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Putting Apple’s $1 trillion valuation into perspective — as a separate stock market it would be the world’s 15th largest! - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 11/02/2018 - 20:08

The market value of Apple’s stock has been in the news lately, first in early August for being the first US company to reach a valuation of $1 trillion, see reports of that important financial milestone from the Washington Post, Bloomberg, and USA TodayToday Apple has been in the news because its shares have dropped by 7% in today’s trading, “after the smartphone manufacturer… delivered a disappointing forecast and announced that it will no longer provide unit-sales figures for the iPhone and other hardware products.” That drop in share price lowered Apple’s market capitalization by about $70 billion to slightly below $1 trillion this afternoon ($996.8 billion at 3 p.m.).

To help put $1 trillion in market cap in perspective, I created the table above yesterday when Apple’s market cap was at $1.07 trillion. As the table shows, Apple as its own “country” or “stock market” would rank as the world’s 15th largest country stock market by stock market capitalizations at the end of September, according to data from the World Federation of Exchanges a London-based trade association of 63 publicly regulated stock, futures, and options exchanges. For countries like the US, China, Taiwan and India with more than one major stock market, I’ve combined those into a single market cap for those countries. Even with today’s drop, Apple’s valuation is still slightly ahead of the $988 billion market cap of South Africa’s Johannesburg Stock Exchange, and so maintains its rank as the world’s No. 15 largest “stock market.” The data in the table also show that Apple’s valuation is greater than the market cap of entire national stock markets like Spain ($810 billion), Brazil ($800 billion) and Russia ($650 billion).

For some other interesting comparisons, if you added either Microsoft’s valuation ($817 billion) or Amazon ($816) to Apple, either of those two-company US stock portfolios at $1.8 trillion would be the world’s tenth largest “stock market.” And if you combined Apple ($997 billion) with Microsoft ($817 billion), Amazon ($816 trillion) and Google/Alphabet ($743 billion), the combined value of $3.4 trillion would rank those four US companies as No. 7 for the world’s largest stock markets.

Bottom Line: If we assume that a company’s market value reflects the value it creates (and will create in the future) for consumers through its products, there’s never been a US company in history that has benefited and created more value for consumers than Apple. And the fact that the market values of US-based companies like Apple, Microsoft, Amazon and Google are greater than most other countries’ entire stock markets is a testament to the remarkable success of the greatest value-creating enterprise that has ever existed — the US economy.

From the archives: Helping America vote - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 11/02/2018 - 19:30

Elections in the US are run locally, but after the fiasco in Florida during the Bush v. Gore election of 2000, members of Congress and AEI scholars Norm Ornstein and John Fortier worked together to help lawmakers reform the nation’s voting process.

The Help America Vote Act (HAVA) was passed in 2002 and it provided minimum voluntary standards for states to follow in several areas of election administration including areas such as testing and certifying voting equipment. The first national voting reform law, HAVA established the Election Assistance Commission to oversee the law and assist states with compliance, while providing funds to enable an upgrade to their systems.

AEI and the Brookings Institution created an election reform project and convened a series of meetings with election officials around the country to discuss best practices. A young senator from Illinois, Barack Obama gave the keynote address. You can read a transcript of that address here.

Today many Americans believe our voting systems are too insecure. Ironically, the electronic machines enabled by HAVA in response to “hanging chads” with paper ballots are targets for corruption and chicanery. Today five states use electronic voting machines that do not provide a paper ballot backup. Most of these are now being phased out. Americans need to believe that their votes will be counted accurately and fairly, and the AEI and Brookings Institution efforts were designed to increase citizens’ trust in the voting process.

You can learn more about the upcoming midterm elections by following AEI scholars’ analysis here.

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What made the American economy great? A long-read Q&A with author Adrian Wooldridge - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 11/02/2018 - 19:05

Imagine the elites of China, Turkey, Britain, and all the other great powers of the day meeting in Davos in 1620 to discuss who among them would emerge as the world’s greatest economic power over the next few centuries. None would have even considered North America, and yet it is the United States that today produces the plurality of world GDP with less than 5 percent of the world’s population. How did that happen? In the excellent new book “Capitalism in America: A History” Alan Greenspan and Adrian Wooldridge provide the answer.

Adrian recently joined me on the show to discuss his book, American and world economic history more broadly, and the lessons voters and policymakers should draw today. Adrian Wooldridge is the political editor and Bagehot columnist at The Economist and the author of “Measuring the Mind: Education and Psychology in England, 1860–1990.” You can follow him on Twitter @adwooldridge.

What follows is a lightly-edited transcript of our conversation. You can download the episode by clicking the link above, and don’t forget to subscribe to my podcast on iTunes or Stitcher. Tell your friends, leave a review.

Your book is fantastic. I liked it quite a bit and wrote a mini-review of it on the AEI website. It opens with an interesting thought experiment. Imagine if there was a Davos meeting back in 1620, and all the members made their case for which country or region would be the most influential and dominate the global economy over the coming centuries. Nobody would have pointed to America, which at that point was a bit of a wilderness, but obviously we’ve done pretty well over the past four centuries.

I always like to give alternate titles when we have authors on this podcast, and an alternate title to your book — not necessarily a better title — would have been “What Made America Great.” What did we do right in the United States that the rest of the world missed?


Voting worries and problems - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 11/02/2018 - 18:59

What are Americans worried about in terms of casting their votes next week? What kinds of problems have they faced at the polls in the past? Three organizations, NPR/Marist, the Pew Research Center, and the Public Religion Research Institute/The Atlantic have provided some answers. The news is mostly reassuring. 

Counting Votes: Eighty-two percent in Pew’s late September–early October American Trends Panel survey were confident votes in their community will be counted as voters intend. Seventy-two percent felt that way about votes across the country. In the September NPR/Marist poll, 63% had a great deal or quite a lot of confidence that ballots cast will be counted accurately.

Confidence in Election Officials: People are generally more confident in their state and local election officials than they are in federal ones. In Pew’s poll, 45% were very confident that the poll workers in their community will do a good job. Thirty-two percent felt that way about the officials who run their state election, 28% about local election officials, and 17% officials who run elections across the United States. In the NPR/Marist poll, 66% had more confidence in their state and local officials to protect the actual results of the midterms; 23% had more confidence in federal election officials.

Election Security/Interference: Americans believe keeping US elections secure should be a high priority. In the NPR/Marist poll, 53% said the country is prepared to do so; 38% said it is not. In the Pew survey, 67% said they think it is likely that Russia or another foreign government will attempt to influence the November congressional elections.

Sixty-six percent in the Pew survey were confident that election systems in their state are secure from hackers and other technological threats, while 45% felt confident that election systems in the United States are secure.

Only a third in the Pew survey were at least somewhat confident in technology companies such as Facebook, Twitter, and Google to prevent the misuse of their platforms to influence the November election. In another question, 76% thought they had that responsibility. In the NPR/Marist poll, 24% had a great deal or a good amount of confidence in Facebook (18% gave that response in a separate question about Twitter) to make sure there was no foreign interference in the midterms.

