An Immigration Reform Dream: What’s Trump’s Price?

08 Friday Sep 2017

Posted by pnuetz in Executive Authority, Immigration

Tags

Border Wall, DACA, David Harsanyi, Deferred Action on Childhood Arrivals, Deportation, Dream Act, Executive Overreach, Executive Power, Ilya Somin, Immigration Enforcement, Immigration reform, Michael Ramsey, Path to Citizenship, Prosecutorial Discretion, The Federalist, The Originalism Blog, The Volokh Conspiracy, Zachary Price

Two major issues weigh on critics and supporters of President Trump’s rescission of DACA, President Obama’s 2012 executive order establishing the Deferred Action on Childhood Arrivals program. First is the treatment of individuals who entered the U.S. illegally prior to mid-2007 at less than 16 years of age (and who were 30 or younger in 2012). Under Trump’s new order, these individuals would be subject to deportation in March 2018 or later, depending on their remaining DACA eligibility and the status of any renewal application already filed by then.

As an isolated question, draconian treatment of so-called “Dreamers” (taken from the “Dream Act”, which never made it through Congress) is difficult to justify. These individuals did not arrive here by choice or through any fault of their own, and the vast majority are now productive members of society. The problem, however, is the usual argument against amnesty: it creates an incentive for would-be immigrants to circumvent the legal immigration process in the hope of later forgiveness. If children of illegals are subject to lenient treatment once in the U.S., it probably magnifies that incentive. While some take a hard line with respect to deporting today’s Dreamers, many critics of DACA are strongly sympathetic to their plight.

The second issue defines another basis for opposition to DACA: the questionable legality of Obama’s original order. Obama issued another executive order in 2014 that essentially expanded DACA. That later order, already rescinded by Trump in June, was likely to be overturned by the Supreme Court. This article quotes from the majority opinion of the U.S. Fifth Circuit Court of Appeals:

“The administration’s interpretation of the Immigration and Naturalization Act, [5th Circuit Judge] Smith wrote, would effectively vest the Secretary of Homeland Security with the power ‘to grant lawful presence and work authorization to any illegal alien in the United States—an untenable position in light of the INA’s intricate system of immigration classifications and employment eligibility.’ In other words, Smith wrote, ‘the INA flatly does not permit the reclassification of millions of illegal aliens as lawfully present and thereby make them newly eligible for a host of federal and state benefits, including work authorization.’“

The key here is the clause “making them newly eligible for a host of federal and state benefits” without proper legislative authorization. In other words, Obama exceeded his authority. The original DACA order suffers from the same defect as the extension, and it was likely to be challenged as well. However, Ilya Somin has defended DACA as a matter of “prosecutorial discretion”, which was Obama’s original rationale for not enforcing immigration law for Dreamers. (But there is suspicion that the likelihood of adding to Democrat voter rolls appealed to Obama.) Enforcement against the children of illegal immigrants, Somin contends, is simply bad policy of the sort routinely avoided by prosecutors. In 2013, Zachary Price addressed this defense of DACA, including the application of earlier statutes specifically allowing discretion in immigration enforcement (also see this post by Michael Ramsey):

“The immigration [DACA] policy, in contrast, provides a more definite and specific guarantee of non-enforcement to a broad category of undocumented immigrants who fall squarely within the scope of removal statutes. … It’s worth noting (as some folks have helpfully pointed out to me) that the Obama Administration has maintained vigorous enforcement with respect to other groups of undocumented immigrants. But DACA goes beyond simply turning a blind eye to their unlawful presence in the country. It effectively grants a form of lawful status not contemplated by the applicable statutes through an exercise of prosecutorial discretion.

It’s true that there is a history to the practice of deferred action. Although this form of relief originated in executive practice, it’s now mentioned in several statutes, so to some degree at least Congress may have ratified it. … Yet the practice (as I understand it) originated as a form of case-by-case humanitarian relief. While immigration officials have used it categorically a few times in the past (for instance, to grant relief to immigrant students affected by Hurricane Katrina), I’m not aware of it ever being used for as broad and significant a group of immigrants as in the DACA program. So I think it’s hard to claim that there’s been even an implicit ratification of the practice sufficient to support the DACA program.“

Legislative action — a new attempt at some kind of Dream Act — could resolve the dilemma faced by Dreamers and their defenders while avoiding the legal objections to unrestrained executive authority. It’s likely that Trump is willing to exchange a continuation of the DACA regime, or even complete amnesty for Dreamers, to achieve other priorities, such as funding for his ballyhooed border wall. One could accuse Trump of using the Dreamers as pawns — why else would he have agreed to a grace period of six months? And why did he say, subsequently, that he would “revisit DACA” if Congress failed to act? That might give him some leverage with those who oppose DACA on the legal grounds discussed above, but it might undermine his ability to cut a deal for the wall or any other priority with Democrats.

