Incoming leadership of the House Oversight Committee plans to investigate waste, fraud, abuse and mismanagement of COVID relief funds, including the $350 billion provided to state and local governments as part of President Biden’s American Rescue Plan (ARPA). In retrospect, this expenditure looks like a serious error: state and local governments did not need the money, and, by spending it, they appear to have exacerbated the recent outbreak of inflation.

But at a recent Volcker Alliance Special Briefing, municipal finance experts defended the spending. To avoid future unnecessary bailouts, it is important for small government advocates to come to grips with the arguments they made.

Speakers offered two main defenses: (1) we could not have expected such a sharp rebound in state and local revenues, and (2) it was important to avoid the Obama-era “mistake” of providing insufficient stimulus which reputedly caused a weak rebound from the Great Recession.

In the runup to ARPA’s passage, a high-profile economic forecaster overestimated state and local government revenue losses. Moody’s Analytics, which had initially projected a $500 billion budgetary hit, was still forecasting $220 billion of red ink as of February 19, 2021.

But Cato’s Chris Edwards provided overwhelming evidence that state and local revenues were holding up. Looking back at what we knew in early 2021:

• The COVID-19 recession had already bottomed out
• High income workers were maintaining their jobs and taxpaying ability by working from home
• Calendar Year 2020 state revenues were almost identical to 2019 levels

So, there was a lot of reason to doubt the most pessimistic forecasts, but there was a lack of mechanisms for including that knowledge into the policymaking process. Having been repeatedly cited by Joe Biden as a candidate and as president, Moody’s Analytics estimates appear to have had outsize influence on administration and Congressional leadership.

In a future downturn, representatives should ask the Congressional Budget Office or Congressional Research Service to conduct their own analysis, hopefully insulated from commercial considerations.

But, regardless of how much states and cities were likely to lose, some argue that the federal government should have “gone big” anyway. The cautionary tale for them was the Obama Administration’s decision to seek “only” $819 billion of fiscal stimulus when it took the reins in 2009.

Analogies between Obama’s American Rescue and Recovery Plan (ARRA) and Biden’s ARPA are challenged by the differences in circumstances. Obama’s ARRA passed when the economy was still in the Great Recession, but by the time Biden’s ARPA became law, the economy had already been growing for ten months. Further, ARPA was preceded by much more stimulus than its earlier counterpart. In 2020, the previous Congress had passed three large COVID rescue packages containing a total of $3.4 trillion in new spending.

But differences in circumstances aside, the assertion that ARRA was underpowered requires more examination. While spending money we do not have can improve GDP figures in the very short term, it is less clear that the effect lasts beyond the quarter in which the money is spent.

Theoretically, a portion of stimulus money is invested in infrastructure projects that enhance productivity in the intermediate to long-term. This effect could improve economic growth over many years, but only if the money is spent on value added projects. Unfortunately, a lot of ARRA spending has yet to yield dividends, over a decade after it was committed. Billions were spent on California High Speed Rail and the Honolulu Authority for Rapid Transit. But, as of the end of 2022, neither system was in operation. Once they begin service, they are likely to carry far fewer passengers than originally projected.

Stimulus advocates also argue that more government spending ripples through the economy creating more jobs in the process. But it is also possible that newly created reserves used to fund deficit spending will find their way into asset markets, pumping up valuations. In the ten years after the Great Recession ended, the S&P 500 stock price index tripled.

During this period, there was a large volume of federal stimulus. Each year, the federal government ran deficits ranging from $440 billion to $1.3 trillion, and the M2 money supply grew by 73 percent. So, the problem was not lack of stimulus; it was just that this stimulus did not reliably find its way into the broader economy. Instead, it pumped up asset prices, mostly benefiting wealthy investors.

The idea that every downturn must be met with a torrent of federal spending and money creation is an increasingly dangerous one. As federal debt grows relative to the size of the economy, policymakers are being forced to choose between two undesirable alternatives: devote a large portion of the federal budget to debt service or suppress interest rates, thereby spiking inflation.

