Niskanen Notes
Pledging to Overcome the Military-Society Gap
Earlier this week, in their column at War on the Rocks, Nora Bensahel and retired General David Barno, both professors at American University, addressed an issue that I have discussed here a number of times: the gap between the U.S. military and American society. Bensahel and Barno do an excellent job explaining the problem and, specifically, the perverse incentives for the use of force this gap creates. I’m skeptical that their proposed solution would have the intended outcome. They write:
How can we strengthen and reinforce the principle that U.S. citizenship requires serving and defending the nation when called? One option might be instituting some sort of an oath-taking ceremony that mirrors the one undertaken by newly-naturalized U.S. citizens. Such a ritual could become part of Selective Service registration (which should expand to include women) or included at high school graduation ceremonies. That would reaffirm to all of those present that the responsibility and the risks of fighting America’s wars belong to the population as a whole, not just to an ever-shrinking, committed cloister. Even just suggesting such a controversial proposal would spark a vibrant debate among students, teachers, and parents about the responsibilities of citizenship. This would be a small but important step to help close the nation’s yawning civil-military divide while also highlighting and strengthening the other civic responsibilities of U.S. citizens.
While they are right to note that a major power conflict in the future cannot be ruled out, the odds are still vanishingly small—meaning, as a practical matter, most Americans will, in practice, remain disconnected from the military. The United States is more likely to continue fighting the limited wars of the first two decades of this century, so the words of any “oath” are likely to be easily forgotten by most eighteen-year-olds shortly after the ceremony ends (or, if they’re anything like I was at that age, before). It is not as if Bensahel and Barno are proposing universal military training that would require regular military preparation for the public, but which has been routinely rejected in American history as antithetical to democratic values.
They note early in their piece that part of the oath immigrants take when they become citizens includes a pledge to “bear arms on behalf of the United States when required by law.” There is an empirical question here about whether this pledge makes any difference in the opinion of naturalized American citizens regarding the use of military force. Are they less likely to support military action? Is the issue more salient for them due to the inclusion of those words? Are they more prepared for the possibility they may be called upon to fight in a major power conflict should one occur?
Like Bensahel and Barno, I worry about the rise of a “warrior caste” as fewer Americans have any tangible connection to the military. And I appreciate their efforts to find a solution that addresses the Americans public’s disconnection from the consequences of the use of military force. I think, however, that further research is needed to see if their proposal would have its intended effect.
Carbon Tax Crippling?
Vance Ginn and Megan Ingram of the Texas Public Policy Foundation argue against carbon taxation, saying that a carbon tax would do crippling harm to the American economy:
Because it’s a tax on energy production by fossil fuels that primarily fuel our livelihood, it’s a tax on virtually everything we do. It would mean people paying more for everything they do, eat, wear, and use. Reducing carbon dioxide to a taxable good means the subjection of nearly every facet of human existence to taxation.
The costs are real — and crippling.
The whole point—and the primary advantage—of a carbon tax is its ubiquity. Under a carbon tax, prices of energy and consumer goods go up because the things that people buy and consume are produced and delivered by a system laden with carbon emissions. By taxing carbon emissions, every transaction is incentivised toward lower-carbon options of production, delivery and consumption. People producing and buying stuff can switch to low-carbon options, where it is cost-effective and advantageous. The actors involved in trading X for Y will have a much better idea of what X for (less carbon) Z will be cost-effective and advantageous than will a central planner designing policies to reduce carbon emissions through efficiency standards, regulations, or etc. By its widespread nature, the carbon tax will also influence decisions across a wider range of economic activity than an army of bureaucrats would ever be able to accomplish.
And even then, ubiquity doesn’t imply that a carbon tax would be crippling. That is a question of how one calibrates a carbon tax. Here Ginn and Ingram have doubts:
Just as it’s hard to overstate the harm of one, it’s difficult to understate — indeed, even to know — the benefits. That’s because the calculations of the “social cost” used to justify a carbon tax are so subjective in their attempt to quantify the value of human lives and livelihoods, in order to sum up how climate change might affect them. As economist and MIT Professor Robert Pindyck notes, these calculations “can be used to obtain almost any result one desires.”
