Because this series is about the New Deal’s contributions to economic recovery, it’s essential that we recognize the difference, as Roosevelt himself did, between recovery on one hand and relief and reform on the other. A New Deal policy that undoubtedly offered relief to those harmed by the depression, or one that achieved reforms with indisputable long-run benefits, might not have made the depression any shorter, and might even have lengthened it.
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White House Declares Xylazine-laced Fentanyl “An Emerging Threat”
Today the Biden Administration declared that fentanyl laced with xylazine (“tranq”) is an “emerging threat.” In February, I wrote about how the veterinary tranquilizer xylazine is being added to fentanyl to boost its potency, causing more people to die from overdosing. This mixture is more deadly than fentanyl alone because xylazine is not an opioid, and overdoses from it that cause people to stop breathing cannot be reversed with naloxone. Xylazine causes blood vessels to constrict, and if it gets into the tissues surrounding blood vessels, it can lead to tissue necrosis and deadly soft tissue ulcers. Some users’ ulcers have become so severely infected that surgeons must amputate limbs to save their lives.
I explained how tranq’s appearance on the black market is just the latest example of the Iron Law of Prohibition: “The harder the law enforcement, the harder the drug.” Enforcing prohibition incentivizes those who market prohibited substances to develop more potent forms that are easier to smuggle in smaller sizes and can be subdivided into more units to sell.
I made the same points when I testified before the House Judiciary Subcommittee on Crime and Government Surveillance last month. I urged the Subcommittee members to avoid doubling down on law enforcement and drug interdiction because such interventions only turbocharge the Iron Law, fueling the development of even more potent and deadly drugs and drug combinations. For example, I warned that the synthetic opioid isotonitazene, which users call “iso,” purported to be 20 times the potency of fentanyl, started appearing in 2019 and is increasingly detected in overdose toxicology studies.
Alas, my warnings have been falling on deaf ears as policymakers continue to propose doubling down on the same policies that have failed since the second war on drugs began in 1971. Some in Washington call for the military to invade Mexico to root out the drug cartels. Others seek to pile on penalties for drug possession or sale, from mandatory minimums to the death penalty.
In declaring tranq a threat, Dr. Rahul Gupta, director of the Office of National Drug Control Policy, said the administration is considering making the currently unscheduled veterinary drug a Schedule III drug under the Controlled Substances Act. That would be a futile gesture. Fentanyl, methamphetamine, and cocaine are Schedule II drugs; diacetylmorphine (heroin) and cannabis are Schedule I drugs. Scheduling has not deterred the black-market sale of any of those drugs.
Alas, policymakers continue flailing with futile gestures in response to the worsening overdose crisis. Today’s lawmakers are either slow learners or refuse to see the evidence. President Nixon declared “war on drugs” 52 years ago. It took only 13 years (1920–1933) for lawmakers to realize that alcohol prohibition only made alcohol consumption more dangerous and deadly while profiting underworld criminals and promoting violent crime.
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California-Style Top Two Is a Mistake for Montana
In Montana, legislators are considering an unusual elections proposal. In an effort seen as targeting incumbent Sen. Jon Tester (D), Senate Bill 566 would adopt a “Top Two” election system, but only for one specific election: the 2024 U.S. Senate contest. Under Top Two, all candidate regardless of party run in a so-called jungle primary. Only the top two candidates then advance to the general election in November, even if they’re both members of the same party.
Writing at FiveThirtyEight, Nathaniel Rakich pokes holes in the political theory underlying this move. It’s true Tester has won twice in the past on a plurality of less than 50%, with Libertarian candidates taking a few points in each of those elections. But it is mathematically unlikely he would have lost head-to-head. As Rakich explains, it can not simply be assumed that all of those third-party votes would have otherwise gone to the Republican candidate. Even if the larger share of them had, an implausibly lopsided supermajority would have been needed to change the results. In Tester’s most recent reelection in 2018, it’s a moot point because he won with over 50% of the vote. The partisan advantage provided by knocking spoilers off the ballot is often overstated. In reality, in most cases it wouldn’t matter even if the third party candidate “beats the spread,” that is, exceeded the margin of victory between the Republican and Democratic candidates.
