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Is a trade war really worth the candle? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 15:12

Nobody seriously doubts that China takes unfair advantage of its trade arrangements with the rest of the world and that it routinely flouts the rules. Nobody also seriously doubts that China steals intellectual property on an epic scale. However, before starting a trade war with China on moral grounds, the Trump administration might want to do a cost-benefit analysis of proceeding down that path to determine whether such a war is worth the candle.

There would seem to be three basic questions that the administration should be asking itself in any such cost-benefit analysis. First, how likely is it that China will accede to U.S. pressure to create a more level playing field for trade? Second, how likely is it that higher import tariffs on China will help the administration achieve its basic objective of eliminating the U.S. trade deficit? Third, and most important, what might the costs of a trade war be for the United States and global economies and are those costs worth paying?

As to the first question, it would seem highly unlikely that China will buckle under U.S. public pressure to mend its ways in the area of trade relations. Unlike the United States, China is hardly a democracy and, having recently consolidated his power, China’s President Xi Jinping is very much less subject to domestic political pressure than is President Trump. This would especially seem to be the case ahead of the U.S. November midterm elections where the last thing Trump needs is dissatisfaction in the U.S. Farm Belt that might be caused by Chinese food import restrictions.

It also might be of relevance that China has a very much higher pain threshold than does the United States. This would not be the first time in China’s post-war history that a Chinese leader would allow his people to go without grain in pursuit of a political objective.

As to the question of whether higher import tariffs on China would help to reduce the U.S. trade deficit, the administration might wish to reflect on the fact that the trade deficit is arithmetically the difference between the U.S. level of savings and investment. Unless higher import tariffs somehow increased U.S. savings or reduced U.S. investment, there is no reason to think that they would help eliminate the trade deficit.

By contrast, there is every reason to think the Trump administration’s budget policy that involves a large unfunded tax cut and increases in public spending will cause the U.S. trade deficit to widen. It will do so by reducing public savings and by reviving the ghosts of our twin deficit problem of the 1980s.

As to the all-important question of the likely costs of a trade war, it is well to recall that from a financial market perspective Trump could not have chosen a worse time for a trade war. After many years of ultra-easy monetary policy by the world’s major central banks, global financial markets are now in bubble territory. A trade war could very well be the factor that bursts the financial market bubble.

It is not simply that global equity valuations are still at levels experienced only three times in the last 100 years or that price bubbles characterize a number of important housing markets around the world. It is also that sovereign bond yields are still close to their historic lows while credit risk is being seriously mispriced in the high yield debt market and in the emerging market corporate bond markets.

As the experience of the last few weeks should be reminding us, there is the real risk that the threat of a trade war could be the trigger that causes global financial markets to unravel. That in turn would have very untoward consequences for the U.S. and global economies.

As a foretaste of what could happen, it is worth recalling that since end-January 2018, the U.S. stock market alone has lost 10 percent in value, which is equivalent to 15 percent of GDP. This has to raise the basic question as to whether the costs from engaging in a trade war with China might well exceed any gain that we might derive from getting China to buckle to our demands for fairer trade.

Tempting as it might be for the administration to vent its displeasure with China’s unfair trade practices, one must hope that it thinks carefully before rushing into a trade war. If it does not, we should brace ourselves for some very rough sledding in the U.S. and global economies.

Desmond Lachman is a resident fellow at the American Enterprise Institute. He was formerly a Deputy Director in the International Monetary Fund’s Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.

CBO forecast leaves no room for wishful thinking - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 15:08

The Congressional Budget Office’s latest forecast makes a convincing case that fiscal complacency is now dangerous for the U.S. economy. CBO projects the federal government will borrow an additional $12.4 trillion over the next 10 years. At the end of 2028, the federal government will have outstanding debt of $28.7 trillion, or 96 percent of GDP. Ten years ago, federal debt was equal to 39 percent of GDP.

In fact, CBO’s official projection is an optimistic scenario. It assumes Congress will let many of the tax-cutting provisions enacted in the recently passed tax legislation expire after 2025. It also assumes, even more implausibly, that the caps on defense and nondefense appropriations for 2020 and 2021 contained in the Budget Control Act of 2011 will remain in place, thus forcing deep cuts in federal spending. However, Congress just enacted a bipartisan agreement to raise the caps in 2018 and 2019 by nearly $300 billion over that two-year period. If the tax cuts are made permanent, and if discretionary appropriations grow with the rate of inflation after 2019, then the budget deficit over the next decade would be $15 trillion instead of the $12.4 trillion contained in CBO’s baseline forecast. In 2028, the annual budget deficit would widen to 7.1 percent of GDP, while total federal debt would reach 105 percent of GDP.

CBO has not yet updated its long-term budget forecast, but when it does the projection will show federal debt exploding at an alarming rate, as population aging and health-care costs push entitlement spending up at a rapid pace. Last year, CBO projected that federal debt would reach 150 percent of GDP by 2047. An updated forecast will show federal debt reaching that level much sooner.

The federal government’s massive fiscal problems will not be solved with more rapid economic growth. CBO rightly credits the recently passed tax bill with boosting business investment, productivity, and the size of the labor force. These are all important, positive developments for an economy that has suffered from sub-par performance for far too long. But the agency also notes that wider federal deficits and more borrowing by the government are drags on economic growth — a view that fiscal conservatives should share. CBO expects real GDP to grow at an average annual rate of just 1.9 percent over the period 2018 to 2028.

Recently, a group of distinguished economists tried to make the case that the nation’s fiscal problems should not be blamed on the growth of entitlement spending. The facts say otherwise. In 1970, federal spending on Social Security, Medicare, and Medicaid was just 3.7 percent of GDP. In 2019, CBO expects spending on these programs to be 10.5 percent of GDP. Over the next 10 years, the federal government will spend an additional $15 trillion above what would be spent if total outlays were frozen at this year’s level. Of that amount, $9.8 trillion will go entitlement programs, and another $3.7 trillion will be devoted to paying interest on the national debt. The federal budget is heavily weighted toward entitlement spending and will become more so in the coming years.

Republicans have responded to criticisms of their profligacy by seizing on two ideas that are both predictable and disheartening. The first is to take up and pass a Balanced Budget Amendment to the Constitution in the House.

There is a case to be made for such an amendment, especially to counter the natural tendency of democratic governance to favor short-term needs over long-term investments. Put another way, today’s voters are inclined to favor their current economic concerns over what should be done to invest in the future. But there are also serious problems with such an amendment, starting with how to enforce it. An amendment to the Constitution could invite the judicial branch to participate in tax and spending decisions — decisions that should be made by our elected representatives, not judges.

But the current push by Republicans to take up a version of a Balanced Budget Amendment is not really motivated by a desire to reorder our constitutional powers to ensure better economic governance. Rather, Republicans are pushing the idea in a feeble attempt to protect themselves from being blamed for the disastrous state of the federal budget. There is no prospect of securing a Balanced Budget Amendment to the Constitution, which would require the affirmative vote of two-thirds of the members in both the House and the Senate and ratification by three-fourths of the states. If Republicans were serious about taking action on the budget, they would offer a plan to reform entitlements and thus begin to lower federal spending over the next two decades — rather than float a constitutional amendment that they know stands no chance of being approved.

The second idea now under active consideration is a bill to cut spending this year, but only for annually appropriated accounts, not entitlement programs. President Trump has voiced criticism of the recently passed omnibus appropriations bill, which increased spending substantially both for defense and nondefense activities. (He seems not to understand that this added spending was a foregone conclusion when he agreed to raise the caps on discretionary appropriations as part of the bipartisan budget agreement which passed in February.) In response, the White House has proposed using an authority provided in the Congressional Budget and Impoundment Control Act of 1974 to make cuts to the levels of spending contained in the omnibus legislation. A bill considered under this special authority could not be filibustered in the Senate, which means that Republicans, at least in theory, could pass the spending cuts without needing any Democratic votes.

If Republicans can muster the votes to approve some cuts in appropriated spending, they should be encouraged to do so. The fiscal hole is so deep you have to start somewhere. But it is more likely that this exercise will prove to be nothing more than political posturing, not a serious attempt to control spending. Republicans have only 51 votes in the Senate. Getting 50 out of these 51 Senators to agree on a spending cut package will mean every program with a Republican patron will be protected. And that means almost nothing will get cut. It is telling that the only area of the budget that has been mentioned so far as a possible target is foreign aid, which is a tiny fraction of overall appropriated spending. The massive increases showered on scores of domestic programs in the omnibus bill are apparently off limits, even among Republicans.

CBO’s budget forecast signals that the country is now very close to the cliff’s edge. Any number of different events — such as a major international conflict — could trigger a debt crisis. The U.S. is currently able to borrow funds at preferential rates, but that may not always be the case. If interest rates were to rise sharply and suddenly, lawmakers could find themselves needing to raise taxes or cut spending drastically just to cover spiraling debt service payments.

Unfortunately, there seems to be little concern about this possibility among those in a position to do something about it — most notably the Republicans now controlling both Congress and the White House.

Social security is becoming more generous, not less - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 14:51

Ronald Reagan once quipped that he didn’t worry about the budget deficit, because it was “big enough to take care of itself.” On that theory we should be relieved to learn that the Congressional Budget Office is projecting a deficit larger than $1 trillion in 2020.

Five eminent Democratic economists have offered one interpretation of this report, under the headline: “A debt crisis is coming. But don’t blame entitlements.” Their actual argument is a little more nuanced than that: They want a “balanced approach” to deficit reduction rather than one that relies entirely on cuts in future spending on Medicare, Medicaid and Social Security.

Much of their case is reasonable. But here I want to focus on one sentence of the Democrats’ argument: “These widely popular programs are indeed large and projected to grow as a share of the economy, not because of increased generosity of benefits but because of the aging of the population and the increase in economywide health costs.” It’s a comment that glides over an important point that is not well understood.

The truth is that the increased generosity of Social Security benefits is an important contributor to our projected debt. Congress has not kept passing legislation to expand those benefits. But the program automatically expands benefits over time.

That’s because the size of the initial Social Security check that a retiree draws is tied to wage levels, not prices. Because wages have usually grown faster than prices, today’s retirees get bigger checks than yesterday’s, even when you adjust for inflation. Tomorrow’s retirees will likely get bigger checks still.

A medium-wage worker who retires this year will receive an annual benefit of $20,222. His equivalent in 2040 is projected to get $27,948 in today’s dollars. That’s a 38 percent increase, although of course Social Security’s actuaries may be wrong about how much wage growth will take place between now and then.

An alternative policy would be to tie Social Security benefits to prices rather than wages. That way future Social Security benefits would keep up with inflation, but would not rise more than that. That policy would eliminate 94 percent of Social Security’s financing gap over the next 75 years.

An implication of that change is that over time Social Security would replace a smaller and smaller portion of the income people made during their working lives. A retiree’s Social Security check would also shrink as a percentage of the average income of a current worker. Again, that’s because the checks would stay roughly at the same level in constant dollars while wages rise. This fall in the replacement rate is often considered a drawback of shifting from a wage index to a price index.

