Monday, November 13, 2017

Humanitarian Crisis in Myanmar and a Brief Look at Economic Sanctions as a Possible Remedy

There is so much craziness that is going on in the world as of late: North Korea, Catalonian independence, mass shootings, hurricanes. It feels like a marathon keeping up with global affairs. The scale of these events have been so large that it has sadly overshadowed what is going on in Myanmar (Burma). Until recently, I was completely unaware that the Burmese army was oppressing the Rohingya, a predominantly Muslim, stateless Indo-Aryan people that primarily resided in Myanmar. The accusations of human rights infringements range from arson to gang rape to extrajudicial killings.

Prior to this humanitarian crisis, about a million Rohingya resided in Myanmar. Since then, 600,000 Rohingya have fled Myanmar to escape the oppression. The United Nations Secretary General said last Friday that it is an essential priority to stop the violence against the Rohingya, allow the Rohingya to return home, and be granted legal status. Freedom House, which is a non-governmental organization [NGO] focused on the research and advocacy of political freedom, democracy, and human rights, had something to say on the issue. Last week, Freedom House co-signed a letter with 58 NGOs to urge the U.S. government to impose targeted sanctions on Myanmar. This letter brought up an interesting question for me: how well do economic sanctions work?

A short primer on economic sanctions: Economic sanctions are commercial and financial penalties enacted by one or more country to target a certain country, group, or individual. An economic sanction can take multiple forms, including steep tariffs, quotas, restrictions on financial transactions, asset freezes or seizures, or other non-tariff barriers. Depending on the scenario, the purpose of an economic sanction can be to prevent a national security threat (e.g., North Korea), to bring about regime change, or to punish for human rights violations, as we see with Myanmar. Economic sanctions are used as an alternative to war in order to engender certain foreign policy goals. The appeal to economic sanctions is that they do not spill blood and they do not cost a lot of money to implement. Even so, there is the debate as to whether they work.

Countries that are subject to economic sanctions tend to have smaller economies. Knowing that these economics are more prone to vulnerabilities could help target these regimes. On the other hand, these same countries tend to be more corrupt, which means the target government will pillage its citizens and continue oppressing its people, even with the economic sanctions. Even then, I think the success of economic sanctions comes down to "it depends." There are multiple factors in play, including the balance of power dynamics, the decision-making process of those in charge of the target country, as well as the economic composition and levels of corruption of the target country. As the Council on Foreign Relations [CFR] brings up in its primer on economic sanctions, we can only determine correlation (as opposed to causation) since so many domestic and international factors are in play.

Based on the Peterson Institute's ranking, economic sanctions were much more successful in the 1960s, and the success waned since then. A lot of research on economic sanctions is more dated (e.g., Harvard report), such as this 1992 report from the Government Accountability Office that states that economic sanctions are not effective at the primary directive (e.g., regime change). With the example of Iran, the sanctions boosted military spending more than it hurt the Iranian economy (McDonald and Reitano, 2016). One recent report from the University of Chicago goes as far as saying that economic sanctions do not have the desired effects on the target economy (Shin et al., 2016). Calling the success of economic sanctions as mixed seems to be an understatement, but over the years, a few suggestions (primarily from the CFR) on best practices for economic sanctions have come about:
  • Make sure the goals of the sanctions are targeted. Economic sanctions cannot simply be a knee-jerk reaction of the United States flexing its soft power. If the embargo on Cuba has taught us anything, the less ambitious and more targeted the sanctions are, the better. 
  • Have a more comprehensive and well-rounded plan. Take Libya as an example. Not only were there economic sanctions and threats of military action, but there was also the positive inducement of financial aid in the event that Libya behaved accordingly. Many countries can weather the storm in more ways in one, so it is helpful to have multiple incentives pointing the target country in the desired direction. 
    • There is also research to suggest that comprehensive sanctions have more of an impact on bilateral trade between the sanctioning and target countries than selective sanctions do (Yang et al., 2004).
  • Have multilateral economic sanctions. If the United States unilaterally imposes economic sanctions, they are less likely to succeed than if multiple countries team up with the United States. Unless the United States has a monopoly in a certain market, the effect that economic sanctions will have will be less in comparison to multilateral sanctions. A 1998 report from the International Trade Commission admits that unilateral sanctions lack the transparency and discipline to be effective.
How would the sanctions work specifically for Myanmar? Sanctions on Myanmar date back to 1997, but were removed in 2016. Past sanctions on Myanmar seem to have been more targeted at select individuals. Former Burmese Deputy Minister of Commerce Pwint San admitted the success of the economic sanctions on Myanmar, and was happy to see them removed so that it could boost the economy. The counterargument against the sanctions' success is that it did not even take a year for the Burmese government to start systematically oppressing an ethnic minority. Whether another round of economic sanctions on Myanmar would be successful remains unclear. Depending on how they are targeted and who sanctions them, as well as intended goals, will affect the outcome, as will other international factors. What I do know is that if there is indeed another round of sanctions, it should be carefully crafted so it is more than a case of good intentions.

