Posted by on June 28, 2015

I have stated before that the argument over immigration is in many ways a disguised debate about the welfare state.  Further proof of this contention comes from Europe, where “welfare tourism” has become a major issue.

“Welfare tourism” is the supposed movement of people from the poorer countries of the European Union (“EU”) to the wealthier ones, primarily to enjoy greater welfare benefits and better social services.  Reform to curb this movement is one of the principal demands of David Cameron, the Conservative Party Prime Minister of the United Kingdom, prior to the UK’s referendum on EU membership in 2016 or 2017.

The EU is nearly a perfect laboratory for an experiment on the interaction between immigration policy and the welfare state.  Within the EU, the free movement of people is guaranteed; citizens of any EU country have the right to reside and work in any other EU state.  In addition, under current EU law, any citizen of an EU country has the same rights to welfare benefits and social services in his adopted land as a native of that country.  Combine this latter point with the wide disparity in income, opportunities and benefits between EU countries – where the wealthiest countries have a GDP per capital of about three times the poorest, with commensurate differences in the generosity of the welfare state – and the basis of the experiment is obvious.  As is the analogy to the US situation: the wealthy northern states of the EU are, to the poorer states of the south and east of Europe, as the US is to Mexico.  Except the natives of the poorer states in Europe don’t even need to get their feet wet in the Rio Grande.

There is a lively debate on whether the new immigrants have helped the wealthier countries in Europe and how prevalent “welfare tourism” is.  Exchange Romanians, Poles and Bulgarians for Mexicans, and the debate will sound familiar to any American.  But I think that there is no disputing the political impact of the welfare state on the willingness of countries to receive immigrants.  For example, the UK’s demands for reform have recently been echoed by Lars Løkke Rasmussen, who is heading up the coalition trying to form a new government in Denmark after last week’s elections:

It would be a disaster for all of us if we arrive at a situation where Cameron doesn’t get the platform he needs to win a referendum….Some of the points the British are prioritizing match my own thinking, namely that we need to strike a new balance between the free movement of labour and what welfare services those rights entitle a person to.

It couldn’t be clearer.

Greece: An Update

The Greek debt crisis continues to trundle along, with suggestions that this weekend is “make or break” time.  But we have heard this before.  It is clear that the fault line runs through the Greek banking system, which loses deposits at a greater or slower pace depending on the apparent progress of the negotiations.  Mondays therefore loom large, since this is the traditional day for the declarations of the banking holiday and capital controls that a liquidity crisis in Greece would require.

It is useful to summarize the current state of the negotiations.  Broad agreement has been reached on the financial goals of a restructuring.  The dispute now is about the way to achieve these goals.  The creditors want them to be achieved primarily through cost cuts, including in the pension system, and broad-based tax increases, including through a simplification of the multi-tiered value added tax (“VAT,” a form of sales tax).  The Greeks have instead offered greater pension contributions (from business and employees), the retention of VAT preferences for “necessities” and higher taxes on business income (including a one-off 10% surcharge on companies making over EUR 500,000 per year).  The Greeks would also like an explicit commitment to further debt relief, which everyone knows is coming in one form of another, but which is politically very difficult for the creditors, especially in Germany where any deal would have to go through parliament.

For good reasons, the creditors place little faith in the Greeks’ ability to collect additional taxes.  More importantly, they believe that the only way to restore growth to the Greek economy is to unburden the productive sectors of society, without which they think that the debt – or a significant portion of it – will never be repaid.  Finally, they complain that Syriza, the ruling party of Greece, is simply perpetuating the flagrant “clientelism” that has gotten the Greek state into the problem to begin with, in this case by defending their political constituencies among government employees and pensioners.

The Greeks respond that this is an insufferable violation of Greek sovereignty and an “indignity” that the other bailout countries did not have to have to endure, which is not totally true.  The creditors respond with, basically, “he who pays the piper calls the tune.”

And so the debate continues.   Meanwhile, the problem for Greece grows larger by the day as the economy, which was showing signs of recovery prior to Syriza’s election, flounders and more money flees the banking system and the country, much of it never to return.  But, so long as the bond markets in the “contagion” countries of Spain, Italy and Portugal remain calm, the rest of Europe only cares so much.