Sixty-eight percent told NPR/Marist pollsters that paper ballots would make US elections more safe from interference or fraud. Only 7% in the NPR poll said internet voting would make US elections more safe and secure, and 36% in a separate question gave that response about electronic voting such as touch-screen machines. Eight-five percent in Pew’s survey favored requiring electronic voting machines to print a paper backup of the ballot.

Fraud: In the NPR/Marist poll, 53% said it was likely that there would be voter fraud “that is, people who are not eligible to vote will vote or vote more than once,” while 44% said this was not likely. In the June PRRI/Atlantic survey, 38% said the bigger problem for US elections was people casting votes who are not eligible; 40% said it was eligible voters being denied the right to vote. When asked about their state’s election rules, 19% told Pew pollsters their state’s rules make it too easy to register and vote, and 10% said the rules make it too hard. A majority (69%) said their state’s rules are about right.

Fifty-four percent in the Pew poll strongly favored and another 22% somewhat favored requiring all voters to show government-issued photo ID to vote. In the NPR/Marist poll, 96% said they had a government-issued photo ID, including 91% of African Americans and 97% of Latinos.

Voting Problems: Forty-five percent told NPR/Marist interviewers they thought it likely that many people will show up to vote and be told they are not eligible. But the PRRI poll showed that very few Americans have had negative voting experiences. In the poll, 5% said they or someone in their household was told they did not have the correct ID the last time they tried to vote. Nine percent of black Americans and, separately, Hispanic Americans gave that response. Only 5% nationally said they or someone in their household had been harassed or bothered while trying to vote. Seven percent of blacks and 9% of Hispanics said this had happened. Seven percent nationally said they or someone in their household had been told their name was not on the list even though they were registered to vote, including 10% of blacks and 11% of Hispanics. Only 4% in the NPR/Marist poll said having their voter registration questioned or being told that they were not registered had happened to them a lot or sometimes. 7% of blacks and, separately, Latinos gave this response.

Episode 68: Revenge of the corn - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 11/02/2018 - 18:00

Sen. Ben Sasse (R-Corn) rejoins the Remnant to discuss “Them,” his new book about giant ants. Jonah also does some particularly pungent rank punditry.

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.

Deep in the weeds: A tale of two poverty measures - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 11/02/2018 - 17:54

Something that should go without saying but too often does not: When we calculate how many Americans live in poverty and how well our social safety net is reaching them, our measurements should reflect the resources available to families from their earned income, from saved money and durable goods, and from public assistance programs.

While there are several measurements for poverty in America, only AEI fellow Bruce Meyer’s and Jim Sullivan’s consumption poverty rate accounts for standard of living rather than income from earnings and assistance. Thanks to its reliance on a rigorous evidence base of survey and administrative data that has been called “a dizzying, overwhelming effort,” the consumption poverty measure has earned respect in policy circles for its comprehensiveness.

Thanks in large part to a strong economy and generous assistance for working families, consumption poverty in the United States declined again last year. Image via Twenty20

So it is good news that Meyer and Sullivan found a decline in consumption poverty once again in 2017, in their report issued on Wednesday. The consumption poverty rate declined from 3.0 percent in 2016 to 2.8 percent this past year — in other words, there were over 650,000 fewer Americans in material deprivation than there were in 2016. This is not entirely surprising given the health of our economy — especially the uptick in employment — combined with generous assistance for working families. But it is still encouraging to see that our system of fighting poverty is working better than it has in the past.

Particularly noteworthy in Meyer and Sullivan’s data is the difference between after-tax money income — the earned money individuals get to take home after accounting for tax liabilities and credits — and consumption poverty. After dropping sharply between 2014 and 2016, after-tax money income poverty levels remained steady at 7.0 percent in 2017.

What accounts for consumption poverty dropping while money income remains the same — and for that matter, only a shred lower than the rate reported for the year 2000, when it was 7.2 percent?

One source of the discrepancy is likely the non-cash benefits that are not counted in after-tax income but do help relieve material poverty. Supplemental Nutrition Assistance Program (SNAP, or food stamps) is one such program, which in 2017 provided benefits to more than 42 million Americans. Medicaid, too, provided a non-cash benefit worth thousands of dollars of in-kind value for poor Americans. These benefits help relieve material deprivation, so they are captured in consumption poverty rates, but until levels of work and earnings go up (which thankfully they have since the time period covered by the report) income poverty is unlikely to move. This shows the way in which our safety net works best — when assistance and employment are combined.

Another observation: When you look at after-tax income rates by age group, both children and adults 18-64 years old saw their rates of income poverty drop, if only slightly. The rate for people above the age of 65 ticked up from 4.6 to 4.7 percent, accounting for the overall lack of change in the income poverty rate. This is a complicated problem, one which points to Social Security’s possible shortcomings in helping elderly Americans with limited work histories, an issue that AEI’s Andrew Biggs has written about at length.

One more note on the after-tax income numbers. The income poverty rate dropped drastically between 1996 (when it was 9.4 percent) and 2000 (7.2 percent) before leveling off as the economy slowed. This has to do with several factors, such as a strong economy, an increase in the earned income tax credit, and some efforts to move people into work and earnings. Expect to see a similar drop in the coming years with two similar factors at play. The healthy economy is one obvious reason. But after-tax income poverty will also reflect the increase to the refundable child tax credit that was part of the tax reform effort late last year. If assistance programs, such as Medicaid and Food Stamps, devoted more effort to helping recipients work and increase their earnings, they would work in combination with these increasingly generous credits, and we could see after-tax income poverty rates decline significantly in 2018 and 2019.

Learn more:

The Report Card with Nat Malkus election edition: Discussing controversial topics and debate in schools - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 11/02/2018 - 17:19

As the 2018 midterm election approaches, America’s polarized politics are on full display. In this episode of “The Report Card with Nat Malkus,” on the AEI Education Podcast, Jonathan Zimmerman and Norman Ornstein join to discuss how addressing controversial topics in the classroom head-on and giving all students the opportunity to engage in competitive, civil debate can — paradoxically — help create more informed citizens and improve the nation’s political discourse.

Show notes:

The Case for Contention: Teaching Controversial Issues in America’s Schools | Jonathan Zimmerman and Emily Robertson | University of Chicago Press, 2017

The Matthew Harris Ornstein Memorial Foundation

National Association for Urban Debate Leagues

Washington Urban Debate League

Subscribe to The Report Card with Nat Malkus on the Podcast Channel on Apple Podcasts.

Is blockchain the new tech bubble set to burst? - Is blockchain the new tech bubble set to burst?