Political motives aside, Top Two is a terrible system, one of the few electoral reforms widely panned on both sides of the aisle. Top Two has been in place for several years in California and Washington state, and it’s recently under well-deserved fire in both. No other state has adopted it in well over a decade. There are good reasons it hasn’t caught on, even in an era of rising support for electoral reform.
Top Two was intended to to promote more competitive elections and encourage more moderate candidates. It has done neither. Instead, the system has produced only dysfunction and dissatisfaction. It has created manifestly undemocratic results, such as advancing two Republican candidates in a Democratic-majority district or vice versa. It also creates the unseemly spectacle whereby some voters go to the polls in November and see candidates from only a single party on their ballot, more reminiscent of elections in the Soviet Union than the United States. The number of spoiled ballots also increases exponentially under Top Two, with millions of voters refusing to mark either candidate in a one-party election.
I wrote more about Top Two’s failures in California here. The Montana proposal is subject to the same critiques and others as well. Making such a change only for one election, targeting one particular incumbent, is an improper way to design election rules and procedures. As noted above, it probably would not accomplish its intended goal of defeating Tester by keeping third-party spoiler candidates out of the race. And it could backfire in dramatic fashion. The larger party in a state and the non-incumbent party (here, Republicans on both counts) will tend to attract more candidates to run in the primary. This results in a greater risk of the party fracturing and thus failing to advance any candidate to the general election. It puts parties in the untenable and often impossible position of trying to clear the field and discourage too many of their own candidates from running.
While Tester is not seen as likely to face a strong Democratic primary challenger, it’s worth considering the possibility. In a race where two Democrats are splitting, for example, 40% of the primary vote, and as many as six or seven Republican candidates are splitting their party’s 60%, it is entirely possible that two Democrats would take the top two spots. In November, voters would have no Republican option even though Montana voted for Trump over Biden by sixteen points, and even though more primary voters wanted a Republican candidate than a Democrat. Making sure there’s a strong second Democratic candidate in the race might even be a reasonable strategic move for Montana Democrats if Top Two passes.
There are other options to address the problem of spoiler candidates. Runoff elections such as those used in Georgia are one possibility, as is ranked choice voting. But ultimately, electoral rules should not be bent to try to achieve a desired outcome in a specific race. Exploring alternatives to first past the post elections is a worthy goal, but Top Two is a step in the wrong direction.
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Importance of Startup Businesses
This Cato study examined the role of startup businesses and the angel investors who fund them. It discussed how startups create jobs, generate innovations, and inject competition into markets.
Covering some of the same ground, a new piece in the Wall Street Journal by Christopher Mims discusses differences between large and small high-tech firms. Compared to large firms, small firms tend to have less bureaucracy, assume more risk, act more quickly, and may have better worker incentive structures.
The moment Noam Bardin, former chief executive of navigation app Waze, knew that life at a big company would be profoundly different from running a startup came soon after he sold his company to Google. ‘The first few weeks after the acquisition, we began dealing with the bewildering corporate bureaucracy,’ says Mr. Bardin. ‘What seems natural at a corporation—multiple approvers and meetings for each decision—is completely alien in the startup environment: make quick decisions, change them quickly if you are wrong.’
… big companies of every sort tend to give their employees incentives to be cautious rather than bold, to pursue overly complicated solutions rather than simple ones, and to seek promotions over serving the customer.
[The findings of a new study] show that when inventors join large firms, they get a pay bump, but they also produce fewer new innovations, relative to inventors hired by young firms.
… At big companies, people generate new ideas and get them in front of customers more slowly because of misaligned incentives, bureaucracy and institutional risk aversion, says Mr. Bardin. ‘The people who stay at a big company have to play the same games as everyone else, which means their innovative side doesn’t help them,’ he adds. ‘Their political side is what gets them promoted.’ People at big companies tend to have plenty of good ideas, he adds. The difficulty is with bringing them to fruition.