*********

Late flash: After failing to win any further concessions, the Greek Prime Minister, Alexis Tsipras, has called a surprise referendum on, well, nobody quite knows what, in large part because this is a far more technical issue than is typically put to the public.  (For example, the only other time a referendum has been used in Greece since it emerged from military rule in 1974 was on the issue of “Do we keep our king, ‘yes’ or ‘no.'”)  The referendum was approved in the Greek parliament by a “red/black” coalition consisting of Tsipras’ far left-wing Syriza coalition and the far right-wing Golden Dawn party, proving that the lunatics are truly running the asylum.  The EU finance ministers have put down their pens and, in the words of the Finnish representative, “Plan B is fast unravelling and becoming Plan A.”  After the announcement of the referendum, many Greeks have rushed to their banks to withdraw their last funds.

Negotiation by the Syriza government has been amateurish, slow and incompetent from the beginning; the last-minute tactic of a referendum continues this pattern.  The creditors also share in the blame, particularly for the original sin of loading Greece with a debt that cannot, and therefore will not, be repaid.  But above all, the Greek crisis shows the dysfunctionality of the Eurozone.  From the beginning, many economists warned that the Eurozone could not work, but the politicians, as is so often the case, chose to ignore them in pursuit of their great European project.  How fitting that this act of hubris is meeting its nemesis in Greece.

The Supremes

This has been a busy week for the Supreme Court, which came down with three much-anticipated decisions.

The first was the decision on same-sex marriage (Obergefell v. Hodges ).  As a libertarian, I have absolutely no problem with gay couples enjoying the same legal rights as heterosexual ones.  I also see no reason why they should be spared the ravages of our divorce system just because they are gay.  In fact, I look forward to the day when the anti-male bias of the divorce courts in most countries is tempered by precedents coming from gay divorces, where the enemy is much harder to identify.

As someone who suffers from a quaint and decidedly unfashionable belief that words should actually mean something, I have a bit of a problem with calling it same-sex “marriage,” since this word has meant, from time immemorial, something involving a man and woman.  However, I can easily get over this.

What I do have a problem with, however, is how this decision is being discussed by commentators on both sides.  The continuous discussions about this or that justice, usually referring to Roberts or Kennedy, has gone over to the liberal or conservative side.  Or the invocation of opinion polls or the spirit of the times.  All of these things speak to a fundamental misunderstanding of the role of the Supreme Court, which is the most disconcerting part of the reaction.

Discussion about the decision on Obamacare (King v. Burwell ) shows a similar partisan inability to distinguish between the political and the legal issues at hand.  Right or left applaud or decry the decision based on whether it is a win or loss for their “side.” For my part, although politically I am not thrilled by the decision, my non-lawyer mind always thought that the legal case was weak.

I have spent most of my business career surrounded by laws from multiple jurisdictions.  I can tell you that nearly all of them read like they were originally written in crayon.  If judges started invalidating the clear intent of laws on the basis of poor drafting, then we would quickly be back to “Thou shalt not kill” and little else.  Like it or not, Congress fully intended that subsidies be available to anyone buying health insurance over any state or federal exchange.  To expect the Supreme Court to overrule this political decision due to a slip of the pen was always a reach.

Lastly, we have the most disappointing decision of all, as least from my perspective.  This is the decision in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., which relates to the doctrine of “disparate impact,” as I have discussed earlier.  Here the court has ruled in favour of the doctrine as it relates to the Fair Housing Act.  Although the decision could be, and hopefully will be, read as narrowly applying only to this Act, it represents yet another nose under the tent for this pernicious theory.  And it is being celebrated as such by liberal commentators, including the reliably left-leaning Noah Feldman from BloombergView, who is teaching the next generation of social-engineers at Harvard Law School.

I will quote at length from his recent blog on this decision (with bold added for emphasis):

What’s important about the decision isn’t the rationale but the real-world effects.  Housing discrimination is a significant legacy of the broader history of racial discrimination throughout the U.S., in North and South alike.  Proving intentional discrimination, however, is difficult to do – especially when a faceless institution is involved….