Fri, 11/02/2018 - 10:00

At the beginning of 2018, the astronomical rise of bitcoin values caused speculation as to whether we were witnessing hype-driven speculation of even greater proportions than observed in all the South Sea, Dutch tulip, and dot-com tech bubbles combined. The fall in its value over 2018 has seen many claiming, as Nouriel Roubini did last month, that “the mother of all bubbles has now gone bust.”

via Twenty20

Putting the bitcoin bubble burst in context, its price on October 31, 2018 (approximately $6300) differed little from its price on October 31, 2017 (approximately $6400) and was a far cry from its October 31, 2016 value (approximately $700). To be sure, those who bought at the peak may have lost a bundle, but for those who invested early with a view to the long-term the outcome is far from doom and gloom.

Notwithstanding the evidence, some of the vultures picking over the remains of disappointed blockchain investors have moved on to pronouncing the blockchain technology underpinning bitcoin and other cryptocurrencies such as Ether, Litecoin, and XRP as the next villain in the land of over-hyped technologies bound to lead investors to a disastrous end. In Roubini’s words, “Blockchain has been heralded as a potential panacea for everything from poverty and famine to cancer. In fact, it is the most overhyped — and least useful — technology in human history.”

Or is blockchain more like the internet?

Once again, it is helpful to put blockchain technology in a realistic context.  Not so long ago — the late 1990s in fact — the internet was subject to the same sorts of claims as those being made currently about blockchain. If firms did not adopt internet transacting, it was claimed they were doomed to die. Fortunes were bet on fledgling dot-com companies, and most of them were lost on firms that quickly went to the wall. But a few, such as Amazon and eBay, who were able to skilfully engineer linkages between the internet technology and their core business proposition, not only survived the dot-com bubble, but have gone on to dominate their industries.

The learning point from the dot-com bubble and crash for the blockchain era is that no one technology can be a panacea for all ills. Some business models will be tailor-made for the new technology, or will be able to be easily adapted to take advantage of its salient features. Others may not be such obviously good fits. The trick is in identifying where the leverage points lie.

Chain of control

The feature that distinguishes blockchain is that unlike conventional database systems, there is not one central or “master” copy of the database, with access to information and the ability to change or record data being channelled through discrete points controlled by the database “owner.” Blockchain is a distributed ledger — with potentially thousands of copies and no one central point of control. Using rules coded into the software controlling each of the ledger copies and the software used by those engaging in transactions over the system, transactions are processed and “sealed” in a block (link) in a chain that is added — in the same precise order — to all the distributed copies of the ledger. (There’s a bit of cryptography involved here to ascertain the identity of those transacting and to match up parties to transactions where value is exchanged over the system — such as for cryptocurrencies — but it’s not essential to understanding  the main features of a distributed ledger). Once a block is “sealed” it is next to impossible to change the information in it, as it would have to be changed in all of the thousands of other copies of the ledger. The integrity of the ledger is maintained by way of encoded consensus processes — the authoritative version is “agreed” to by all the copies. If someone tries to change the data in a locked block on one of the copies, that copy is effectively voted out by the others and replaced by the agreed-upon version.

One outcome is a time-bound record of transactions that is near-immutable. Blockchain technologies are therefore well-suited to not only transactions where permanent records are required, but also those where the order in which legitimate changes are made to the records is also important (hence its usefulness for recording the movements of units of value amongst participants – i.e. currencies). Retrospective inquiries can verify that actions did occur in the order expected (i.e. audits), and future actions can be triggered when an authenticated and verified block containing the relevant information is added to the chain (the “smart contract” aspect of the technology).

However, it is the “distributed” nature of the copies, and the concept that no one single authority stands as gatekeeper to a specific blockchain that has attracted attention — both good and bad. Bitcoin (and other cryptocurrencies) have received bad press because they have enabled some transactions to occur anonymously and outside of government control. Concerns have also been expressed that all transactions on a blockchain system are open to scrutiny by all those who have access to it.

Or no control?

Nonetheless, a distinction must be drawn between the use of the particular technology and the application it supports. Blockchain technology underpins bitcoin. While the copies of the ledger may be distributed, and there is no central authority mediating the actual operation of the blockchain, there is a central authority that at the outset specified the features of the application, including who can participate, and how their participation will be managed via the relevant software. While bitcoin is a public application which anyone can join (as currencies need to be widely used to be successful), it is not axiomatic that all blockchain applications must be public. Indeed, it is almost certain that most viable commercial applications of distributed ledgers will be private arrangements, controlling access to the application in the first place, thereby ensuring participants are not anonymous and protecting information from scrutiny outside an approved group. That is, exercising explicit control of the application, regardless of the features of the underlying technology. Supply chain applications tracing activities of disparate parties engaging in different industries bringing a complex product or service to market need this sort of control via an existing alliance (”club”) where membership is maintained and managed separate from the application itself, in order to ensure product integrity.

Interestingly, there are parallels here to the internet. The internet was originally characterized as a technology enabling all information to be available to everyone, and where users could interact anonymously (infamously, no-one would know if a user was a dog). Yet most commercial applications are now predicated upon at least some controls on access, with the most secure corporate information available online only via secure virtual private networks.

Like the internet, blockchain may not solve all problems. But it surely has much more to offer than we have seen so far with cryptocurrencies.

Learn more:

The future of the Saudi-US bilateral relationship and economic cooperation - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 20:36

On November 1, 2018, AEI’s Karen Young participated in a Center for American Progress-AEI joint panel on US-Saudi relations. The panel was moderated by Brian Katulis of CAP and Karen was joined by Steven Cook, of the Council on Foreign Relations, and Melissa Dalton, of the Center for Strategic and International Studies. A video recording of the event is available here. A summery of Karen’s remarks and commentary are presented below.

Now is not the moment to sever ties or to make drastic changes to our relationship with Saudi Arabia. It may be appropriate to place sanctions on Saudi Arabia after the murder of Jamal Khashoggi, but these should be in proportion to other sanctions on states that commit similar crimes against their own citizens in US or NATO member territory. The most recent comparative case is the poisoning of Russian citizens (and British citizens) in the UK. In that case, the US sanctions were a reaction to the targeted assassination and use of chemical weapons, using legal force under the Chemical and Biological Weapons Control and Warfare Elimination Act (CBW Act).

In the Khashoggi murder, the Magnitsky Act is the more likely basis of US law that could be applied to those responsible for the murder. It is unclear, however, how the US is cooperating with the parallel Saudi and Turkish investigations, and how the US might assign blame to individuals within the Saudi government for this human rights violation against its own citizen. In the context of both of these legal frameworks, there has not been penalization of heads of state.

But let’s have a bit of self-reflection. Why has Khashoggi’s murder become a tipping point in what has been a long and already difficult relationship between Saudi Arabia and the United States? We do not share many political values or forms of governance. We have a difficult history understanding each other, often using each other when convenient, as in the Cold War and our efforts to defeat the Soviets in Afghanistan. After September 11, 2001, the relationship was strained, but was largely preserved via intelligence cooperation. After 2011, the relationship tensed again, as the US policy towards the Arab uprisings, especially in Egypt, signaled that the US was not a reliable partner to autocrats like Hosni Mubarak. Now, in the midst of the Trump era, we are two nations in a period of profound self-examination. We are both asking: “Who are we? What is our role in international and regional stability and prosperity?”

