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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. 


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.

Learn more:

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.

From the archives: Compassionate conservatism - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 17:30

In 1977, Jeane Kirkpatrick, then a professor at Georgetown University, joined AEI as a resident scholar. A few years later, Kirkpatrick, then a Democrat, wrote an essay for a small influential journal published by the Republican National Committee called Common Sense. The title of her essay was “Why We Don’t Become Republicans.” There were several reasons, Kirkpatrick said. First:

Party identification is a real identification. One’s party — and the people, symbols, beliefs it comprises — are actually incorporated into the self, so that one isn’t only part of one’s party, but more crucially, one’s party is part of one’s self . . . Changing parties is thus like denying part of one’s self and one’s heritage.

Hence, it was not to be given up lightly. Second, she said, Democrats and many independents harbored concerns about the GOP, “doubt[ing] that Republicans care enough about the whole, including those who are, for one reason or another, unable to look out for themselves.” Kirkpatrick continued: “Since the New Deal, it has almost always been the Democrats who moved first to provide economic aid, social status, and political rights to the deprived members of the society. As always, it has been the Republicans who complained.”

Kirkpatrick eventually switched her partisan allegiance, but the concern she raised remained and in the late 1980s and early 1990s, George W. Bush and Newt Gingrich sought to address the Republican deficit with a new approach, compassionate conservatism.

Dr. Kirkpatrick’s argument was about politics. AEI’s long interest in providing for the “whole” — about what is truly compassionate for the “deprived member of society” — extends back decades and continues to this day. Last week at an event at AEI titled “What Happened to compassionate conservatism — and can it return?” Dr. Marvin Olasky, author of “The Tragedy of American Compassion,” and a panel including AEI’s Ryan Streeter and Angela Rachidi revisited some of AEI’s work.

Streeter mentioned the important 1976 AEI Press volume by Richard John Neuhaus and Peter Berger “To Empower People: The Role of Mediating Structures in Public Policy.” Many urban communities, Streeter said, had started “taking ownership for solving problems in distinct ways,” using the core mediating institutions of families, neighborhoods, and communities that Berger and Neuhaus had discussed. Streeter noted Amazon’s description of the book: It “anticipated the major worldwide project of the 1990s, the renewal of civil society.”

Olasky and the panel discussed the politics and programmatic approaches of compassionate conservatism. In 1996 AEI published an expanded volume of the original Berger/Neuhaus book with commentary. At the event introducing the revised edition, Neuhaus said, “The New Deal proposition of the 1930s — that society has an obligation to help those in need — was a great advance in our understanding of social association. The great mistake was to assume that this obligation requires a governmental response.” Government will be involved of course, but to successfully combat poverty, improve our schools, and help families and children, you can’t do it without the “little platoons,” Edmund Burke’s phrase for the work of mediating structures.

Trump can help American workers. His trade war won’t. - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 15:44
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Chinese President Xi Jinping gave a major address Tuesday that answered some of the Trump administration’s major criticisms. Xi pledged to improve the protection of intellectual property, along with increasing imports and offering a better environment for foreign investment.

So have the trade hawks in the Trump administration won?

Not so fast. Much of this has been offered before. But given the context of the speech, I am allowing a small bit of optimism about the Trump administration’s trade strategy. And it’s important to keep in mind that on two goals in particular, President Donald Trump is right on target.

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The first critically important issue — mentioned specifically by Xi — is the forced transfer of technology from U.S. firms to Chinese partners as a condition of doing business in China. Over the past decade, the Chinese government has repeatedly committed to eliminating these requirements, but has not done so. And so Chinese companies continue to acquire U.S. technology, giving themselves a competitive advantage.

Trade-policy folly: 5 ways President Trump’s efforts to placate the farm lobby are misguided - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 14:32

Trade wars are costly and, sooner or later, end up increasing unemployment in all of the countries engaged in the conflict. The consequences of the trade war President Trump is starting with China could be particularly severe for U.S. farmers. But compensating them for losses, as the president has suggested might happen, would be wrong.

China is the No. 1 market for U.S. agricultural producers, accounting for over one-fifth of all farming exports. Soybeans are the top export crop, averaging over $12.3 billion in annual shipments to China. Soybeans grown on one out of every four U.S. acres are shipped to China. If China raises tariffs on U.S. soybeans in response to tariffs the U.S. imposes on Chinese goods, U.S. farmers will have to find new buyers and offer them lower market prices.

@crystalmariesing via Twenty20

The effects of China’s tariffs on U.S. soybeans aren’t likely to be felt immediately. Traditionally, China looks south to Brazil and Argentina to meet its needs for soybeans between March and October. But instead of turning to U.S. supplies when farmers here are harvesting their crops in the fall, the higher tariffs would make Brazilian and Argentine crops more attractive, and China would continue to buy from farmers there.

While some U.S. soybean producers may be able to sell to markets from which Brazil and Argentina have diverted exports to meet China needs, Brazil has the capacity to ramp up soybean production to meet all, if not most, of China’s needs. U.S. soybean producers would then risk losing a large share of the global export market.

While it is easy to sympathize with U.S. farmers who are likely to be damaged by the administration’s trade proposals, and dangling the possibility of aid might placate the farm lobby, compensating farm businesses through subsidy programs for losses imposed on them as a result of a trade policy folly is not the way to go.

First, almost all U.S. soybean farmers are already protected against unexpected drops in revenue through a heavily subsidized federal crop insurance program. They are covered also by additional direct price and income support systems that provide additional protection against lower prices and revenues. Declines in prices will likely increase taxpayer costs for these programs—at a time when fiscal pressures are compelling Congress to find savings and not increase expenditures.