Furthermore, these models fail to account for how reliable, affordable energy from traditional sources benefit people — by extending lives, fighting disease, reducing hunger, and alleviating poverty.
I have my own concerns about estimates of the social cost of carbon. But it is worth pointing out, that is an uncharitable invocation of Pindyck, who in the same piece wrote “even though we don’t have a good estimate of the SCC, it would make sense to take the Interagency Working Group’s $21 (or updated $33) number as a rough and politically acceptable starting point and impose a carbon tax (or equivalent policy) of that amount.” That the social cost of carbon is somewhat subjective means it should be determined by Congress, agents of our democracy, rather than bureaucrats.
No one who flips a light switch or starts a car doubts the benefits of reliable and affordable energy, but accounting for them is only half the ledger. Figuring out the remote damages caused by climate change is the other half. Comparing the two is completely reasonable. When economist Richard Tol did the calculation last year, he found that the private benefits of consumption that created CO2 emissions were something like $411 per ton of CO2 emitted, ten times the Obama Administration’s social cost of carbon. That very comparison should allay fears that a carbon tax will halt economic activity. Even if we managed to price carbon at its social cost, the private benefits of emitting CO2 will continue to produce and consume as they shift to low-carbon options on the margin.
Should we have a special tax on “data”?
Facebook co-founder Chris Hughes has a provocative new essay in The Guardian arguing for “a new tax on the revenues of any companies that collect and store meaningful amounts of information and data about people to build their businesses.” While his proposal is not fully fleshed out, it’s nonetheless interesting to think through. Ultimately, I find myself skeptical of the need for a special tax on data companies, for a few reasons:
1) Operationalizing a “data tax” into law would be very tricky
What counts as “data” is hard to pin down metaphysically, much less as a matter of law. As a result, I suspect any attempt to operationalize a data tax into law is likely to be highly technology- and medium-specific. Is it phone meta-data? Keystrokes? The content of what you post online, or also your lurking behavior? Is it only data that’s permanently stored? Is it just the raw inputs or also the new data created after it has been transformed? What about satellite data tracking the movement of cars to inform a highway project? Do I own my driving patterns? How are all these kinds of data weighed against one another for relative significance or degree of ownership?
2) We shouldn’t tax mobile factors
The rule of thumb in tax policy is to tax the factor of production that is least mobile. Land and other natural resources, wages and consumption are all great candidates. Data, on the other hand, are perhaps most mobile factor of production ever created. A data tax is therefore likely to create a lot of inefficient avoidance behavior, including firm restructuring. Maybe the “data layer” part of the software stack gets off-shored. Or maybe the data tax spurs the creation of third-party data holders who specialize in minimizing tax incidence through creative accounting, and otherwise take-on various novel forms of liability that an explicit ownership stake on one’s data will create.
3) Data creation is a public good
Hughes writes:
One person’s data is worth little, but the collection of lots of people’s data is what fuels the insights that companies use to make more money or networks, like Facebook, that marketers are so attracted to. Data isn’t the “new oil”, as some have claimed: it isn’t a non-renewable natural resource that comes from a piece of earth that a lucky property owner controls. We have all pitched in to create a new commonwealth of information about ourselves that is bigger than any single participant, and we should all benefit from it.
This is an astute point, but ultimately cuts against the argument for a special data tax. In essence, Hughes is saying data has all the properties of a public good:
- data is non-rival; it can be duplicated ad infinitum;
- data is relatively non-excludable; platforms and data brokers are able to capture comparable data many times over;
- user generated data has large benefits that are hard for any one individual to capture.
All told, this suggests we ought to (if anything) subsidize data creation, not tax it. Which is roughly what we’ve done throughout history: Before VC backed companies began launching micro-satellites into orbit we had GPS systems run by NOAA and DoD; before Facebook knew our entire life story we had social surveys run by the US Census, and identity services provided by the SSA and DMV; the list goes on. Private data creation has thus in some sense beat the odds thanks to the bootstrap provided by bundling data generation with valuable, free services. In other words, overcoming the chicken and egg problem of building a data-centric platform requires capturing the benefits of network effects. Internalizing the network externality with a data tax wouldn’t just lead to marginally less data; it would potentially jeopardize the very pricing strategy two- and multi-sided platforms companies depend on to grow.
