Today is the 150th anniversary of the pounding of the gold spike that represented completion of the first transcontinental railroad. Union Pacific, which now owns the complete route, plans to bring its newly restored Big Boy steam locomotive to Ogden to recreate, with 4–8‑4 locomotive 844, the joining of the UP and Central Pacific in 1869. Numerous museums and history societies are planning exhibits and meetings.

While it would be fascinating to watch the Big Boy operate, you’ll have to excuse me for otherwise being unenthused about this event. As I see it, the first transcontinental railroad was the biggest boondoggle in nineteenth-century America, and one that — as later railroads proved — we could have lived without. Unfortunately, it is still being cited as an example of why twenty-first century America should do even more foolish things like build high-speed rail.

Railroads were the high-tech industry of the mid-1800s. They revolutionized both passenger travel and freight movement and mode it possible to farm and extract resources in remote locations. Yet, like today’s high-tech industries, many planned and some actual railroads were little more than securities schemes to separate naive investors from their money. The first transcontinental railroad did so on a grand scale, relying not on naive investors but a gullible Congress willing to give away tax dollars and resources.

The story is told in detail in Railroaded: The Transcontinentals and the Making of Modern America by Stanford University historian Richard White. To entice investors into building a continuous line from the Mississippi River to the Pacific shore, Congress agreed to give the railroads 10 square miles of land for every mile of track. In addition, it would loan builders $16,000 a mile for construction on flat lands and $48,000 a mile in the mountains.

The leaders of the Central Pacific (which built from California) and Union Pacific (which built from the Mississippi) quickly realized that immediate profits could be made by contracting construction out to themselves. They created separate companies that built the railroads as cheaply as possible, then billed the government the full amount of the available loans. The railroads were committed to eventually repaying the loans, but that responsibility belonged to a different set of investors, while a narrow inner circle of each railroad’s leaders owned the highly profitable construction companies.

The Central Pacific even went so far as to hire a geologist who claimed that the Sierra Nevada Mountains started just outside of Sacramento, many miles away from the real mountains, so they could collect the full $48,000 a mile for that segment. Using techniques like this, the people who owned the construction companies earned millions of dollars in profits before the railroads were even completed.

Later, when people became suspicious about the loans, the companies bribed the vice president, secretary of the treasury, and important members of Congress to shut them up. Eventually, some unbribed Congressmen held a hearing and subpoenaed the Central Pacific’s books to find out how much it really spent on construction. Charles Crocker, who was treasurer of both Central Pacific and its construction contractors, appeared at the hearing to announce that the books had mysteriously gone missing. He thought that maybe his partner, Mark Hopkins, had accidentally thrown them out. Hopkins wasn’t there to testify, having conveniently passed away a few years before the hearing.

Altogether, the Central and Union Pacific railroads received $55 million in loans (about a billion dollars in today’s money) and 19.5 million acres of land. Although they were supposed to sell this land to actual settlers, they ended up keeping much of it because, even with the railroad nearby, few were willing to try to farm in the mountains or Great Basin. Although the land was not immediately valuable, by the mid-twentieth century the lands the railroads still owned were probably more valuable than the railroads themselves.

Congress learned its lesson and gave no more loans to railroad construction in the nineteenth century. But it still gave land grants to the Northern Pacific, Atlantic & Pacific (Santa Fe), and Southern Pacific to build more transcontinental railroads. As if to demonstrate that it was too soon to build a transcontinental railroad, the Union Pacific, Northern Pacific, and Santa Fe all went bankrupt in 1893. The Central Pacific escaped bankruptcy because of its access to Nevada silver mines, while the Southern Pacific almost went bankrupt but was saved only when its leader, Colis Huntington, illegally diverted funds from the Central Pacific, which he also controlled, to the SP.

Both UP and SP eventually repaid the loans (by which time most of the people who had become millionaires from the construction scam were dead). But the terms of the loans were so vague that they were able to convince the courts to allow them to pay a lot less than they would have paid if they had paid the interest rates paid by the government on the bonds it sold to finance the railroads. By one estimate, they saved at least $56 million in interest charges — about $1.5 billion in today’s dollars.

In 1893, the year most of the railroads that had received land grants went bankrupt, the Great Northern Railway completed its line from St. Paul to Seattle. Built without any subsidies, the railway was built in segments, with each segment financed by the profits from the previous one. First (under the name of St. Paul, Minneapolis & Manitoba Railway), it went from St. Paul to the Red River Valley of Minnesota and North Dakota, which was soon producing at least a quarter of the wheat grown in the United States. Then it continued to Minot, North Dakota, opening up even more wheat land.

