Last week during one of their debates, all Democratic primary candidates supported government health care for illegal immigrants. This type of position is extremely damaging politically and, if enacted, would unnecessarily burden taxpayers for likely zero improvements in health outcomes. I expect the eventual Democratic candidate for president to not support this type of proposal, but it should be nipped in the bud.
After the debate, Democratic candidate Julian Castro argued that extending government health care to illegal immigrants would not be a big deal. “[W]e already pay for the health care of undocumented immigrants,” Castro said. “It’s called the emergency room. People show up in the emergency room and they get care, as they should.” It is true that some illegal immigrants use emergency room services thanks to the Emergency Medical Treatment and Labor Act and to Emergency Medicaid, but Castro leaned heavily into a stereotype often used by nativists. According to a paper published in the journal Health Affairs, illegal immigrants between the ages of 18–64 consumed about $1.1 billion in government healthcare benefits in 2006 – about 0.13 percent of the approximately $867 billion in government healthcare expenditures that year. That’s a fraction of the cost that would be imposed on American taxpayers by extending nationalized health care to all illegal immigrants. So, with all due respect to Mr. Castro, we do not already pay for their health care just because some illegal immigrants visit emergency rooms at government expense.
One of the reasons why immigrants individually consume so much less welfare than native-born Americans is that many of them do not have legal access to these benefits. Cato scholars have proposed making these welfare restrictions even stricter to deny benefits to all non-citizens and to not count work credit toward entitlements until immigrants are naturalized citizens – what the late Bill Niskanen called “build a wall around the welfare state, not around the country.”
Many American voters are concerned about immigrant consumption of welfare benefits. In a 2017 poll, 28 percent of Americans agreed with the statement that “Immigration detracts from our character and weakens the United States because it puts too many burdens on government services, causes language barriers, and creates housing problems [emphasis added].” That level of concern exists under current laws that restrict non-citizen access to benefits and even chill eligible non-citizen participation. I’d expect that poll result to worsen if new immigrants, especially illegal immigrants, were put on government health care program.
Extending government health care to illegal immigrants and other new immigrants would probably not improve healthcare outcomes for immigrants. According to the wonderful The Integration of Immigrants into American Society report published by the National Academies of Sciences, immigrants already have better infant, child, and adult health outcomes than native-born Americans, while also having less access to welfare benefits like Medicaid. Immigrants also live about 3.4 years longer than native-born Americans do. Illegal Mexican immigrants had an average of 1.6 fewer physician visits per year compared to native-born Americans of Mexican descent. Other illegal Hispanic immigrants made an average of 2.1 fewer visits to doctors per year than their native-born counterparts. Illegal immigrants are about half as likely to have chronic healthcare problems than native-born Americans. Overall per capita health care spending was 55 percent lower for immigrants than for native-born Americans.
Immigrants also lower the cost of other portions of the health care system. In 2014, immigrants paid 12.6 percent of all premiums to private health insurers but accounted for only 9.1 percent of all insurer expenditures. Immigrants’ annual premiums exceeded their health care expenditures by $1,123 per enrollee, for a total of $24.7 billion. That offset the deficit of $163 per native-born enrollee. The immigrant net-subsidy persisted even after ten years of residence in the United States.
From 2002–2009, immigrants subsidized Medicare as they made 14.7 percent of contributions but only consumed 7.9 percent of expenditures, for a $13.8 billion annual surplus. By comparison, native-born Americans consumed $30.9 billion more in Medicare than they contributed annually. Among Medicare enrollees, average expenditures were $1,465 lower for immigrants than for native-born Americans, for a difference of $3,923 to $5,388. From 2000 to 2011, illegal immigrants contributed $2.2 to $3.8 billion more than they withdrew annually in Medicare benefits (a total surplus of $35.1 billion). If illegal immigrants had neither contributed to nor withdrawn from the Medicare Trust Fund during those 11 years, it would become insolvent 1 year earlier than currently predicted – in 2029 instead of 2030.