If we want to keep the replacement rate from falling — if, that is, we want to maintain the current policy of letting Social Security benefits rise in real terms over time — we need to raise taxes in a broad-based way. We need, that is, to make middle-income workers pay more today in order to get higher benefits tomorrow.

A lot of people would probably prefer to keep the money up front, and save some of it themselves. That’s especially the case since a lot of people can expect to be in a better financial position in retirement than during their working lives.

The good news is that we don’t actually have to cut Social Security benefits from their current levels to make fiscal progress. We need only stop, or at least moderate, their growth. It would not by itself keep the national debt from rising. But it ought to be part of the solution.

Back to tax reform: What the polls say now - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 14:51

Is the new tax law becoming more popular? And what might that mean for the midterm elections? In the latest issue of AEI’s Political Report, we reviewed the polling evidence.

Americans don’t pay close attention to most legislative debates, even on a subject like taxes that affects their lives so much. “Don’t know” responses in some polls leading up to passage of the tax bill in December were high. To take just one, 34 percent in the December NBC News/Wall Street Journal poll did not have an opinion about whether it was a good or bad idea. Responses like that were an early indication that most people were not deeply engaged or informed about it. That’s still true.

In a February poll by Fox News, only 14 percent of registered voters said they understood what was in the federal tax law very well. Thirty-nine percent said they understood it somewhat well, 27 percent not very well, and 17 percent not at all. Those responses were very similar when Fox News asked the identical question in January. A February Harvard Center for American Political Studies/Harris poll found that 62 percent said they had too little information about the new tax bill, 31 percent about the right amount, and 6 percent too much.

So what do people think about the new law? Recent NBC News/Wall Street JournalGallup, and Quinnipiac University polls show support inching up, while Fox News polls show no change. Overall opinion is still more negative than positive.

NBC/WSJ pollsters asked people whether the “new tax reform bill recently signed into law by President Trump” was a good or bad idea. In the December poll mentioned above, 24 percent said it was a good idea; in their January poll, 30 percent gave that response. The “bad idea” response dropped barely from 41 to 38 percent. In both surveys, around three in ten had no opinion about it.

In Gallup’s polling, 33 percent in January and 39 percent in their late February-early March poll approved of the new tax law. Fifty-five percent in January and 48 percent in their new poll disapproved.

Quinnipiac’s surveys of registered voters showed an uptick in approval of the “Republican tax plan” from 32 percent in January to 38 percent in mid-March. Once again, more people disapproved: 52 percent in January and 47 percent in mid-March. And, finally, 38 percent of registered voters in Fox’s January poll approved; a virtually identical 39 percent did so in February.

A few pollsters have also asked people if they have noticed any changes in their pay checks. Around a quarter in February and March Politico/Morning Consult online surveys of registered voters said they had noticed an increase as a result of the new law. Half in both polls said they had not, with a quarter having no opinion. Slightly more in Gallup’s late February-early March survey and in a CNBC All America mid-March poll said they had noticed a change.

How much will the new tax law or taxes in general matter to voters this November? In a March Quinnipiac survey that asked registered voters about the most important issue to them in deciding how to vote in the midterm election, taxes ranked last of five issues. Health care ranked highest, with 23 percent who said it was the most important issue, followed by 22 percent who mentioned the economy. Only 8 percent chose taxes. In the same survey, 24 percent of registered voters said the Republican tax plan would make them more likely to vote for a Republican candidate in the midterm, 34 percent that it would make them less likely to vote for a Republican, and 39 percent that it would have no impact on their vote. In a February CNN poll, 83 percent said health care would be extremely or very important to their vote for Congress. Sixty-seven percent gave that response about taxes. The only items that ranked lower than taxes on the list of seven issues were sexual harassment, with 64 percent who said it was extremely or very important, and the investigation into Russian interference in the 2016 election, with 45 percent who gave that response.

But these early soundings may mean very little. Taxes rarely rank high as top voting issues. The economy’s performance could be more important for voters. Additionally, the news cycle moves so fast these days that it is hard to anticipate what will happen next week, let along months from now, and what will matter to voters. Since the bill’s passage, we’ve seen extensive news coverage of sexual harassment, the Mueller investigation, gun control, tariffs, Stormy Daniels, and Facebook data, to name a few subjects that could have political consequences.

Vice President Mike Pence and other Republicans have been on the road working to solidify the positive impressions GOP rank-and-file have of the law, and the RNC is planning a “week of action” around tax-filing time to reinforce those impressions. Activities to shore up and expand support for the new law are not unimportant, but it is too early to know how much or if those efforts will matter in the fall.

Free speech on campus: Is it in danger? | Factual Feminist - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 14:22

 

Campus protestors have shut down recent speeches by Charles Murray, James Watson, Ben Shapiro – and even the Factual Feminist herself. While some observers claim that free speech on campus is in crisis, others argue that college students are more likely support free speech than any other group. Who’s right? AEI’s Christina Hoff Sommers looks at the data to see if free speech on campus is really in danger.

Of course Trump can fire Mueller. He shouldn’t. - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 13:38

President Trump this week claimed the power to fire the special counsel, Robert Mueller, “directly.” In response, the Senate Judiciary Committee seems poised to prohibit Mr. Mueller’s removal by the president except “for cause,” which generally requires a crime, violation of the law, or abuse of power. While the Senate has the politics right, Mr. Trump has the Constitution on his side.

Special Counsel Robert Mueller departs after briefing the House Intelligence Committee on his investigation of potential collusion between Russia and the Trump campaign on Capitol Hill in Washington, June 20, 2017. Reuters

Firing Mr. Mueller would be a grave political mistake — “suicide” as a Republican senator, Charles Grassley, rightly put it — yet protecting the independent counsel with a new statute would prescribe a cure far worse than the disease.

Instead, President Trump should seize the initiative. He should retain Mr. Mueller in exchange for a fixed deadline for the investigation.

Mr. Trump sparked this latest controversy after an F.B.I. search on Monday of the Manhattan offices of Michael Cohen, his longtime personal lawyer, for evidence of payoffs of women alleging past affairs with the president. Though the federal prosecutors of the Southern District of New York sought the search warrant, they acted under a request from the special counsel, who would most likely use any information uncovered in his continuing investigation.

Mr. Trump declared that “attorney-client privilege is dead” and denounced the search as “a witch hunt.” He added of Mr. Mueller that “many people have said you should fire him.” As usual, the president left the nation in suspense: “We’ll see what happens.”

Mr. Trump can fire the special counsel for the search, for exceeding the original mandate of his investigation, or for no reason at all. Because the Constitution charges the president with the duty to “take care that the laws are faithfully executed,” Mr. Trump serves as the top federal law enforcement officer. If he disapproves of the execution of the law by subordinate Justice Department officers, he can remove them. Presidents can not only direct all federal prosecutions, as they have from the days of George Washington and Thomas Jefferson, they also can drop cases for wasting resources.

But critics insist that Mr. Mueller enjoys protection under Justice Department regulations, which provide that the special counsel may be “removed from office only by the personal action of the attorney general” for “misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause.”

According to this view, Mr. Trump must convince Rod Rosenstein, the acting attorney general, to fire Mr. Mueller. If Mr. Rosenstein refuses, Mr. Trump can fire him and replace him with someone willing to do the dirty work. Alternatively, the president could order Attorney General Jeff Sessions, who has recused himself from the Mueller probe, to rescind the regulations, which date back to 1999, and then fire Mr. Mueller.

But this narrow view of the president’s options rests on a misunderstanding of basic constitutional principles. Ever since the founding, presidents, Congresses and the Supreme Court have recognized that the chief executive has constitutional power to remove executive officers. As James Madison noted in 1789: “Is the power of displacing an executive power? I conceive that if any power whatsoever is in its nature executive, it is the power of appointing, overseeing, and controlling those who execute the laws.” In Myers v. U.S. (1926), the Supreme Court observed “it was natural, therefore, for those who framed our Constitution to regard the words ‘executive power’ as including” the power to remove executive officers.

A regulation issued by the Justice Department should not be read to limit the president’s constitutional power to remove officers. Otherwise, a mere cabinet officer could prevent future presidents from exercising the constitutional authorities of their office. The chief executive commands the attorney general, not the other way around.

A bipartisan group of senators are currently mulling a proposal to prevent the president from firing Mr. Mueller except for cause, and to allow the courts to review his removal. The Senate Judiciary Committee has scheduled the bill for a possible vote next week.

But any law that prevents the president from removing executive officers would be constitutionally problematic. In his lonely dissent in Morrison v. Olson (1988), Justice Antonin Scalia noted that independent counsels would become unhinged Inspector Javerts. “Frequently an issue of this sort will come before the Court clad, so to speak, in sheep’s clothing,” Mr. Scalia wrote. “But this wolf comes as a wolf.”

Mr. Scalia had in mind the Iran-contra investigation, which attempted to criminalize a separation of powers dispute between the executive and legislative branches over foreign policy. In the following decade, Democrats belatedly saw the light, too. Ken Starr’s investigation of Bill Clinton lasted for years, consumed enormous resources, and resulted in few convictions. By the end, Congress allowed the independent counsel law to quietly die. Resurrecting this Frankenstein would once again strike a blow at the separation of powers, which protects individual liberty as surely as the Bill of Rights itself. It would also let Congress off the hook for conducting a vigorous probe and possible impeachment — the constitutional text’s only device to punish a sitting president.

Mr. Trump can short-circuit the Senate and shift the political momentum in his favor. Rather than fire Mr. Mueller, the president should promise his honest and complete cooperation with his nemesis, including agreeing to a one-on-one interview.

But Mr. Trump should also make clear that the special counsel must keep to his mandate — Russian meddling in the 2016 elections — and forget the unrelated payments to various mistresses, which, however sordid, do not relate to that investigation. If Mr. Mueller does not bring the investigation to a swift conclusion, Mr. Trump could then consider using his favorite line: “You’re fired.”

John Yoo is a law professor at the University of California, Berkeley, and a visiting scholar at the American Enterprise Institute. Saikrishna Prakash is a law professor and a senior fellow at the Miller Center at the University of Virginia.

Challenging China - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 13:23

President Trump’s National Security Strategy bluntly states that China is challenging “American power, influence, and interests, attempting to erode American security and prosperity.” And while much attention has been focused on Beijing’s expanding military presence in the South China Sea, its effort to expand its influence across Asia and Europe through its “one belt, one road” projects, and unfair trade practices, China’s challenge to the administration’s vision of a free and open Indo-Pacific region is increasingly taking place in Taiwan and Hong Kong.