Sending funds to state and local governments that they do not need and are unlikely to spend efficiently is not a recipe for long-term economic growth. And such stimulus spending is inflationary, regardless of whether that inflation impacts asset prices or the cost of consumer goods and services.

Christmas has come early for maritime special interests this year. Buried in the 4,300-page fiscal year 2023 National Defense Authorization Act (NDAA) is language further limiting the executive branch’s ability to waive the Jones Act, the 1920 law requiring vessels transporting cargo between U.S. ports to be U.S.-flagged, U.S.-built and mostly U.S.-crewed and owned. Among the changes to the waiver process include a prohibition on waivers for vessels already carrying cargo as well as a requirement that waivers be granted no earlier than 48 hours after a waiver request is published. The problem with the world’s most restrictive cabotage law, some members of Congress have evidently concluded, is that it isn’t restrictive enough.

The impact of these changes could prove significant.

Imagine, for example, a ship sailing to Europe laden with U.S. fuel while New England is experiencing an energy shortage. With the new restrictions in place, any such ship not complying with the Jones Act’s requirements—which is to say, the overwhelming majority of the world’s ships—would be ineligible for a waiver enabling it to divert to a New England port to discharge its much-needed cargo. Rather, any non-compliant ship would first have to be empty of U.S. cargo, apply for a waiver, and then wait at least 48 hours for it to be granted before supplies could finally be loaded and the vessel proceed to where it was needed.

“This is the equivalent to requiring that a firetruck that’s already on the road [and] driving by a house that’s on fire go back to the firehouse, unload, request permission to go and put out the fire, and wait two days, minimum, before it can go back to put out the fire,” argues the head of the National Energy and Fuels Institute trade association. 

Sadly, adding new obstacles to the use of foreign ships in exactly these kinds of emergency situations appears a likely motivator for the new waiver restrictions.

In September the Department of Homeland Security issued a Jones Act waiver allowing a Marshall Islands-flagged ship sailing from Texas to Amsterdam to unload its cargo of diesel fuel in Puerto Rico following Hurricane Fiona. That prompted letters from Jones Act supporters in Congress questioning the waiver’s legality. The new NDAA restrictions would have prevented such a waiver from being issued.

While the September waiver certainly reeked of politics and no explanation for how the waiver was in the interest of national defense—a key requirement for Jones Act waivers—was provided, members of Congress are drawing the wrong conclusions. If existing law prevents foreign ships loaded with U.S. fuel or other critical supplies from speeding relief to Americans during times of emergency, plainly Congress’s priority should lie in providing increased flexibility and removing such obstacles. What it’s now doing is the complete opposite.

This should not surprise. After all, this latest move by Congress comes two years after it restricted the executive branch’s ability to issue broad Jones Act waivers in the fiscal year 2021 NDAA. Notably, that particular revision followed President Trump’s 2019 consideration of a ten-year Jones Act waiver for the waterborne transportation of bulk liquefied natural gas (currently impossible due to the complete lack of appropriate Jones Act-compliant ships), something he was said to initially favor before backing away under pressure. The 2021 NDAA changes ensured such a waiver was no longer possible.

Few things, it seems, upset the U.S. maritime lobby more than Americans having expanded access to domestic sources of energy.

The lobby’s legislative strategy is plain to see: fend off waivers of the Jones Act by inserting new restrictions in must-pass legislation such as the NDAA. It’s a dangerous game. This week the country is set to experience its first Arctic blast of the new season, and more will certainly follow before the winter ends. Yet rather than ensure there is maximum flexibility for Americans to access the energy needed to heat their homes, the new NDAA moves in the opposite direction. It’s an early unjustified gift to domestic maritime lobbyists and a lump of coal in the rest of the country’s collective stocking.