Both large and small businesses are crucial for a growing economy. We need an ecosystem, or spontaneous order, where both can thrive. What we don’t need is antitrust laws, which give policymakers the impossible task of central planning. What we don’t need is Federal Trade Commission chair Lina Khan deciding what sort of competition is “fair,” as she told Mims.
Rather, we need policymakers to avoid imposing barriers to startups and their financing. They should avoid regulatory burdens that hit small firms harder than large firms. They should repeal entry barriers such as occupational licensing and certificate of need laws. And they should cut America’s high capital gains taxes to support the flow of risk capital to startups.
More policy lessons for startups are discussed here and here.
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Arizona Governor Hobbs Makes the Right Call by Vetoing Fentanyl Mandatory Minimums Bill
Today Arizona Governor Katie Hobbs vetoed SB 1027, which would have placed a mandatory minimum of 10 years in prison on the first offense, and 15 years on the second offense, for anyone convicted of possessing, distributing, transferring, selling, or manufacturing heroin, fentanyl, or fentanyl analogs. In 2006 Arizona voters passed Proposition 301, imposing mandatory minimum prison sentences for possessing, transferring, selling, distributing, or manufacturing methamphetamine. This did nothing to decrease meth-related deaths. Meth-related drug deaths per 100,000 increased nationally by 1,500 percent between 2006 and 2021. From 2020 to 2021, meth-related deaths in Arizona increased by 33 percent. Why would lawmakers expect it to work differently with fentanyl?
No evidence exists that mandatory minimum laws deter the illegal drug trade or affect overdose deaths. And multiple studies show “no relationship between prison terms and drug misuse.” In 2020 Arizona ranked seventh among all states in prison population, with 526 prisoners per 100,000 population, and spent $30,000 per prisoner that year. Adding more people to the prison population will cost taxpayers money, with nothing to show for the millions spent.
Mandatory minimums will also make it easier for prosecutors to engage in coercive plea bargaining, which is responsible for more than 94 percent of state-level criminal convictions and disproportionately impacts people in lower socioeconomic groups who can’t afford to post bail or hire good lawyers.
As I testified to the U.S. House Judiciary Subcommittee on Crime and Federal Government Surveillance last month, harsher penalties—including death—will not deter the drug trade. Most drug dealers already factor these risks into their decision to get into the business and, correctly, have a greater fear of being killed by rival cartels and dealers than they fear federal or Arizona law enforcement.
I also told the Subcommittee about the “Iron Law of Prohibition” (a variant of what economists call the Alchian-Allen Effect): “The harder the law enforcement, the harder the drug.” Enforcing prohibition incentivizes those who market prohibited substances to develop more potent forms that are easier to smuggle in smaller sizes and subdivide into more units to sell.
During alcohol prohibition, bootleggers and dealers were not smuggling beer and wine but whiskey and other hard liquors. At football games, tailgaters drink beer and wine but smuggle flasks of hard liquor into stadiums that prohibit fans from bringing alcoholic beverages.
The Iron Law of Prohibition is why cannabis THC concentration has grown over the years. It is what brought crack cocaine into the cocaine market. And it made fentanyl replace heroin as the primary cause of overdose deaths in the United States.
Therefore, doubling down on penalties will do nothing to deter drug dealing and drug possession but will increase incentives to create new, more potent drugs. And it’s already happening: the veterinary tranquilizer xylazine is being added to fentanyl to boost its potency and ravage Philadelphia and other East Coast cities.
Doubling down on penalties will also undermine Arizona’s “Good Samaritan Law,” intended to make drug users unafraid of calling first responders if a person with whom they are doing drugs has an overdose. If mandatory minimums have any deterrent potential at all, it is the potential to deter people from calling 911.
The rising overdose rate understandably exasperates Arizona lawmakers. But they should think about unintended consequences before acting out of frustration. Repeating the same mistakes that drug prohibition enforcers have made for the last 50 years only worsens matters. If Arizona lawmakers want to take meaningful steps to reduce Arizona drug overdose deaths, they should remove government obstacles preventing harm reduction organizations from helping their neighbors, starting with the state’s drug paraphernalia laws. In vetoing this bill, Governor Hobbs didn’t allow anger and frustration to trump reason.