Second, ad hoc assistance may temporarily aid farmers but does nothing to address the potential long-run damage to trading relationships caused by trade wars. Farmers still remember the impacts of the Nixon soybean embargo (which helped launch the growth of the Brazilian soybean industry) or the Carter grain embargo against the former Soviet Union (which disrupted U.S. grain exports).

Brazil has the capacity to ramp up soybean production to meet all, if not most, of China’s needs.

Third, increasing support to U.S. farmers will increase the level of trade-distorting domestic support that the U.S. must report to the World Trade Organization, thus exposing U.S. farmers to potential adverse trade actions such as the successful challenge of the U.S. cotton program by Brazil more than 10 years ago.

In addition, should the compensation be included in the new proposed farm bill, the result will be a long-term increase in farm subsidies. Those subsides are likely to be funneled through programs that distort production incentives away from market signals.

Finally, and perhaps one of the most worrying concerns, is the real possibility that by “buying off” one group with compensation, the administration will open the door to trade wars with other countries. Up to now and with good reasons, U.S. farmers have been a vocal and effective voice for free trade. Compensating them (and possibly other sectors) for their losses in the administration’s trade war with China, could silence their free trade voices. This could encourage the White House to pursue other unilateral trade actions.

Trade wars are costly and, as the lessons of the past have demonstrated, can spread quickly as they did in the 1930s following the imposition of the Hawley-Smoot tariffs. Since that time world leaders have worked hard to avoid them. Over the past 24 years, disputes have been largely resolved using the multilateral rules-based system established by the World Trade Organization.

Today, the adverse effects of a trade war should not be made worse by the administration’s attempt to buy off affected parties through government-funded compensation schemes. While the schemes may ease the trade war pain for a few politically influential groups in the short run, it would be at a considerable cost to taxpayers, and do little or nothing to ameliorate the painful effects on the U.S. economy as a whole. Such policies set a dangerous trade relations precedent for the future.

Joseph W. Glauber, a former chief economist at the U.S. Agriculture Department, is a visiting scholar at the American Enterprise Institute; he is also a senior research fellow at the International Food Policy Research Institute. Vincent H. Smith is an AEI visiting scholar and a professor of economics at Montana State University.

SCOTUS should balance Main Street and online - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 13:25

For more than 50 years, the Supreme Court has prevented states from requiring out-of-state sellers to collect sales tax unless the seller has a physical presence, such as a local store or warehouse, in the state in which the sale occurs. Although the out-of-state sellers’ customers are supposed to remit tax on such sales, very few of them do so. As online retail sales continue to grow, states’ annual revenue loss has been estimated to be as much as $33.9 billion in 2018.

@macfawlty via Twenty20

In 2016, the South Dakota legislature launched a challenge to the Supreme Court’s holdings by passing Senate Bill 106, which  requires any large seller of tangible personal property that does not have a physical presence in the state to collect and remit sales tax. Wayfair and other online sellers challenged the law. On April 17, the Court will hear oral argument in South Dakota v. Wayfair.

The fundamental issue is the impact of state and local sales taxes on the competition between online sellers and traditional brick-and-mortar retailers. In order to uphold the South Dakota law, the Court must find that (1) the law does not discriminate against interstate commerce and (2) the law’s tax collection obligations do not impose undue burdens on interstate commerce.

South Dakota and many of its supporters argue that the physical-presence requirement sharply reduces state revenue collections, seriously harms competing brick-and-mortar businesses, and causes out-of-state sellers to take costly steps to avoid establishing a physical presence. The physical-presence requirement, they argue, effectively forces states to favor out-of-state sellers without a physical presence over local sellers.

Wayfair and its supporters argue that eliminating the physical-presence requirement would impose undue burdens on out-of-state sellers, especially small and mid-size companies. They emphasize the heavy costs businesses will incur trying to comply with as many as 16,000 inconsistent and changing state and local sales tax regimes across the country and the legal risks they could face when they make mistakes.

It may seem that the Supreme Court will be forced to simply pick a side in a tug of war between two parties. Luckily, there is an established legal framework that recognizes and protects the legitimate economic interests of both camps. In a 1970 case called Pike v. Bruce Church, Inc., the Court established a balancing test that weighs the burdens on interstate commerce against the benefits to the state from the regulation. In our view, applying Pike balancing is the right approach for the Court to take in reviewing tax collection obligations, which are ultimately a type of regulation. If the Court applies that balancing test in South Dakota v. Wayfair, two factors should make it easy to conclude that any burden placed on out-of-state sellers is minimal relative to South Dakota’s interest in collecting sales taxes.

First, the regulatory burden on out-of-state retailers of complying with South Dakota’s sales tax regime is negligible. South Dakota, along with 22 other states, is a full member of the Streamlined Sales and Use Tax Agreement (SSUTA), under which the member states’ sales taxes are standardized to minimize the administration and recordkeeping burden on sellers. The SSUTA provides for a centralized online registration system through which retailers can register and agree to collect and remit sales and use taxes for all taxable sales to customers in the member states. And importantly, the SSUTA also allows out-of-state retailers to use approved service providers – paid for by the state, not the retailers – to collect and remit taxes to the state. By standardizing and harmonizing many aspects of their sales taxes and by providing compliance software and other assistance, the states that have signed on to the SSTUA have reduced the cost to out-of-state sellers of complying with sales tax in other states almost to zero.

Second, the South Dakota law contains clear rules that protect small or infrequent out-of-state sellers. An out-of-state seller with no physical presence in South Dakota has no obligation to collect or remit taxes if it makes fewer than 200 sales of tangible personal property, with a total value of no more than $100,000, per year in the state.