Faced with dismal adoption rates of its central bank digital currency (CBDC), the Central Bank of Nigeria has restricted cash withdrawals to push citizens into using its CBDC. Unfortunately, restrictions on (and the eventual elimination of) cash are just one of the risks that Norbert Michel and I warned about in a paper we published in November.

Nigeria launched its CBDC (the eNaira) in the fall of 2021, but few Nigerians have been eager to use it. Current estimates suggest less than 0.5 percent of Nigerians are using the CBDC. To put that number into perspective, more than 50 percent of Nigerians use cryptocurrency.

When it comes to increasing the popularity of a product, the private sector usually only has so many options. For instance, the product itself could be improved or the price could be discounted. To their credit, the Central Bank of Nigeria tried both options. In August, the CBDC program was changed so that Nigerians no longer had to have bank accounts to use the CBDC—a bid to attract the 55 percent of adults that are unbanked. And then in October, the central bank offered a 5 percent discount for taxi payments in an effort to “discount the price” of using the CBDC.

Yet governments have a few privileges that ordinary businesses do not. Namely, they can “increase adoption” by establishing legal barriers to hinder alternatives or outright prohibit those alternatives. The Central Bank of Nigeria already took steps to prohibit cryptocurrencies, but now it seems even cash isn’t safe as cash withdrawals are now limited to ₦100,000 ($225) per week for individuals and ₦500,000 ($1,123) for businesses.

Nigerians can likely expect those restrictions to increase over time. In a statement, central bank Governor Godwin Emefiele said, “The destination, as far as I am concerned, is to achieve a 100% cashless economy in Nigeria.”

Interestingly, some have tried to defend the move. Simon Chantry of Bitt—the company that was contracted to develop Nigeria’s CBDC—responded that he “wouldn’t be surprised if we see central banks try different, creative options to stimulate [CBDC] adoption.” Restrictions on freedoms have been characterized in many ways, but describing them as “different” and “creative” is a concerning strategy.

As it stands, there appears to be no unique benefit that a CBDC may offer that the private sector is not already providing or developing. Norbert Michel and I have documented this reality extensively, but it should also be evident by the fact that just 0.5 percent of Nigerians are using the CBDC. More so, it should be evident by the fact that the Nigerian government has resorted to restricting alternatives.

As governments continue to weigh the costs and benefits of CBDCs, they should be mindful that if a product or service has to be forced on citizens, it’s probably not a product or service that should be offered at all.

After an interruption due mostly to my move to Spain, I’m pleased to be back in the saddle again, wrapping up my series on the New Deal.

I ended a previous installment of this series by observing that, despite many dire forecasts, the U.S. economy avoided a severe, post-World War II depression, and “appeared to do so with very little help from the federal government.” In particular, while the federal government drastically reduced its military expenditures as soon as the war ended, it didn’t make up for that reduction with any corresponding increase in public works or other peacetime spending. Yet instead of slumping again, the economy saw its first investment boom since the ’20s.

So much for postwar fiscal policy. But what about monetary policy? Might the postwar economy have been kept humming with the help of generous doses of easy money? Could that have been all it really needed to prosper again?

These questions seem worth asking for at least two reasons. First, as we’ve seen, the partial recoveries that took place during the mid- and late 1930s were themselves mainly due not to fiscal stimulus but to monetary growth fueled by heavy gold imports. So it’s only reasonable to wonder whether monetary expansion was also the key to the economy’s postwar performance. Second, postwar Fed policy appears to have been exceedingly easy, having mainly consisted of the continuation, up to the famous Treasury Accord of March 4, 1951, of the Fed’s wartime commitment to keep interest rates low by propping-up the prices of various Treasury securities.