We may like to think that we have a values-based foreign policy, but we do not. That is not to say it is a fool’s errand; it is a noble aspiration. However, the current US foreign policy towards the Middle East is both transactional (and focused on the wrong kinds of transactions, like arms sales) and also hollow in its chest-beating machismo. We have oriented our policies towards both Iran and Syria as regime change, but we are unlikely to do much to achieve that objective. To advocate for regime change or even a leadership re-organization in Saudi Arabia is equally disingenuous. We have no intention of picking up the pieces should the system collapse.

The United States is making an inward turn, away from international agreements, allies, and leadership in international organizations. Our conception of economic growth is now confused with a zero-sum logic that is ignorant of how global markets function. Saudi Arabia, on the other hand, has been trying to reach out; to attract foreign direct investment; to invite visitors and tourists; to be proactive in its regional security provision; and to be seen as an equal in the international system. Certainly, under the direction of the crown prince, Saudi Arabia has also made foreign policy choices in Yemen and inside the Gulf Cooperation Council that are rash and destructive.

How we decide to treat each other right now will have important consequences for the Middle East, and, more generally, how the US continues to exercise its foreign policy and leadership in the world. Do we see the Middle East only through the lens of terrorism, or do we see regional opportunity? Do we have a vision for governance and economic growth that is attractive to the region? Do we stand for openness, tolerance, and opportunity? Or do we stand as “nationalists”?

The truth is, we don’t have the kind of global economy that works well for nationalists. And it is in the national security interests of the United States to see a prosperous and inclusive Middle East. And, by the way, when they grow, we also benefit.

Let me address three core misconceptions about the utility of economic cooperation with Saudi Arabia.

(1)     No, Saudi Arabia is not a defense free-rider. In fact, they are invested in regional security. Their methods of deploying their resources for regional security may be different than, and sometimes less optimal for, the United States. We are seeing the emergence of the Gulf states (particularly Saudi Arabia, the United Arab Emirates, Kuwait and Qatar) as an alternative finance facility for the MENA region and beyond, to the Horn of Africa and West Asia. They rival the World Bank and International Monetary Fund, and often surpass them in the amount of financing they can provide (in cash deposits to central banks, commitments to infrastructure investment, and in-kind oil and gas transfers), frequently without restrictions on fiscal or monetary policymaking. This is more than buying loyalty or checkbook diplomacy. This is economic statecraft.

This mode of intervention entails the ability to provide models of governance and to impact decision-making and the trajectory of domestic politics across the region. The United States cannot and will not compete in that way. Compared with the resources of China in partnered investments in the Belt Road Initiative, or with joint sovereign funds between Russia and China, our OPIC or USAID dollars are peanuts.

Saudi Arabia and its Gulf partners are now global development actors. We can be a part of that plan and seek to benefit from regional growth, or we can walk away from the table. If we walk away from political and economic reconstruction in Yemen, Syria, Iraq, and Libya, we will walk away from global leadership and the promotion of American ideals, including economic competition.

Some examples:

Therefore, the Saudi economy is in some ways a bellwether of the broader MENA economy and important in the lines of fiscal support and investment flows between oil importers and exporters in the developing world. Remittance flows are another important connector to Egypt, Jordan, Pakistan, Lebanon, Bangladesh, Sudan, and India. Workers in the Gulf account for 70 percent of remittance flows to Jordan (13 percent of GDP), Egypt (10 percent of GDP) and Pakistan (6.4 percent of GDP).

Our foreign policy towards the Middle East should see Saudi Arabia as central, but we need to engage a wider and more sustained way. We are forfeiting our entry points to the region and that is not in the long-term interest of the US or our global economy.

(2)     No, the United States does not need Saudi oil. With current US production at 11 million barrels per day, we rival Saudi production. But we do need Saudi oil to flow and to go eastward. The flow and supply of energy to China, South Korea, India, and Japan is in everyone’s interest to sustain global growth, especially in emerging markets. And, oil should be reasonably priced. A ten percent increase in the global price of oil impacts the Chinese economy with a 0.2 percent fall in GDP, 0.3 percent decline in India, a 0.5 percent decline in South Korea, and a 0.6 percent decline in Thailand, according to Global Data Watch research by J.P. Morgan.

This is not to say that Saudi Arabia is holding the global economy hostage. It is not, but it does have leverage. With the US current Iran policy, oil market cooperation is vital. While the Saudi energy minister Khalid Falih has been adamant that oil will not be weaponized (as during the 1973 embargo on the US and the Netherlands), we are in a situation in which there is not tremendous spare capacity. The Trump administration’s Iran policy is difficult and nearly impossible without Saudi cooperation in oil markets.

(3)     The US’s choices are not black-and-white. There is a false dichotomy between supporting the Crown Prince Mohamed bin Salman and therefore creating a 40-year reign of terror, and following a more values-driven foreign policy to undermine and shun him with the expectation of a change in leadership. First, the US should not be in the business of telling other countries whom to put in power. This reinforces a sense of unreliability after 2011 and makes the US look fickle in its relationships.

Second, it is not a sustainable policy that can be routinely and fairly applied. We don’t do it to China, which is certainly guilty of detaining its own citizens in rehabilitation camps and forcefully “rendering” its citizens back home for discipline. The sanctions on Russia for the poisoning of its own citizens in the UK are a more likely and appropriate standard.

Saudis are perfectly capable of determining how they want to be governed. Mohamed bin Salman has had a lot of domestic support. There are now some serious shifts underway, and not for the reasons that most Americans would expect. It is not because of the disastrous war in Yemen, the Qatar crisis, or the debacle of detaining Prime Minister Hariri. It is because of national pride. Mohamed bin Salman has embarrassed them and insulted the honor of the country, if he ordered the brutal murder of Jamal Khashoggi. He won’t last if people feel he has dishonored them.

And there is no reason to think that MbS will be a dictator for 40 years. Saudi Arabia right now is in the midst of tremendous upheaval. Anyone who has the task of governing will be met with some serious economic challenges, which no amount of repression can erase. The 44.5 percent youth unemployment among citizens is one key reason. The pressure is on the Crown Prince to deliver and continue social reform, to create jobs, and to deal with the problem of economic and social exclusion.

We are connected by our markets. The massive amount of sovereign debt issued Saudi Arabia and the Gulf states since 2015, now more than $144 billion, will be a metric to weigh the success of reforms and domestic governance. That debt is traded globally, and will soon be included in global index funds (JP Morgan EM Bond Index) with much of it coming to maturity in 2023. Americans will hold this debt in their pension funds and IRAs. And it is not just debt securities, it is investment in Saudi corporates as well, as new inclusion in equity indices (FTSE, MSCI) will encourage American and global investment funds to invest in Saudi Arabia.