Here are related posts on the topic from Alex Tabarrok and Will Rinehart.
Lotteries, Caps, and Red Tape
Or: How I Learned to Stop Worrying and Love New Restrictions on Capped H-1Bs
The new H-1B rules are more restrictive, but some of the effects are more subtle than they may first appear.
The H-1B program is unambiguously good for the United States, beneficiaries, and the businesses that employ them. To the extent that restrictions affect the total supply of visas, they are almost certainly harmful. But overwhelming excess demand above current caps means that some restrictions don’t affect total supply of visas as much as they affect the distribution.
To be clear, ending H-4 employment authorization is harmful and destructive, as my colleague Matthew La Corte explains. So too is making renewals more onerous, removing the International Entrepreneur Rule, or placing more restrictions on the flexibility of H-1B holders. But the new restrictions on petitioners are more ambiguous. The same effects I explored in the context of the policy memorandum issued days before the petition window applies to new regulations being considered by USCIS.
For cap-exempt petitioners, more scrutiny and restrictions will reduce the total supply of H-1B labor. But for petitioners subject to the cap, new H-1B applications are not the win-win proposition that they could be in the absence of a cap. Instead, it’s a zero-sum game where an approval for one employer means one fewer approval available for another. And under the lottery-based allocation, USCIS must give equal weight to all employers, even if one is petitioning for an employee worth much more.
Without legislation, USCIS cannot adopt an auction system, which would allocate visas to the most valuable workers, nor can it set its own minimum salary threshold so that the number of petitioners is equal to the capped number of visas. But that does not mean USCIS has no ability to shift the allocation of visas toward higher value workers. It can do this imperfectly with new restrictions. While not as efficient as an auction would be, new restrictions can be an approximation of an efficient allocation. If new rules screen out more relatively-lower salaried jobs and raise the average salary of applicants, they raise the expected value of our H-1B program. They make it harder for some people to get an H-1B but they simultaneously make it easier for others. The trick is to make it harder and easier for the right people respectively.
Winnowing the applicant pool by new regulations is a third-best solution, at most. But it might be the first-best solution possible via regulation. Most of the new restrictionist rules coming out of USCIS deserve severe criticism. But the new restrictions on capped visas deserve some leniency.
Senator Paul’s Pompeo Capitulation
After initially declaring his opposition to CIA Director Mike Pompeo’s nomination for secretary of state, yesterday Senator Rand Paul announced that he would instead vote to confirm him. The junior senator from Kentucky is well within his rights to change his mind, but his explanation doesn’t make a whole lot of sense. Senator Paul laid out his reasoning on Twitter:
So, according to Paul, he can now support Pompeo for secretary of state because he agrees with President Trump that the Iraq war was a mistake and the United States should end its military presence in Iraq. But there are a few of problems with this explanation. First, while it’s great that Pompeo might now acknowledge that the Iraq war was a mistake, that would be more relevant if he were being confirmed for secretary of state in March 2003, not 2018. Second, and related, if mistaken beliefs about the use of military force are important, the relevant questions should be about American military involvement in Syria or a potential war with North Korea. Did Senator Paul ask the president or his nominee about the potential for further strikes on the Assad regime? Or America’s course of action with regard to North Korea should upcoming talks with the Kim regime failto achieve denuclearization? And third, while Senator Paul seems pleased that Pompeo now agrees with President Trump that the U.S. military presence in Afghanistan should come to an end, it’s unclear the president agrees President Trump given the open-ended military mission he committed the country tolast year.
Last year, journalist James Antle argued that Paul was working to stay in the Trump administration’s good graces—for example, voting to confirm drug warrior Jeff Sessions as attorney general—to prevent foreign policy hawks, such as Elliot Abrams and John Bolton, from joining the administration through his position on the Senate Foreign Relations Committee. While Trump personally nixed Abrams appointment to deputy secretary of state, Bolton is now national security advisor, a position that does not require Senate confirmation.
The plan Antle described, to the degree it ever existed, doesn’t seem to be going great.
While it’s possible the senator secured some concessions from the president that he did not include in his tweeted explanation last night, I wouldn’t hold my breath given the track record so far.