Before the Accord

That U.S. monetary policy was easy during World War II no one denies. At first, gold flows remained the main driver of monetary expansion: indeed, thanks to the “cash and carry” policy adopted soon after the war began, which allowed U.S. merchants to sell war materials to Britain and other nations at war with Germany provided they paid in cash, gold flooded into the United States like never before. In just two years, the U.S. monetary gold stock grew by $5.5 billion. During that same time, the Fed’s government security holdings hardly budged, and banks hardly borrowed from it. So it was entirely thanks to all that gold that the U.S. monetary base grew by about $3.35 billion, allowing the (narrow) money stock in turn to expand by about $13 billion.

The passage of the Lend-Lease Act of March 1941, allowing the allies to get war supplies from us gratis, or nearly so, caused the gold inflow to quickly taper off. But once the United States itself went to war, Fed officials determined “to use its powers to assure at all times an ample supply of funds for financing the war effort.” The result was a set of new policies that became a far more potent cause of monetary stimulus than gold imports had ever been.

Of those new policies, the most important consisted of the Fed’s formal agreement to buy as many 3‑month Treasury bills as it had to to keep the rate the Treasury paid on them at just three-eighths of one percent. The Fed also offered, though informally, to keep the interest rate on 25-year Treasury bonds at 2.5 percent. Once these agreements went into effect, in the summer of 1942, instead of pursuing monetary policy in the usual sense, the Fed, in the words of Chairman Eccles, “merely executed Treasury decisions” (Meltzer 2003, p. 579).

As a result of these arrangements, the Fed went on to purchase very large amounts of Treasury securities, expanding the monetary base and total money stock correspondingly. The last grew more than 20 percent in both 1942 and 1943, and by not much less than 15 percent during 1944 and 1945. Thanks to wartime price controls, posted consumer prices only rose by about 11 percent during this same period. But no one doubted that they would rise a lot more once those controls were lifted.

Yet the Fed’s interest-rate pegging went on for several years after the war ended. Although the Fed’s formal agreement to peg the bill rate ended in 1947, and that rate quickly rose to one percent, and eventually rose even more, rates on longer-term Treasury securities never exceeded their wartime targets until the Treasury Accord went into effect. It’s therefore not at all implausible to suppose that long rates were kept below their “natural” levels during this time, and that (as many theories suggest) those low rates gave an artificial boost to investment spending.

In short, it’s tempting to think that, while postwar fiscal policy fell well short of Keynesian economists’ recommendations, easy money stood in for it, playing an outsized part, not just in helping the U.S. economy steer clear of a postwar depression, but in fueling the postwar investment boom, albeit at the cost of a later, if still not very severe, recession.

Not So Easy

But this is another of those temptations that needs resisting. For starters, it’s worth noting that the same Keynesians who had been so keen on fiscal stimulus saw no corresponding advantage in easy money policies. The view then prevailing amongst them, Alan Meltzer observes (2003, p. 607), “was that monetary policy had, at most, modest effects on output and prices.” Consequently, they neither recommended nor promoted a postwar, easy money policy, so that, assuming the Fed really did pursue such a policy, it did so for reasons other than the standard macroeconomic ones that are widely recognized today.

Although he became a Keynesian with little help from Keynes, Fed chair Marriner Eccles’ views on the respective roles of fiscal and monetary policy resembled those of most Keynesians of his era: while he had long favored aggressive deficit spending to combat depression, it was his opinion regarding the futility of trying to do the same by means of easy money that prompted Representative Goldsboro’s famous remark about “pushing on a string.” Eccles was also a thoroughgoing inflation hawk, who considered an “inflated money supply” the fundamental cause of rising prices. If he allowed the Fed to cooperate with the Treasury during the war, it was for patriotic reasons, and not without frequently criticizing the Treasury’s heavy borrowing.

Of course, neither Eccles’s views nor those of Keynesians generally ruled out the possibility that monetary policy remained as easy after the war as it had been during it for reasons apart from their advice. Then as in more recent times Fed officials worried that rate increases would harm bondholders and worsen the deficit. And the fact remains that rates weren’t allowed to rise, except to a very limited extent, until 1950. But plenty of other evidence suggests that, although rates stayed low, after the war ended, those low rates were no longer a symptom of an easy money policy. Instead, money growth was subdued throughout the immediate postwar period.