Then, in 1887, the Great Northern build 640 miles of track from Minot to Helena (and soon after Butte), Montana, giving it access to mines that were then paying monopoly prices to the Northern Pacific (in Helena) and Union Pacific (in Butte). Finally, having changed its name to Great Northern in 1890, it built from Great Falls to Seattle, finishing in January, 1893.

That was just weeks before the economic panic that sent some 200 other railroads into bankruptcy. Great Northern survived that panic because it had been built to haul freight, not to get land grants or construction loans. It was able to earn a profit in the greatest American recession before the Great Depression even though it had to compete with other companies that didn’t have to repay their creditors because they were in receivership.

Great Northern showed that a transcontinental railroad didn’t have to be a boondoggle. Considering the productive farmlands in Nebraska, Kansas, and California, plus the valuable minerals in Colorado and Nevada, a transcontinental could have been built on the UP-CP route, following the Great Northern model, without government subsidies. It just wouldn’t have been completed in 1869.

Nor is there any reason to think that building the railroad early helped promote economic prosperity along its route. The Wyoming and Nevada segments of the rail route remain some of the most desolate regions of the country. Nor was it vital to keeping the country together. There were plenty of railroads connecting the North and South, but they hardly prevented the Civil War. Nor was anyone in California talking about seceding the union if they didn’t get a railroad connection to the rest of the country.

Scandalous profits, corruption, and bribery all seem to be a part of mega follies like the first transcontinental railroad. We should remember it today not as a hallmark of American enterprise but as an example of what not to do.

Instead of entering what many anticipated would be the home stretch of negotiations to end the nearly yearlong trade war, U.S. tariffs on about $200 billion of imports from China are set to increase from 10 percent to 25 percent tomorrow morning. There is plenty of speculation as to what happened, who’s to blame, whether President Trump is engaging in negotiating tactics described in “The Art of the Deal,” and which economy is better situated to withstand a wider, longer trade war (as if a 10 percent economic contraction means victory if the other economy shrinks by 15 percent).

The most prominent explanation for the abrupt reversal is that U.S. negotiators learned that their Chinese interlocutors were backing away from previous commitments to resolve the forced technology transfer problem, which is one of the most important U.S. objectives in these talks. After mulling that development last weekend, Trump opted for escalation. He also promised that the balance of Chinese goods (another $250 billion of imports not yet tariffed) soon will be hit with rates of 25 percent, as well. In response, Beijing announced it will impose yet-to-be-specified countermeasures.

Interestingly, this week’s developments haven’t completely torpedoed the negotiations. A somewhat smaller (than originally planned) delegation of Chinese officials is in Washington for negotiations slated to begin at 5pm, which gives them exactly 7 hours to sort everything out before Trump’s higher tariffs take effect at the stroke of midnight. Don’t expect a comprehensive deal or even the contours of one to materialize, but with Chinese Vice Premier Liu He making the trip to Washington despite this latest upheaval, there is at least some hope that the actual tariff escalation will be deferred.

It turns out that the fine print in the Federal Register notice announcing the new rates states that products leaving China after 12:01, Friday, May 10, will be subject to the higher tariffs. It takes about two weeks for a cargo ship departing Shanghai to arrive in Long Beach, so negotiators really have seven hours, plus about two weeks, to reach a deal before Customs has to tax U.S. importers at the new, higher tariff rate. Of course, time is much shorter (seven hours plus about twelve hours!) for importers of high-value, fragile, and perishable products, which are typically transported by air.

As of this moment, the United States has punitive tariffs in place on approximately $250 billion of imports from China. Since last July, tariffs of 25 percent have been levied on imports that were valued collectively at about $50 billion in 2017. Nearly all of those goods are intermediate inputs or capital equipment—the purchases of U.S. producers. Trump advisor Peter Navarro was pleased to note at the time that, in selecting the products to target, he and colleagues used a special economic model to help them avoid burdening consumers by focusing on business purchases, as if businesses don’t pass their higher costs onto consumers in the form of higher prices or onto to their shareholders and workers in the form of lower profits. Thanks, Pete!

After Beijing retaliated, the Trump administration imposed 10 percent tariffs on an additional $200 billion of Chinese goods. This time, the majority of targeted products were consumer goods. It is this tranche of products for which tariffs are slated to increase to 25 percent at midnight. Makes one pine for the days when Navarro worried about consumers.