And Saudi Arabia is equally, if not more substantially, invested in the United States. Saudi Arabia holds roughly $150 billion in US securities, both equities and debt, as government investments. Kuwait actually holds considerably more, at nearly $220 billion, and the Norwegians hold nearly $350 billion. We are connected– by oil markets, by shared investment, and in a global economy that has little concern for national boundaries.

It is possible to have good bilateral relations with Saudi Arabia that focus on our shared interests in global growth; in a stable and prosperous Middle East that sees opportunity for its youth population; for governments that can have the resources and access to finance to make choices about policy that are based not on fear, but on optimism. It is also possible to be optimistic about the Middle East without kowtowing to brutality. We just have to figure out what we stand for.

Annual report on US consumption poverty: 2017 - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 18:01

Download the Report


This report presents estimates of consumption and income based poverty in the United States derived from information collected in the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey and the U.S. Census Bureau’s Current Population Survey. A poverty rate visualization tool, additional results, and resources can be found at povertymeasurement.org.

Summary of findings

  • Using the standard of living of the poor in 1980, the consumption poverty rate fell from 13.0 percent in 1980 to 2.8 percent in 2017, while the official poverty rate fell by 0.7 percentage points over that period. 0.2 percentage points of the overall drop in consumption poverty occurred between 2016 and 2017.
  • Using the standard of living of the poor in 2015, the consumption poverty rate fell from 32.9 percent in 1980 to 12.1 percent in 2017. Using this higher standard, 0.6 percentage points of the overall drop in consumption poverty occurred between 2016 and 2017. Note: The standard of living of those at the poverty line has changed over time because the official poverty thresholds are adjusted using a biased price index. For simplicity, our main results are reported using the 1980 historical standard. The choice of year for the historical standard is arbitrary, as was the initial official standard, a point which we discuss more fully below.
  • The 2017 decline in the consumption poverty rate continues a trend that started in 2011, when poverty began to fall after rising for two years during the Great Recession.
  • Three factors explain why consumption poverty shows a long-term decline but the official poverty measure does not: the consumption poverty measure 1) is constructed using a bias-corrected measure of inflation; 2) implicitly incorporates taxes and in-kind transfers in family resources by using consumption; and 3) avoids the bias due to the under-reporting of certain types of income that are commonly received by those with low reported income.

Measuring Poverty

The Office of Management and Budget established the procedure for measuring the official poverty rate in the United States through a Policy Directive in 1978. This official rate is determined by comparing the pre-tax money income of a family or a single unrelated individual to poverty thresholds that vary by family size and composition. For example, in 2017, the poverty threshold for a one-parent, two-child family is $19,749. The underlying data on pre-tax money income come from the Current Population Survey Annual Social and Economic Supplement. If a family has income below the poverty cutoff for that size family, all family members are classified as poor. Except for a few minor changes, the only adjustment to these thresholds over the past five decades has been for inflation using the Consumer Price Index for all Urban Consumers (CPI-U).

The release of this report is motivated by several longstanding criticisms of the Official Poverty Measure (OPM). Many criticisms can be found in sources such as Citro and Michael (1995), Blank (2008), and U.S. Census Bureau (2016b), but two are probably of greatest importance. First, the price index that the OPM relies on to adjust the poverty thresholds for inflation, the CPI-U, is known to overstate the extent of inflation (e.g. Hausman 2008). This problem can be addressed by using an unbiased price index.

Second, the OPM does not reflect in-kind transfers and tax credits that have grown over time, such as the Supplemental Nutrition Assistance Program (SNAP), housing benefits and the Earned Income Tax Credit (EITC). The first problem means that the poverty cutoffs rise too quickly over time, leading more and more people to be below the cutoff in the absence of countervailing increases in income. The implication of the second problem is that the OPM fails to reflect the full array of resources, cash and noncash, that families can use to meet their needs.

A potential solution to the second problem is to include SNAP, housing, tax credits, and other benefits in the measure of income used to determine poverty status. This is the approach taken in the Census Bureau’s Supplemental Poverty Measure (SPM). Unfortunately, the third problem with the OPM, income underreporting, plagues the SPM as well leading. The survey data sources for government benefits suffer from substantial reporting problems, and consequently they substantially understate the in-kind and tax benefits mentioned earlier: SNAP, housing benefits, the EITC (Meyer, Mok and Sullivan 2015; Meyer and Mittag forthcoming). Some forms of income included in the OPM are also sharply under-reported such as cash welfare, pension income (Bee and Mitchell 2017), and earnings for those at the very bottom (Meyer, Wu, Mooers and Medalia (2018). Thus, the SPM only addresses one of three major problems with the OPM, and because it makes a partial correction for one problem, while leaving the others in place it can do more harm than good (Meyer and Sullivan 2012; Meyer, Wu, Mooers and Medalia 2018).

Where does the battle for the Senate stand? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 18:00

A week before the election, the battle for control of the Senate seems to have wrapped up, and the attention turns to questions about exactly how the Senate will shape up for 2019-2020. A large number of very close races leave us with a fairly wide range of possibilities, but Republicans are probably favored to pick up a seat or two.

US Senate Minority Leader Chuck Schumer (D-NY) and US Senate Majority Leader Mitch McConnell (R-KY) walk to the Senate chamber on Capitol Hill. REUTERS/Eric Thayer

Republican reaches

Over the past few weeks, we’ve seen poll tightening of varying degrees in Michigan, Ohio, and Wisconsin. This isn’t terribly surprising. Many of these races flew under the radar screen for this cycle, with relatively low-profile challengers going up against well-established incumbents in an unfavorable environment. A lot of this is probably soft Republican voters coming home as the challengers begin to establish a media presence. I don’t think that any of these states are real danger spots for Democrats, but I also expect the margins to look more like recent polls than earlier polls.

Republican potential gains

There are three races here: New Jersey, Montana, and West Virginia.  I’ve long been suspicious of Republican Bob Hugin’s ability to flip this seat. Yes, Bob Menendez is “ethically challenged,” to be generous, but we’ve seen this movie before. Undecideds either break toward the Democrat (2006) or the Democrat removes himself from the ballot (2002). But it’s realistically too late for Menendez to come off the ballot, even for New Jersey, and undecideds seem to be breaking heavily against him. The environment is probably too bad for Hugin to win, but it isn’t outside the realm of possibility anymore.

The other two states are deep red states that people were keeping an eye on. Jon Tester and Joe Manchin are pretty good fits for their states, but they are also incumbents under 50 percent in states that went overwhelmingly for Republicans in the last presidential contest. It wouldn’t be shocking for undecideds to break heavily against them, and the fact that President Trump is planning rallies in those states should surprise no one.


We have two Republican states and three Democratic states that look like pure tossups. Right now, the polling shows close races in Arizona, Florida, Nevada, Indiana, and Missouri.  Republicans probably have an edge in Missouri, while early voting shows Democrats on track to eke out a surprisingly narrow victory in Nevada. Arizona, Florida, and Indiana look like pure tossups; I would not be surprised with any outcome on Wednesday morning there. Forced to choose, I might take the Republican in Arizona and the Democrat in Florida, while we just don’t have enough high-quality polling to make an informed guess about Indiana.