How could that be so? Friedman and Schwartz (1963, p. 577) call the modest pace of monetary expansion “[t]the foremost puzzle of the immediate postwar period.” But—as Friedman and Schwartz themselves recognize—solving the puzzle is mainly a relatively simple matter of taking account of the dramatic postwar change in borrowing by the federal government. During the war it borrowed heavily, and rates were held down despite this by means of a combination of substantial Fed purchases of Treasury securities and the government’s (apparently credible) commitment to take steps to avoid postwar inflation.[1] In contrast, after the war rates stayed low with little help from the Fed, because, instead of borrowing more, the government started paying off its wartime debt. Between the start of 1946 and the end of 1948, the Federal government’s outstanding interest-bearing debt declined by $37 billion, from $227 billion to $190 billion. During that time, the amount of the debt held by the Fed hardly changed. “In actual practice,” the IMF’s I.G. Patel (1953, p. 82) observed several years later,

it would be a mistake to think that the Federal Reserve Banks’ open market operations in support of the bond market led to any steady monetization of the public debt. Except for two periods (1947–48 and the first months of the Korean War), the Federal Reserve Banks were, in fact, able to reduce their portfolio of government securities.

Nor were the exceptional periods Patel mentions ones during which the Fed might be said to have relapsed into its wartime, easy money ways. During the first, although its Treasury bond holdings rose from $1.5 billion to $11 billion, it offset all but $1 billion of this increase by selling shorter-term securities; and as soon as Fed officials recognized the possibility, during the latter part of that period, that the Fed’s bond purchases were contributing to excessive bank lending, they countered them by imposing higher bank reserve requirements, which they maintained until May 1949, despite the downturn that began some months earlier. When the Fed reentered the bond market during the Korean War, it raised banks’ minimum reserve requirements once again—enough, Patel says, “to reduce potential bank credit expansion by about $12 billion” (ibid., p. 86).

Tight-Money Inflation?

For the rest of that postwar demi-decade, Alan Meltzer (p. 631) observes, “the Fed had little enough to do” to stick to its agreement to keep interest rates from rising above their wartime targets. Indeed, until the Korean war began, its main challenge was one of keeping rates—long-term rates especially—from falling below those targets, as they did frequently. Doing that meant selling rather than buying Treasury securities, which was, as Patel notes, “the reverse of debt monetization” (1953, p. 84). Money growth decelerated accordingly, with annual M1 growth quickly declining from its wartime double-digit levels to less than 6.5 percent in 1946, 5.51 percent in 1947, less than one-half of one percent in 1948, and minus one percent in 1949! Nor did Fed officials mind this, for so far as they were concerned the Fed’s principal postwar duty wasn’t helping the government pay its bills: it was keeping a lid on inflation.

Even so, inflation was a problem. Although controls had kept the observed rate of consumer price inflation below two percent during the last years of the war, once they were relaxed that rate rose quickly, reaching a peak annual inflation rate of over 20 percent for the year starting in March 1946. However, it’s necessary to distinguish here between inflation that consists of prices “catching up” to their equilibrium levels after having been held below them by controls for some time, and inflation that’s the result of an ongoing easy money policy. That the inflation of the latter 1940s was mainly of the first sort is suggested by the fact that, after rising quickly to its spring 1947 peak, the inflation rate fell off just as quickly. Although the outbreak of the Korean War led to another burst of inflation, its cause was a wave of “scare buying” by a public convinced that the government was about to start rationing goods again, and it also tapered off quickly.[2] That is, it also can’t be attributed to deliberate Fed policy.