If matters aren’t resolved quickly, the likelihood is very high that all U.S. goods imports from China will be hit with tariffs of 25 percent. Let me try to put that in some perspective.

In 2017 (before the punitive tariffs were in place), U.S. imports from China totaled $504 billion and duties paid to U.S. Customs amounted to $13.5 billion, which is an average applied tariff rate of 2.68 percent. Last year, when tariffs of 25 percent on $50 billion of Chinese goods were imposed in June and July, and additional tariffs of 10 percent on $200 billion of Chinese goods were imposed in late September, the value of imports from China totaled $543 billion and the duties collected came to $23 billion—an average applied tariff rate of 4.23 percent. Nearly $10 billion of costs associated with the higher tariffs were imposed on consumers, businesses, shareholders, and employees.

It turns out that for many products Americans purchase from China, demand is fairly price inelastic. In other words, a one percent increase in price generates less than a one percent decline in quantity demanded. Total revenue rises. At least that is the case for broad swaths of products within the range of price increases attributable to the tariffs. Afterall, despite that tariffs, import value rose from $504 to $543 billion in 2018. Maybe there aren’t many substitute sources or the costs of finding substitutes and switching is too high relative to the tariffs.

A 25 percent across-the-board tariff could generate different effects. Demand may be more price elastic for more products at that price range. In other words, we will likely see a decline in import value from China if 25 percent tariffs are imposed. That means that the added costs directly attributable to the tariffs would not be 25 percent of $543 billion (the 2018 value), for example, because the value of imports will be lower. How much lower depends on these elasticities and other factors. However, 25 percent of $543 billion is not an unreasonable, upper end estimate of the costs to U.S. consumers and businesses that would be attributable to a 25 percent across the board tariff. That’s $135 billion. That’s a cost of about $400 for every person in the United States. That’s a lot.

Former Ohio Governor John Kasich paves the way for sound thinking on highways in his new Wall Street Journal op-ed. Eliminate most of the federal gas tax, ditch unneeded federal regulations, and let the states fund their own highways.

Unfortunately, it appears that Congress and the White House are heading toward a $2 trillion federal spending plan. That’s getting it wrong. Getting it right would require returning money and control back to the states.

… Any new plan should shift control of infrastructure funding to states and municipalities, letting them directly manage their needs and establish their own priorities. That was the aim of a bill I sponsored in 1998 as a member of Congress.

… Instead of sending gas-tax money to Washington, which keeps some and returns only part of the money to the states, Congress should end the program. Scale back the 18.4‑cent-a-gallon federal levy to a few cents a gallon, leaving enough money to maintain the interstate system and oversee other safety concerns. With the bulk of the tax eliminated, states would be responsible for levying their own taxes to build and maintain their transportation systems. States would regain control and stop losing money to Washington.

Washington could also help by removing regulations that prohibit state-collected tolls on interstate highways and keep states from privatizing rest areas. States need more options to finance infrastructure improvements, and drivers would get more value for their gasoline-tax dollars.

Congress will be considering legislation next year to reauthorize highway and urban transit programs. The two key reforms should be: 1) Kasich-style devolution of most highway funding and spending, and 2) elimination of all federal funding, spending, and control over urban transit. There is no proper federal interest in urban transit. Indeed, federal subsidies are a key reason why most big cities have bloated, inefficient, mismanaged, unionized, government-owned bus and rail systems.

More on transit here, highways here, and infrastructure here.

Customs and Border Protection (CBP) just announced that they have apprehended 531,711 people so far during the fiscal year (FY) 2019. CBP apprehended 109,144 people in April alone, marking the second month in a row that more than 100,000 people have been apprehended. Relative to the end of April in FY 2018, apprehensions this year are up 84 percent and the number is more than double just for the month of April relative to last April. Although the number of apprehensions is rising, the number of criminal aliens encountered by CBP is continuing to drop.

CBP defines criminal aliens as those who have been convicted of crimes here or abroad if the conviction is for conduct which is also a crime in the United States. From the beginning of FY 2015 through the end of April 2019, the absolute number and percent of criminal aliens encountered by CBP, which includes Border Patrol and the Office of Field Operations, have fallen in every year. In 2015, about 4.9 percent of all CBP apprehensions were criminal aliens. For FY 2019 through the end of April, only about 1.9 percent of people apprehended by CBP were criminal aliens.