It’s entirely possible that no one in the Texas office was consciously or knowingly engaged in racial discrimination.  Yet the effects on housing markets, and by extension on racial equality, could be real, regardless of intent.

When the law is interpreted to allow disparate impact claims, it permits statistically based challenges to the reality of discriminationIt draws attention away from the fantasy that behind every discriminatory act lies some identifiable racial animus.

This kind of pragmatic approach is particularly desirable in this historical moment, when police discrimination has been so much a matter of public attention.  Frequently, police officers have no conscious intent to treat blacks differently from whites.  That’s one reason discrimination can happen even when officers are black – and even when a department is led by a black chief.  Yet discriminatory effects can nevertheless be felt by blacks even if no one knowingly means to discriminate….

Discrimination is still with us even as conscious, knowing racism declines.  Disparate impact remains a crucial tool for producing more equal outcomes in a more equal America.

There you have it: the liberal view of the rule of law.  Legal rationale isn’t important, just a “pragmatic” approach to “real world effects” in which we can have crimes without criminals.  Or even crimes without crimes, so long as the damage is “felt.”  And all of this guided and justified by the overriding goal of “producing more equal outcomes in a more equal America,” in which “disparate impact” will become indistinguishable – if it ever has been – from “disparate outcome,” and where the latter standard will be applied to more and more categories of disparity.  And since discrimination appears to exist in some kind of aether, outside the realms of “conscious” or “knowing,” then the likes of Feldman will be able to pronounce its eradication only when we have achieved statistical perfection.

Gay marriage and the Obamacare victory will get all the coverage, but I predict that Texas Department of Housing is the ruling that America will most come to regret.

(By the way, am I the only one who has noticed the following discrepancy:  Commentators discuss the decisions of the five Republican nominees to the Supreme Court (Kennedy, Scalia, Thomas, Roberts and Alito) in microscopic detail – Noah Feldman, for example, recently invoked Freud in discussing a split between Scalia and Alito, saying that it’s “hard to avoid the sense that there’s something almost Oedipal going on between the two Italian-American Catholic conservatives of different generations.”  Conversely, seemingly no one discusses the fact that the four Democratic nominees (Ginsburg, Breyer, Sotomayer and Kagan) move in lock step, as they did in the three cases discussed above.  Could it be because the Republican appointees actually understand that their job is to apply the law to the merits of individual cases, whereas no one wants to notice that the Democratic nominees are a bunch of political hacks predictably hewing to the party line?  Just a thought.)

Hillary on the Trans-Pacific Partnership

CNN counts 45 times that Hillary Clinton, as Secretary of State, publicly pushed for the Trans-Pacific Partnership, the trade deal with Asian countries that the US is currently negotiating.

As a presidential candidate, however, Clinton first dodged the question and then hid behind a recommendation that Obama works with Congressional leaders like Nancy Pelosi, which she knows would be the kiss of death.  This is an early taste of the type of leadership we can expect if Clinton is elected.

Roger Barris, London

I Am Glad I Didn’t Say That…

“Why isn’t the government enforcing the law?  In this country, it’s apparently possible not to respect the rule of law,” a statement by the head of a Parisian taxi union, referring to an anti-Uber law in France which has been passed but not yet implemented pending judicial review; the statement was made during an anti-Uber protest by taxi drivers in which they burned tires on public roads and blocked access to airports and major train terminals, and follows multiple allegations of violence by taxi drivers against Uber drivers

 

Read Offline:
Posted in: Economics, Policy, Politics

Comments

  1. To Be or Not to Be: The UK Referendum – sentinelblog - […] also wanted to avoid paying child benefits for any children not residing in the UK.  As I have pointed out before,…
  2. To Be or Not to Be: The UK Referendum - European - […] also wanted to avoid paying child benefits for any children not residing in the UK.  As I have pointed out before,…
  3. To Be or Not to Be: The UK Referendum | - […] also wanted to avoid paying child benefits for any children not residing in the UK.  As I have pointed out before,…

Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>