Indeed, according to most assessments of that policy, to the extent that it contributed to the postwar behavior of consumer prices, it did so not by keeping money too loose in the immediate postwar period, but by tightening too much in response to both “catch-up” and “scare buying” inflation. Its tightening in the response to the first almost certainly contributed to the 1949 recession, and to the first outbreak of deflation since the Thirties. Consequently, despite the fact that the average inflation rate for the whole 1946–1951 period averaged a far from trivial 6.5 percent, Alan Meltzer (2003, p. 582) is quite right when he insists that during it the Fed “was far from an ‘engine of inflation’.”

Net Investment, Naturally

But might the Fed have been an “engine of investment”? The combination of low nominal interest rates and high inflation during most of the 1946–1951 period meant that real (inflation-adjusted) interest rates were mostly negative, and sharply so during 1946 and 1947. And that happens to be precisely when private net fixed investment suddenly awoke from its decade-and-a-half long slumber. After that, as inflation declined, giving way to deflation in 1949, while nominal rates rose, real rates shot up, and investment fell off again. It sounds, some would say, like a classic case of excess money creation causing an unsustainable investment boom by driving real interest rates below their “natural” levels.

But here once again, appearances deceive. Stepping back to take in the larger picture shows that, despite the 1949 setback, there was nothing unsustainable about the postwar investment revival. Instead, after that setback, which was itself relatively minor, net private fixed investment returned to and soon exceeded its previous postwar high. Moreover, as the next chart shows, it continued on that modest upward trend, with only modest interruptions, for almost two decades after the March 1951 Treasury Accord freed interest rates from their former limits. Thus liberated, those rates eventually rose substantially; and because inflation was held in abeyance for most of the next two decades, real interest rates also rose. These developments strongly suggest that the postwar revival of net investment didn’t depend on the Fed’s ability to keep interest rates low.

***

To conclude: neither fiscal nor monetary stimulus played any substantial part in the postwar investment boom. Postwar fiscal policy had as its chief aim reducing the federal debt, and was therefore remarkably austere. Postwar monetary policy had as its chief aim keeping a lid on inflation, which invited over-tightening. Despite their essential conservatism, neither of these policies was so stringent as to have stood in the way of a robust recovery of overall private spending. That was itself no small thing. But if we seek the springs of the pronounced and permanent revival of investment, which was the key to a lasting recovery, we must keep looking.

Continue Reading The New Deal and Recovery:

• • Intro
  • Part 1: The Record
  • Part 2: Inventing the New Deal
  • Part 3: The Fiscal Stimulus Myth
  • Part 4: FDR’s Fed
  • Part 5: The Banking Crises
  • Part 6: The National Banking Holiday
  • Part 7: FDR and Gold
  • Part 8: The NRA
  • Part 8 (Supplement): The Brookings Report
  • Part 9: The AAA
  • Part 10: The Roosevelt Recession
  • Part 11: The Roosevelt Recession, Continued
  • Part 12: Fear Itself
  • Part 13: Fear Itself, Continued
  • Part 14: Fear Itself, Concluded
  • Part 15: The Keynesian Myth
  • Part 16: The Keynesian Myth, Continued
  • Part 17: The Keynesian Myth, Concluded
  • Part 18: The Recovery, So Far
  • Part 19: War, and Peace
  • Part 20: The Phantom Depression
  • Part 20, Coda: The Fate of Rosie the Riveter
  • Part 21: Happy Days
  • Part 22: Postwar Monetary Policy
  • Part 24: The RFC
  • Part 25: The RFC, Continued
  • Part 26: The RFC, Conclusion
  • Part 27: Deposit Insurance

  _____________________________

  [1] Mark Toma argues that, during the war, “the Treasury and Fed were implicitly committed to future money growth rates that would be consistent with low long-run inflation and [that the Treasury would] at the same time would restrict the quantity of government bonds that would be covered by the 3/8 percent peg…. In fact, the Fed encouraged limits on the weekly issues of new Treasury bills throughout the pegging period, although Treasury pressure sometimes served as a countervailing force.”