Wednesday, November 8, 2017

The GOP Tax Plan: The Good and Bad News of the Tax Cuts and Jobs Act

During his presidential campaign, President Trump made tax reform one of the pillars of his platform. Cutting income taxes, reducing corporate taxes, improving the child tax credit, eliminate the estate tax: these were a few of Trump's proposed ideas. The much awaited Tax Cuts and Jobs Act (TCJA) was released last Thursday. If this Act passes, it will be the largest overhaul of the U.S. tax system since the Tax Reform Act of 1986. When legislation or public policy this complex and overarching is in the process of being enacted, there are multiple facets of the bill that hardly make it a "black and white"/"either-or" statement. Nevertheless, one can make a general conclusion after looking at the individual parts. This was similar when I looked at the Trans-Pacific Partnership about a year ago, a multilateral trade agreement that Trump nixed on his first day in office. While I did not like everything in the TPP, I generally thought that the TPP was a step in the right direction for freer trade. I would like to take a look at the major provisions of the TCJA in the same spirit to analyze the components, as well as determine whether or not this would be a net benefit.

Here Is The Good News...
  • No changes for 401(k) payments. There had been rumors circulating that the Republicans were going to lower or eliminate the current deduction for the 401(k). Fortunately, this did not take place because a lower deduction would have made it more difficult for people to save. 
  • Lower cap on the mortgage interest deduction (MID). Starting next year, the cap on the MID would decrease from $1M to $500K. Reducing the cap is important because it reduces the percent of eligible households from 21 percent to less than 4 percent. Considering that a) the MID does not increase household ownership rates, and b) it causes other unintended consequences, I'm happy to see this make it into the bill. It doesn't downright eliminate the MID, but it is a step in the right direction. 
  • Estate tax phasing out and repeal. If this TJCA passes, then the estate tax will have the exemption doubled immediately, followed by a repeal six years later. Considering how I feel about the estate tax (a.k.a. the death tax), I would consider this a win. 
  • Simplified tax codeOne of the things that makes the tax code burdensome is the complexity. A simpler tax code with a broadened tax base would mean less compliance costs for taxpayers and less administrative costs for the government. Not only does the TJCA reduce the number of income tax brackets from seven to four, but it also eliminates a number of tax breaks (e.g., sports stadiumsmedical expense deductionadoption tax credit).
  • Elimination of the alternative minimum tax (AMT). The AMT is a supplemental, flat income tax that was created in 1969 to target millionaires in order prevent the wealthy from reducing their tax base through the use of tax preference items. However, it targets those making between $250K and $1M, as well as those in high-cost states and those with children. Since the AMT affects 30 million people, it affects more of the middle class than upper class. Additionally, the AMT is quite a complex tax, which increases compliance and administrative costs. As such, it is a good thing that AMT is being repealed. 
  • Creation of a territorial tax system for business taxes. To make a long story short, I am in favor of this change in tax policy. 
  • Elimination of state and local tax deduction. The state and local tax (SALT) deduction allows for taxpayers who itemize on federal income tax to deduct state and local real estate, property, and income taxes. The SALT deduction acts as an indirect federal subsidy to state and local governments in the sense that decreases the net cost of nonfederal taxes. 
    • Proponents argue that repeal could end up being more regressive and allow for double taxation (although there is a counterargument on the "double taxation" argument). On the other hand, the SALT deduction acts as an indirect subsidy towards high-income, high-tax states, as well as towards higher-income individuals. Plus, the existence of SALT incentivizes states to increase taxes and government spending, thereby increasing state-level government debt.
    •  Not only does the Center for Freedom and Prosperity estimate that 99.7 percent of taxpayers would benefit from this repeal, but the Heritage Foundation estimates that it would generate $1.6T of revenue over the next decade. 
    • The SALT deduction for income and sales tax will be repealed, but the SALT deductions for property and business remain. 
Here is The Bad News...
  • Huge deficits. The bill contains $5.8T in tax cuts and $4.3T in revenue raisers. According to the Joint Committee on Taxation, this tax plan is going to add a net $1.487T deficit over the next decade (see a policy-by-policy breakdown here). The CFRB calculates that this would increase the estimated 2027 debt-to-GDP ratio from 91 percent to 99 percent (see below). Another way of phrasing that is "debt will increase by about 9 percent with the passage of this bill." This assumes that the true cost of the TJCA is not being hidden with accounting gimmicks
    • Because it causes a deficit, it might not get enough votes to pass. Senator Bob Corker (R-TN) already said he would not support a bill that adds to the deficit. If one more Senator feels the same way and votes accordingly, then the TJCA will not pass. 
    • Senate budget rules, especially the Byrd rule, state that the budget cannot add deficits outside the next decade, which means that the TJCA will need to undergo modifications before enactment.
    • The deficits are simply not an issue of a higher debt-to-GDP ratio. As the Brookings Institution points out, this is bad fiscal policy. Right now, we are near full employment, which means we should be running a surplus. This is the time for contractionary fiscal policy, not expansionary. 