President Donald Trump and China’s Xi Jinping meet business leaders at the Great Hall of the People in Beijing, China, November 9, 2017. Reuters

Since the inauguration of Taiwanese president Tsai Ing-wen in 2016, Beijing has ratcheted up pressure on the world’s only Chinese-speaking democracy, taking aim at Taiwan economically, militarily, and diplomatically. It has curbed Chinese tourism to Taiwan and squeezed Taiwanese companies doing business on the mainland to do Beijing’s bidding back home. China has made naval and air exercises around Taiwan routine and established a northbound civilian air route up the Taiwan Strait without consulting Taipei. Nor is Beijing shy in using its own version of “sharp power”—through information warfare and financial coercion—to sow political dissent within Taiwan and attempt to purchase the loyalty of the Taiwanese elite. And China has stepped up efforts to further isolate Taiwan diplomatically by attempting to flip the island’s few existing state-to-state formal ties to itself and by blocking Taiwan’s representatives from even observer status at international organizations like the World Health Organization and Interpol.

For her part, President Tsai has responded calmly to Beijing’s pressure tactics, keeping open the possibility of engagement while looking to expand relations with the neighboring states of South and Southeast Asia. The Taiwanese public remains wary of any talk of unification with the mainland, peaceful or otherwise, with almost three-quarters supporting a position of de facto or de jure independence from China. The Nationalist party (KMT) that long ruled Taiwan remains willing to accept the notion that the island is part of “one China,” but the KMT is on life support, with new opposition parties emerging that are even more pro-independence than President Tsai’s Democratic Progressives (DPP).

Slightly further south and west, China has stepped up its campaign to reduce Hong Kong’s promised autonomy. Students and other activists protesting Beijing’s tighter grip have been met with harassment, arrests, and jail time. Some pro-independence legislators have been disqualified and others prevented from running for office. A diminution of the independence of the once-vaunted judiciary and of the city’s vibrant free press, not to mention abductions of residents by Chinese state security agents, are seen by many in Hong Kong as clear signs that Beijing has no intention of abiding by its promised governing paradigm of “one country, two systems.” To the contrary, President Xi Jinping compares the relationship to “a long-separated child coming back to the warm embrace of his mother.” But if Hong Kong is a child, it’s more like one raised in another home, with little affection for its mother. One poll found that only 3 percent of 18-to-29-year-olds in Hong Kong think of themselves as being broadly Chinese.

* * *

Despite the Trump administration’s stated focus on the pervasive threat of Chinese power, its reaction to Beijing’s pressure campaign toward Taiwan and Hong Kong has been muted at best.

In Hong Kong, passive observation seems to be the name of the game. State Department officials have gone to great lengths not to offend Beijing over its handling of Hong Kong and its persecution of the city’s democrats. During the tenure of Secretary of State Rex Tillerson, the State Department resisted congressional efforts to update the 1992 Hong Kong Policy Act to make clear to Beijing that America has an interest in the city’s autonomy.

On Taiwan, so far, it’s been largely confusion. The president-elect famously took a phone call from President Tsai in late 2016 but then, without any policy review by senior staff, reaffirmed the one-China policy so the Chinese president would take his call and proceeded to publicly state that he would do nothing about Taiwan without first consulting President Xi, a clear violation of U.S. policy dating back to President Reagan’s “six assurances” to Taipei.

With a number of key policy positions left unfilled during the administration’s first year, the departments of State and Defense have been slow to signal just how much effort will be made to back Taiwan’s attempts to participate in various multilateral forums or what kind of arms package might be offered to support Taiwan’s defense needs. The State Department did recently dispatch a deputy assistant secretary to Taipei to reiterate the administration’s commitment to Taiwan and, with Pentagon backing, Washington has okayed American defense companies selling technology in support of Taiwan’s plans to build its own submarines.

But far too often Taiwan is seen as a liability, not what it is: a democratic island of stability of more than 20 million that, if permitted, could be an economic and strategic partner for the United States in the region. There is unfulfilled potential in the relationship, if the administration would only take advantage of the Taiwan Travel Act, which calls for the repeal of self-imposed restrictions on what level of government or military officials can visit Taiwan, and this year’s defense authorization bill, which supports strengthened ties with the Taiwanese military. For far too long, one administration after another has fallen short of the policy mandates laid out in the 1979 Taiwan Relations Act, which declared peace in the Taiwan Strait to be a U.S. national interest and called for maintaining close relations with the people of Taiwan.

There is an opportunity at hand to reverse course. Taiwan can play a key role in the Trump administration’s concept of a “Free and Open Indo-Pacific.” Taiwan has been neglected in previous U.S. regional initiatives, such as the Obama administration’s “pivot to Asia.” As a geostrategic matter, Taiwan serves as a breakwater to China’s ambitions to push its military power into the broader Pacific and sits between two states—Japan and the Philippines—with which the United States has formal security ties. More broadly, the Tsai government has launched a “New Southbound Policy” to bolster a full range of relations with the Southeast Asian and Indian Ocean states. These efforts could easily complement Washington’s own cooperation with Australia, India, and Japan. Through its humanitarian assistance in the region, its participation in the coalition to counter ISIS, and its effort to enforce sanctions against trade with North Korea, Taiwan has shown that it is a responsible international partner.

The administration could also do more to help Taiwan push back against Beijing’s campaign to isolate the island diplomatically. The United States can take a stronger stand with Taiwan’s diplomatic allies to encourage them not to abandon those relationships under pressure from Beijing. The State Department should also make it a priority to assist Taiwan’s efforts to gain entry to multilateral organizations, even if only as an observer. Given the size of Taiwan’s population and economy, it should have a voice in key multilateral forums on international law enforcement, public health, and civil aviation. The State Department should help build a coalition to support Taiwan’s efforts to participate in these forums, starting with Japan and Australia but also including U.S. allies in Europe. If China wants to politicize these nonpolitical issues, there should be repercussions. The administration and Congress should examine China’s role in multilateral organizations that block Taiwan and assess whether continued support of these agencies is appropriate.

Finally, as the tenth-largest trading partner of the United States, Taiwan should be given priority as the administration develops its regional trade agenda. Taiwan had hoped eventually to join the Trans-Pacific Partnership (TPP). However, with the president opting out of TPP for now, advances in the U.S.-Taiwan economic relationship appear uncertain. The fact that Taiwan was not exempted from the president’s initial round of tariffs on steel and aluminum is yet another reminder of how counterproductive U.S. policy toward Taiwan has been.

If current U.S. policy toward Taiwan is confused, it is still a step above the persistent American silence on events in Hong Kong. The 1992 act gave Hong Kong a preferred status, stipulating that Washington would continue to deal with the territory in commercial and financial matters, transportation, access to technology, and international organizations—regardless of the transfer of sovereignty from the U.K. to China. However, as the law makes clear, this carve-out for Hong Kong rested on China’s living up to its pledge of autonomy for the territory internally and respecting Hongkongers’ fundamental rights as set out by the International Covenant on Civil and Political Rights. Long forgotten, but still a matter of black-letter law, the act states, “The human rights of the people of Hong Kong are of great importance to the United States and are directly relevant to United States interests in Hong Kong.”

At a minimum, the ’92 act needs updating to reflect China’s backsliding. The goal should be to make it more costly for Beijing to squeeze Hong Kong, with perhaps a first step being a provision calling for sanctioning Chinese officials who have a hand in undermining the territory’s autonomy.

Hong Kong and Taiwan are effectively canaries in the coal mine, providing advance warning to the United States and its allies of dangerous Chinese ambitions. Congress and the Trump administration would do well to keep a close watch on the health of the two to make sure they don’t become the first victims of China’s increasingly toxic behavior. Without a U.S. agenda supporting freedom for Taiwan and Hong Kong, the new U.S. strategy toward the region will ring hollow.

Jamie Fly is senior fellow and director of the Asia program at the German Marshall Fund of the United States. Gary Schmitt is co-director of the Marilyn Ware Center at the American Enterprise Institute.

Should SNAP prevent recipients from purchasing sugary beverages? Part 2 of the debate - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 13:15

Nearly 43 million Americans receive Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) benefits, making it a source of considerable focus for those looking to reform programs for low-income people. With the program only nominally committed to nutrition, some experts say restricting unhealthy food and beverage choices — namely sugar-sweetened beverages — is a good place to start.

In this installment of AEI’s Poverty and Social Policy Debate Series, Jerry Mande, former Deputy Under Secretary for Food Safety at the USDA and current professor at Tufts University, will debate Craig Gundersen, Professor in Agriculture Policy at the University of Illinois, on the merits of restrictions on sugary beverages in SNAP. This is the second round of their exchange. You can read Part 1 here. You can find the entirety of their debate, as well as sources for the various studies they cite, here.

Jerry Mande:

First, we owe Dr. Craig Gundersen our gratitude. SNAP has remained strong despite frequent attacks, thanks in large part to the persistence of anti-hunger advocates like Dr. Gundersen. However, that single-mindedness is misplaced in this debate. Restricting SSBs is a means of strengthening SNAP by bolstering its nutritional integrity, improving the health of participants, reducing fiscal pressure on Medicaid, and thus making the program less vulnerable to criticism.

The proposal to restrict SSBs was not born from mere “perceptions,” as Dr. Gundersen argues. After nine months of careful deliberation over the research, the Bipartisan Policy Center SNAP task force came out unanimously in favor of an SSB restriction. The 13-member task force was deeply troubled by two facts: the first being that soft drinks are the number-one purchase in terms of share of expenditures by SNAP households, with sweetened beverages accounting for 9% of spending; the second being the undisputed association between SSBs and obesity, diabetes, and coronary heart disease — which together are the number one leading cause of death and disability in the United States and a major driver of rising health costs.

Food security isn’t the same as good nutrition. For most struggling families, food insecurity manifests itself in an insidious way: an excess of calories with a lack of quality nutrients.

Drawing parallels between Trump’s Harvest Box scheme and the proposed SSB restriction is a play out of Trump’s distraction playbook. In its most recent budget, the Trump administration levied more than $200 billion dollars in cuts to SNAP. We, on the other hand, strongly oppose any changes that would reduce the value of SNAP benefits or make them more difficult for qualified individuals to access.

Dr. Gundersen correctly underscores SNAP’s success in reducing food insecurity. Indeed, SNAP is tremendously successful at easing the financial burden of obtaining food for low-income families. Unfortunately, food security isn’t the same as good nutrition. For most struggling families, food insecurity manifests itself in an insidious way: an excess of calories with a lack of quality nutrients. SNAP is a “Nutrition” program, and it is not improving diets. Given that sugar-sweetened beverages do not, under any circumstances, contribute to a balanced diet, they have no place in a nutrition program.

Lastly, Dr. Gundersen is concerned, rightly so, about preserving choice for SNAP families. What he fails to address is that SNAP participants’ choices are already under assault from billions of marketing dollars spent by the food and beverage industry. We should support SNAP participants’ dignity and autonomy by helping them stand up to a toxic food environment and corporate influence, and do what the overwhelming majority of citizens (including SNAP participants) support — restrict SSBs and increase incentives for foods that promote health.

Craig Gundersen:

I wish to begin by thanking AEI for asking me to participate in this dialogue and Jerry Mande for his respectful comments. In some cases, these dialogues do create opportunities to bring some form of consensus on an issue but, alas, in this case, I think we must remain divided for two main reasons.