As we explained in an amicus brief that we filed in this case, Pike balancing makes more sense than the rigid, obsolete, and inefficient physical-presence requirement. Under Pike balancing, states could require out-of-state sellers to collect and remit sales tax, but only if the states take steps (as South Dakota has done) to reduce the potential harms emphasized by Wayfair and its supporters. While balancing tests can sometimes be difficult to implement, Wayfair is an easy case to resolve. The South Dakota law should be upheld because it has been carefully structured to avoid placing undue burdens on interstate commerce.

Work, welfare, and Trump - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 13:23

Though President Trump spoke in his inaugural address about replacing welfare with work, his efforts in pursuing that goal have been mixed at best. The administration has relied far more on the strength of the job-producing economy to increase employment and reduce poverty than on any changes to benefit programs themselves. But the economy can only do so much — especially after an extended period of benefits-first policy, in which increased enrollment was the only goal.

President Donald Trump waves as he arrives to speak during a visit to White Sulphur Springs in West Virginia, April 5, 2018. Reuters

This week, the Trump team tried to restart their efforts with an executive order directing federal benefit programs to make it a priority to help non-working recipients become employed. It remains to be seen whether this will do the trick. The question is whether the resulting reforms will address the underlying problem of welfare enrollment leading to too little work and too much poverty.

What, specifically, needs to be addressed? Too many healthy, working-age American adults are not working but receiving significant government-funded help. The programs providing that assistance have done little to help these individuals spring out of poverty, and their funding is often structured to create incentives to add more people to their rolls. In such situations, antipoverty programs wind up inadvertently inhibiting work and upward mobility.

For example, in Medicaid and SNAP (food stamps), the number of working-age adults receiving benefits but reporting zero earnings is at least 9.5 million each. That’s a minority of the total number of recipients on these programs — which include seniors, children, and the disabled — but a large number nonetheless.

Labor force participation tells the same troubling story. Our country is nine years into an economic recovery, with unemployment at 4.1 percent, yet we are still well below the pre-recession rate of working-age Americans in the workforce. Availability of financial assistance from government programs that do not care about work — principally SNAP, Medicaid, and housing assistance — has made it easier for non-workers to remain on the sideline.

The gulf between today’s welfare policy and work was starkly visible when I crisscrossed the country as a member of the Congressionally appointed National Commission on Hunger. At one point, a food stamp recipient, a healthy man in his thirties, blurted out: “That program [SNAP] is great at getting me an EBT [food stamp] card to buy food, but it does nothing to get me a job.” If welfare programs are not actively helping the poor gain employment, they cannot truly fulfill their mission to end poverty.

Helping people on Medicaid, SNAP, and housing assistance get to work is the best way to help them attain incomes above the poverty level. It will also help such people improve their health and gain a sense of dignity, ultimately making their communities stronger. Asking large and omnipresent government programs to reiterate that work is expected for non-disabled working-age adults is a good step toward bringing about such a change.

Until Tuesday’s announcement of the executive order, the most significant Trump administration effort has been the approval of three waivers from state Medicaid programs seeking to make work a focus of their programs. Seema Verma, the CMS administrator responsible for this effort, has bravely pushed the notion that states should have the option to enact activity requirements, in spite of the usual howls of protest from those who oppose introducing any component of personal responsibility into a benefit program. Unfortunately, her guidance has elicited change in only a few states so far.

A major disappointment has been over at the Department of Agriculture (USDA), which runs SNAP. It seems as though this administration has been unable to recruit anyone for the important job of running the program. Meanwhile, those managing the shop have been reluctant to assert their leadership on the state officials who implement food stamp programs on the ground. (The Housing and Urban Development (HUD) low-income housing programs are equally far behind.)

The order the president signed yesterday is a reasonable and productive place to start. Critically, it directs federal departments such as Agriculture and Housing to review the guidance documents that relate to work, and to follow the CMS administrator’s lead in using whatever authority they have to fight poverty more effectively through work requirements. The document is focused on outcomes, though it provides flexibility for states. It also ensures that program administrators around the country are accountable for achieving desired goals by requiring them to report results to overseeing agencies.

In announcing the executive order, White House officials said they believed there was a lot the federal agencies could do to promote work through administrative actions. Moreover, they signaled their hope that the order would lead to greater acceptance of the idea that employment and increased earnings are the best measures of success for benefit programs. The administration’s rhetoric is right, and it should help, especially given how plentiful jobs are. The large federal departments that oversee these programs — USDA in the case of SNAP, Health and Human Services for Medicaid, and HUD for housing — must now do their part to help more Americans replace welfare with work.

5 thoughts on the teacher strikes - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 12:00

The recent teacher walkouts in West Virginia, Oklahoma, and Kentucky have not only been remarkable for their scope and success, but have also rapidly reshuffled the educational debates. In the weeks before West Virginia’s teachers walked out, talk of teachers revolved around how badly the Supreme Court’s impending decision in Janus might hurt the unions. Now, at least temporarily, the narrative has totally flipped. What to make of all this? Well, as I’ve talked to various advocates, journalists, and officials, at least five thoughts keep coming to mind:

Oklahoma teachers rally outside the state Capitol in Oklahoma City, Oklahoma, April 2, 2018. Reuters