  • Corporate tax rate reform will not be enough. Under this plan, the corporate tax rate is to decrease from 35 to 20 percent. Needless to say, I'm all for lowering the corporate tax (see here and here). Even so, there is still a question of how assets overseas are treated in order to get a sense of the overall corporate tax plan. But that is not the only concern. Per the previous point, the deficit is causing procedural issues with the TJCA passing. For this Act to pass, there will need to be deficit reduction. The best way to achieve less deficit is weakening the corporate tax reform, which means that this reduction will only be temporary and have minimal effect
  • Employer-sponsored health insurance. The employer-sponsored health insurance tax break is the largest in the tax code, and yet it remains untouched. Employer-sponsored health insurance has multiple adverse effects, including driving up health costs, causing excess consumption in health care goods and services, incentivizing employers to offer more expensive plans instead of offering higher wages, and exacerbating income inequality. If you want a good reason as to why health care costs are higher in the United States versus other countries, this tax break is a major reason. 
  • Some lower- and middle-class households will have higher taxes while the rich benefit. There is a lot in play in the TJCA: child tax credit reform, the doubling of the standard deduction, the elimination of personal deductions, and raising the lowest marginal tax rate to 12 percent. Some will experience tax increases, others tax deductions, and for some, it will not change. It really depends on multiple factors, including income bracket, geographic location, size of household, and composition of household. The Tax Policy Center found that 28 percent of households will have their taxes raised, whereas the JCT puts the figure at 18 percent
    • 11-10-2017 Addendum: The Tax Policy Center had to retract and reissue its report on the TCJA. It found that only 7 percent of households will experience tax increases in 2018. However, that number will increase to 25.5 percent by 2027 (See below). 

Source of Graph: Slate
  • Increase the child tax credit. I have commented on the Child Tax Credit (CTC) before, and I am not a fan (see here and here). The modifications of the CTC not only make the current flaws of the CTC more pronounced, but it will add an extra $640B to the debt over the next decade (JCT). 
  • Modified education savings plan. The Coverdell Education Savings Account is a tax-deferred trust account that encourages parents to save for future education costs. This Savings Account is to be rolled into the 529 savings plan (see here for difference between Coverdell and 529). The people over at Heritage Foundation were thrilled about rolling the Coverdell into the 529 because it supposedly encourages education choice. I do not share this enthusiasm. As the Brookings Institution illustrates, the 529 savings plan drives up the very college costs that it was meant to help meet. This is no surprise since federal loan subsidies for college do the very same thing (see here and here). Needless to say, this does not leave me inspirited about higher education costs. 
  • Graduate Students: Tax Exemption. If you are a graduate student, you might end up paying more under the TCJA. The TCJA is expected to roll back or eliminate tax breaks used by graduate students who are research or teacher assistants. About 177,000 students use the Qualified 117(d) Reduction. If repealed, it could cost these students an average of $2,000 a year, which adds up for those in years-long PhD programs. 
There are quite a few features of the TCJA that I like, and I am happy to see a bill address some major issues with the tax code. At the same, I think still comes with major issues, the foremost being that of increasing the deficit. Don't get me wrong. High tax rates have an adverse effect on the economy (e.g., here), but at the same time, tax cuts are only part of the solution. Without reduced spending, tax cuts become tax-shifting, which means that we would pay with higher tax rates in the future. Even the libertarian Cato Institute and Mercatus Center acknowledge that real tax reform is not about lowering or eliminating tax deductions, but rather about raising revenue in the least distorting way possible with the longer-term goal of paying off debt so we don't get pummeled by it in the future. Plus, lowering taxes while raising spending is one of the worst ways to go about fiscal policy since it exacerbates the debt-to-GDP ratio.