First, we seem to be drawing conclusions about the efficacy of SNAP based on two quite different sets of research. As noted in my earlier response, the papers cited in the Bipartisan Policy Center’s report are taken from research that uses fundamentally wrong assumptions (e.g., assuming that SNAP participation is randomly assigned) and, consequently, uses outdated and, given the questions being posed, incorrect statistical models. In contrast, respected researchers on SNAP have relied on sophisticated studies that show that, after controlling for the non-random selection into SNAP and the fungibility of SNAP benefits, SNAP participants are not more likely to be obese than similar, eligible non-participants and, in some studies, actually have lower probabilities of being obese.

Given that we are looking at two different research areas, it is not surprising that we reach different conclusions about the efficacy of SNAP and the need for restrictions. It is also telling that while there were some people on the BPC task force that have a research background, none have published on SNAP. It isn’t clear why researchers who have done credible work on SNAP were not asked to be part of the task force.

I firmly resist calls to just single out low-income Americans for patronizing and condescending restrictions.

Second, we have different perspectives about whether SNAP recipients should be treated differently than others in our country. A central reason for the success of SNAP is that it treats those who are going through tough times with dignity and provides them with a sense of normalcy, from the grocery store checkout line to the kitchen at home with their families. Mr. Mande and others want to impose restrictions on these struggling families in ways that they would never do to, say, farmers receiving subsidies from the USDA, Social Security recipients, or participants in Medicare. They do this despite the fact that, by their own admission, all these other groups also face similar influences which may lead to poor dietary intakes. I firmly resist their calls to just single out low-income Americans for patronizing and condescending restrictions.

While we are unlikely to ever reach an agreement on restrictions on SNAP recipients, I do agree with Mr. Mande when he notes that funding for SNAP should not be reduced. I presume he, like me, would encourage even higher spending on SNAP. Thus, I urge him to join others and myself in support of three recent proposals to increase SNAP benefit levels. With respect to the wisdom of increasing SNAP benefits, I hope we can agree!

Jerry Mande is a former Deputy Under Secretary for Food Safety at the USDA and a current professor at Tufts University. Craig Gundersen is a Professor in Agriculture Policy at the University of Illinois.

See also:

Straight up conversation: Grom Social founder Zach Marks - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 12:00

Zach Marks is the founder of Grom Social, an anti-bullying social media platform for kids that has 13 million users across 200 countries. Zach founded Grom back in 2013, when he was 12 years old. Now a 17-year-old high school student, Zach attends the online Lighthouse Christian Academy as a full-time student. I recently had a chance to chat with Zach about Grom Social, the idea behind it, and the importance of online responsibility.

@adspedia via Twenty20

Rick Hess: So what exactly is Grom Social—what do users do on the site?

Zach Marks: Grom Social is a safe social networking site for kids ages five to 16. Grom is similar to other popular social media sites like Facebook or Instagram, but is designed specifically for children with a focus on safe content. Users can make friends, post photos, play games, and stream the original, kid-friendly content we produce. We also spend a lot of time creating new videos to keep our audience engaged.

RH: How many users do you have and who are they?

ZM: Right now, we have about 13 million users across 200 countries, which breaks down to 6.9 million children plus 6.6 million parents and guardians. The majority of Grom’s users are between the ages of 9 and 11. However, over 200,000 are 7 years old, and over 400,000 are 8 years old. The site and both apps on Android and iPhone are completely free.

RH: Considering this is all free, how do you sustain the venture?

ZM: Grom is a publicly traded company, so technically we are owned by the very people we wish to serve—our users. We do have a number of partnerships with various companies and organizations, and are also present in over 3,000 schools across the country.

RH: What led you to create Grom Social?

ZM: By the time I was 10, I already had an interest in coding and computers, as well as a general interest in social media. It was around that time when I convinced my parents to let me have a Facebook page. Almost immediately I accumulated a lot of “friends,” most of whom were adults I didn’t know. I also began to see things on Facebook that were inappropriate for someone my age. My parents made me delete my account, but I secretly made another one using a false name. Soon enough, my parents found out through my dad’s friend that I was back on Facebook, and I was forced to delete my account again. This led to me wanting to build a social network that was just for kids. In retrospect, I don’t think there is much that could have stopped me from getting online—it’s just too easy despite how hard parents may try to censor. I think that’s why it’s important to provide kids a safe environment to learn and practice good social media skills early on.

RH: Why do you think censoring kids or keeping them off social media doesn’t work?

ZM: Kids are exposed to social media at a younger and younger age, as technology like cell phones and iPads become more easily accessible. According to a 2015 study by the Centre for International Governance Innovation, 1 in 3 internet users are children. With this increased access comes increased curiosity about social media, especially as peers begin to use it to chat and engage with friends. Also, most children are using the internet as a tool to complete school projects and learn new things outside of the classroom, so it’s challenging for parents and educators to have it both ways. Instead of focusing on censoring or avoidance, it’s important to focus on all of the positive ways social media can be utilized by teaching good digital citizenship.

RH: You were only 12 when you created Grom. How did you manage to get this all started? What were a couple of the biggest practical challenges?

ZM: I was lucky to have the support of my parents and their network. While they helped with the business perspective, the idea for Grom and its overall design—including special characters that focus on issues like bullying—was formed by myself and my siblings. One of the main challenges when we started was hosting the site on a server that could handle the amount of traffic we were receiving. The very first version of the site took about three months to build and was hosted on a GoDaddy server for $9.99 per month. Within the first week the server couldn’t handle the traffic. We decided to shut down this version and build a better one with more original content and additional safety measures. Eleven months later we launched the new version of Grom Social, and the response we received was overwhelming. Today, Grom Enterprises employees over 600 people.

RH: There are tons of different social media platforms out there these days. What sites would you say are your biggest competitors? What makes Grom different?

ZM: For our older demographic, the biggest competition are popular sites like Instagram, Facebook, and Snapchat. For our younger users, Facebook’s Messenger Kids comes to mind because it is geared towards children ages six to 12. What makes Grom Social stand out is that we give users the tools they need to become good digital citizens. Apps like Messenger Kids allow for parental monitoring—which is, of course, important and something we focus on with Grom as well—but do not serve as a guide or educational tool. Grom helps children build self-confidence and improve decision-making skills through positive social-media interaction. For example, on Grom, every user interacts with other “GromAtars,” which are controlled by our highly skilled team. If a child tries to post something inappropriate, a GromAtar will stop them and explain why the behavior won’t be allowed and why it’s important to stay positive. This experiential learning from “peers” instead of parents resonates with young users.

RH: The anti-bullying message seems to be a central part of the Grom experience. Why was this important for you to emphasize?

ZM: When I was in the process of launching Grom Social, my sister Caroline was experiencing bullying at school. This impacted our entire family and made me realize how important it was to have a social network that worked to stop any form of cyberbullying or negative behavior. I wanted a way to promote being kind online. Caroline helped me create the anti-bullying characters on Grom that teach children lessons about treating others the way they want to be treated, both online and in person. The Grom character “Ashley” was inspired by her experiences and continues to influence Groms to this day.

RH: To build off that, your website claims that Grom’s “devotion to social responsibility, good digital citizenship and positive social interaction is unique to the world of kid’s social media.” Can you talk a bit about how you ensure that users have this positive experience?

ZM: One of the things that makes Grom stand out is that the site is monitored live 24/7 by trained professionals who can answer any questions users have, as well as take action right away when something is posted that does not fit our community guidelines. This immediate engagement allows us to address critical issues like cyberbullying in real time. For example, we have the ability to reach out to the user who is behaving inappropriately while also interacting with the child experiencing the negative behavior to resolve it through both parties.

RH: What role, if any, do you see parents playing at Grom Social? Is there any way for parents to monitor their kids’ activity on your site?

ZM: Parents play an important role in their children’s social-media use and are an integral part of the Grom platform. The only way a child can interact directly with other children on Grom is with verifiable parental consent, which can be given by a signature or a phone call. Grom also offers a variety of options when it comes to parental monitoring. The Parent Portal allows parents and guardians the ability to set privacy levels for their child’s account, monitor their activity including chats, and manage their friends. While we offer all of these services, the amount a parent wants to monitor is up to them. For example, if they feel reading chats is too invasive, they can choose to only control privacy settings.

RH: Let’s say I’m visiting the site for the first time. How do I get started?

ZM: First you need to create an account with a username, password, and parent email. Then you can create your profile and use the site on a limited basis. Once your parent goes through the registration and approval process you will have full access to Gromsocial.com. Users can then chat with our 17 characters, view exclusive content, play games, view photos and videos, and connect with other kids around the world.

RH: Teachers typically try to get students to stay off social media while in class. It sounds like Grom’s approach to social media in school is a bit different. Can you speak to that?

ZM: I’ve always felt that because teachers interact so closely with children on a day-to-day basis, they are uniquely qualified to understand the pros and cons of children using social media. They also understand better than most that you simply can’t keep children entirely off-line. By designing something well-received by teachers, we realized that winning over one educator could essentially win over a classroom or even a school. For those who use our digital citizenship license program, they realize that Grom is an asset for their mission to educate children, not a platform or company to be wary of. We aren’t encouraging kids to be distracted by their phones in class, but are encouraging proper education so they can safely use social media and the internet once they leave.

RH: Could you talk a bit about this digital citizenship license program? How many schools are currently participating in this?

ZM: Our digital citizenship license program is available to all 3,000-plus schools currently using Netspective web filtering, which is one of our partners. If schools use our NetSpective web filtering service–which blocks or filters children’s internet access from harmful content—we provide the digital citizenship license program for free. In addition, schools subject to the Children’s Internet Protection Act have two additional certification requirements, including educating minors about appropriate online behavior, including interacting with others and cyberbullying awareness and response. We help schools fulfill this requirement with our program, which includes six short videos presented by me. After the students watch each video, they have to successfully answer a series of questions before moving on to their next lesson. Topics we address include defining what good digital citizenship is, how to be a good digital citizen and focus on privacy, and ways to address cyberbullying.

RH: Let’s close with this. You’re still finishing up high school. So, I have to ask: What’s next for you?

ZM: I graduate high school in May. I have been going to college for the past two years so I want to finish up and get my two-year degree. I’m also getting ready to launch a new Grom app. It’s a combination of Snapchat and YouTube Kids with all the Grom safety aspects. Because the app has not been officially released or announced yet, we can’t share too many additional details. As a brief overview, the app will allow users to upload their own content via mobile and have camera functions similar to Instagram and Snapchat in terms of filtering.

This post originally appeared on Rick Hess Straight Up.

Facebook’s convenient desire to be regulated - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Fri, 04/13/2018 - 10:30

Here’s a bet: Congress will end up “cracking down” on Facebook with “tough” regulations that Facebook will probably protest quite vigorously.

And then Facebook profits will go up.

Mark Zuckerberg, the founder and CEO of Facebook, withstood two days of questioning in Congress this week. You could tell Zuckerberg took it very seriously, not least because he shed his traditional T-shirt and hoodie in favor of a grown-up suit.

Again and again, he was asked whether he was opposed to regulation.