American taxpayers should not have to pay for the health care costs of other Americans, let alone for non-citizens. For those reading this post who are very concerned about the well-being of immigrants, think of what would happen to public support for legal immigration if welfare benefits were extended in this way. Immigrants come here primarily for economic opportunity, not for government health insurance. They tend to be healthier than native-born Americans and lower the price of health care for others as a result – but the point would likely change if the laws were different. Let’s not build public support for reducing legal immigration, or increase reluctance to expand it, by extending government health care, at enormous public cost, to people who don’t need it.
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Is There Such a Thing as a Free-Market Gold Standard?
Twice recently I’ve come across arguments to the effect that, despite what some libertarians, goldbugs, cryptocurrency fans, and Fed Board candidates imagine, the idea that the historical gold standard kept governments from managing money, leaving the job to market forces, is a myth.
In his June 24th piece criticizing Facebook’s Libra Currency, which is being marketed as a sort of international stablecoin, Barry Eichengreen writes:
Mercifully, Facebook avoided the idea that a stablecoin will free us from the tyranny of the Federal Reserve. Typically, stablecoin purveyors invoke a mythical past in which the monetary unit of account was free of government manipulation and backed by tangible assets, such as gold in the 19th century. But as any historian will tell you, the 19th-century gold standard never operated this way. Governments were always involved. The gold backing of national monies was at most partial. Still, these simple facts don’t prevent the libertarian advocates of stablecoins from abusing the analogy.
More recently Greg Ip, in a WSJ article questioning Judy Shelton’s merits as a prospective Fed governor, made a similar point. “Goldbugs,” he says,
claim the gold standard takes away politicians’ and unelected central bankers’ control of interest rates, which they consider antithetical to free markets. … But it is a myth to claim the gold standard obviated discretion. Someone had to decide which metals would back the currency, and at what price, and how much gold had to be kept in reserve per unit of currency (the gold-cover ratio).
Even on gold, central bankers still had to decide interest rates. Whereas those decisions are now guided by inflation, unemployment and growth, back then they were also guided by the amount of gold in reserve. If gold was fleeing to other countries or stashed under people’s mattresses, the central bank had to raise interest rates to bring it back.
Although I’m neither a goldbug nor sold on Libra (the workings of which remain something of a mystery), and I’m happy to concede there has never been such a thing as a pristine free-market gold standard, I think that Eichengreen and Ip exaggerate the role government authorities played in “manipulating” or otherwise managing the historical gold standard. Moreover, I believe that the role of some governments was sufficiently small to justify treating their nations’ gold standards as “free market” systems, meaning ones in which market forces, including bankers’ pursuit of profits, rather than government-dictated policies, ruled the roost.
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New Evidence From British Columbia Provides a Strong Case for Harm Reduction Strategies
A study published last month in the peer-reviewed journal Addiction by researchers at the British Columbia Centre for Disease Control and the British Columbia Centre on Substance Use found that harm reduction strategies were responsible for the province’s opioid-related overdose death rate being less than half of what it otherwise would have been between April 2016 and December 2017.
The researchers noted that 77 percent of opioid-related overdose deaths during that time frame involved illicit fentanyl. Vancouver has long been a major port of entry for fentanyl and fentanyl analogs, produced in China and other parts of East Asia, often using historic seaborn drug trade routes.
During the 23 months ending December 2017 there were 2,177 overdose deaths in British Columbia, according to the British Columbia Centre for Disease Control. Using mathematical modeling methodology to estimate monthly overdose and overdose-death risk along with the impact of harm reduction interventions, the researchers concluded an estimated 3,030 overdose deaths were averted.
The three harm reduction strategies investigated were take-home naloxone kits, safe injection sites, and “opioid agonist therapy”— known in the U.S. as Medication Assisted Treatment (which includes methadone, buprenorphine, hydromorphone, and heroin assisted treatments in British Columbia). The researchers employed counterfactual simulations with the fitted mathematical model to estimate the number of deaths averted for each harm reduction strategy as well as the three strategies in combination.