  [2] For details see Blinder and Brunet (2021) and sources cited therein.

The school choice landscape has changed dramatically over the last few years. Since 2020 alone, school choice programs have been launched or expanded in 20 states. This is good news for families in those states since some state education dollars can now follow their children to the learning options that work for them. It’s also good news for teachers and education entrepreneurs who will now have more sustainable funding to create new learning environments.

But staying abreast of new developments can be difficult. There’s where EdChoice comes to the rescue with the School Choice in America (SCIA) dashboard. “In my experience, some of the most valuable information policymakers, parents, and reformers seek simply describes what’s currently happening,” says John Kristof, a research analyst at EdChoice. “Some recent polling data from our monthly public opinion tracker finds that many parents don’t know what school choice options already exist in their state. Many lawmakers don’t know what other states have proven possible. SCIA offers an easy way to close those knowledge gaps.”

The front page of the dashboard is a clickable map that has icons to show which states have school choice programs. This is an easy way to see the whole nation at a glance. Clicking on a state gives you a list of programs in that state, and each program is linked to a page with details about the program’s eligibility, history, usage statistics, legal battles, and expert feedback.

Beyond the map and clickable state and program details, there’s a wealth of information in the “data drawer.” This terrific resource takes a little more digging to access. The helpful tour—which you open by clicking on the question mark to the right of the map—shows how easy it is to download the entire dataset or select the program, years, and states that interest you. You can even save it as a spreadsheet so you can sort and filter it however you want.

The SCIA dashboard is my go-to resource to find the latest information on what’s happening in every state. When I speak to education entrepreneurs who are looking to expand their reach, I often point them to the dashboard so they can weigh the school choice programs available throughout the country.

Even if you’re already familiar with SCIA, John recommends checking back soon. “Over the next couple months, we will be making updates to the dashboard to present the most up-to-date data for each of these programs,” he says.

In the summer of 2019, Turkey, my home country that had been going downhill for years under the populist and authoritarian rule of President Tayyip Erdogan, made some rare good news: The municipal elections of Istanbul and Ankara, the two largest cities, were won by opposition candidates. Also, the winner of Istanbul, Ekrem Imamoglu, had emerged as a new political star, who could perhaps beat Erdogan in a future presidential election. So, Turkish democracy was still alive, and there was still hope.

But let’s fast forward from 2019 to this week, when Turkey was shaken by shocking news. An Istanbul court sentenced Ekrem Imamoglu for more than two years in jail for “insulting state officials.” The officials in question were Turkey’s Erdogan-orchestrated judiciary, which Imamoglu had called “fools” for trying to cancel his very electoral victory in 2019, by recasting the ballots. (Maybe “apparatchiks” would be a more fitting term, but of course Imamoglu had the right to say whatever he thinks about an unabashedly partisan judiciary.)

Needless to say, this verdict is a travesty of justice, and it is purely political: Just months before the presidential elections scheduled for June—the exact date is not yet clear—the regime is attacking the most popular candidate against Erdogan. The legal process will still linger for a few months, but it is possible that Imamoglu’s verdict can be confirmed before the ballots, which will also legally ban him from politics for the next two years.

Why is Erdogan doing this now? Turkey’s pundits are heatedly debating the question. My guess is that Erdogan, by taking down the most threatening rival, wants to compete with the less charismatic leader of the main opposition party, Kemal Kilicdaroglu, whom he thinks he can beat. Erdogan may also be planning to grab the Istanbul municipality by sending Imamoglu to jail, and replacing him with one of his loyalists—as he did in many Kurdish provinces before.

The very fact that such calculations are necessary for Erdogan reminds that elections are still genuine and decisive in Turkey—unlike in a typical dictatorship, where the ruler always wins with some 99 percent of the vote. However, it is also painfully clear that Erdogan can tailor the whole political landscape by using the judiciary as his rod, and enlisting almost all major media as his propaganda machine. It is hard to call such elections “free and fair.”