Democratic potentials

The Democrats’ path to a majority ran through picking up Arizona and Nevada, picking up Texas or Tennessee, and then holding all of their seats. That’s probably too much to ask now.  Texas and Tennessee seem to have reverted to partisan form, and while Republicans are unlikely to blow the roof off there, they are poised for solid, if unspectacular, wins.

Making matters worse for Democrats, everyone seems to believe that Heidi Heitkamp is trailing Rep. Kevin Cramer, and seems likely to lose. We’ve seen polling errors before (fairly recently, in fact), but it would take a substantial one for her to pull this off. And it would take systemic polling errors for Democrats to win two of the three. In short, the Democrats’ path to a majority is exceedingly narrow.

Democratic reaches

None, really. This map is so bad for Democrats that they were lucky to be able to put Texas and Tennessee even on the radar screen.

Join the AEI Election Watch team on November 8 for lunch to discuss what happened and what it means. Click here for details.

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Machine learning with a twist: How trivial labels can be used to predict policy changes - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 17:08

Supervised learning — the most developed form of Machine Learning — involves learning a mapping from input data (such as emails) to output labels (whether they are “spams”) and, subsequently, applying the learned mapping to predict the labels for new data (i.e., new emails). A critical prerequisite to this approach, however, is a rich and representative set of training data, which are often hard to come by.

@bradneathery via Twenty20

On the other hand, in the era of Big Data, there are ample data labels that are readily available but ostensibly unimportant for the problems we would like to tackle. But, are they really unimportant?

In a new research paper, “Reading China: Predicting Policy Change with Machine Learning,” we demonstrate that seemingly trivial labels can be used to uncover important underlying patterns. We build a neural network algorithm that “reads” the People’s Daily, China’s official newspaper, and classifies whether each article appears on the front page — an ostensibly trivial label. It turns out that such a simple algorithm can be used to detect changes in how the People’s Daily prioritizes issues, which, in turn, have profound implications for China’s government policies.

Read the report:

The algorithm tries to mimic the mind of an avid People’s Daily reader who reads its articles and tries to figure out how its editor places articles on different pages. Due to the official status of this newspaper, the way its editor selects articles for the front page reflect the newspaper’s issue priorities, which the avid reader will try to pick up. If the reader had read and thought through, say, five years’ worth of articles, they would have acquired a fairly good sense of what is in the editor’s mind and what kind of articles “should” or “should not” appear on the front page. But if the reader was then surprised by new articles in the following quarter — that is, their educated guess about the new articles turned out to work either particularly well or exceptionally poorly — it might constitute a signal of change from the reader’s perspective. While a small surprise may well be taken as noise, a strong signal would convince the reader that their existing understanding of the editor’s mind is no longer valid and that the priorities of the People’s Daily must have fundamentally changed.

Using the above reasoning, we construct a quarterly indicator, which we call the Policy Change Index (PCI) of China, that captures the amount of surprise to the algorithm in each quarter, compared to the paradigm the algorithm has acquired over the past five years’ data.

The namesake of the indicator comes from the fact that detecting changes in the newspaper’s priorities allows us to predict changes in the Chinese government’s policies. This is because the People’s Daily is at the nerve center of China’s propaganda system, an essential function of which is to mobilize resources to attain the government’s policy goals. Moreover, before major policy changes are made, the government often finds it necessary to justify to or convince the public that those changes are the right moves for the country. Hence, while the algorithm is detecting propaganda change in real time, the resulting index is really predicting policy changes for the future.

When put to the test against the ground truth — policy changes in China that did occur in the past — the PCI could have correctly predicted the beginning of the Great Leap Forward in 1958, that of the economic reform program in 1978, and, more recently, a reform speed-up in 1993 and a reform slow-down in 2005, among others. Furthermore, these events are widely recognized in the academic literature as among the most critical junctures in the history of China’s economy and reforms.

Our approach to learning underlying patterns from easily available labels has an obvious “context-free” feature; that is, the construction of the PCI does not rely on the researcher’s understanding of the Chinese context (it’s language, history, or politics). This feature opens the door to a variety of applications that have a structure similar to ours. Readers can find more details about China’s policy changes,  methodology, and its potential applications in this research paper or the website of the project. The source code of the project is also released on GitHub, so that the academic, business and policy communities can not only replicate the findings but also apply this method in other contexts.

Protect the gains made by low-skilled workers - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 17:01
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The U.S. economy is less than one year away from breaking the record for the longest expansion in the country's history. Despite the length of the recovery from the Great Recession, data from the middle two quarters of 2018, including last week’s GDP report, suggest the economy is still growing with considerable strength. It is on track to grow around 3 percent for the year, about an entire percentage point above estimates of its maximum sustainable rate of growth.

This strength is reflected in the job market, which continues to expand at a robust clip. In the last five years, the economy has added an average of 211,000 payroll jobs per month. Over the last 12 months, the average job gain has been the same. Fewer than 4 out of 100 workers are unemployed, and that ratio is expected to fall even lower in the months to come.

That’s the view from 30,000 feet. What happens when you zoom in and focus on specific groups? By some important measures, the labor market actually looks better for low-wage workers with relatively fewer skills than it does for other groups.

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Over the past quarter century, the average unemployment rate for workers who did not complete high school is about 9 percent. In 2018, the average unemployment rate for this group is 5.5 percent, or about 60 percent of the long-term average.

Banter #336: Clay Fuller on transnational organized crime and authoritarianism - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 14:45

This week on Banter, AEI Jeane Kirkpatrick Fellow Clay Fuller joined the show to discuss combating transnational criminal organizations and the authoritarian regimes that facilitate their activities. Clay’s work at AEI focuses on authoritarian survival, corruption, and how dictators, terrorists, and criminals use free markets to legitimize their actions. Earlier this week, he and AEI Visiting Fellow Roger Noriega hosted an event at AEI on dismantling transnational organized crime networks in the Americas. You can watch the full event video at the link below.

Learn More:

Unraveling the web: Dismantling transnational organized crime networks in the Americas (AEI Event Page)

Kingpins and corruption: Targeting transnational organized crime in the Americas | AEI Working Group on Transnational Organized Crime in the Americas | AEI | June 2017

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Rein in the administrative state — and preserve democracy - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 14:19

With Brett Kavanaugh now settled in at the Supreme Court, academics and others on the left have begun to worry that the court will reduce the power and reach of the federal government’s administrative and regulatory agencies—often called the administrative state.

Eric Posner, a professor at the University of Chicago Law School, recently wrote in a New York Times op-ed: “The conservative majority [on the court] can, and most likely will, rule against the government using broad theories that would also eat away at the constitutional foundations of the New Deal system, which is essential for protecting health and safety, the environment and much else.”