While the harm reduction strategies combined for more than 3000 deaths averted, the number of lives saved by each strategy taken in isolation broke down as follows:
- 1,580 (1,480–1,740) deaths averted by take-home naloxone
- 230 (160–350) deaths averted by safe injection sites
- 590 (510–720) deaths averted due to opioid-agonist therapy
All three interventions worked in synergy to greatly reduce the death rate, but the widespread distribution of naloxone saved the most lives.
Michael Irvine, the study’s lead author, told Canadian Broadcasting Company reporters that in recent years the overdose crisis has been driven by a prevalence of fentanyl and fentanyl analogs.
Among the developed nations, Canada has been one of the hardest hit by the overdose crisis on a per capita basis, with overdose deaths in Vancouver, BC approximating those of some of the worst-hit states in the U.S. as recently as 2017. This recent study gives us reason to conclude that, had British Columbia not embraced harm reduction strategies, the per capita overdose rate would have far-exceeded that of the U.S.
Canadian policymakers are being urged to curtail the prescription of opioids to patients in pain, despite the fact that more than three-quarters of overdose deaths involve fentanyl and, as in the U.S., the majority of overdose deaths involve multiple other drugs as well, including cocaine, heroin, benzodiazepines, and alcohol. This approach is driven by the failure to recognize there is no correlation between the number of prescriptions written for patients and the incidence of non-medical use of prescription opioids or prescription opioid use disorder.
The Canadian government has also given in to pressure by the U.S. government to double down on its war on drugs. But in the U.S., researchers have learned that overdoses from the non-medical use of licit and illicit drugs has been on a steady exponential increase since the 1970s–the only variation being which particular drug is in vogue in any particular era–with no evidence of any slowing. It appears to be a result of sociocultural and psychosocial factors. There is no reason to believe things are much different in Canada.
Efforts to approach this problem by doubling down on supply-side interventions and the War on Drugs are doomed to fail—and will only cause more people to die. Fighting a war on drugs is like playing a game of “Whac-a-Mole.”
If the British Columbia experience should teach policymakers anything, it should be that harm reduction is the most effective way to end the overdose crisis. Ending prohibition would be the most consequential form of harm reduction.
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One Year Later, The Harms of Europe’s Data-Privacy Law
The European Union’s General Data Protection Regulation (GDPR), which went into effect just over a year ago, has resulted in a broad array of consequences that are expensive, unintended, or both. Alec Stapp reports at Truth on the Market:
GDPR can be thought of as a privacy “bill of rights.” Many of these new rights have come with unintended consequences. If your account gets hacked, the hacker can use the right of access to get all of your data. The right to be forgotten is in conflict with the public’s right to know a bad actor’s history (and many of them are using the right to memory hole their misdeeds). The right to data portability creates another attack vector for hackers to exploit.
Meanwhile, Stapp writes, compliance costs for larger U.S.-based firms alone are headed toward an estimated $150 billion, “Microsoft had 1,600 engineers working on GDPR compliance,” and an estimated 500,000 European organizations have seen fit to register data officers, while the largest advertising intermediaries, such as Google, appear to have improved their relative competitive position compared with smaller outfits. Venture capital investment in Euro start-ups has sagged, some large firms in sectors like gaming and retailing have pulled out of the European market, and as of March more than 1,000 U.S.-based news sites were inaccessible to European readers.
More in Senate testimony from Pinboard founder Maciej Ceglowski via Tyler Cowen:
The plain language of the GDPR is so plainly at odds with the business model of surveillance advertising that contorting the real-time ad brokerages into something resembling compliance has required acrobatics that have left essentially everybody unhappy.