Which proves all the concerns about “illiberal democracy” quite right. The latter is a simply electoral democracy that is devoid of political liberalism—with pillars such as freedom of speech, rule of law, and judicial independence. Without such guardrails, democracy can simply devolve into the tyranny of the majority, embodied in the whimsical rule of a strongman—which is exactly what Turkey is today.

How far Turkey will go down this road is still a curious question. No one also knows what will happen in the forthcoming presidential elections. But the Imamoglu affair suggests that Erdogan will do everything he can in order to win—and the tools in his arsenal are alarmingly abundant.

Thousands of immigrants are crossing the U.S.-Mexico border to request asylum in the United States. These people are not trying to evade detection of the U.S. government. They are turning themselves in for processing. The Wall Street Journal described the scene this way:

On Wednesday morning, several hundred migrants waited on the U.S. side of the Rio Grande for a chance to surrender to waiting Border Patrol agents, the first step in what is likely to be a long legal process to apply for asylum. The migrants stood in a single-file line, many huddled under blankets to shield them from near-freezing temperatures. It was a scene that has been repeated daily since the weekend.

Why is lining up in a single file line to wait to be checked and evaluated by the U.S. government illegal? This sounds like any day at Ellis Island before Congress closed legal immigration to most of the world. So what’s the problem?

Under 8 U.S.C. § 1182(a)(6)(A)(i), immigrants are “inadmissible” to the United States, and they are criminally liable under 8 U.S.C. § 1325(a) if they enter the United States at a “place other than as designated” by the Secretary of the Department of Homeland Security (DHS). In other words, the only reason that these asylum seekers are considered illegal immigrants is that they have entered the country at a location not designated by Secretary of Homeland Security Alejandro Mayorkas.

DHS Secretary Mayorkas could simply designate the entire border as a valid place to cross, and these violations of the law would immediately disappear (so long as the people crossing did not try also to evade detection). More narrowly, he could just designate many of the usual places that immigrants are already crossing to turn themselves in as places that are legal to cross so long as they wait to be processed.

Doing this would not immediately grant asylum seekers any status in the United States, and they could still be deported immediately if they had no credible claim. But erasing the legal violation would remove numerous legal difficulties that asylum seekers face after they enter the country. They could not be sent to prison for entering the country. They would not be subject to any legal barrier to adjusting their status based on family or employer sponsorship.

Of course, this prospect raises the important question: why didn’t the immigrants already enter at one of the designated ports of entry? The answer is that the government refuses to allow nearly all of them to enter there. Even though the 8 U.S.C. § 1158 plainly authorizes people to apply for asylum at ports of entry (or between them!), the U.S. government is not following this law:

Any alien who is physically present in the United States or who arrives in the United States (whether or not at a designated port of arrival and including an alien who is brought to the United States after having been interdicted in international or United States waters), irrespective of such alien’s status, may apply for asylum.

It also works with the Mexico government to prevent people from reaching ports of entry to apply.

CBP has long claimed it lacked “capacity” to process people at the ports of entry, turning them away—which leads them to cross illegally. This capacity excuse is a pretext to ignore their legal right to asylum. But accepting this premise, if DHS knows that they will be crossing somewhere else when it turns them away at those border crossing points, DHS is causing illegal immigration. If DHS prefers to force them to cross somewhere away from other travelers, it should just designate specific places for asylum seekers to cross—eliminating the violation of the law.

As important as the legal implications are, the political implications are just as important. If these entries are legal, it removes the most significant rhetorical tool for opponents of immigration. DHS has the power to change the story about the border from one of chaos and illegality to one of orderliness and legality, and its refusal to do so leads to greater hostility to immigrants and feeds into misguided “invasion” narratives around immigration. DHS should stop blocking asylum seekers and create a process for legal entry to the United States.

Photograph by Paul Ratje for The Wall Street Journal