If I had to grade the TCJA as a whole, I would give it a B/B-. Yes, it takes a serious attempt at tax reform. At the same time, it increases debt. Additionally, it does not even address the largest tax exemption, the very one that needlessly drives up our healthcare costs. I would feel much better if the TCJA were more revenue-neutral and eliminated the deduction for employer-sponsored insurance. Even so, there is an argument to be made that the TCJA allows for revenue to be collected in a more efficient and less destructive manner.

Furthermore, the Tax Foundation is estimating that on net, it will create more jobs and create bigger tax cuts on average. Like any major bill, there are going to be winners and losers. We also know that this is not the final version (especially since it creates a deficit, not to mention that the Senate version needs to line up with the House version). At the same time, we have a sense of where Republicans are going with tax reform. I definitely think some modifications are in order, but I am happy to see that Congress making a concerted effort to make taxation a simpler, more efficient process.

Thursday, November 2, 2017

Parsha Vayera: Abraham's Argument About Sodom and Building a Relationship with G-d

Sometimes it seems difficult to have a relationship with G-d. One reason has to do with the very nature of G-d. After all, G-d is Infinite, Transcendent Oneness. In that respect, G-d is completely other. At least from a Jewish standpoint, mysticism is an attempt to bridge that gap and understand that which is incomprehensible. Fortunately, we don't have to go towards something as esoteric or abstract as mysticism. We can simply take a look at this week's Torah portion. In this week's Torah portion, we see an exchange between Abraham and G-d about the fate of Sodom (Genesis 18:17-33). This is the famous scene where G-d announces that He is going to destroy Sodom and Gomarrah. Abraham pleads with G-d to save the cities for the sake of the righteous. Abraham is able to successfully bargain with G-d and asks that G-d save the cities provided there are ten righteous men. G-d agrees, but as the story goes, the cities are ultimately destroyed since there are not even ten righteous men.

What I find interesting about this passage it that provides some guidance for how to have a relationship with G-d. Since G-d is this powerful, all-knowing being, He is clearly higher in the hierarchy. In that respect, G-d sets the tone for how to have a relationship with Him. G-d allows for us to have a relationship with Him, and we see that from this passage. How so? For one, G-d wonders if He should hide the announcement of destroying Sodom from Abraham (Genesis 18:17). G-d is not asking for Abraham's input or assumes that it would influence divine judgement. Nevertheless, G-d expresses concern about Abraham's opinion and whether He should let Abraham know. This concern implies that Abraham's potential reaction could have longer-term implications for their relationship.

The second point is that G-d "goes down to Sodom" (Genesis 18:20) before formally rendering a verdict. Rashi teaches that G-d did not literally ascend because G-d is not only omnipresent, but He is all-knowing. Rather, it is to teach us that a judge must not give a verdict in a court case without examining the evidence. If Abraham is expected to behave justly and righteously, Abraham needs to see that behavior exhibited by G-d. It is at this point in the story that G-d is setting the tone for a more profound relationship between Him and Abraham. Once we see G-d opening the door, we see Abraham walk through and give us a few pointers on how to interact with G-d:

  1. Abraham was "but dust and ashes" (Genesis 18:27). Humility is a recurring theme throughout the Hebrew Scriptures (Tanach), and this verse illustrates Abraham's humility. The prophet Micah (6:8) teaches us what G-d requires from us, and it's not sacrifices. G-d teaches that we should act justly, love mercy, and finally, walk humbly with G-d. We see Abraham walk humbly with G-d when he refers to himself as "dust and ashes." 
  2. Abraham remained standing before G-d (Genesis 18:22). How could Abraham be humble and remain standing before G-d?  In a religion such as Islam, practitioners are prostrated before G-d to act humbly. Not so in Judaism. R. Simcha Bunim of Peshischa, an 18th-century Hasidic rabbi, attempts to resolve the paradox. He taught that we should carry two notes in our pockets. The first should be the aforementioned verse from Genesis 18:27: "I am but dust and ashes." The second should say "For my sake was the universe created" (Mishnah Sanhedrin 4:5). Remember, Moses was "very humble," but his humility did not stop him from leading the Jewish people. It was a necessary component. It reminds us that humility is not about being weak or meek, but rather about having a balanced and accurate understanding of the self. It is with that humility that Abraham remains standing before G-d. 
  3. G-d wants us to argue and be engaged (Genesis 18:23-32). The fact that Abraham has this argument with G-d says a lot. One is that Abraham should be engaged with the process. The fact that Abraham was able to negotiate with G-d, and get the number of required righteous people down from 50 to 10 says a lot about the process. It is not as if Abraham was going to let the people of Sodom and Gomorrah completely off the hook. He stopped at ten, which shows how we have give and take in any relationship, including that with G-d. 
  4. Our definition of justice goes beyond what happens in the home (Genesis 18:24). The passage asks if there are 50 righteous in "the midst of the city" (בתוך העיר). This phrase teaches us that righteousness is not about what we do privately, but how we treat others publicly. Furthermore, righteousness is still a standard to abide by, regardless of the environment (Artscroll). 
  5. We are to intercede for others, regardless of their shortcomings (Genesis 18:23-24). How those of Sodom behaved was the antithesis of Abraham. Sodom sinned because they were prideful and did not care for the poor or needy (Ezekiel 16:48-49). Abraham was the opposite of Sodom. Nevertheless, he negotiated with G-d on their behalf. This shows the vigor and tenacity that we should argue with G-d (R. Avigdor Miller).
In a sense, our relationship with G-d is to be one of balance. We take into account the idea of justice, as well as love, thereby creating mercy. We are to balance our inferiority to G-d while acknowledging that we are still created in His Image. We are to argue with G-d, but there is still a point that even after the arguing and negotiating, that one eventually accepts. If this exchange is to remind us of anything, it is that building a relationship with G-d is complicated. We might not completely accept or agree with what is to happen or does happen, but it does not mean we cannot develop a meaningful relationship with G-d. It just means it's not as straightforward as some would like to think.  

Monday, October 30, 2017

Should Japan and South Korea Go Nuclear in Response to North Korea?

As North Korea becomes an increasing nuclear threat, North Korea becomes a central part of President Trump's foreign policy. Its capabilities are getting to the point where North Korea could hit anywhere in Japan, which means that North Korea could also hit South Korea. These increased capabilities make South Korea and Japan nervous because they are in firing range. However, they are covered under U.S. protection vis-à-vis the nuclear umbrella. At the same time, the United States would rather not get dragged into a military conflict in East Asia, not to mention that President Trump has made U.S.-South Korean relations uneasy since he became president. Instead of relying on the United States to provide protection, one suggested policy alternative is for South Korea and Japan to develop their own nuclear weapons.

Before I start, I would like to state that I would prefer a scenario or option of non-proliferation or nuclear disarmament. The havoc and devastation that nuclear weapons causes is jaw-dropping, as we saw with Hiroshima and Nagasaki during World War II. On the other hand, we have an oppressive despot that is unresponsive to economic sanctions or diplomacy towards disarmament or non-proliferation. Not only is North Korea not responsive, but North Korea's capabilities are getting better and better. There is a good chance that in the next few years, their ballistic missile capabilities will be able to reach the United States with accuracy (see current range below).

Right now, the balance of [nuclear] power in East Asia is that Russia, China, and North Korea are the ones with nuclear weapons. This is a nuclear version of "the bad guys have all the guns."As much as the United States and other developed nations have taken a stance towards non-proliferation, the truth is that we are looking at a bunch of unsavory options. Since North Korea isn't going to acquiesce if we ask nicely, the only way to stop North Korea before it acquires the desired capabilities is through military intervention (and even that is doubtful). Public policy is not about choosing some awesome option, but rather about choosing the least worst option.