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Abandoning the US, More Scientists Go to China
The Organisation for Economic Co-operation and Development (OECD)—an intergovernmental organization with 38 member countries—has published new data showing that the United States is losing the race for scientific talent to China and other countries. China’s strategy to recruit scientific researchers to work at China-affiliated universities is working.
In 2021, the United States lost published research scientists to other countries, while China gained more than 2,408 scientific authors. This was a remarkable turnaround from as recently as 2017 when the United States picked up 4,292 scientists and China picked up just 116. As Figure 1 shows, the rest of the OECD and China have both surpassed the United States for net inflow of scientific authors.
The OECD data are not measuring the movement of non-Chinese into China or non-Americans into the United States. The OECD tracks inflows and outflows of published scientific researchers based on changes in institutional affiliation. If an author who was previously affiliated with a different country publishes another article in a new country, the new country will be credited as receiving a new research scientist. The OECD credits more Chinese scientists returning to China for the sudden reversal in Chinese and American inflows.
This is a disturbing trend that started before the pandemic. In fact, it appears to coincide with the Trump administration’s “China Initiative”—more accurately titled the anti-Chinese initiative. Launched in November 2018, the Department of Justice’s campaign was supposed to combat the overblown threat of intellectual property theft and espionage. In reality, it involved repeatedly intimidating institutions that employed scientists of Chinese heritage and attempting malicious failed prosecutions of scientists who worked with institutions in China. U.S. Attorney Andrew E. Lelling has even admitted that the initiative that he helped lead “created a climate of fear among researchers” and now says, “You don’t want people to be scared of collaboration.”
If Chinese scientists are afraid to work in the United States, that means that the United States will not benefit from their discoveries as much or as quickly as China will. Although the Justice Department claims to have shut down its “China Initiative,” my colleagues doubt that Chinese scientists will be free from unjust scrutiny going forward. The U.S. National Institutes of Health is still bragging about having caused the firings of more than 100 scientists and shutting down research by over 150 scientists—over 80 percent of whom identify as Asian.
The administration continues to maintain contrary to evidence that Chinese industrial espionage—by scientists working in the United States—is a significant threat to the country. Universities and U.S. companies think the far greater threat is losing out on talented Chinese researchers. If the United States wants to deal a blow to the Chinese Communist Party, it should start by trying to fix the damage that it has done in the last few years and liberalize immigration from China.
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Did South Korea Spy On Congress?
There’s been quite an uproar over the past week regarding the latest Pentagon document leak. While much of the attention has been focused on material dealing with Ukraine, another U.S. ally is not happy about alleged American snooping on its internal affairs: South Korea.
Responding to the allegations, South Korean Democratic Party leader Lee Jae-myung said, “If it is true that they have spied on us, it is a very disappointing act that undermines the South Korea‑U.S. alliance, which is based on mutual trust.”
What the South Korean minority party leader may not be aware of is that his own government has a history of spying on his U.S. counterparts in the American Congress. The evidence comes in the form of a partial declassified FBI memo dated December 5, 1975, obtained by Cato via a Freedom of Information Act request.
The exact confidential source of the information remains classified nearly 50 years later, but the source was not only aware of FBI interest in the South Korean espionage and influence operations, but was seeking information from the Bureau as well–specifically the names and positions of the South Korean intelligence officers operating against Congress, suggesting the source may have been an intelligence or law enforcement officer from another agency or department.
The late Senators Strom Thurmond (R‑SC) and James Eastland (D‑MS) and Representative Otis Pike (D‑NY) were all involved in the drama, though to what degree is difficult to say given the still ridiculously high level of redaction in the five-page memo. The memo reveals the FBI’s Washington Field Office (WFO) was investigating at least some individuals mentioned by the confidential source. Whether any further action was taken by WFO in connection with this case is not known to the author.
These episodes–old and new–are just reminders that allies spy on or try to influence each other nearly as much as they do on their adversaries.