  1. Teachers are immensely sympathetic actors. For all the gibes, harsh rhetoric of the accountability era, and tsk-tsk’ing occasioned by polls in which people say they don’t want their kids to be teachers, the reality is that people really like teachers. In surveys, no matter how much talk there is about “failing” schools and problems with tenure, teachers are trusted and popular. For most parents, the primary source of information about their school is their child’s teacher. As we’re seeing, and as I noted back in The Cage-Busting Teacher, that reservoir of goodwill makes teachers pretty formidable actors—much more than some observers might imagine.
  2. The Trump era has made it tougher for GOP officials to plead “fiscal restraint.” Since Trump’s election, there’s been a lot of attention to the struggles of working- and middle-class Americans in places like West Virginia, Kentucky, and Oklahoma. Meanwhile, last year, Republicans in Washington passed a trillion-dollar tax cut for businesses. And, just a few weeks ago, Washington Republicans blew up the federal budget caps—largely so that they could boost funding for the Pentagon. Against this backdrop, it’s tough for Republican governors to insist, “Well, sure, our party’s leaders in Washington can find huge dollars for tax cuts and defense, but we can’t afford a pay raise for struggling, hard-working teachers.”
  3. Twenty-first century school reform has a big role in bringing us to this point. A mantra for reformers since No Child Left Behind has been the critical role of teachers. In pursuing this agenda, would-be reformers emphasized the need to overhaul teacher evaluation and tenure, retool teacher preparation, and place a substantial weight on reading and math scores in judging teacher effectiveness. This was all sensible enough (aside from an increasingly unhinged fascination with reading and math scores), but it was pursued with rhetoric that not infrequently veered into broad condemnations of the nation’s schools and teachers—and which failed to take serious the need to ensure that any changes were equally attentive to rewarding professionalism and honoring excellence. Along the way, teachers came to look and feel like targets, rather than beneficiaries, of “school reform,” which may be why bread-and-butter demands from teachers are ascending as the guts of Bush-Obama school reform are sinking to the bottom of the “discarded school reform” sea.
  4. Teachers have picked up tremendous momentum. The textbook case for deflating a public-sector strike may have been Ronald Reagan’s response to the 1981 air traffic controllers strike. Readers of a certain age will recall that, early in his presidency, Reagan was confronted with a strike by the nation’s air traffic controllers. It was presumed that they had Reagan over a barrel—and that their success would inspire imitators. Instead, shockingly, Reagan fired the striking controllers. The enormous cost to those who lost their jobs prompted a lot of second-guessing among public employees and deterred would-be imitators. Developments in West Virginia, and now Oklahoma, have taken a different path. In West Virginia, superintendents shuttered districts, ensuring that teachers wouldn’t run afoul of the state’s “no striking” law or lose salary. Oklahoma’s district leaders have acted similarly. Meanwhile, faced with popular support for the teachers, state officials have avoided harsh words and worked to meet their demands. The good press, lack of consequences, and big wins seem primed to inspire imitators.
  5. There’s a huge opportunity here . . . if teachers and state leaders can seize it. As I see it, good teachers are ridiculously underpaid—and I’d like to see teachers get a solid raise across the board. But there’s a problem with simply funneling those dollars into existing arrangements because school systems spend a lot of money in ways that don’t make a lot of sense. We have exceptionally expensive benefit systems that mean a big chunk of school funding is going to pay retirees rather than today’s teachers. Schools have added non-instructional staff at a pace that has massively outstripped student enrollment. In recent years, would-be reformers have goofed when imposing new teacher-evaluation systems while failing to identify or do right by all the teachers who play a critical role in their schools and classrooms. Now, we have another opportunity to tackle this challenge—to boost teacher pay and make substantial new investments in schooling while rethinking benefits systems, teacher compensation, and staffing. Doing so would be good for teachers and students, appealing for taxpayers, and make it easier to sustain bipartisan support for new spending. Now, admittedly, in recent years, we’ve not been great at seizing win-win opportunities when it comes to schooling—but here’s hoping.

It’s hard to know how these things will go. Ten weeks ago, hardly anyone saw West Virginia and Oklahoma coming. Will they trigger a national wave of imitators? Will the narrative shift again in the aftermath of a Janus decision that goes against the unions? Or might these simply be more glimpses of what’s ahead as the school-reform pendulum swings away from the Bush-Obama era? Time will tell.

This post originally appeared on Rick Hess Straight Up.

The future of corporate taxation in a digital world - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 10:00

It is relatively straightforward for governments to tax brick-and-mortar single-establishment retail stores or factories that mostly sell locally, because the value those businesses create and the profits they make are largely tied to a clear physical location. In those cases, production and sales processes take place where the company’s employees work, which is also where its consumers live. For other businesses, however, production, sales, and other elements of value creation are unbundled and cannot be assigned to a single location, which poses challenges to existing measures of corporate income and value added.

European Economic and Financial Affairs Commissioner Pierre Moscovici holds a news conference at the EU Commission’s headquarters in Brussels, Belgium, REUTERS.

These challenges may be most severe in the case of multinational corporations that rely heavily on intangible capital and draw their revenue from online activities. The European Commission recently proposed two directives to address the challenges of taxing the “digital economy.”

The first proposal, which is meant to provide a permanent framework, effectively expands the notion of a firm’s location to incorporate so-called digital presence. The policy is similar to South Dakota’s effort to collect sales tax from online retailers (the subject of the pending Supreme Court case South Dakota v. Wayfair, Inc.), but it extends beyond retailers to include any firm that derives sufficient online revenue from, or has sufficiently many users in, a member state. Skeptics worry that this framework would limit tax competition between different EU countries by effectively shifting from an origin-based tax system (with businesses taxed where they produce) to a destination-based tax system (with businesses taxed where their customers are located).

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The second proposal is more narrowly focused and is intended to be an interim solution that will be applied until the first proposal is fully implemented. This controversial proposal has generated headlines and triggered pushback on this side of the Atlantic. It imposes a 3 percent tax on the gross revenue — not the profits — of large firms that either sell online ads or operate social media networks in the member states. The professed rationale is that it is the users who create value in those lines of business.

How will these proposals work? Who will they help and harm? Conveniently for readers of this post, Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation, and Customs, will come to AEI on Thursday, April 19 to present and discuss the commission’s proposals. His appearance will be followed by an expert panel composed of Professor Itai Grinberg of Georgetown Law Center, Professor Joann Martens Weiner of George Washington University, William Morris, the deputy global tax policy leader at PwC, and Stephen Quest, the director general for Taxation and Customs Union at the European Commission. I am confident that these distinguished speakers will answer all of your — and my — questions on this important topic.