David Harsanyi writes in The Federalist that “Rescinding DACA Is the Right Thing To Do“:

“If there’s one thing that exemplified Obama’s administration, it was its embrace of executive unilateralism. No administration in memory was stopped more often by courts on this front—often by unanimous Supreme Court decisions. … The Constitution makes no allowance for the president to write law ‘if Congress doesn’t act.’“

Somin notes that rescinding DACA, and even passing a law in this case, will do nothing to prevent this and future presidents from exercising excessive authority. That’s certainly true, but rectifying a case in which that authority was exceeded, along with recognition of the constitutional limits on executive authority, is worthwhile.

Congress should pass legislation offering relief to the Dreamers. In a best case scenario, new legislation would provide them with a clear path to citizenship, and it would also reform existing immigration law to allow for greater flows of immigrants through the legal process. Those provisions might come at the cost of building a wall, as well as funds for tougher immigration enforcement. And Trump has made merit-based criteria for issuing green cards and accepting immigrants a priority. That’s fine as long as: 1) “merit” is defined partly by economic needs, such as low-skilled farm labor; and 2) there is some sort of navigable process for refugees.

While the prospect of allowing Dreamers to be used as political pawns might be repugnant, the end result could be worthwhile. And we shouldn’t forget that some of those Dreamers, as children, were probably used as pawns by the very parents who brought them here.

Infrastructure: Public Waste & Private Rationality

25 Tuesday Jul 2017

Posted by pnuetz in infrastructure, Privatization

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Tags

American Society of Civil Engineers, Border Wall, capital costs, Donald Trump, infrastructure, Infrastructure Tax Credits, Jeffrey Harding, Milton Friedman, P3s, Private Benefits, Public benefits, Public-Private Partnerships, Reason Foundation, Underpricing, User Charges

The exaggerated deterioration of American infrastructure is the basis of a perfect bipartisan spending coalition. Proposed public spending on capital such as roads, bridges, high-speed rail, locks, dams, and water and wastewater systems is of obvious value to those who would build it, but the benefits for the public are not always beyond question. As Jeffrey Harding notes at the link, the American Society of Civil Engineers (ASCE) rates U.S. infrastructure as seriously deficient, but it is in their interests to do so. The news media finds the kind of horror story promoted by ASCE hard to resist:

“What they don’t tell you is that if you look at transportation issues over time, things have been getting better, not worse. … The Reason Foundation’s studies on state-owned highways (they are widely recognized as being leaders in this field) and other studies on highways and bridges reveal that there have been significant improvements of infrastructure measures like road and bridge quality and fatalities over the past 20 or 30 years. The facts are that, on the state level, overall spending on highways doubled during that period, and overall measures of highway transportation have improved.“

The point of building new infrastructure is the future flow of service it can offer. Creating construction jobs is not the point. If it were, the government could hire workers to dig holes with spoons, to paraphrase Milton Friedman. Nor should the timing of infrastructure investment be dependent on employment conditions. Unworthy projects are not made worthy by high unemployment. Politicians often attempt to sell projects to the public on exactly that basis, yet as Harding points out, increases in public spending on infrastructure seldom happen in a timely manner, and they often fail to create jobs in any case. This is partly due to the regulatory morass that must be navigated to get approval for new infrastructure, and also because the skilled labor required to repair or add infrastructure is usually occupied already, even when the jobless rate is elevated. In addition, expensive infrastructure projects are vulnerable to graft, which is compounded by the many layers of approval that are typically required.