“You embrace regulation?” asked Senator Lindsey Graham (R., S.C.).

“I think the real question, as the Internet becomes more important in people’s lives, is what is the right regulation, not whether there should be or not,” Zuckerberg responded.

Many are focusing (understandably) on Zuckerberg’s stance on the countless and complex free-speech issues raised by Facebook’s dominance and reach. Zuckerberg kept suggesting that artificial intelligence could soon solve most of these problems by policing “hate speech” and perhaps “fake news” faster than human monitors ever could.

Senator Ben Sasse (R., Neb.) had a brilliant line of questioning that exposed at least some of the problems with handing over these responsibilities to the real-world equivalent of HAL from “2001: A Space Odyssey” or Skynet from the “Terminator” movies.

“Can you define hate speech?” Sasse asked.

Zuckerberg admitted that beyond calls for violence, he couldn’t come up with a definition of the sort of speech that should be banned by an algorithm.

Added Zuckerberg:

I do generally agree with the point that . . . as we’re able to technologically shift toward especially having AI proactively look at content, I think that that’s going to create massive questions for society about what kinds of obligations we want to require companies to fulfill.

That is both an impressive understatement and a topic we’ll all be returning to often in the years to come.

But let’s assume Zuckerberg is correct. In the future, much of our speech will be policed by our robot overlords.

As Zuckerberg hinted more than a few times, political leaders will need to get involved in the regulation and administration of how these AI systems will work. We’ll probably set up some new agency or a new division of the FCC to provide oversight.

And which company will have the loudest voice in the drafting of these new rules? If history is any guide, the obvious answer is . . . Facebook.

The standard story of the Progressive era, taught to high-school kids and college students alike, is that the government has come to the rescue time and again to curtail the excesses of irresponsible, selfish, or otherwise dastardly big businesses. Upton Sinclair, in his book “The Jungle,” famously exposed the abuses of the meat-packing industry, prompting the government to impose new regulations on it.

Left out of this tale of enlightened regulation is that the meat-packing industry wanted to be regulated — something even Sinclair admitted.

“The Federal inspection of meat was, historically, established at the packers’ request,” Sinclair wrote in 1906. “It is maintained and paid for by the people of the United States for the benefit of the packers.”

The famous trusts were no different. In 1909, Andrew Carnegie wrote a letter to the New York Times suggesting “government control” of the steel industry. The chairman of U.S. Steel, Judge Elbert Gary, lobbied for the same thing.

The story repeated itself during the New Deal. The “malefactors of great wealth” that FDR demonized welcomed government regulation. Famed lawyer Clarence Darrow issued a report on the New Deal’s industrial “codes.” In “virtually all the codes we have examined, one condition has been persistent, “Darrow found. “In Industry after Industry, the larger units . . . have for their own advantage written the codes, and then, in effect and for their own advantage, assumed the administration of the code they have framed.”

Why would the titans of capitalism welcome regulation? Because regulation is the best protection against competition. It stabilizes prices, eliminates uncertainty, and writes profits into law — which is why AT&T convinced Congress at the beginning of the 20th century to give it a monopoly over phone services.

I don’t know what the regulation of Facebook will look like. But I suspect one reason Zuckerberg wants AI to be essential is that Facebook can afford to make AI essential while potential competitors can’t.

Regardless, I have confidence that when all is said and done, Facebook will look more like the 21st-century AT&T of social media.

Italy is too big to fail, too risky to be ignored - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/12/2018 - 20:39

If ever one doubted that Italy should not have adopted the euro as its currency, all one need do is look at Italy’s present political and economic dysfunction.

Sadly, that dysfunction sets the stage for yet another round of the eurozone debt crisis once the European Central Bank (ECB) starts to normalize its ultra-easy monetary policy.

Hopefully, Washington is alert to the Italian political and economic situation, which could pose a real threat to the global economic recovery.

The truth of the matter is that Italy’s adoption of the euro in 1999 was a recipe for economic failure. One has to wonder what Italian and European policymakers were thinking to have put a poor productivity performer like Italy in a monetary union with a productivity powerhouse like Germany.

In the event, over the past 20 years, Italy has managed to lose more than 20 percent in competitiveness to Germany. Stuck in the euro, Italy can no longer resort to currency depreciation to correct such losses in competitiveness.

Italy’s loss of competitiveness, coupled with its need to undertake serious budget adjustment in a euro straitjacket, has contributed to its highly disappointing economic performance over the past two decades.

Remarkably, Italy’s per capita income is lower today than it was on the eve of Italy’s euro adoption. Equally remarkable is the fact that over the past decade, Italy has experienced a triple-dip recession, and it is yet to regain its pre-2008 crisis output level.

As a result of its sclerotic economic performance, Italy’s financial market vulnerabilities have only increased. Its public debt-to-GDP ratio has kept rising to its present level of 133 percent of GDP, which makes Italy the second-most-indebted country in the eurozone after Greece.

At the same time, a lack of economic growth has contributed to the weakening of the Italian banking system. That weakness is underlined by a level of non-performing loans that amount to around 15 percent of the banking system’s balance sheet.

Sadly, there is little real prospect that Italy will improve its poor economic growth performance anytime soon. This would seem to be especially the case considering the collapse of the Italian political center and the rise of populist parties in Italy’s recent parliamentary elections.

Following those elections, the left-of-center populist Five-Star Movement together with the Eurosceptic League have between them 50 percent of parliamentary seats for the next five years. It is now also almost a certainty that a populist party opposed to real economic reform will be leading the next Italian government.

This has to raise the question: If Italy could not grow with a reform-minded government, why should we expect it to grow with a less reform-minded and a less budget-disciplined government?

Italy’s economic vulnerabilities are certainly not of a recent vintage. However, what has been keeping Italy afloat over the past several years has been a very favorable international economic environment and an ECB that has been buying large amounts of Italian government bonds as part of its quantitative easing program.

The question that international economic policymakers should now be asking themselves is what might happen to the Italian economy when global liquidity conditions tighten as the Federal Reserve raises interest rates and when the ECB exits its aggressive bond-buying program?

All of this should be of real concern to both European and United States policymakers. Having an economy 10 times the size of the Greek economy, Italy is too big to fail for the euro to survive in anything like its present form.

Yet, having the world’s third-largest sovereign bond market, with €2.5 trillion in outstanding debt, Italy is probably too large an economy for Europe to save.

From a United States perspective, it would not seem to be too early to be thinking about contingency plans for internationally coordinated crisis resolution in the event that markets were to lose confidence in Italy.

Needless to add, Italy’s economic vulnerability should be giving the United States pause about leading us into a trade war with China that could be a trigger for markets to become more risk averse and for markets to focus on Italy’s economic vulnerabilities.

Desmond Lachman is a resident fellow at the American Enterprise Institute. He was formerly a deputy director in the International Monetary Fund’s Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.

Should SNAP prevent recipients from purchasing sugary beverages? A debate - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/12/2018 - 16:00

Nearly 43 million Americans receive Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) benefits, making it a source of considerable focus for those looking to reform programs for low-income people. With the program only nominally committed to nutrition, some experts say restricting unhealthy food and beverage choices — namely sugar-sweetened beverages — is a good place to start.

Given their lack of nutritional value and role in contributing to obesity and diabetes, should SNAP allow its recipients to purchase sugary beverages? Jerry Mande and Craig Gundersen discuss. Image via Twenty20.

In this installment of AEI’s Poverty and Social Policy Debate Series, Jerry Mande, former Deputy Under Secretary for Food Safety at the USDA and current professor at Tufts University, will debate Craig Gundersen, Professor in Agriculture Policy at University of Illinois, on the merits of restrictions on sugary beverages in SNAP. This is the first round of their exchange. You can find the entirety of their debate, as well as sources for the various studies they cite, here.

Jerry Mande:

Absolutely, restricting sugar-sweetened beverages (SSB) from SNAP is the best way to protect and strengthen the program. Today the greatest threat to SNAP is no longer its fiscal integrity, which is sound, but SNAP’s nutritional integrity.

These were the findings of the recent Bipartisan Policy Center SNAP Task Force, co-chaired by former USDA secretaries Ann Veneman and Dan Glickman, and Senate Majority Leader Dr. Bill Frist. The bipartisan National Commission on Hunger made similar findings in 2015. Both expert panels recommended eliminating SSBs from SNAP. This action is also supported by a majority of SNAP recipients and the public.

Unlike virtually all other foods and beverages, SSBs have no nutritional value and only cause harm to health without benefits. SSB consumption has been linked, time and time again, to weight gain, diabetes, and coronary heart disease. These diseases accrue tremendous health care costs that threaten Medicaid, Medicare, and our entire economy.

Today the greatest threat to SNAP is no longer its fiscal integrity, which is sound, but SNAP’s nutritional integrity.

Recent studies show that the diets of SNAP recipients are slightly worse than Americans of similar income not on SNAP. A USDA study found that sweetened beverages constitute 9% of SNAP purchases, compared to 7% of purchases from non-SNAP households. SNAP is funded by taxpayer dollars to provide nutrition and should not subsidize products that lead to chronic disease and burden an already stressed health care system.

A frequent argument against restricting SSBs is the potential stigma involved. However, growing up as a low-income child with obesity and diabetes is also tremendously stigmatizing. Furthermore, purchases of sugary beverages are a frequent, if often anecdotal, cause for criticism of SNAP. This policy change could help blunt negative views of the program and actually reduce the stigma experienced by SNAP recipients.

There is no denying that most SNAP recipients want to make sound decisions about what to feed themselves and their families. But these desires are no match for the billions of dollars spent on targeted SSB marketing. Treating low-income citizens with dignity and autonomy means prioritizing their health and making nutrition a central tenant of SNAP.

Craig Gundersen:

There is a long history of proposals to place restrictions on SNAP recipients. These proposals are based on the perception that participants are extravagant in their food purchases (e.g., comments like “the other day I saw a man using food stamps to buy lobster”) and/or are purchasing the “wrong” things (“the woman and her children in front of me in line were using SNAP to buy sugary cereals”).

It is therefore not surprising that an array of proposals has emerged based on these perceptions. For example, the Trump administration wants to give SNAP recipients pre-selected “Harvest Boxes” of shelf-stable foods from the US as a large portion of their benefits, regardless of the family’s dietary needs, preferences, allergies, or other factors. In his essay, Mr. Mande has argued for a similar proposal to place restrictions on the purchases of some types of “Sugar Sweetened Beverages” (SSBs). While these proposals may help score political points for some, they have been roundly criticized by anti-hunger groups and other organizations concerned about the well-being of low-income families in the United States — and for good reason.

Credible study after study has shown that SNAP recipients are no more likely to be obese than eligible non-participants, or are even less likely to be obese.

Study after study has shown that SNAP has been a profound success at achieving its central goal of reducing food insecurity in our country. A direct result of the welcome decrease of hunger in our nation has been reductions in multiple negative health outcomes and associated health care costs. And, along with achieving its main goal of reducing food insecurity, the program leads to improvements across multiple other dimensions over both the short term and, critically, over much longer time horizons.