RSVP for the event here.

Learn more:

Episode 32: Blarney Tim Carney - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 06:25

In the latest Remnant, Washington Examiner commentary editor Tim Carney joins Jonah to discuss the headlines of the day (the Cohen raid, Syria, the 2018 midterms) and to do a deeper dive on the nature of crony capitalism.

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

This podcast was originally published by National Review.

Remembering Bob Malott - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 19:36

At AEI, we mourn the passing on April 4 of our dear friend Robert H. “Bob” Malott, a longtime trustee and generous supporter of the Institute.

Bob was a generous and steadfast supporter of AEI, dedicated to the Institute’s mission of maintaining free markets and upholding a strong national defense.

In 1976, Bob joined the Institute’s board of trustees. After his retirement in December 1993, he was elected an emeritus trustee and actively served in this role until his death.

He was a generous and steadfast supporter of AEI, dedicated to the Institute’s mission of maintaining free markets and upholding a strong national defense. He said, “I am concerned that these fundamental objectives are being challenged, and we need to continue to look to AEI to actively resist these pressures.” Bob established the Christopher DeMuth Chair, named after AEI’s former president. The chair was held by AEI Resident Scholar and Director of the Critical Threats Project Frederick Kagan.

A graduate of Harvard Business School, Bob volunteered for the Navy during World War II before becoming president at the age of 45 of FMC Corporation, a Chicago-based maker of chemicals, machinery, and military systems. Throughout his life, Bob enriched his beloved Chicago through his support of institutions such as the University of Chicago, the Lyric Opera, and the Illinois Math and Science Academy.

Bob’s support, counsel, and generosity transformed AEI’s work and community. The Robert H. Malott Library at AEI’s headquarters serves as a reminder of his legacy and enduring impact on AEI. We will miss him and offer our condolences to his family and many friends.

The future of infrastructure policy under the Trump administration: Remarks from Department of Transportation Under Secretary Derek Kan - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 18:34

On this AEI Events Podcast, AEI hosts Derek Kan, Under Secretary for Policy at the Department of Transportation. Kan outlines the details of the Trump administration’s infrastructure plan. Following his remarks, AEI’s R. Richard Geddes leads a discussion among infrastructure policy experts to review the main elements of the proposal and the future of US infrastructure policy.

The Trump administration released its long-awaited infrastructure plan on February 12. The plan includes $200 billion in federal spending to incentivize $1.5 trillion in new infrastructure investment nationally. It would streamline environmental permitting, create incentives for state and local governments to raise more revenue, and support greater use of public-private partnerships and other mechanisms to facilitate private participation in infrastructure delivery.

Watch the full event here.

Subscribe to the AEI Events Podcast on Apple Podcasts.

This podcast features introductory remarks from R. Richard Geddes (1:01), following remarks from Under Secretary Derek Kan (7:57), audience Q&A (20:14), a panel discussion (35:08), and a final audience Q&A (1:14:29).

Panelists include Kevin DeGood from the Center for American Progress, Joung Lee from American Association of State Highway and Transportation Officials, Robert Poole from the Reason Foundation, and Matt Rose from the BNSF Railway Company.

This event took place on March 22, 2018.

It’s time to assassinate Assad - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 16:40

On April 8, after learning of the alleged Syrian regime’s use of chemical weapons against a civilian neighborhood, President Trump tweeted that Syrian President Bashar Assad would pay a “big price.” The last time the Syrian government so blatantly used chemical weapons, Trump ordered a barrage of Tomahawk cruise missiles to strike at the base responsible for the chemical weapons attack. In the wake of the latest incident, however, many analysts have pointed out that last year’s response neither deterred Assad nor undercut his momentum against the Syrian opposition and questioned whether a new missile barrage would be any different.

Russian President Vladimir Putin (R) shakes hands with Syrian President Bashar al-Assad during a meeting in the Black Sea resort of Sochi, Russia November 20, 2017. Reuters

Nor can Assad expect any serious repercussions at the United Nations given Russia’s willingness to protect him at all costs. “What’s the point of trying to shame such people?” U.S. Ambassador to the U.N. Nikki Haley said, “Pictures of dead children mean little to governments like Russia.”

What can Trump do? Former President Barack Obama’s unwillingness to enforce a red line on chemical weapons use hemorrhaged his credibility and convinced Assad and his Russian patrons that they could, quite literally, get away with murder. But if he is serious about restoring a deterrent to the use of chemical weapons, then he should not rely on some symbolic cruise missile response. That was his tactic last year, but its lasting impact was negligible. For that matter, that was Bill Clinton’s tactic of choice in 1998 after al Qaeda attacked U.S. embassies in Kenya and Tanzania, and a middle-of-the-night cruise missile strike into Afghanistan did nothing to convince al Qaeda and their Taliban protectors to cease their terrorist activities ahead of the Sept. 11 attacks.

Targeting Assad, however, would be the ultimate deterrent to dictators who might want to go down the same path. There is nothing absolute about the prohibition on targeting world leaders. President Gerald Ford issued Executive Order 11905, which declared that “no employee of the United States Government shall engage in, or conspire to engage in, political assassination,” but that is of only questionable application to targeting a commander in chief militarily. While President Abraham Lincoln administration had in 1863 instructed Union forces not to engage in assassination, the subsequent international agreements joined by the U.S. (the 1907 Hague Convention and the 1949 Geneva Conventions) were vague on the question of assassination.