One question is how would North Korea and its allies respond to Japan and South Korea acquiring nuclear weapons. Is North Korea pursuing nuclear weapons strictly for defensive purposes (much like it purports) or does North Korea has more nefarious plans in mind? If North Korea views nuclear armament as a way to protect itself, then Japan and South Korea acquiring nuclear weapons could either escalate the situation or create a situation of mutually-assured destruction (MAD). If North Korea has conquest or military conflict in mind, nuclear weapons would make more sense. Even if North Korea is not "suicidal" in the way you saw with kamikaze fighters in World War II, there is still room for miscalculation or elements within the North Korean military that could instigate undesirable outcomes. If North Korea is more unpredictable than the former Soviet Union was during the Cold War, it is going to be difficult to navigate this situation.

It is not just North Korea's response that is dubious. China is in a quandary. China won't meddle in North Korean affairs until it's too late either because it does not want to delegitimize its own regime or because China worries about North Korean retaliation. At the same time, China does not want Japan to have nuclear weapons, especially given China's history with Japan in the Second Sino-Japanese War. Plus, China does not want a scenario that invokes a U.S. military presence in East Asia. China is delicately walking on egg shells, to say the least. And as for Russia, it would benefit because it would reduce American power and increase its power in the region.

North Korea and its actors are not the only ones to have in mind. Japan has a particular aversion towards nuclear weapons because it is the only country that has experienced what nuclear weapons can unleash. When I analyzed South Korea and why the U.S. still guards the border, my concern based on that is that South Korea has been too reliant on U.S. help keeping North Korea in check. South Korean President Moon Jae-in stated last month that he doesn't want to pursue nuclear weapons because he doesn't want an arms race. At least with South Korea, they had nuclear arms on hand until 1991, so at least there is some precedence for South Korea.

Even if Japan and South Korea end up acquiring nuclear weapons, there is still a reality of international politics: alliances shift all the time. During World War II, the United States was allied with Russia until shortly after the end of the war. Afterwards, we had the Cold War. China went through a similar phase. Even now, take India as a more recent example. Historically, India was not particularly friendly towards Israel. Since the Modi regime, Israel and India have become closer than ever. Japan and South Korea have been allies to the United States for many years. However, Japan added Article 9 to its Constitution and took a more pacifist route precisely because of the havoc it reeked during World War Two. The reason I bring up alliances is that I would hate to see one problem be replaced with an even worse one, such as South Korea allying itself with China and sharing U.S. nuclear technology with China. Granted, Japan or South Korea have not given the world reason that they would develop military ambitions, but stranger things have happened before. Even so, there is nothing to indicate that this would end up being the case.

As long as North Korea becomes increasingly antagonistic, there is no easy decision on this front. This could go awry, and it could also become more difficult to persuade others to take a path of non-proliferation or disarmament in the future if we open this door. Nevertheless, based on what information we have, containment and deterrence are the best bet to keep North Korea at bay. Given that primary deterrence is preferable to extended deterrence, perhaps it is time for Japan and South Korea to have a modest stockpile, at least enough for second-strike capability. The U.S. is in no position to plausibly neutralize North Korea's missiles or prevent an initial North Korean attack on South Korea or Japan short of attacking North Korea preemptively. Although there are some risks to having Japan and South Korea having nuclear weapons, there are worse things than giving responsible, democratic nations a viable deterrent against a nuclear power like North Korea. I'll leave you with this quote from South Korean Saenuri party leader Won Yoo-Cheol:

"We cannot borrow an umbrella from our neighbor every time it rains. We need to have a raincoat and wear it ourselves."