The studies cited above about the positive impact of SNAP use sophisticated, state-of-the art methods that carefully control for the non-random selection into SNAP and the fungibility of SNAP and cash. Unfortunately, some less rigorous studies have gained traction and led some to believe that SNAP is responsible for increases in obesity as suggested by Mr. Mande. Instead, credible study after study has shown that SNAP recipients are no more likely to be obese than eligible non-participants, or are even less likely to be obese.

SNAP has been successful at combating hunger in our nation because it gives its customers the freedom to choose the grocery items they feel are most appropriate for their families and their budgets. We would never dream of telling farmers receiving subsidies from the USDA, USDA and HHS employees, or Social Security beneficiaries how they should spend these funds from the government. To preserve the success of SNAP, we should accord SNAP recipients — seniors, people with disabilities, veterans, low-paid workers and their children, and other struggling Americans — the same dignity and autonomy.

Jerry Mande is a former Deputy Under Secretary for Food Safety at the USDA and a current professor at Tufts University. Craig Gundersen is a Professor in Agriculture Policy at the University of Illinois.

Related reading:

Washington, DC graduation scandal: A canary in a coal mine? | In 60 seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/12/2018 - 14:26

 

AEI’s Nat Malkus argues that DC is a lesson that we can’t improve the lives of students or school systems, unless school leaders push our students to new heights rather than just pretending to.

The left thinks Mark Zuckerberg escaped danger in Congress. The right sees it very differently. - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/12/2018 - 13:38

Facebook doesn’t seem any closer to data privacy regulation, much less getting broken up, after CEO Mark Zuckerberg’s two-day visit to Capitol Hill than before he came. That’s why Facebook stock rose so sharply during Zuckerberg’s testimony to the Senate and House. Investors saw the same thing everyone did: A smart, if slightly robotic, corporate chieftain easily answering or swatting away questions from tech-illiterate politicians. If Congress has only a tenuous grasp of how the social media platform’s ad-driven business model works, it’s probably not very likely Democrats and Republicans can agree on significant new rules constraining it anytime soon.

Facebook CEO Mark Zuckerberg testifies before a House Energy and Commerce Committee hearing regarding the company’s use and protection of user data on Capitol Hill in Washington, April 11, 2018. Reuters

But as Team Facebook analyzes their boss’s performance, they should give special focus to his questioning by Sen. Ted Cruz (R-Texas). Cruz used his five minutes to grill Zuckerberg about his concern that “Facebook and other tech companies are engaged in a pervasive pattern of bias and political censorship.” Among the examples Cruz cited: Facebook suppressing conservative stories from trending news in 2016, temporarily shutting down a Chick-fil-A Appreciation Day page in 2012, and blocking the Facebook page of President Trump supporters and video bloggers Diamond and Silk.

Zuckerberg didn’t specifically address Cruz’s examples of bias. And while conceding that Facebook’s Silicon Valley home was indeed “an extremely left-leaning place,” Zuckerberg also emphasized that he was “very committed to making sure that Facebook is a platform for all ideas.”

Now to many tech reporters covering the hearings, the exchange seemed like a distraction from more important issues like privacy and Russian meddling during the 2016 election. And rather than follow up on Cruz’s line of questioning, some merely dismissed it as Cruz trying to avoid the issue of his 2014 re-election campaign’s involvement with Cambridge Analytica. As the tech website Gizmodo put it, “Rather than discuss the $5.8 million Cruz’s campaign paid to a data firm that used the stolen Facebook information of 87 million people, Cruz wanted to insinuate that Zuckerberg is waging some sort of war on Christmas.”

But many on the right saw Cruz’s questioning as completely relevant and perhaps the highlight of the hearings. The Federalist, a Trumpy conservative site, rejoiced that “Ted Cruz savaged Mark Zuckerberg over Facebook’s tendency to shut down and silence conservatives and conservative ideas.” Another site, ConservativeHQ, called Cruz the “star of the show” who “nailed Zuckerberg’s liberal bias.” And even a cursory look at Facebook itself saw many right-leaning users expressing similar opinions.

Clearly Zuckerberg was not prepared to answer Cruz’s charges. But when asked about Diamond and Silk the next day in the House hearing, Zuckerberg was ready. He called the situation an “enforcement error.” (After Zuckerberg’s Senate testimony the day before, Facebook said it initially labeled Diamond and Silk content as “unsafe” before reconsidering.) That response earned a large font, all-cap headline from Breitbart: “ZUCK BEFORE HOUSE: SAYS NO BIAS. CONSERVATIVES NOT CENSORED, JUST ‘ENFORCEMENT ERROR’ … ”

The “techlash” on the right against Big Tech mostly isn’t about data privacy or foreign powers weaponizing platforms or concerns about monopoly and competition. Rather it’s just another front in America’s culture war. Many on the right see Silicon Valley as just another institution, like the media and higher education, that’s biased against conservatives. Fox News host Tucker Carlson has been running a series of “Tech Tyranny” segments on his show highlighting supposed tech crimes such as helping China’s artificial intelligence effort and how tech is more addictive than opioids. But Carlson’s campaign against Big Tech actually started with a defense of James Damore, the Google engineer who was fired after writing a memo about the company’s “ideological echo chamber.” Other conservatives fear that Facebook will try to make up for Trump by helping throw the 2020 election to the Democrats.

Now in a country less beset by political tribalism and political opportunism, one might see Cruz’s various bias claims as isolated incidents. Facebook’s two billion users generate and share massive amounts of content. It’s not unreasonable to expect a mistake or two when monitoring it, as Zuckerberg responded when the issue came up during his House testimony. (Of course, tech firms would be wise to take the advice of Sen. Charles Grassley (R-Iowa), who advised Facebook “to lean over backwards to make sure that you are fair in protecting political speech, right or left… .”)

But that is not the country we live in. It often seems as if everything is political and sides must always be chosen. And that is why the risk of Washington eventually regulating Big Tech, perhaps recklessly so, is higher than it might appear right now. In other, more normal times, the right’s natural pro-market bias might lead them to defend America’s most valuable and innovative companies against thoughtless and ill-informed state intervention. But as #Resist Twitter incessantly reminds us, these are not normal times.

 

Related reading:

Testimony prepared for US-China Economic and Security Review Commission Hearing on China’s policy toward contingencies in North Korea - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/12/2018 - 13:35

How are the PLA and PAP preparing for a contingency in North Korea? What forces would be available to respond to a contingency, and what might those operations look like in different scenarios? In non-specialist terms, about many forces could China devote to a North Korean contingency, where would they come from, what would they be capable of doing?

If China intervened militarily on the Korean peninsula, the newly formed Northern Theater Command headquartered in Jinan would be in charge of the large ground force needed for any operations, from establishing a buffer zone to conducting more expansive combat operations. Force posture and exercises suggest that China is considering infiltrating North Korea by ground, air or sea, depending on the contingency and the degree to which China decides to intervene. For example, in September 2017, two days after North Korea’s fifth nuclear test, land and air force personnel conducted exercises while China’s strategic rocket force practiced shooting down incoming missiles over the waters close to North Korea. The People’s Armed Police (PAP), of which there are approximately 50,000 in the Northeast provinces, would most likely be in charge of securing the border in the meantime.

There are three group armies in the Northern Theater Command (the 78th, 79th, and 80th), each with 30,000 to 50,000 troops that have their own Army Aviation Brigades (about 1,000 people) and SOF Brigades (about 2,000 people). These forces could be used in a ground invasion of North Korea, or in more limited contingencies, China could air drop in SOF, for example to secure critical sites, something the Z-10 brigades seem to be training for. The Aviation Brigades have a full mix of the transport (Mi-17, Z-8, Z-9) and attack helicopters (Z-10, Z-19) needed for close air support and lift capabilities into North Korea. If a conflagration were to ensue on the Korean peninsula, China could also pull Army Aviation brigades and SOF from Central Theater Command in addition to airborne units assigned to the PLAAF if it needed extra forces. The fact that Shandong was added to the Northern Theater command during the reorganization suggests that China may also have plans to enter North Korea by sea. Since 2015, the majority of Chinese naval drills have taken place in the Bohai and Yellow Sea off the coast of North Korea and Japan, including three known major exercises in the waters close to North Korea.

There is some opacity surrounding which forces would be in charge of handling North Korea WMD. China has reportedly created “sanfang” (三方) units (meaning three components—nuclear, biological, and chemical) within its military forces designed to deal with WMD; media reports suggest that the Chinese military has engaged in training and exercises to deal with nuclear contingencies with units participating from across all services in the military. There are indications that the Army is training to engage in radiation monitoring, contamination inspection, and decontamination. Also, the Chinese air force, border forces, militia, reserve forces, police, armed police, air defense, civil defense, and other specialized units would all be involved in the broader mission of protection against nuclear contamination. Once secured, technical experts from outside the PLA, likely from the Chinese Engineering and Physics Institute, the China Institute of Radiation Protection, and the China Aerospace Science and Technology Corporation, would be invited in to support the mission. The Strategic Rocket Force would likely provide technical expertise as well, given its missile technology and nuclear weapons knowledge.

What interests would China try to advance in a North Korean contingency, and how would Beijing prioritize those interests? What are the tradeoffs China might have to make, i.e., could sealing the border to block refugee flows occupy forces needed to secure nuclear or other WMD sites?

As previously discussed, the PAP and border security would likely be in charge of securing the border and handling refugees. China has plans to seal the border and conduct border control operations—which may include moving Chinese forces into North Korea—though the Central Politburo Standing Committee will ultimately decide whether to execute such a plan. China could also establish refugee camps and controlled areas to separate civilian, military, and political personnel in various locations along the border.

This frees up the PLA to engage in more traditional military operations within North Korea, and China would be driven by a number of concerns. In the short term, nuclear security concerns would compel Chinese forces to intervene early to ensure control of North Korean nuclear facilities. Based on information from the Nuclear Threat Initiative, if China moved 50 kilometers across the border into North Korea, the PLA would control territory containing approximately 44 percent of the North’s priority nuclear sites and 22 percent of the priority missile sites. A hundred kilometers in, Chinese forces would control all of the priority nuclear sites and two-thirds of the missile sites. The latter scenario is more likely, as Chinese military officers have articulated explicitly in interviews with me and other American interlocutors that contingency plans are in place for a mission to secure DPRK nuclear weapons and fissile material.

Chinese leaders’ priority is to avoid the spread of nuclear contamination. They may hope that the presence of Chinese troops at these facilities would deter the United States, Japan or South Korea from striking North Korean nuclear facilities, would block the North Koreans from using or sabotaging the weapons or would prevent accidents at the facilities.

Beijing would also be concerned by the prospect of a reunified Korea under South Korean control inheriting the North’s nuclear capabilities. Chinese scholars have often articulated the fear that following the collapse of the North, its nuclear sites and materials might be seized by the South, with or without the U.S.’s blessing. While this concern may seem farfetched, the idea of going nuclear has gained popularity in South Korea.