Regardless, there is ample precedent which suggests that Assad could be a target. In 2010, the Iraqi government executed Ali Hassan Abd al-Majid al-Tikriti, better known as “Chemical Ali,” for his complicity in the use of chemical weapons against the Kurds and, of course, the United States supported the trial of Iraqi dictator Saddam Hussein for a series of outrages against civilian populations.

Want to use cruise missiles? As Assad leads Syria to ruin, there is no reason why his shiny and ostentatious palace should remain standing on a mountaintop above Damascus. And while Russia warns the United States not to retaliate in Syria, permanently removing Assad from the battle field would leave Moscow no choice but to begin serious negotiations on who comes next. Simultaneously, the Kremlin would think twice about allowing its other clients in the future to stray so far from the rules of war.

Certainly, a decision to target a foreign leader should not be taken lightly. Some critics will question whether such targeting would open enemies to try to assassinate U.S. leaders. Let’s put aside moral equivalence — the United States is not Syria.

Rather, enemies already do try to target the U.S. leadership and other world leaders. During the Cold War, the Soviets were complicit in an assassination attempt on Pope John Paul II. And President Bill Clinton ordered the bombing of Iraq after evidence emerged that Hussein had sought to assassinate President George H.W. Bush. The Islamic Republic of Iran sought in 2010 to kill the Saudi ambassador to the United States by using a car bomb at a popular Capitol Hill eatery frequented by U.S. senators.

Then there is a question about whether Assad, the devil we know, is better than the devil we don’t. Let’s put aside the fact that such a calculation largely went out the window once the devil began using sarin gas on women and children. It is true that the Syrian opposition, with the exception of the Syrian Kurds, has largely radicalized well beyond any definition of moderation. Their inability to work together makes it unlikely that they will be able to seize full control over Syria. More likely, a member of Assad’s inner circle will step in and take the reins and make it possible for all sides to save face and begin discussing a provisional government.

A cruise missile strike that kills Assad will not alone bring peace. But it will enable Syrians to begin a new discussion while simultaneously signaling other world leaders that they do not have immunity should they use weapons of mass destruction.

Making the 2020 census succeed - Hot Java? Google potentially on hook for billions after recent Oracle copyright infringement ruling

Tue, 04/10/2018 - 15:14

The 2020 decennial census is critically important. Businesses rely on official statistics to make key decisions, and those statistics must be accurate. Policymakers rely on official statistics as well, for decisions as important as setting interest rates throughout the economy. And the research community needs accurate data to evaluate the effects of public policies. Many are concerned about the 2020 census’ funding, the controversial decision to include a question on US citizenship, and response rates. How will these affect the accuracy of the 2020 census? And in turn, how will that ripple through the economy?

Please join AEI for a panel discussion on the importance of the 2020 census and what can be done to ensure its success.

Join the conversation on social media with @AEI on Twitter and Facebook.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

Should big tech be regulated? | In 60 Seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 14:15

The cries to regulate big tech have only grown louder over the last year, coming from voices as disparate as Fox News Host Tucker Carlson and Virginia Democratic Senator Mark Warner. Is it time for the US federal government to put a lid on Google, Facebook, and other tech firms? No, says AEI Visiting Scholar Mark Jamison, and he explains why.

What China gained from hosting Kim Jong Un - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 13:15

In late March, North Korean leader Kim Jong Un, who had not stepped foot outside the hermit kingdom since taking power in 2011, traveled to Beijing to meet with Chinese President Xi Jinping for the first time. The encounter came amid two decades of declining relations between North Korea and China, with its worst period yet under Xi—only six high-level bilateral exchanges had taken place over the past six years, compared to 54 during the presidency of his predecessor, Hu Jintao.

As I previously argued in the January/February issue of Foreign Affairs, Beijing had grown wary of Kim’s provocations and was “no longer wedded to North Korea’s survival.” It was remarkable, then, that Xi had extended the invitation to Kim. Has there been a sudden thaw in diplomatic relations? And if so, what does this apparent reversal signify?

On the surface, Xi appears driven by a desire for improved Sino–North Korean relations. During the Xi-Kim meeting, the Chinese media portrayed their two countries as ideological comrades, emphasizing their common interest in finding a peaceful solution to the security challenges on the peninsula and publishing photos of the two leaders sharing a warm embrace. But although the summit signals Beijing’s interest in pursuing productive relations with Pyongyang, Xi’s decision to meet with Kim represents less of a strategic shift than appearances might suggest. China is still not wedded to North Korea’s survival, and the countries’ “alliance” continues to be only in name.

Read the full text of this article HERE.

Arthur Brooks: ‘I’m going to stay at it’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 13:00

Editor’s Note: Joseph Lawler’s interview with Arthur Brooks originally appeared in Washington Examiner on April 10, 2018.

Arthur Brooks is now contemplating a fourth career.

Before becoming the president of the American Enterprise Institute nine years ago, he’d already had two successful careers, first as a professional French horn player and then as a tenured professor.

Next summer, he’ll leave AEI, one of the most influential conservative institutions in the country. This was announced last month at an all-hands meeting.

His planned departure isn’t a huge surprise to colleagues familiar with his academic work. In his research as a professor of public administration, Brooks concluded that organizations work best when the head doesn’t stick around for longer than a decade.

Speaking to the Washington Examiner in his office in downtown Washington, Brooks says he hasn’t figured out his next step. It could be returning to academia, or going into business. It could be something as different as his first two careers were from his third, although he wants to stay in the world of ideas. “We’ll see what the market will bear,” he said. “I don’t know.”

His successor, he says, should be someone not exactly like him, because another pitfall for organizations is making the mistake of trying to recreate success — which he’s had.

Under Brooks, AEI has grown significantly and moved into a large new home on Massachusetts Avenue, a renovated 1917 Beaux Art building that was once the home of Andrew Mellon, the billionaire businessman of the early 20th century.