Thursday, October 26, 2017

#MeToo: Addressing the Nuance in the Sexual Assault Discussion

Last week, I noticed a social media campaign that was taking place: #MeToo. It was in response to a man named Harvey Weinstein. Before the #MeToo campaign, I had no idea who Harvey Weinstein was. Apparently, he is a Hollywood film producer and executive. But it goes beyond that. Earlier this month, multiple women made allegations of sexual harassment, sexual assault, and rape against Weinstein. In response to these allegations, people were tweeting and posting on Facebook the hashtag of #MeToo. I noticed that a number of my female friends, and even some male friends, were posting this hashtag. Essentially, those who had been sexually assaulted or harassed hash-tagged #MeToo, and some even shared their story. The idea behind this social media campaign was to bring awareness about the prevalence of sexual harassment and sexual assault. In the short-run, I think that the campaign succeeded, as it should. Rape, sexual assault, and sexual harassment have no place in civil society.

However, looking at these postings got me thinking about the TV series Law and Order: Special Victims Unit (SVU). Law and Order: SVU is the Law and Order series that covers sexually-based crimes. Sexual assault and harassment often come up as themes. I know that the show is fictionalized. Nevertheless, I have been watching it since it first aired, and what I can say is that it does a good job capturing the complexity behind sexual assault. There is the act of sexual assault itself: often, it is "he said, she said," "he said, he said," or "she said, they said" get the idea. Even if you can prove that sex or the given act took place, then there's the matter of proving malicious intent. None of this gets into statute of limitations, false reporting, underreporting, or stigmas and misconceived notions about men and women. It is with that appreciation for the complexity and nuance that I would like to proceed.

Sexual Assault Rates
I think it's important that if we are to identify a problem, we need to determine how prevalent it is. That is where rates come in: so we can determine the frequency with which something happens. I know the #MeToo hashtag covers sexual assault and sexual harassment, but I want to cover rape rates here because at least in part because it's easier to measure. The chart below shows the rape rate from 1972 to 2013. Since the early 1990s, the rate of forcible rape in the United States has dropped by nearly half. To be fair, rates had increased slightly since then from 25.9 to 28.6 per 100,000 from 2013 to 2016 (see FBI historic crime statistics here). This does not consider that the FBI changed its definition of rape in 2013, at least in part to include the rape of a male.

Source: AEI

The Bureau of Justice Statistics also has statistics of rape and sexual assault of women (Planty et al., 2013). Although the the most recent numbers in their reporting go back to 2010, there is at least an overall decrease in completed, threatened, and attempted sexual assault.

False Allegations
This is the least politically correct part of today's blog entry: talking about false allegations. Part of the issue is that many would feel more inclined to believe the victim over the suspect, at least in part because the victim would have less reason to lie than the suspect. Yet there have been instances in which false allegations have been made. While I don't want to minimize the trauma of an individual who has been sexually assaulted, I also want to make sure that we establish the facts and corroborate the evidence before condemning an individual in a court of law. Last time I checked, we are shooting for a legal system in which someone is "innocent until proven guilty." If a victim makes a false allegation against a suspect and it comes to light that said allegation is false, the life of the falsely accused individual is forever ruined. Do false allegations happen often enough where we need to be worried?

The definition of false allegation can be disputed. Are we talking about allegations that are formally filed with the police or does this also include informal, word-of-mouth allegations? Even getting past this definitional quandary, there has been difficulty finding an answer to that question. One meta-analysis from 2006 [see below] puts the range between 1.5 and 90 percent (Rumney, 2006). The wide range suggests inconclusiveness. Nevertheless, there is one oft-cited study (Lisak et al., 2010) that has the rate of false accusations at a range of 2 to 10 percent, although that study is disputed. In his textbook on false allegations, forensic scientist Brent Turvey estimates that the figure could be 8 to 41 percent.

While we cannot ascertain the truth about prevalence of false reporting through the statistical ambiguity, we do know it still happens with frequent enough occurrence where we should be mindful of it. In our attempt to get justice for sexual assault victims, we should become more sensitive, not less, to unfairly accused individuals because we do not want to create additional victims in the process.

Just because a crime is not reported does not mean it did not happen. The advantage here is that the statistics on underreporting are more reliable than those for false reporting. The National Crime Victimization Survey (NCVS) in 2013 found that sexual assault was greatly underreported. Based on that study, Rape, Abuse, Incest National Network (RAINN) estimated that 40 percent of sexual assaults are reported, which is close to the general criminal victimization reporting rate of 35 percent. Although sexual assault is underreported, the silver lining is that it is not underreported more than other violent crimes. What we can say, though, is that underreporting occurs more frequently than false accusations.