Harding questions the ASCE’s insistence that inadequacy of our infrastructure is inhibiting U.S. productivity growth. If there is any truth to this assertion, it is probably more strongly related to how infrastructure is priced to users than to the state of the facilities themselves. For example, road congestion in certain areas is a chronic problem that can only be solved via efficient pricing, not by endless attempts to expand capacity. Not only does efficient pricing ease congestion, it enhances the profitability of improvements as well as other modes of transportation. A proposal to add infrastructure that is destined to be mis-priced to users is a plan to waste resources.

Donald Trump conveniently bought into and re-sold the notion that America’s infrastructure is unsound, and he is likely to garner support for an infrastructure initiative on both sides of the aisle. He would undoubtedly include the proposed wall at the Mexican border as an infrastructural need, but we’ll leave the wisdom (and payback) of that project aside for purposes of this discussion. As I’ve discussed before on Sacred Cow Chips, President Trump has at least learned that infrastructure is not and should not be the exclusive domain of the public sector. Trump’s infrastructure proposal calls for tax credits for “public-private partnerships” (Harding’s acronym: P3s). As Harding says:

“P3s let private companies design, build, and operate new infrastructure projects. According to Bob Poole, the Reason Foundation’s expert on privatization, P3s will result in projects that will be more economically productive (no bridges to nowhere) and would be much more cost effective. … These projects would be based on privatized systems which generate an income stream, and are financed by revenue bonds. Thus, the risks of these projects are shifted to private companies rather than to taxpayers.“

P3s solve several problems: they allocate private resources toward facilities for which developers expect high demand and user willingness to pay; they avoid higher levels of general taxation, instead allocating costs to the cost causers (i.e., the users); they give users a more accurate measure of opportunity costs when considering alternatives; and they avoid overuse. Too often, users of public infrastructure pay nothing, or at most they pay enough to cover operating costs with very little contribution to capital costs. Ultimately, that makes the quality and service level delivered by the infrastructure unsustainable. Private developers are unlikely to invest in such boondoggles as long as taxpayers are not obliged to subsidize them.

The P3 tax credits in the Administration’s proposal would certainly represent a public contribution to the funding of a project, but the incentive provided by those credits helps avoid a much more substantial committment of public funds. Moreover, the credits do not create the degree of forced economic stimulus that publicly executed projects often do. Rather, the availability of credits means that projects will be initiated when and if they are economically viable and profitable to do so. We can therefore dispense with the nonsensical goal of “job creation” and focus on the real problems that infrastructure investment can solve.

Some would argue that many types of infrastructure are too public in nature to be left to P3s. In other words, projects with pure public benefits would be under-provided by P3s due an unwillingness to pay by users of “the commons”. Yet there is no rule limiting the public role in the design of a public-private partnership, whether that refers to physical development, operation, or funding. Presumably, the more “public” (and non-exclusive) the benefits, the greater the share of development and maintenance costs that should be funded by government. Whether a piece of true public infrastructure should be funded is a standard question of public finance. Assuming it should, there is likely to be a significant role for private builders and operators. Finally, P3’s do not eliminate the potential for graft. Public review and ongoing regulation would still be demanded. In a sense, P3s are all formalized corporatist efforts, but a key difference relative to current practice is the use and risk of private capital rather than public funds. Ultimately, that won’t matter if failed developments are bailed out by public “partners”. The assets of a failed infrastructure project must be sold off to the highest bidder, presumably at a steep discount.

The standard narrative is that America suffers from substandard infrastructure is highly misleading. There are certainly needs that should be met, many with urgency, and there will always be a series of worthwhile repairs and replacements that require funding. Using P3s to accomplish these objectives demands recognition that 1) users typically derive significant private benefits from infrastructure; and 2) use is often underpriced, especially with respect to allocating capital costs. Infrastructure development can be encouraged by inducing private firms to put “skin in the game”. High-risk but potentially valuable projects might have trouble attracting private funds, of course, and that is as it should be. Politicians might ask taxpayers to fund such a project rather than shopping it to private developers. It therefore behooves voter/taxpayers to evaluate the benefits and sustainability of the project with the utmost skepticism.

Postscript: The image at the top of this post prompts me to reflect on whether a starship is infrastructure. It is certainly a transportation system. Is it a public good? In a large sense, the diversification offered by spreading humanity across multiple worlds can be viewed as a benefit to mankind in the future. But rides on the starship would offer private benefits, depending on one’s sense of adventure as well as the prospects for the home planet. Those private benefits, and the voluntary payments they induce, just might get it done.

