruction that fuels economic prosperity - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 14:34

What do the companies in these three groups have in common?

Group A: American Motors, Brown Shoe, Studebaker, Collins Radio, Detroit Steel, Zenith Electronics and National Sugar Refining.

Group B: Boeing, Campbell Soup Company, Colgate-Palmolive, Deere & Company, General Motors, IBM, Kellogg Company, Procter and Gamble Company, and Whirlpool Corporation.

Group C: Amazon, Facebook, eBay, Home Depot, Microsoft, Google, Netflix, Office Depot and Target.

All of the companies in Group A were in the Fortune 500 in 1955, but not in 2018.

All of the companies in Group B were in the Fortune 500 in both 1955 and 2018 (and have remained on the list every year since it started in 1955).

All of the companies in Group C were in the Fortune 500 in 2018, but not in 1955.

The list of Fortune 500 companies in 1955 is available here and for 2018 here (based on sales for the fiscal year ended on or before Jan. 31, 2018). Comparing the 1955 Fortune 500 companies to the 2018 Fortune 500, there are only 54 companies that appear in both lists and have remained on the list since it started (see graphic above). In other words, fewer than 11% of the Fortune 500 companies in 1955 have remained on the list during the 63 years since in 2018, and more than 89% of the companies from 1955 have either gone bankrupt, merged with (or were acquired by) another firm, or they still exist but have fallen from the top Fortune 500 companies (ranked by total revenues) in one year or more. For example, Ashland Global Holdings was in the Fortune 500 last year, but its sales have been flat and it dropped to No. 705 this year — the cutoff to make the Fortune 500 this year was $5.4 billion in sales, and Ashland’s sales were $3.2 billion. Many of the companies on the list in 1955 are unrecognizable, forgotten companies today (e.g., Armstrong Rubber, Cone Mills, Hines Lumber, Pacific Vegetable Oil, and Riegel Textile).

Economic Lessons: The fact that nearly nine of every 10 Fortune 500 companies in 1955 are gone, merged, or  contracted demonstrates that there’s been a lot of market disruption, churning, and Schumpeterian creative destruction over the last six decades. It’s reasonable to assume that when the Fortune 500 list is released 60 years from now in 2078, almost all of today’s Fortune 500 companies will no longer exist as currently configured, having been replaced by new companies in new, emerging industries, and for that we should be extremely thankful. The constant turnover in the Fortune 500 is a positive sign of the dynamism and innovation that characterizes a vibrant consumer-oriented market economy, and that dynamic turnover is speeding up in today’s hyper-competitive global economy.

According to a 2016 report by Innosight (“Corporate Longevity: Turbulence Ahead for Large Organizations“) corporations in the S&P 500 Index in 1965 stayed in the index for an average of 33 years. By 1990, average tenure in the S&P 500 had narrowed to 20 years and is now forecast to shrink to 14 years by 2026. At the current churn rate, about half of today’s S&P 500 firms will be replaced over the next 10 years as “we enter a period of heightened volatility for leading companies across a range of industries, with the next ten years shaping up to be the most potentially turbulent in modern history” according to Innosight.

Another economic lesson to be learned from the creative destruction that results in the constant churning of Fortune 500 (and S&P 500) companies over time is that the process of market disruption is being driven by the endless pursuit of sales and profits that can only come from serving customers with low prices, high-quality products and services, and great customer service. If we think of a company’s annual sales revenues as the number of “dollar votes” it gets every year from providing goods and services to consumers, we can then appreciate the fact that the Fortune 500 companies represent the 500 companies that have generated the greatest number dollar votes of confidence from us as consumers – like Walmart (No. 1 this year for the sixth straight year with more than $500 billion in “dollar votes” for 2018 – the first time the sales of any Fortune 500 company has exceeded the $500 billion mark), Exxon Mobil (No. 2 at $244 billion), Apple (No. 3 at $229 billion), CVS (No. 7 at $185 billion), Amazon (No. 8 at $178 billion) and General Motors (No. 10 at $157 billion).

As consumers, we should appreciate the fact that we are the ultimate beneficiaries of the Schumpeterian creative destruction that drives the dynamism of the market economy and results in a constant churning of the firms who are ultimately fighting to attract as many of our dollar votes as possible. The 500 top winners of that competitive battle in any given year are the firms in the Fortune 500, ranked not by their profits, assets or number of employees, but by what is ultimately most important in a market economy: their dollar votes (sales revenues).

Bonus Video (below), “Introducing the 2018 Fortune 500 .”

Shades of gray in the Mueller investigation - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 14:20

The Trump presidency is often a kind of political “Rashomon,” with partisans on either side looking at the same facts and coming to wildly different conclusions.

So it’s all the more remarkable that the central controversy of our time isn’t a fight over one story with different interpretations of shared facts, but a fight over two different stories altogether.