Posner is correct; it’s likely that the court’s new conservative majority will pare back the power of the administrative state when an appropriate case comes before the court. But instead of reducing the protections American get from regulation, the court will be acting to preserve American democracy—something academics and others on the left fail to recognize or appreciate.

The administrative state’s threat to democracy arises primarily from a 1984 Supreme Court ruling in Chevron v. Natural Resources Defense Council. There, the court directed lower federal courts to defer to administrators’ interpretations of their own statutory authorities, if these interpretations are “reasonable.”

Administrative agencies are always looking for ways to increase their powers, and this ruling enabled them to expand the scope of their rules beyond the four corners of the statutory language that is the legal basis for their authority.

In the U.S. Constitution, the Framers created a government of separated powers, in which Congress—elected by the people—has the sole power to make the laws; an executive branch, headed by the president, is limited to enforcing the laws; and a judiciary, headed by the Supreme Court, is authorized to interpret the laws.

Apart from specific limited powers granted to the president under the Constitution itself, neither the president nor the agencies of the executive branch have any authority to act other than under—and consistent with—a statute enacted by Congress.

The actions of administrative agencies, then, are only valid if they are based on authority conferred by Congress. If the rules or regulations of these agencies go beyond that authority, they are not only invalid but amount to unauthorized lawmaking, a violation of the Constitution’s statement that “all legislative power herein granted is vested in a Congress of the United States.” So the fundamental question about the authority of administrative agencies to issue rules is whether these rules are ultimately based on laws enacted by Congress.

The deference that the Chevron court accorded to administrative agencies in 1984 enabled them to interpret their statutory authority very broadly, and substantially reduced the likelihood that reviewing courts would object. As a result, in every year since 1993 the agencies of the administrative state have issued over 3,000 rules and regulations—a total of more than 101,000 in 25 years. While that in itself does not prove that these rules were not authorized by Congress, it does suggest that the agencies have been taking full advantage of the Chevron decision to expand their rule-making authority.

Many of those who fear elimination or modification of what is called Chevron deference like the policies that the agencies of the administrative state have imposed. But they ignore the fact that, in a democracy, unelected officials should not have the power to make rules that have not been specifically authorized by Congress.

That is likely to be the test that the new, more conservative Supreme Court will apply if it modifies or eliminates Chevron. It will authorize lower courts to determine, through what is known as judicial review, whether a rule under challenge is soundly based in statutory language. If it is not, the rule must be adjudged invalid.

As now-Justice Kavanaugh wrote in a 2015 court of appeals dissent, “If an agency wants to exercise expansive regulatory authority over some major social or economic activity…an ambiguous grant of authority is not enough. Congress must clearly authorize an agency to take a major regulatory action.”

No one who believes that the United States is a democratic republic can argue with this idea. But we should be aware that, for progressives, democracy is often a second choice.

Peter J. Wallison a senior fellow at the American Enterprise Institute. His most recent book, “Judicial Fortitude: The Last Chance to Rein In the Administrative State” (Encounter Books), was published in October.

Episode 67: Immigration reform for Fox and Vox - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 14:01

Jonah invites Reihan Salam, National Review executive editor and author of the newly-released “Melting Pot or Civil War,” onto The Remnant to discuss immigration, nationalism, solidarity, and his latent Bismarckian tendencies.

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.

Why does the UK want to tax American tech firms? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 10:00

When the United Kingdom voted to leave the European Union, some Brexiteers placed a free-market spin on the decision. Global Britain, the story went, would become a small-government paradise with amazing trade deals and glorious prosperity. That spin always seemed like a weird fit for a movement that had just rejected the four freedoms of the European Single Market in favor of the zero-sum logic of Brexit, but weirder things have happened.

Britain’s Chancellor of the Exchequer Philip Hammond, an advocate of the proposed Digital Services Tax, stands outside 11 Downing Street in London, Britain, October 29, 2018. Via REUTERS

Well, we have not had to wait long to get some first hints on how this is unfolding. Even before a theoretical Prime Minister Jeremy Corbyn could start nationalizing industries left and right, no longer constrained by EU restrictions on such seizures of the means of production, current Prime Minister Theresa May’s conservative government is building new tariff walls. Their first target: large, mostly American, tech firms.

Starting in 2020, the UK will introduce a new digital services tax of 2 percent on the revenue of large internet firms. This tax seems inspired, ironically, by a proposed European Commission directive, though the details are slightly different. The goal is to target profitable search engines, online marketplaces, and social media firms with global revenue over £500 million, with an exemption for the first £25 million of UK revenue. Companies that are likely to be hit include Facebook, Google, and eBay, and the overwhelming majority of tax revenue from this levy would certainly come from American firms.

Now, much like the European Commission did, the British government presents this tariff as something deeper than a simple revenue grab targeted at foreign firms. Its stated theory of the case is that these firms generate value not when they develop their products, but only when consumers engage with them. This is not a crazy theory, but the same reasoning could obviously be applied to the coffee I am currently drinking, the food I just ate, and the computer on which I am composing this high-quality content. This logic would guide one, then, to a destination-based tax system for all industries, not just the digital one that is overwhelmingly based abroad. But that is not what the Brits are proposing. They are singling out one specific industry, following Spain’s example and beating even the French to the punch.

Let’s hope this doesn’t signal that the UK is on the way back to where it was around the time it joined the then-European Economic Community: miner strikes, International Monetary Fund bailouts, and double-digit inflation.

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Discussing Trump’s birthright citizenship plan: Yoo on Fox News’ ‘Fox News at Night with Shannon Bream’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/01/2018 - 03:14
Visiting Scholar John Yoo discusses the constitutionality of eliminating birthright citizenship through an executive order.

Our descent into vitriol began long before Trump — and Democrats are culpable too - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 10/31/2018 - 22:14

After a deranged Democrat living in his van nearly assassinated Rep. Steve Scalise (R-La.) firing more than 70 rounds at House Republicans practicing for the Congressional Baseball Game, House Minority Leader Nancy Pelosi (D-Calif.) declared it “outrageous” that anyone would blame Democrats’ rhetoric for inspiring the shooter. “How dare they say such a thing!” Pelosi thundered. Never mind that the shooter echoed Democratic vitriol against the president, ranting on Facebook that “Trump is Guilty & Should Go to Prison for Treason” and that “Trump Has Destroyed Our Democracy. It’s Time to Destroy Trump & Co.”

Now Democrats are doing exactly what they condemned, blaming President Trump’s divisive rhetoric for the recent spate of mail bomb attacks and the massacre at a Pittsburgh synagogue. The truth is they ceded the moral high ground years ago. Our descent into vitriol began long before Trump — and Democrats and their allies are as culpable as the president.