Politicians and Infra-Hucksters

05 Thursday Jan 2017

Posted by pnuetz in Government, infrastructure, Technology

≈ 2 Comments

Tags

Border Wall, Congestion, Donald Trump, Dynamic Message Boards, economic stimulus, Efficient Pricing, Elon Musk, eminent domain, Heritage Foundation, High speed rail, Hyperloop, infrastructure, Jerry L. Jordan, Job Creation, Keystone Pipeline, Michael Sargent, Private Infrastructure, Reason Foundation, Solar Roads, St. Louis MO, Steven Horowitz, T. Norman Van Cott, Trolleys, Tunnel Boring, User Fees

We’ll soon have a new president and already we’ve heard new promises of infrastructure investment. Once again, a chorus of politicians and pundits decries the woeful state of America’s road, bridges, sewers and airport terminals. Then, there are hosannas in adoration of the economic stimulus and job creation promised by large public works projects. And of course there are proposals to integrate politically-favored technologies with new infrastructure. All three rationales for a publicly-financed infrastructure program are flawed. Our infrastructure is not as inadequate as many believe; it is bad public policy to justify infrastructure decisions on the basis of the construction jobs required; and new infrastructure should not be treated as a vehicle for large-scale deployment of unproven technologies.

Ownership

Much of our nation’s infrastructure is privately owned. This includes, but is not limited to, power generation and the power grid, communication networks, many water systems and sewer systems, most rail lines, some toll roads and bridges, and some river, sea and space ports. Maintenance and upgrades to private facilities, and to some public facilities, depend on the adequacy of the rates or fees charged to users. On the other hand, the quantity and quality of publicly-owned and operated infrastructure is often left up to taxpayers rather than users. Proposals for federal infrastructure investment are largely about these public facilities, but they might also involve subsidies for the development of private infrastructure.

Crisis or Crock?

In a Heritage Foundation research report, Michael Sargent notes that the poor state of the country’s public infrastructure is wildly exaggerated:

“The notion that America’s infrastructure is ‘crumbling’ and in uniquely poor condition is not supported by data. The percentage of the nation’s bridges deemed ‘structurally deficient (not necessarily unsafe, but requiring extensive maintenance) has declined annually since 1990 and now sits at under 10 percent, well under half of what it was 25 years ago. Similarly, analyses of highway pavement quality conclude that the nation’s major roads have been steadily improving in quality and are likely in their best shape ever. Our airports and airways safely move more people and goods than those of any other nation. Overall, the U.S. ranks near the top of G-7 nations for infrastructure quality.“

The usual poster child of the infrastructure “crisis” is the nation’s transportation system, but this report from the Reason Foundation shows that those troubles are something of a myth.

Nevertheless, there are always repairs, maintenance and replacement projects to be considered, as well as possible expansion and new facilities. Infrastructural shortfalls and expansion must be prioritized, but as Sargent emphasizes, an even larger number of projects should and probably would be handled privately if not for burdensome federal regulations. In addition, an irrational mistrust of privately-operated facilities among some segments of the public creates pressure to burden taxpayers with costs, rather than users. Complaints about congestion on roads offer a case in point: the best solutions involve efficient (and positive) pricing of existing capacity, rather than continued expansion of a “free” good. The avoidance of rational solutions like efficient pricing underscores the extent to which demands for increased public investment in infrastructure are driven by hyperbole, rather than sound analysis.

It’s About the Infrastructure, Not the Jobs

Public infrastructure projects are also pitched as effective engines of economic stimulus and job creation. Both of those claims are questionable. Most importantly, the real rationale for infrastructure investment is the value of the infrastructure itself and the needs it serves going forward. The public expense and the jobs required to produce it are cost items! This point was made recently by economist T. Norman Van Cott, who rightfully asserts that a given output is of greater benefit when its costs are low and when it requires less labor input. (Van Cott’s piece uses the Keystone pipeline as an example, a controversial private project that I find objectionable for its dependence on eminent domain actions.) The sharp distinction between creating value and creating jobs is also made here by Jerry L. Jordon and here by Steven Horowitz. Here is Horowitz:

“Creating jobs is easy; it’s creating value that’s hard. We could create millions of jobs quite easily by destroying every piece of machinery on U.S. farms. The question is whether we are actually better off by creating those jobs—and the answer is a definite no.“

Yet this is how so many infrastructure projects are pitched at the national, state and local levels. It’s also puzzling that economic stimulus is used as a rationale even when the economy is operating near its potential output. Even by the standards of traditional Keynesian economic analysis, that is the wrong time for stimulus. Infrastructure projects should be evaluated on their own merits, not on how many construction workers must be hired, or on how much of their paychecks those workers will spend. Many of them must be bid away from competing projects anyway.