The absolute number of criminal aliens apprehended is also dropping. If the number of criminal aliens apprehended continues to decline apace for FY 2019, the absolute number will be also about 35 percent below the total number apprehended in 2015. To put that in perspective, CBP has already apprehended about 87,000 more people so far in FY 2019 than in all of FY 2015.

From FY 2015 to FY 2019, the percentage of those apprehended by CBP who were non-criminals rose from 95.1 percent to 98.1 percent while the percentage who were criminals fell from 4.9 percent to 1.9 percent (Figure 1). In absolute numbers, criminal aliens have also declined from 26,932 apprehensions in FY 2015 to 10,173 through the first seven months of FY 2019. If the trend of criminal alien apprehensions continues for the rest of FY2019, there will be about 17,439 by the end of this FY – well below the 20,486 recorded in 2018.

The most persistent argument in support of closing the border, harsher border security methods, or restricting asylum is that those being apprehended are criminals who pose a serious threat to Americans. Based on data supplied by CBP, the absolute number of criminal aliens and their proportion of all apprehensions along the border are lower in FY 2019 than in previous years. Furthermore, these numbers provide evidence that the current surge of Central American women and children is better from an American security perspective than a large surge of single men. Although the current immigration issues on the border present challenges, they do not present serious criminal challenges.

Tensions in the Middle East are getting higher, with the announcement that Iran would take steps that could make it harder for them to comply with the terms of the nuclear deal – and more importantly, that they would potentially violate the deal if the other parties to the agreement don’t do more to mitigate the impact of U.S. sanctions.

The announcement came after weeks of Trump administration moves to ratchet up pressure on Iran, from oil sanctions waivers to designating the IRGC as a terrorist organization. Just this week, John Bolton announced that the U.S. would be sending “a clear and unmistakable message to the Iranian regime” by speeding up the deployment of a carrier strike group to the region.

Is the Trump administration pushing for war in the region? It’s hard to say. As I point out in a recent article: 

While there are superficial similarities with the 2003 Iraq war, the Trump administration has made no real effort to actually make the case for war against Iran. Instead, they’ve spent the last two years alienating US allies in Europe, doing everything possible to undermine international non-proliferation frameworks, and generally giving the impression that America will be to blame in the case of a conflict. To be blunt, if the administration is seeking war, they’re doing it in a very stupid way.

Unfortunately, that doesn’t mean that conflict won’t happen:

Just because the Trump administration isn’t uniformly pushing for war doesn’t mean it couldn’t happen. The slow, purposeful build-up to the invasion of Iraq in 2003 is one way to start a conflict. But miscalculation and mistakes are another. By repeatedly escalating the situation – particularly in the military realm – the Trump administration risks an unplanned clash with Iranian-backed forces in the Gulf, Iraq, or Syria.

You can find the whole article, along with discussion of the differences between Trump’s advisors on this question, over at Inkstick. 

Yesterday, Cato released my latest policy analysis entitled “Terrorists by Immigration Status and Nationality: A Risk Analysis, 1975–2017.” Much of it is an update and expansion of my original policy analysis on this topic from 2016. I added two more years of data, estimates of the number of people injured, and a handful of non-deadly foreign-born terrorists whom I had failed to include in my original paper. The annual risk of being murdered in an attack committed by a foreign-born terrorist by visa category is very similar to my original study as there were only a handful of victims from attacks perpetrated by foreign-born terrorists in 2016 and 2017. 

Overall, the chance of being murdered by a foreign-born terrorist was about 1 in 3.8 million per year during the 43-year period in which 3,037 people were murdered. Foreign-born terrorists who entered on tourist visas were the most deadly, responsible for over 96 percent of those deaths – largely because 18 out of the 19 9/11 hijackers entered on tourist visas. 

The changes to this analysis mentioned above are small, but there are two major additions that you should pay attention to. The first is that I included all 788 native-born terrorists during this time by applying the same exclusion criteria that I applied to foreign-born terrorists. It took years and reading tens of thousands of pages of government documents, news stories, dissertations, reports by non-profits, and more biographies of sketchy people than I care to remember. Just for the record, there are a lot of Nazis who have been killed in shootouts with the police but most of them are not terrorists. All 788 native-born terrorists are listed in the appendix. If you think I missed somebody or included somebody I shouldn’t have, please let me know. 