In terms of long-term interests, geopolitical considerations create a high and increasing likelihood that Chinese forces will move to seize parts of North Korean territory and nuclear facilities. Doing so would put China in a better position to shape the postwar outcome to maximize its chances of realizing its national security and regional power aspirations. First, China fears that even a denuclearized Korea under American influence would pose a threat to China’s northeastern border stability and limit China’s quest for regional power. Only if the PLA controls territory and North Korean nuclear facilities can Beijing insist that a reunified Korea be denuclearized and devoid of U.S. military personnel. If that outcome seems unlikely, China can push to postpone reunification and put a pro-China North Korean regime back into power. The last thing China wants is North Korean instability, or to absorb the costs of conflict only to be left with a postwar outcome that strengthens the U.S. role in the region.

What is Beijing’s thinking concerning the pros and cons of working with the United States and South Korea to secure of WMD sites in North Korea, as well as acting to secure these sites before the United States and South Korea can act? How and where, if at all, would Chinese efforts to secure WMDs interfere with U.S. efforts?

Geography, the vicinity of troops, and potentially lower North Korean resistance to Chinese forces all make it likely that Chinese forces will get to North Korea’s nuclear facilities, nearly all of which are located in the northern 100 kilometers of the country, before U.S. troops reach them. In the words of a recent RAND study, “due to its proximity, absence of significant military barriers, existence of more rail lines and roads into China than into South Korea, and the sheer size of its military, China can essentially penetrate as far into North Korea as it chooses.” In contrast, it may take weeks or even months for U.S. forces to reach these areas in the context of stability operations.

Therefore, it is safe to assume that Chinese troops will be present in North Korea if conflict breaks out, and they may specifically be tasked with securing and occupying the nuclear facilities. The presence of Chinese troops around critical facilities would complicate any U.S./ROK plans to secure and destroy those facilities themselves, including conducting standoff attacks. The presence of China introduces an even greater risk—an attack on nuclear facilities could mean a direct attack against Chinese forces, which could easily escalate to war between the two sides. Moreover, Chinese troops and U.S. troops rushing to the same sites, or U.S. attempts to push Chinese troops out of critical sites, would severely increase the risks of unintentional clashes. In short, if the United States insists on securing the sites itself and not collaborating with China in this mission, the potential risks and costs are very high.

However, this may prove unnecessary. China is largely capable of securing these facilities. In areas where its capabilities are weak, such as in dismantling and rendering safe any weapons or nuclear material found there, Chinese interlocutors have expressed a willingness to coordinate and cooperate with international agencies such as the IAEA to share the burden of dismantlement.

Another issue is that Beijing may have a narrower standard of nonproliferation than the United States would feel comfortable with. Specifically, China may be focused on sealing off access to China to ensure that people and dangerous materials cannot enter—but may not necessarily put forth the resources necessary to secure the borders and conduct maritime and aerial interdiction to prevent the movement of people and materials of concern out of North Korea as a whole. But China may allow the United States to help with sealing the ports and ensuring no nuclear material, technology or know-how escapes by sea.

What is the state of U.S.-China military talks concerning contingency planning?

One of the main recommendations of my article in the Jan/Feb edition of Foreign Affairs, “Why China Won’t Rescue North Korea,” was that “Washington must be willing to take greater risks to improve coordination with China in peacetime.” Additionally, bilateral consultation and discussion of contingencies are necessary to avoid miscalculation and clashes between U.S.-South Korea coalition forces and Chinese forces in wartime. Also, “sharing intelligence with China and jointly planning and training for contingencies could allow the United States to leverage Chinese involvement to its benefit, especially in the context of securing North Korean nuclear weapons and facilities.”

Reporting in 2017 suggested that because of Beijing’s estranged relationship with North Korea and the heightened likelihood of war, China was being more receptive to such activities. In August 2017, Chairman of the U.S. Joint Chiefs of Staff General Dunford visited Beijing and the Northern Theater Command, which would be in charge during a Korea contingency. There, he discussed potential Korea contingencies with his Chinese counterparts and signed an agreement to improve operational communication, including planning the first China-U.S. Joint Staff Dialogue, to take place three months later. Further discussions may have taken place on November 30, 2017, when Major General Shao Yuanming, deputy chief of the Joint Staff Department of China’s Central Military Commission, met Lieutenant General Richard Clarke, director for strategic plans and policy of the Joint Chiefs of Staff, though some deny this.

In a public speech in December 2017, Rex Tillerson noted, “We have had conversations that if something happened and we had to go across a line, we have given the Chinese assurances we would go back and retreat back to the south of the 38th parallel when whatever the conditions that caused that to happen. That is our commitment we made to them.” Tillerson was also very clear that he wanted “U.S. and Chinese military leaders to develop a plan for the safe disposition of North Korea’s nuclear weapons, were the regime to collapse.”

While China was more willing to broach the topic of Korean contingencies, it is unlikely that any of these discussions reached the level of operational detail necessary to facilitate U.S. operational planning and prevent miscalculation that could lead to clashes between the two sides during a war. Moreover, with Kim’s visit to Beijing, any opening to discuss potential contingencies on the Korean peninsula and likely responses is rapidly closing. Xi has invested political capital in improving his relationship with Kim, and discussions premised on the demise of the North Korean regime are probably too politically sensitive to risk. This would leave the United States with the option of unilaterally communicating aspects of U.S. contingency plans to reduce the risk of accidental clashes, but this now comes with the greater operational risk that Xi will share information with Kim.

Is there a risk of a North Korean contingency, and its aftermath, sparking a broader U.S.-China conflict on the Peninsula? If so, what could cause a larger war?

Yes, but the likelihood is less than conventionally assumed. The greatest risk is that the United States will attack, inadvertently or not, Chinese forces present on the peninsula, leading to clashes between the two sides. However, China is interested in occupying some North Korean territory primarily to gain leverage at the negotiating table, so troops are likely to stop advancing far short of U.S./ROK troop positions, putting the burden of initiating conflict on the U.S./ROK side. At that point, the U.S. will have to decide whether to engage China militarily or move to negotiations. The latter option would avoid war with China but would also mean conceding at least in part to China’s terms to bring the conflict to a close.

In my Foreign Affairs article, I argued that Chinese military intervention would only be triggered “if the United States seems poised to move its forces north.” But given the public face of improved relations with North Korea, China may become more proactive in its efforts to deter U.S. military action, including threatening to intervene militarily even if the U.S. only launches a limited strike without an accompanying ground operation. Moreover, while the nuclear security and regional power concerns will still drive Chinese behavior, the improved relationship increases the political price to China of abandoning North Korea. Beijing may therefore demand tougher terms to ‘allow’ reunification in the aftermath – terms that might include not only the withdrawal of U.S. troops, as I previously argued, but also the abrogation of the treaty, a degree of sovereignty for the former North Korea, or safe havens for the senior North Korea leadership. In short, China is no longer “wary of a reunified Korea led by Seoul,” but China’s support of this outcome may now come at a higher price.

Are there additional points the Commission should consider when evaluating China’s likely response to North Korean contingency and its implications for the United States and its allies?

The above analysis is based on the current situation, but in many ways China’s North Korea policy is a moving target. Just in the past two months, North Korea sent a delegation to the Pyongchang Olympics, opening a pathway to talks with South Korea and a reduction of tensions in inter-Korean relations. President Trump announced he would be willing to meet with Kim Jong-Un by the end of May, which would make him the first sitting President to meet with the leader of North Korea. Shortly thereafter, President Trump replaced the level-headed National Security Advisor H.R. McMaster with John Bolton, who has called for preventive war against the North Korean regime. Then, in late March, Kim Jung Un made his first trip outside the hermit kingdom since he took power in 2011 to conduct his first ever state visit with China’s Xi Jinping. In other words, the situation changes quickly.

The most important takeaway is that China is looking out for its own interests, whether at the negotiating table or on the battlefield, and not those of the United States. Smart policy can mitigate the risks of Chinese involvement and exploit the benefits, but Chinese ‘cooperation’ always comes at a price.

Major Media Plays Favorites in Coverage of Education Policy - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/12/2018 - 13:15

Key Points

  • We compare press coverage of 2017–18 Republican education policy proposals with coverage of 2009 Democratic proposals.
  • The mainstream media was strikingly more skeptical of Republican education proposals than of Democratic proposals. The education-specific media maintained greater impartiality.
  • In 2017–18, mainstream media coverage of Republican-led education proposals displayed a negative lean in 45 percent of stories. In 2009, mainstream media coverage of Democratic proposals leaned negative in less than 5 percent of stories.
  • Education-specific media coverage displayed more consistency across years, as 25 percent of 2017–18 articles leaned against Republican proposals, while about 13 percent of 2009 pieces were critical of Democratic proposals.

Read the full PDF. 



Introduction 

In an era rife with heated debates about “fake news” and the role that reporters play in safeguarding democracy, it is a propitious time for news coverage to be self-evidently fair-minded. In this analysis, we examine the impartiality of media coverage in the area we know best: education policy.

Both Democrats and Republicans have proposed ambitious reforms to K–12 and higher education in recent years. In late 2017 and early 2018, a Republican president and Congress pursued a tax bill with provisions that had significant implications for education. In that same period, Republicans also issued a series of proposals for reshaping the Higher Education Act (HEA).

In an uncanny bit of parallelism, a little less than a decade ago during the first year of the Obama administration, a Democratic president and Congress put forward major education proposals of their own—most notably the education-related provisions of the 2009 American Recovery and Reinvestment Act, including the heralded Race to the Top program.

In both cases, a single party held power in both Congress and the White House, and in both instances the party proposed major education-related reforms during its first year in office. These two moments provide a useful scenario to examine the degree to which major media coverage of education is evenhanded.

Read the full report. 

 

Republicans and Democrats just did something big together - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/12/2018 - 12:00

Washington seems to be in the grip of hyperpartisan gridlock these days. Important bills are passed on party-line votes (when they are passed at all), and the investigative committees of Congress appear to be sideshows, unable to agree on basic facts. Many Americans despair that Republicans and Democrats seem incapable of coming together to do anything important.

President Donald Trump signs H.R. 1865 “The Allow States and Victims To Fight Online Sex Trafficking Act” at the White House in Washington, April 11, 2018. Reuters

Take heart — the two parties just did do something big together. On Wednesday, President Trump signed into law the Stop Enabling Sex Traffickers Act, a bill designed to crack down on websites that knowingly facilitate the online sex trafficking of vulnerable persons, including underage boys and girls. And the FBI, informed by evidence collected during a nearly two-year bipartisan investigation by the Senate’s Permanent Subcommittee on Investigations, just seized the website Backpage.com — which the National Center for Missing & Exploited Children says is responsible for 73 percent of the 10,000 child sex trafficking reports it receives each year — and arrested seven of its top executives.

You might think cracking down on child sex traffickers would be a legislative layup. You’d be wrong. The bill — authored by Republican Sens. Rob Portman (Ohio), John McCain (Ariz.) and John Cornyn (Tex.) and Democrats Richard Blumenthal (Conn.), Claire McCaskill (Mo.) and Heidi Heitkamp (N.D.) — was hard to pass. (Full disclosure: My wife works for Portman.)