The Public Investment Trough

Here’s a brief anecdote from my own experience with an “advanced” public infrastructure project. Some years ago in the region around my city, St. Louis, Missouri, transportation agencies began to install a network of electronic highway message boards to convey real-time information to drivers on road conditions, congestion, and various public service announcements. The 100+ signs in the area today are connected to operators in a central office via fiber optic cable. This type of system is used elsewhere, and it is partly funded by the federal government.

I seriously question the benefits of this system relative to cost. The signs themselves cost well in excess of $100,000 each. The fiber network is undoubtedly costly, and there are other fixed and variable system costs. The signs have an anachronistic look, vaguely the quality of old high school scoreboards. The information they provide generally adds little to what I already know (“12 minutes to I-270”). The signs are in fixed positions, so the occasional report of an accident or congestion usually comes too late to give motorists decent alternatives. The information the signs provide on road conditions is obvious. Missives such as “buckle up” are of questionable value. Before I depart on a commute, or if I have a passenger, we can consult maps and other apps on cell phones to avail ourselves of far better information. Other, more flexible technologies were outpacing the message boards even before they could be fully deployed, and the boards are still being deployed. This is a project that might have sounded brilliant to highway engineers 20 years ago, but it represented something of a luxury relative to other needs, and it still got funded. Today, it looks like waste.

The politics of infrastructure often means that the enabling legislation gets loaded with poorly-planned projects and shiny jewels to dangle before home constituencies. Legislators are so eager to demonstrate their sophistication that they fall over themselves to approve taxpayer funds for unproven but politically-favored technologies. For example, a recent post by Warren Meyer notes the technical folly of solar roads. These are unlikely to attract much private money because they represent such a monumentally stupid idea. Proponents will go after tax money instead. The same is true of ideas like Elon Musk’s tunnel boring project, for which he hopes to collect massive taxpayer subsidies. Musk claims that tunnels will eliminate road congestion, but efficient pricing would do much to eliminate this problem without tunnels, and other technologies like automated vehicles are likely to reduce congestion by the time Musk over-invests tax money in tunnel-boring equipment, roads and hyper-loops inside tunnels.

In general, taxpayers should be wary of “green infrastructure” proposals. A large number of bike lanes, pedestrian bridges and greenways sound wonderful, but they are serious cost inflators. Federal dollars are regularly squandered on charming but wasteful projects such as trolleys. Even worse are ongoing efforts to subsidize the construction of high-speed rail systems. All of these bright ideas should be resisted.

Let’s Be Rational

The country certainly has infrastructural needs, but claims that we face a crisis are greatly exaggerated. With a new administration and what are likely to be supporting majorities in both houses of Congress, the danger of rushing into big funding commitments is heightened. The sponsors of this kind of legislation will herald massive job creation, but that is incidental to the cost side of the ledger. The benefits of individual projects should be evaluated carefully in comparison to costs. Then they can be prioritized if deemed of sufficient value. Finally, large scale deployment of unproven technologies should be avoided on the public dime.

I haven’t even mentioned one very large infrastructure project that has been proposed by President-Elect Donald Trump: the border wall. I suspect that it would be easier and less expensive to solve the problem of border security using more advanced and flexible technologies, but the permanence and symbolism of a wall appeals to many of Mr. Trump’s supporters. The benefits of a wall in terms of border security and control of immigration flows are difficult if not impossible to evaluate, as are the costs to taxpayers, with Trump promising to extract some form of payment from Mexico. The wall, however, is being “sold” to the American public in emotional terms. Come to think of it, that’s how too many other infrastructure proposals are sold by politicians!

There are promising opportunities to improve the nation’s infrastructure through the private sector, where the value of projects is subject to evaluation by parties who must put “skin in the game”. This will be addressed in my next post.