The second major addition to the updated policy analysis is that I categorized all terrorists by the ideology that motivated them. In order of the size of their body counts, the ideologies are Islamism, Right, White Supremacy, Left, Black Nationalism, Anti-abortion, Unknown/​Other, Foreign Nationalism (Armenian terrorists targeting Turks in revenge for the genocide), Separatists (Puerto Rican independence, Texas secessionists, etc.), Anti-specific Religion (anti-Semitic shooters, etc.), Political Assassination, and Religious (non-Islamist).

I decided to separate White Supremacists, Right, and Anti-Abortion terrorists because they are all different ideologies. True, they would mostly all label themselves as right-wing, but this enhanced level of detail conveys a deeper understanding of American terrorism. Most Black Nationalists, Left, and Separatist terrorists would also label themselves as left-wing, but I made the same judgment call and separated them into their sub-ideologies for the same reason. Similarly, separating Islamist terrorists into Sunnis or Shiites wouldn’t add much clarity so I didn’t do that. 

After the Christchurch mosque terrorist attack in New Zealand in March, many people wrote that right-wing or white-supremacist terrorism is on the rise. While my updated report only covers the United States through 2017 and most of those writers were discussing the issue globally, my research can provide some evidence of whether this is true inside of the United States.

Over the entire 43-year period, the deadliness of Islamist terrorism dwarfs Right, White Supremacy, and Anti-abortion terrorism by factors of 16, 40, and 239, respectively. The picture changes somewhat more recently as Islamists are responsible for 58 percent of all murders in terrorist attacks since 9/11, White Supremacists are responsible for 17 percent, Right terrorists for 10 percent, Left terrorists for 8 percent, and then the numbers get tiny. Islamism is still the deadliest terrorist ideology in the post‑9/​11 world relative to Right, White Supremacy, and Anti-abortion, but by smaller factors of 6, 3, and 27, respectively. Those numbers may well have diverged in 2018 and 2019, but I doubt they’ve changed enough to alter the general pattern.

Since 9/11, 184 people have been murdered by 378 terrorists in attacks on U.S. soil. Of those 378 attackers, 62 managed to murder at least one person in an attack. That means that only 16.4 percent of attackers succeeded in murdering somebody. On this count, Right and White Supremacist terrorists are the most likely to succeed in murdering at least one person in their attacks at 28 and 22 percent, respectively. Islamist terrorists have been less successful, with only 9 percent of them succeeding in murdering at least one person. However, because there were so many Islamist terrorists and each one of them was deadlier on average, that ideology still inspires the deadliest terrorists. It’s a bit premature to write the epitaph for Islamist terrorism in the United States. 

The main lesson from this report is that there are very few terrorists of any ideology or origin and even fewer who manage to murder Americans. The 3,518 total murder victims of terrorism killed by foreign-born, native-born, and unknown terrorists from 1975–2017 account for only about 0.4 percent of the roughly 800,000 homicides during that time. The ideology, frequency, deadliness, and origins of terrorists are fascinating but these numbers are so small that it is difficult to tease out any trend, let alone to be overwhelmed by fear. 

Advocates have successfully pushed in several states for the passage of state constitutional amendments promoted as a bill of rights for crime victims, under the banner of “Marsy’s Law.” I’ve got a new piece at Real Clear Policy pointing out some of the problems with that:

For example: In the name of protecting their privacy, and especially shielding them from fear of possible intimidation, the measures restrict dissemination of personal information about crime victims. While the impulse involved is understandable, and there have long been legitimate ways of accommodating it, it is also essential that accused persons have access to evidence they need to prepare the case in their defense.…

Meanwhile, the laws can deprive the public of information about crime that is legitimately important to them, as when, for example, a murder occurs in their neighborhood. …

Underlying several of these problems is a point made by [one commentator]: “In many cases whether the accuser is a ‘victim’ is only decided after a trial.” To be accorded rights before that point may presume the outcome, and can also give a complainant or accuser valuable leverage.

Consider, for example, the phenomenon by which cops have employed the laws to conceal their identities from the public after shooting civilians who were then charged with having assaulted the officer [as discussed by] my Cato colleague Jonathan Blanks in a recent Cato Daily Podcast. … Blanks “notes that police officers wear their names on their uniform and act in the name of the public in public. ‘That information, by nature, must be public’.”

Whole thing here, including a mention of Cato scholar Roger Pilon’s testimony against a similar constitutional proposal more than two decades ago. And much more at Overlawyered on how, to quote Radley Balko, “Laws named after crime victims and dead people are usually a bad idea.”