The leading ad networks in the European Union have chosen to respond to the GDPR by stitching together a sort of Frankenstein’s monster of consent, a mechanism whereby a user wishing to visit, say, a weather forecast is first prompted to agree to share data with a consortium of 119 entities, including the aptly named “A Million Ads” network. The user can scroll through this list of intermediaries one by one, or give or withhold consent en bloc, but either way she must wait a further two minutes for the consent collection process to terminate before she is allowed to find out whether or it is going to rain.
This majestically baroque consent mechanism also hinders Europeans from using the privacy preserving features built into their web browsers, or from turning off invasive tracking technologies like third-party cookies, since the mechanism depends on their being present.
For the average EU citizen, therefore, the immediate effect of the GDPR has been to add friction to their internet browsing experience along the lines of the infamous 2011 EU Privacy Directive (“EU cookie law”) that added consent dialogs to nearly every site on the internet.
On proposals to base legislation in the United States on similar ideas, see Roslyn Layton and Pranjal Drall, Libertarianism.org.
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Venezuela’s Murderous Regime
A new United Nations investigation underscores the brutal nature of Nicolas Maduro’s government in Venezuela. As reported in the July 4 edition of the New York Times, UN investigators found that Venezuelan Special Action Forces “have carried out thousands of extrajudicial killings in the past 18 months and then manipulated crime scenes to make it look as if the victims had been resisting arrest.” In essence, government security units acted as death squads to eliminate regime opponents.
The death toll is shockingly large. Security forces “killed 5,287 people in 2018 and another 1,569 by mid-May of this year, in what are officially termed by the Venezuelan government ‘Operations for the Liberation of the People.’” The campaign of cold-blooded mass murder is made worse by the government’s cynical, Orwellian euphemism.
The UN document concludes that the actual number of killings may be even larger, noting that some independent reports put the total extrajudicial executions for “resistance to authority,” at well over 9,000. That higher number would come as no surprise to opponents of Maduro and his predecessor, Hugo Chavez. Critics have alleged for years that forces loyal to Maduro and Chavez have kidnapped, tortured, and murdered political adversaries.
In addition to the death squad outrages, the UN report confirms the Maduro government’s other crimes. Men and women detained for political reasons “were subjected to one or more forms of torture, including electric shock, suffocation with plastic bags, water boarding, beating and sexual violence.”
The UN revelations underscore an important distinction that critics of U.S. policy toward Venezuela must make. It is appropriate to criticize all forms of U.S. meddling in that country’s internal political affairs, including the continuation of U.S. economic sanctions that have worsened the misery of the already suffering Venezuelan people. Such sanctions merely inconvenience the country’s corrupt, socialist elite but have a much greater impact on ordinary citizens. Sanctions also give Maduro and his cronies a convenient, phony excuse for Venezuela’s mounting economic woes.
Americans certainly are justified in denouncing the trial balloons that the Trump administration has sent aloft about using military force to remove Maduro from power. By providing diplomatic and financial backing to the competing government of Juan Guaido, the United States already is excessively involved in Venezuela’s internal affairs. A military intervention would make matters even worse and could entangle the United States in yet another regime-change, nation-building quagmire. Maduro’s misguided supporters have the capability to mount a sustained resistance to a U.S.-led military occupation.
Opposing U.S. meddling, though, in no way requires critics to ignore, minimize, or excuse, the Maduro regime’s increasingly well-documented economic and human-rights abuses. Some left-wing opponents of Washington’s flirtation with another regime-change crusade are prone to conflate resistance to such a policy with acting as apologists for Maduro. The morally appropriate position is to oppose intervention but denounce Maduro for his corrupt, murderous dictatorship. The new UN report should erase all doubt about the shameful nature of his rule. If Guaido and his followers ultimately prevail (although that outcome is increasingly doubtful) decent people in the United States and around the world should rejoice that another regime that abuses human rights has ended up on the ash heap of history.
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State and Local Tax Differences
Americans are moving from higher-tax states to lower-tax states.
As I discuss in this study, 578,269 people moved from the highest-tax states to the lower-tax states in 2016, on net. Of the 25 highest-tax states, 24 of them had net out-migration. Of the 25 lowest-tax states, 17 had net in-migration.