AEI has also risen to the top among think tanks, according to Brooks, on the metrics that he uses as proxies for influence, including op-eds published at major newspapers and the frequency at which its scholars are invited to testify before Congress.

He himself has risen to prominence on the Right. He’s a guru to movement conservatives, as well as to many high-ranking Republicans on Capitol Hill.

Brooks has written best-selling books that aspiring D.C. conservatives use as guides and the latest of which GOP presidential candidates, most of them at least, had no choice but to read.

He has one more, a 12th, in the works for before he leaves office. “Unity: A Manifesto” will come out early next year.

“The biggest problem that we have in America today is disunity,” Brooks said.

Partisans are blowing small ideological differences out of proportion, he says, and fixating on them at the expense of agreeing on common ground.

‘I’m going to stay at it’

Disunity and partisan anger, in a way, represents a failing by Brooks.

His ambitions for his and AEI’s work transcended the institution. He sought to change the country and the world. In his 2015 book, The Conservative Heart, he envisioned an American transformation. He called for conservatives and the Tea Party movement to move beyond angry opposition to President Barack Obama and to build a governing agenda that would bring the benefits of the free market to more people, and for liberals to see the empathy in conservatism and embrace it.

Listen to Arthur's podcast:

But the Republican Party chose a different vision that same year, coalescing behind Donald Trump and signing up for his program of nationalism, populism, and protectionism.

Far from showing conservative heart, Trump, during a presidential debate, claimed the “mantle of anger,” Brooks said.

In a Wall Street Journal op-ed in which he announced his planned resignation, Brooks expressed the fear that anger on both sides threatens to make dialogue impossible.

Read Arthur's WSJ op-ed:

Brooks acknowledges that his brand of free-market, pluralist, optimistic, and inviting conservatism didn’t win the “idea sweepstakes,” but he remains committed to it.

“The matrix of ideas, which rotates constantly, hasn’t turned to that yet,” he said.

“I’m going to stay at it,” he added. “I’m going to stay at it as long as I’m at AEI. And whatever I do next, I’m going to stay at it then, too.”

Brooks says the divisiveness and populism of the Trump era hasn’t sapped his energy for the job and is not part of his decision to leave. But he acknowledges that the current environment does not suit him well.

“Politics, when it’s not about ideas, when it’s only about tribes, is unbelievably boring,” he said. “That’s like watching a hockey game when you don’t like hockey and don’t know either team.”

Some of Brooks’ players are on the ice and in the game. One of AEI’s donors, Betsy DeVos, is President Trump’s education secretary. Trump’s top economic adviser, Kevin Hassett, was an AEI scholar, as was Food and Drug Administration Commissioner Scott Gottlieb. Last month, the Trump administration announced that the think tank’s media manager, Judy Mayka Stecker, will be joining the Department of Health and Human Services.

Yet, others in the institution are solidly “Never Trump,” or just liberal.

Brooks has tried to keep AEI above the fractionalization of right-of-center institutions in Washington.

Charles Murray, the famous AEI social scientist reviled by the Left and a declared Never-Trumper, praised Brooks for not attaching the think tank to one group or another, and particularly for not aligning with Trump as others have.

“There has been not an iota of growing respect for the ethos represented by Donald Trump,” Murray said. “Arthur has not accommodated himself to Trumpism in any way philosophically. That’s my view.”

In the interview, Brooks minimizes Trump talk. It’s not hard to guess his presumptions, though, based on his public statements and writings. For example, in 2016, he wrote in the New York Times that Trump has “an apparent cruel streak toward weaker people that goes beyond the rough-and-tumble of normal politics” and faulted him for “the policy-light, insult-comedy entertainment.”

Read the New York Times piece:

That is a contrast with Brooks’ self-description as a Matthew 25:40 conservative: “Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me.”

Yet, Brooks claims he’s not distracted by the politics of the Trump era.

Instead, he compares himself to the head of the National Oceanic and Atmospheric Administration at a time when its scientists are being asked to go on TV to talk about the weather of the week when they should be modeling the climate.

“Weather is politics, climate is ideas,” he said. “My job is to keep us out of the weather.”

The climate, Brooks has concluded, is that part of the nation was left behind in the economic recovery and felt disrespected, and that Trump spoke to them.

He believes there is little overlap between the rise of the Tea Party and the ascent of Trump. The Tea Party was a response to perceived overreach by Obama. Trump is about a part of the country despairing.

In response to the rise of right-wing populism, AEI has launched a project on human dignity that features studies geared toward the needs of people who are suffering through economic stagnation, and involves work on career training, opioids, family structure, and other issues.

It’s a way to get back to the business Brooks was in when he published The Conservative Heart, which is promoting capitalism.

“There are days when I look at what’s going on in the conservative environment and I say, ‘Argh,’” he said. “But then again, the reason I wrote the book is not because I was already there but because we weren’t.”

In fact, Brooks was trying to stave off populism before it began, said Sen. Mike Lee of Utah, a friend. “He could see a natural trend in the other direction, and so he took steps to lay the framework for a more enlightened approach,” the Republican said.

The pain in Spain

One current that runs throughout Brooks’ work is the idea that he doesn’t want America to become like Europe. Instead, he wants to export American-style capitalism, and Americans’ unique, religiously-motivated charitable ways, to the rest of the world.

Specifically, he wants to keep the U.S. from becoming Spain.

Spain is Brooks’ adopted country. His wife is Spanish, and Spain is where he spent his formative years trying to win her over. He lectures there every spring. His family often speaks Spanish at home.

“Barcelona is beautiful, and the food is great, and the architecture is interesting, and the weather is nice, and the place is completely screwed up,” he said. “And it’s screwed up because of all the things we’re trying to do in America today. And that’s the problem.”