Recall that in 2000, the NAACP spent millions on ugly ads accusing George W. Bush of moral equivalence with white supremacists who brutally lynched James Byrd in 1998. “My father was . . . beaten, chained, and then dragged three miles to his death, all because he was black,” said Byrd’s daughter, as the screen flashed grainy images of a chain dragging a body behind a pickup truck. “So, when Governor George W. Bush refused to support hate-crime legislation, it was like my father was killed all over again.”

Barack Obama set the tone for his 2008 campaign against John McCain when he declared, “If they bring a knife to the fight, we bring a gun.” Rep. John Lewis (D-Ga.) answered that call when he compared McCain to segregationist Alabama Gov. George Wallace and declared that McCain was replicating the climate of “hatred and division” that led to attacks on civil rights workers. Four year later, a pro-Obama super PAC ran ads showing GOP vice-presidential nominee Paul Ryan pushing an old lady in a wheelchair over the side of a cliff, while another ran false ads blaming Mitt Romney for a woman’s death from cancer.

During the 2016 campaign, Hillary Clinton compared Republicans to Nazis, saying in regard to illegal immigrants they wanted to “round them up” and put them in “boxcars.” She also compared the GOP to terrorists, declaring, “Now, extreme views on women, we expect that from some of the terrorist groups, we expect that from people who don’t want to live in the modern world, but it’s a little hard to take from Republicans.” And she listed Republicans alongside the Iranians among the “enemies” she was most proud of making.

When Trump took office, Democrats abandoned their role as the “opposition” and declared themselves “the resistance.” Look up “resistance” in the Oxford dictionary and you’ll see the definition “the use of force or violence to oppose someone or something.” William E. Scheuerman, professor of political science at Indiana University, notes the word resistance “first surfaces in debates about tyrannicide, the violent removal from power of misbehaving kings who usurp authority not properly belonging to them.” Scalise would have been forgiven for pointing out that his would-be assassin took Democrats’ calls to “resistance” literally.

More recently, some Democrats were peddling unfounded accusations that Brett M. Kavanaugh participated in gang rapes in an effort to destroy the Supreme Court nominee. Clinton defended smash-mouth tactics, declaring that “you cannot be civil with a political party that wants to destroy what you stand for.”

None of this excuses Trump’s rhetoric, but it does make his Democratic accusers hypocrites. When you traffic for decades in hateful, violent political rhetoric, you have lost the moral authority to effectively condemn others for doing so. Indeed, Democrats arguably bear much of the blame for creating Trump. One of the reasons voters rallied behind Trump is precisely because, after years of seeing their standard-bearers act like punching bags, Trump presented himself as a counterpuncher who isn’t afraid to fight back and gives as good as he gets. The results are ugly. Trump is wrong to call the media the “enemy of the people” and to celebrate a congressman body-slamming a reporter, and the host of other terrible things he has said. But Democrats were dragging us into the political gutter long before Trump came along. If they think Americans elected a Frankenstein’s monster, they are Dr. Frankenstein.

No, the president cannot end birthright citizenship - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 10/31/2018 - 21:48

In an interview for “Axios on HBO,” President Trump announced he will sign an executive order ending birthright citizenship. When challenged on the constitutionality of doing this by executive order, Trump replied:

“You can definitely do it with an act of Congress. But now they’re saying I can do it just with an executive order.”

This is simply untrue. The 14th Amendment — which declares, “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside” — cannot be changed by executive order, or even by an act of Congress. It would require a constitutional amendment.

Not long ago, Trump revoked President Barack Obama’s Deferred Action on Childhood Arrivals (DACA) because, as he correctly pointed out, it was an unconstitutional executive overreach. Now he wants to attempt to change the Constitution by executive order?

Some conservatives justify his proposed action by taking a loose reading of the 14th Amendment, arguing that the phrase “subject to the jurisdiction thereof” leaves birthright citizenship subject to interpretation. Funny, just a few weeks ago, many of these same conservatives during Brett M. Kavanaugh’s confirmation hearings were defending the “originalist” approach to the Constitution, which holds that we should interpret the plain words of the Constitution according to their original public meaning.

They were right the first time. Many of these same conservatives (correctly) bridle at the idea that the phrase “A well regulated Militia, being necessary to the security of a free State” in any way undermines the fundamental right of private citizens to keep and bear arms. Apparently, some on the right are strict constructionists when it’s convenient but suddenly discover their belief in a “living Constitution” when it serves their policy preferences.

As my American Enterprise Institute colleague John Yoo explains, the originalist reading of the 14th Amendment is the correct one:

The 14th Amendment’s reference to “all persons born or naturalized in the United States, and subject to the jurisdiction thereof” refers to children who are born in US territory and are subject to American law at birth. Almost everyone present in the United States, even aliens, come within the jurisdiction of the United States. If the rule were otherwise, aliens present on our territory could violate the law with impunity. …

Significantly, congressional critics of the Amendment recognized the broad sweep of the birthright citizenship language. Senator Edgar Cowan of Pennsylvania, a leading opponent, asked: “is the child of the Chinese immigrant in California a citizen? Is the child born of a Gypsy born in Pennsylvania a citizen?” Senator John Conness of California responded yes, and later lost his seat due to anti-Chinese sentiment in his state. The original public meaning of the 14th Amendment — which conservatives properly believe to be the lodestar of constitutional interpretation — affirms birthright citizenship.

Yoo further points out the high court has upheld this view of the 14th Amendment:

United States v. Wong Kim Ark (1898) upheld the American citizenship of a child born in San Francisco to Chinese parents, who themselves could never naturalize under the Chinese Exclusion Acts. The Court held that “the Fourteenth Amendment affirms the ancient and fundamental rule of citizenship by birth within the territory, in the allegiance and protection of the country, including all children here born of resident aliens.” It also explicitly rejected the argument that aliens, because they owed allegiance to a foreign nation, were not within “the jurisdiction” of the United States.

The precedent is so clear. So if Trump moves forward, he may find that the Supreme Court — in all likelihood with the votes of his own nominees — declares his action unconstitutional. That would be quite a rebuke.

And even if Trump could change the 14th Amendment in Obama-esque fashion with his pen and phone, that is the last thing Republicans should want to do — both as a matter of law and a matter of principle. Because, as Yoo points out, the 14th Amendment is one of the Republican Party’s great historic achievements:

After the Civil War, congressional Republicans drafted the 14th Amendment to correct one of slavery’s grave distortions of our law. In Dred Scott v. Sanford (1857), Chief Justice Roger Taney found that slaves, even though born in the United States, could never become citizens. The 14th Amendment directly overruled Dred Scott by declaring that all born in the U.S., irrespective of race, were citizens. It also removed from the majoritarian political process the ability to abridge the citizenship of children born to members of disfavored ethnic, religious, or political minorities.

Republicans should not be seeking to restore any elements of Dred Scott. They should not be weakening the Constitution with the same kinds of loose interpretive doctrines that liberals use to justify their favored policy outcomes. The way to prevent illegal immigrants from obtaining birthright citizenship for their children is prevent them from entering the country illegally in the first place. Strengthen border security. Build the wall. But leave the Constitution alone.