The pattern seems clear to me, but the degree to which moves are driven by taxes versus other factors is subject to debate. An annual Census Bureau survey asks Americans who move the reasons for their decision out of 19 choices, but the choices do not include taxes.
Many of the largest migration flows are between states with the highest and lowest taxes. State-local taxes are 14.7 percent of personal income in the largest outflow state, New York, but they are just 7.5 percent in the largest inflow state, Florida. Florida’s government costs half as much as New York’s, yet the services are probably just as good.
There are large tax differences between cities. The District of Columbia government produces an annual study comparing state-local taxes on hypothetical families at various income levels in the largest city in each state. The study includes sales, property, individual income, and automobile taxes.
The table shows results for 2017. Families earning $75,000 a year could save about $5,000 a year moving from a high-tax city to a low-tax city. Families earning $150,000 could save about $10,000 with such a move. Bridgeport and Newark have very high property taxes. Other high-tax cities, such as Detroit and Philadelphia, impose city income taxes on top of state income taxes.
People move because of weather, housing costs, and job opportunities. But these sorts of large tax differences are likely driving migration patterns as well.
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A Strong Currency Is No Good Reason to Keep Tariffs High
An interesting debate has arisen in Ecuador during recent weeks over the following proposition advanced by authors at a Quito think tank: a dollarized country shouldn’t reduce its tariffs when the dollar is overvalued relative to the currencies of its regional trading partners (according to purchasing-power-parity measures) because that would undermine its “competitiveness” in export market. As several commentators have noticed, this is reminiscent of the Mercantilist view that a country will lose too much of its gold if it does not discourage imports with tariffs or promote exports with subsidies, a view that David Hume and Adam Smith debunked long ago.
The debate began with the publication of an essay by José Hidalgo Pallares and Daniel Baquero for CORDES, a leading economic policy think tank in Quito. They proposed that it is not “convenient” to reduce the general level of tariffs at the moment, with a strong dollar already making imports cheaper and exports more expensive for Ecuador, and with the economy operating at below capacity. Their concerns were macroeconomic and balance-of-payments related: “In recent years, imports have also grown more than exports … [T]he trade balance, which is one of the main components of the current account, registered a deterioration: from a surplus of $227 million in the first quarter of 2018 to one of just $2 million in the same period of 2019.” Reducing tariffs across the board, they argue, “would mainly favor consumer goods,” whereas “to revive the Ecuadorian economy, it is more advisable to take measures that really allow some recovery of external competitiveness, in order to encourage exports. Here fits an efficient labor reform, the elimination of excessive paper work[,] and trade agreements” that give Ecuadoran products better access to foreign markets. (This and all other translations are mine, Google-aided.)
Critical response to the essay was swift. Gabriela Calderón tweeted incredulously that CORDES, for years a strong critic of the tariff surcharges imposed by then-President Rafael Correa supposedly to “safeguard” dollarization, was now adopting the Correa position: “Amazing! Spend 10 years complaining about Correa and then reproduce his erroneous arguments in favor of trade restriction.”
I will argue that the CORDES proposition – namely that the advisability of a unilateral general tariff reduction depends on macroeconomic conditions – is mistaken. In a nutshell: The stock of money and the price level are self-regulating for a small country under dollarization. The size of Ecuador’s economy (gross domestic product) is comparable to that of Mississippi. Both are dollarized. What is true for Mississippi, in regard to the balance of payments, is also true for Ecuador: When the local prices of traded goods are too high for equilibrium with neighboring countries, arbitrage will bring them down. The problem of overvaluation that reduces Ecuador’s export competitiveness will resolve itself by a combination of (1) internal adjustments (input price reductions or productivity increases) that lower the cost-covering prices local producers need to charge when exporting goods, and (2) rising nominal prices in the trading partners (Colombia, Peru) whose currencies are presently relatively undervalued in exchange markets because inflation higher than Ecuador’s is anticipated.