For devotees of prime-time Fox News, the only story that matters is how the Deep State — i.e., partisans in nonpartisan disguise at the Central Intelligence Agency and the Department of Justice — worked to either destroy Donald Trump or anoint Hillary Clinton in the 2016 presidential election. According to this group, the allegation of Trump–Putin “collusion” is merely a frivolous conspiracy theory, and Robert Mueller’s investigation is both a “witch hunt” and a distraction from this “worse than Watergate” scandal.

For viewers of prime-time MSNBC and CNN, this Deep State stuff is the real bogus conspiracy theory, intended to muddy the waters from the actual “worse than Watergate” scandal, which is Trump–Putin collusion and the president’s attempt to obstruct any inquiry into it.

The two narratives are like a binary star system, each body circling the other, throwing off so much blinding light and heat that it becomes difficult to distinguish them. Their combined gravitational pull bends everything in their direction.

The problem is that both stories might be true. The cartoon versions offered by the usual suspects on the left and the right are surely shot through with hyperbole. But both stories have some truth to them.

It certainly does seem like the Department of Justice was simply going through the motions in its investigation of Hillary Clinton and her off-book server and email system.

My National Review colleague Andrew C. McCarthy, a former federal prosecutor, has meticulously and persuasively argued that the Obama administration was never interested in taking the Clinton investigation all that seriously, because it would have implicated President Obama and possibly derailed or damaged 2016’s presumptive Democratic winner. (Which is ironic, because if the Deep State harmed anyone in 2016, it was Clinton, not Trump.)

Meanwhile, the argument that President Trump secretly colluded — an ill-defined, non-legal term — with the Russians to beat Clinton has more plausibility than those shouting “conspiracy theory!” and “witch hunt!” are willing to entertain.

I still do not think that Trump hatched an explicit scheme to work with the Russians, but normally the hardest thing to prove in most conspiracy theories is intent.

Conspiracy theories reverse-engineer facts to construct imagined motives. This is what William F. Buckley meant when he scorned the John Birch Society’s tendency to infer “subjective intention from objective consequences.” The 9/11 “truthers” looked at the rubble, asked “Cui bono?” — “To whose benefit?” — and concluded that George W. Bush must be the real villain.

Other than Trump’s public pleading with Russia to find Clinton’s missing emails, which he says was a joke, and his open praise of Russia front group WikiLeaks, there’s little evidence that he had a more sinister alliance with Putin.

However, it does seem clear that the Trump campaign was eager to collude with Russia. The infamous meeting at Trump Tower between a Russian emissary and the campaign’s key leadership — Donald Trump Jr., Jared Kushner, and then-Trump campaign chairman Paul Manafort — was convened for that very reason. The early campaign adviser George Papadopoulos was sent by campaign co-chairman Sam Clovis to Russia specifically to get “political dirt” on Clinton. At times, Roger Stone acted like a WikiLeaks agent embedded in the Trump campaign.

These and related facts form the gravitational bind between the two stars. In the New York Times’ telling of the story, and from the perspective of the officials who leak to that paper, the investigations into the Trump campaign were a necessary and good-faith effort to discern whether a foreign power had infiltrated the Trump campaign. For those who subscribe to a Hannitized version of reality, this was a lawless extension of the Deep State’s plot to thwart Trump and protect Clinton.

It is at this nexus where the Rashomonism of our age intrudes. I have no idea what the truth-seekers — Robert Mueller and DOJ Inspector General Michael Horowitz — will find. But I suspect we’ll discover that everybody has some dismaying facts on their own side, and the verdict will be a strong shade of gray.

A new blueprint for competing below the threshold: The Joint Concept for Integrated Campaigning - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 14:18

In The Weary TitanAaron Friedberg paints a picture of a global power that cannot bring itself to adapt to changing times. Comfortable atop the world order, Britain saw the tempest brewing on the horizon, but proved unable to sufficiently adjust to challenges posed by rising powers. Rather than changing its ways, it remained steadfastly focused on a formulaic understanding of means. Decline was indeed a choice; it was not foreordained.

The U.S. military is at a similar strategic crossroads. On the one hand, its power is unmatched. America spends as much as the next eight countries combined on defense, and its military remains the only one with truly global reach. On the other hand, its global operations and presence have failed to translate into lasting political success. Though there is broad recognition of the changing nature of international power balances, the military’s operational thinking has failed to catch up. Ever-focused on strategies of domination, America and its position in the world have been undermined by adversaries whose operational approach has drawn the effectiveness of the American Way of War into question.

To continue reading this article, please visit War on the Rocks here.

Related reading:

Episode 42: Numb as a podcast - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 05/23/2018 - 14:14

Enjoying a brief respite from his book tour, Jonah takes time to memorialize his larger-than-life father-in-law, address critics of “Suicide of the West,” and engage in some rank punditry on Mueller, China, and North Korea.

Are media outlets dishonest? How should conservatives treat Trump? Is DC better than Marvel? Live from Ben Shapiro’s L.A. lair, Jonah attempts to answer these and other pressing questions.

You can subscribe to The Remnant with Jonah Goldberg on iTunesGoogle PlayStitcher, and TuneIn. You can also download this episode here.

This podcast was originally published by National Review.