In The Conservative Heart, Brooks compares Spain unfavorably with an Indian slum he visited. In the slum, he notes, the residents all worked and gained meaning and optimism from their work even if they were destitute. In Spain, work is not a priority.

“This is like your brother in law,” he said of Spain. “You just love him. He’s just irresistible, and fun, and great. He’s great with your kids, right? But he’s a drunk!”

In his academic life, Brooks researched happiness and its determinants, including government policies that lead to happiness.

That research suggests to him that Americans have the answer. Earned success, gained through work, is critical to happiness. So is family. So is giving. A safety net to help the poor can also help, but not if the government can’t maintain it because it’s facing a fiscal crisis.

Dependency, on the other hand, brings misery. It could also be self-fulfilling. In his 2010 book, The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America’s Future, Brooks warned that the number of people who rely on government benefits could form too large a constituency for America’s system to survive. That’s what Mitt Romney was talking about so clumsily in the 2012 election when he was caught on audio dismissing 47 percent of voters.

“Freedom causes happiness,” Brooks wrote in his 2008 book Gross National Happiness.

The foreboding that America could slip into dependency and become terribly unhappy sits uncomfortably alongside Brooks’ recent campaign to make conservatism more inviting and friendly.

“There’s a tension there,” said E.J. Dionne, the liberal Washington Post columnist and Brookings Institution fellow who maintains a friendship with Brooks, a fellow parishioner at a Catholic church in Potomac, Md.

Dionne wishes that Brooks’ more recent writings, and his calls for conservative winsomeness, could be a part of a resuscitation of Bush-era moderate “compassionate conservatism.”

Learn more about AEI's work on restoring compassionate conservatism:

Brooks’ entire public career, from his academic studies tying happiness to conservative policies to his help editing Murray’s controversial work, has consistently made the case for free-market economics.

“He thinks and tried to prove through his research that most Americans care about others and do not need to be forced to take care of the poor and needy, but will do so willingly,” explained Nick Bailey, an assistant professor of management at the University of Northern Iowa who served as Brooks’ research assistant when he was a professor at Syracuse. “So, he is very driven by core Christian values.”

Personal story

Brooks, though, is nothing like the stereotype of a conservative Christian.

The most readily available details of Brooks’ life and public image run counter to expectations, starting with his oft-noted friendship and partnership with the Dalai Lama, who he’s visited in India this year.

Next, the fact that he began his adult life as a musician, putting off college to play the French horn in the U.S. and in Europe. And that he earned his college degree via correspondence course and went on to get a PhD from the Rand Corp., soon becoming a tenured professor.

He also is known for wearing unusually fashion-forward suits and maintaining a more defined sense of personal style than is typical for Washington.

Brooks’ unusual friendships, his style, his own reinventions and improbable successes — they’re not just his personality, but also the proposition he’s offering. He’s willing to draw on anyone to make the case for his worldview. And, in turn, his worldview is the reason that he’s cultivated those aspects of his personality.

His friendship with the Dalai Lama is based partly on their shared appreciation for the value of work, one of his core tenets. His sartorial display is partly to keep up with his wife, he says, but is also an example of being less bound to conventionalism. His shifting vocations reflect his belief in self-improvement and entrepreneurialism.

“You’re doing policy work when you’re explaining yourself,” he explained.

The Dalai Lama at AEI:

Explanation is Brooks’ role. His popular books and writings follow an explanatory template. There’s an anecdote, either from Brooks’ own travels or from someone he’s found who exemplifies some policy issue, an anti-homelessness crusader in New York, for example. There’s a quick explication of a related social science study that casts the episode as part of a broader point. Less frequently, there’s a reference to evolutionary psychology, history, or philosophy. Add a dash of self-deprecating humor, and then, it’s on to easily digestible, carefully-phrased conclusions, often but not always relevant for federal policy. At the last second, it might be wrapped into an explanation for why conservatives think the way they do.

It’s easy to read. It’s also the way Brooks speaks, complete with frequent extemporaneous research citations. Conservative Republicans love it.

“Arthur Brooks was, and is, one of the most compelling storytellers this movement has,” said Sen. Ben Sasse, a Nebraska Republican who is close with Brooks.

Not only does Brooks believe what he says about the message of conservatism, Sasse said, but he is also “willing to get in the grill of lawmakers, who are just crappy storytellers.”

Brooks’ message, fundamentally, is that the case for free enterprise is a moral one, and that conservatives should make it in those terms. Free-market policies that generate growth and jobs also create happiness, and it would be wrong to deprive people of those.

It’s not a surprise that conservatives and Republicans would appreciate that message.

But liberals also give him credit. Obama chose Brooks to appear on a poverty panel with him in 2015. “He’s very gifted, Arthur, at winning over liberal audiences,” Dionne said.

If it’s just smooth talk from Brooks, though, it’s a long con. Everything he says is consistent with his research. And that, in turn, is consistent with his management of AEI.

After all, half of the job is fundraising. And who better to do that than the researcher who studied administration and found evidence that charitable giving makes you happier?

“The thing that made Arthur such a perfect fit was that a chunk of his academic work was studying fundraising. So, it was kind of like letting Bill James run a baseball team,” said Hassett, Trump’s economic adviser, referencing the father of sabermetrics, the empirical analysis of baseball, who now advises the Boston Red Sox.

“The medium and the message and the marketing and the ideology itself, even the policy itself, can’t be de-linked,” Brooks said. That is why he is, for the next year at least, the evangelist for free markets.

At a recent lunch with GOP senators, Lee said, the group agreed that “if we ever wanted to form a cult, we’d want Arthur Brooks to be the guy we’d follow.”

“Every time we hear Arthur Brooks’ speeches, he says something incredibly profound,” he said. “So profound, that he has a very loyal following.”