The act faced a wall of opposition from Silicon Valley because it amended Section 230 of the Communications Decency Act, which gave blanket immunity to online entities that publish third-party content from civil and criminal prosecution. Big Tech wanted to preserve that blanket immunity, even if it gave legal cover to websites that were using it to sell children for sex. When child sex trafficking survivors tried to sue Backpage, and state attorneys general tried to prosecute the owners, federal courts ruled against them, specifically citing Section 230. This did not move Big Tech. Chief among the culprits was Google, which apparently forgot its old corporate motto of “Don’t Be Evil” and lobbied fiercely against the bill.

How did the senators overcome Big Tech’s lobbying campaign? First, Portman and McCaskill, the chairman and then-ranking minority-party member of the Permanent Subcommittee on Investigations, used their subpoena power to gather corporate files, bank records and other evidence that Backpage knowingly facilitated criminal sex trafficking of vulnerable women and children, and then covered up that evidence. They fought Backpage all the way to the Supreme Court to enforce their subpoenas. The subcommittee then published a voluminous report detailing the findings of its 20-month investigation, including evidence that Backpage knew it was facilitating child sex trafficking and that it was not simply a passive publisher of third-party content. Instead the company was automatically editing users’ child sex ads to strip them of words that might arouse suspicion (such as “lolita,” “teenage,” “rape,” “young,” “amber alert,” “little girl,” “fresh,” “innocent” and “school girl”) before publishing them and advised users on how to create “clean” postings.

Then Portman, McCaskill and their co-authors used the result of their investigation to craft a narrow legislative fix that would allow bad actors such as Backpage to be held accountable. The bill they produced allows sex trafficking victims to sue the websites that facilitated the crimes against them and allows state law enforcement officials, not just the Justice Department, to prosecute websites that violate federal sex trafficking laws. The committee also turned over all its raw documents to the Justice Department last summer, urging it to undertake a criminal review, which Justice did.

Despite all the Silicon Valley money against them, the senators never wavered. Through the sheer power of the testimony of trafficking survivors; Mary Mazzio’s documentary “I Am Jane Doe;” the evidence of crimes committed by Backpage; and the support of law enforcement, anti-trafficking advocates, 50 state attorneys general, the civil rights community and faith-based groups — as well as carefully negotiated language — they wore down most of Big Tech’s opposition. In November, Facebook finally came on board. But Google shamefully never relented in its opposition. Despite this, the act overwhelmingly passed both chambers of Congress.

Thanks to this bipartisan effort, the world’s largest online child sex bazaar is shuttered, many of its executives are under indictment and sex trafficking victims can finally get justice in court. These senators have given hope not just to the survivors but also to millions of Americans who had lost faith that their elected leaders could put aside partisanship and resist the power of money in politics for the good of the country.

Silicon Valley’s path to regaining consumer trust on privacy - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 04/12/2018 - 10:00

Human attention is the fuel that powers today’s online markets. Collecting user data gives companies an idea of how consumers spend their time, and the ability to personalize the user experience. Using this knowledge is a powerful tool for marketers. One of the biggest competitive advantages of online platforms is their ability to match consumers with products and services in seconds. We’ve heard this over and over again as Facebook CEO Mark Zuckerberg testified before Congress this week.

Via Twenty20

But what is actually happening to your data when you use a web application, social media platform, or the “pipes” of internet service providers for internet access? Is someone protecting your privacy, or is your data being exploited? As these questions have come to dominate the national discourse, it’s important to remember that on internet privacy, the devil is in the details.

Search engines and platforms collect information about user preferences to suggest related products and services, but this goes beyond their “likes” and what the user is searching for online.  Increasingly these search engine and platform companies are combining online use information with physical location data and information about behavioral patterns to create a truly powerful and enticing package for marketers and advertisers.

Location data and information about user preferences come from the surveillance capabilities incorporated into mobile phones that users actually give companies permission to use. But as the confusion during the Facebook hearing about the use of microphones as a data source illustrated, users may not be fully aware of what they’re agreeing to.

Google, Apple, and Facebook require users to give permission for access to device microphones, but users often accept the terms of service to allow their apps to work, ignoring the fine print. Instructions on how to opt out of microphone recordings or the use of geo-location data from a phone’s camera are buried in disclosures created by legal teams to comply with Federal Trade Commission guidelines, but they are deep in the pages that few take the time to read.

One illustration of the scope of location tracking capabilities is the November 2017 Quartz report that Android phones had “been collecting the addresses of nearby cellular towers — even when location services are disabled — and sending that data back to Google.” The company explained that this information helped improve message delivery and that the location data was immediately discarded. But “by the end of November [2017], the company said, Android phones will no longer send cell-tower location data to Google, at least as part of this particular service, which consumers cannot disable.” While Google says it immediatly discarded location information, this example shows how users’ locations can be triangulated using data from multiple cell towers, down to a quarter of a mile radius — information that could potentially be sold to advertisers.

Should there be a law to make the practices of advertisers and data brokers more transparent and give consumers greater control over the enormous amount of personal data they furnish to their favorite technology companies and by extension, to marketers?

Tech companies have been very vocal that they can self-regulate rather than be forced into federal regulation. Compelling websites and mobile apps to be more transparent in their privacy policies by requiring that they explain their data collection practices could be part of a resolution if companies supply users with a simple description of their data sharing relationships with vendors and marketing partners. An immediate change in policy from unreadable terms of use to consumer friendly language about what’s going on when you use their service could go a long way to resolving the concern about lack of understanding to what a user has agreed to and what happens with the data.

Users should have more visibility into what information is gathered on them and how this data is collected. Currently, does every user opting into third-party agreements when they install new apps really understand what they just agreed to and the implications for their data?

After this week’s Facebook hearings, Congress will be ready to take action. With all of the revelations about how technology platforms work, how data on users is sold to third-parties, and the lack of protections for user privacy, the big question moving forward will be how these technology companies manage their data collections and sales going forward. It’s time for transparent transactions and clear requests for users’ information. It will be difficult for members of Congress to stand on the sidelines and hope for the best of intentions from the companies that have created the current culture of distrust for their users. Whatever happens, it will be important to achieve parity on privacy regulations. The whole internet ecosystem — websites, internet service providers, and mobile apps — should be subject to the same rules. The digital economy needs trust as an anchor to function.

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Why the panic over JUUL and teen vaping may have deadly results - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 18:30

Teens and electronic cigarettes are a combustible issue that’s been heating up the headlines lately. “‘I Can’t Stop’: Schools Struggle with Vaping Explosion,” blares the New York TimesThe Wall Street Journal announces widespread concern: “Schools and Parents Fight a JUUL E-Cigarette Epidemic.” Meanwhile, CNN wonders whether vaping is the “health problem of the decade.” 

@visit via Twenty20

It may (or may not) be a simple coincidence that the panicky coverage coincides with a recent lawsuit demanding that the Food and Drug Administration speed up regulation of vaping products. But, orchestrated or not, rushing the FDA to regulate puts smokers at risk.

The lawsuit, filed at the end of March by a coalition of seven anti-tobacco groups, including the Campaign for Tobacco Free Kids, American Academy of Pediatrics, and five individual pediatricians, took aim at a key decision the FDA made last July. The agency pushed back the pre-market application submission deadline for e-cigarettes from August 2018 to 2022.

Plaintiffs want the original deadline re-instated, claiming that the regulatory delay is illegal. I believe that the delay is wise (and note that regulatory agencies routinely change compliance deadlines). The postponement gives the agency and Congress time to replace the burdensome and costly pre-market approval procedure, which would have crippled the vaping industry, with a more efficient regime. My preferred “standards-based” scheme would ensure product safety while allowing subsequent improvements in technology to reach the market efficiently.

Vaping products are already the most widely used quit-smoking tool. The FDA’s regulatory delay means longer access to a wide variety of vaping devices, including traditional e-cigarettes and the newer JUUL. This is good news for smokers as vaping products, which do not burn tobacco and thereby release dozens of carcinogens, are much safer than cigarettes. As a result, smokers who switch to vaping have improved lung function, blood pressure, cardiovascular health, and lowered risk of pneumonia. Nicotine, it must be emphasized at every opportunity, does not cause cancer.

The window of freedom created by the FDA’s regulatory delay has allowed JUUL, in particular, to blossom. The device’s technology is broadly similar to traditional e-cigarettes in that it produces nicotine-infused aerosol vapor. But, instead of heating nicotine liquid as classic e-cigarettes do, the sleek thin JUUL vaporizer heats pods containing propylene glycol, glycerol, flavoring, and nicotine salts. The salts enable JUUL to deliver high concentrations of nicotine that mimic a regular cigarette’s blood absorption pattern marked by a sharp peak and steep drop-off of nicotine levels. This pharmacologic profile holds special appeal for smokers.

Indeed, JUUL has rocketed to a 55 percent share of the US mass manufactured e-cig market (by dollar value) in a mere two years. At the same time, US cigarette sales volumes continue to decline to their lowest ever, strongly suggesting that such products have vast public health potential. CDC reports that the adult smoking rate hit 14.1 percent, another new record low, in the first nine months of 2017, down from a rate of 15.8 percent in 2016.

And it is not just an American phenomenon. “We are now seeing strong evidence in markets around the world that the substitution of non-combustion products is perhaps the most effective anti-smoking intervention we have ever had” says tobacco policy expert David Sweanor of the Center for Health Law, Policy and Ethics at the University of Ottawa.

But what about teens? Is it concern for their welfare that sparked the headlines in the first place? Is vaping leading them to smoke? If indeed ”gateway effect” exists, the data strongly suggest that it is very small. For one thing, smoking among teens is at an historic low, dropping as vaping is rising. Notably, too, the 2015 National Youth Tobacco Survey found that only 0.3 percent of non-smoking adolescents regularly vape.

JUUL is too new to have been included in those data. And some questions surely need to be addressed. For example, how frequently are adolescents who haven’t first been regular smokers using JUUL on a routine basis? What, if any, are the delayed health risks of using JUUL (and other vaping products for that matter)? Is progression to smoking really as unlikely as appears to have been the case for traditional e-cigarettes? Is adult alarmism around JUUL backfiring and pushing kids to try it? Alternatively, is JUUL offering a path out of smoking for teens or diverting young people who were on their way to becoming smokers?

These and other questions should prompt rational discussion and data analysis. Instead, opponents of the FDA’s regulatory delay are posing a false  choice between the wellbeing of teens and the wellbeing of smokers. Their tactic is simple: emphasize the theoretical downsides of safer nicotine delivery while ignoring its value as a way to help smokers quit.

A whiff of moral panic is in the air. FDA Commissioner Scott Gottlieb must be feeling pressure to renege on his welcome commitment to regulate according to a “continuum of risk,” tailoring each product’s regulation to the degree of harm that it poses.

The challenge for the agency is to see through this smoke screen, devise a thoughtful regulatory regime for non-combustibles, and resist the false choice between sacrificing smokers and protecting teens.

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