Underreporting is not an issue with just sexual assault, but also sexual harassment. In a 2016 report from the Department of Labor's Equal Employment Opportunity Commission (EEOC) on workplace harassment. Not only did the EEOC find that 25 to 85 percent of women are harassed in the workplace, but 75 percent found that they experienced retaliation when reporting. The EEOC also admitted that sexual harassment seminars at work are ineffective.

Some Thoughts Specifically on the #MeToo Hashtag
There are some benefits to the #MeToo hashtag, particularly for the victim. It provides the opportunity for the victim to tell the story, as well as letting the victim know that they are not the only one. There is empowerment for those who have been victimized, but I did find a few issues with it:
  1. The hashtag lumped sexual harassment and sexual assault together. Neither are acceptable, but they are not the same thing. What this hashtag did was blur the line between acts with very different magnitudes of unacceptability. 
  2. I wonder if this social media campaign will go beyond a temporary trend. Paralleling the experiences of protests and of boycotts, it is not easy to actualize change. You need a targeted, massive enough of a collective that lasts long enough to make change. If a short-lived social media campaign is a substitute for actual political change, we'll revert back to status quo in a matter of days.
  3. The #MeToo hashtag assumed that women are always the victims of sexual assault and men are always the perpetrators. This is simply not true. As this Slate article brings up, men are sexually assaulted almost as frequently as women (Stemple and Meyer, 2014). It is difficult for women to discuss sexual assault. Given the hypermasculinity in the United States, imagine how much more difficult it is for men to disclose. This is why I applaud the FBI for revising its definition to omit mentions of physical force or that rape can only happen to a woman. 
What I was hoping to accomplish here is to not reduce the discussion to "women are victims" and "men are predators." This ill-conceived notion not only causes a divide between the sexes, but it also contradicts reality, which interestingly enough, also plays out in the area of domestic violence. The vast majority of men are not rapists or predators. The vast majority of victims that are reporting rape or sexual assault are not lying. Much like with other crimes, there is an issue of underreporting. These are some of the nuances that we should keep in mind moving forward.

It also don't want us to get sucked into an argument about "rape culture" simply because it sounds trendy or "cut and dry." I looked at the topic of sexual assault on college campuses about three years ago, and the "one in five women is sexually assaulted on campus" statistic is exaggerated by a factor of 33! Granted, colleges are a demographic subset, but at the same time, a good point was brought up by the RAINN, the largest national organization dedicated to fighting sexual assault, on the issue of "rape culture":

"Rape is caused not by cultural factors but by the conscious decisions, of a small percentage of the community to commit a violent crime...[Blaming it on 'rape culture'] has the paradoxical effect of making it harder to stop sexual violence, since it removes the focus from the individual at fault, and seemingly mitigates personal responsibility for his or her own actions." 

I see the temptation about blaming it on "rape culture," but the truth is that male sexual aggressiveness has existed in every society. Dare I say that there is definitely a biological component to sex drives. In [Orthodox] Judaism, the recognition of this fact is why there are safeguards that separate men from women. I'm not to say that the Orthodox views on sexuality are perfect (because they're not!), but what I am saying is that there might be a point with regards to the power of sexual urges.

Without getting into a debate about how men and women are different, what I can say is that because people are not equal, there will be imbalances in power. Power corrupts and absolute power corrupts absolutely. This is why, as a libertarian, I am for smaller government. This is also why I believe in checks and balances: so that dominating personalities don't abuse power. The same goes for our cultural institutions. When men like Weinstein gain power, we should use our freedom of speech to call him out on it. We should have free of an economy as possible so individuals do not feel that being sexually exploited is the only way to get ahead or retain a certain position or station in life.

A freer society is an indirect way of solving the issue, but there are also more direct ways of approaching the issue. How about when there is some "locker room talk" or someone does some catcalling, how about call out the person for their bad behavior? Can workplaces create a way to anonymously report sexual abuse and create a better environment for workers? What about simply treating people decently because they are human beings? We can get into preventative measures that could be taken to render a sexual assault less likely to happen (e.g., self-defense course, carry a gun or taser). However, the blame ultimately goes to the assaulter or rapist, not the victim, because the criminal is the one expressing a blatant disregard for others. Perhaps laws that make it easier to prosecute sexual assault or modified police training to better navigate sexual crimes would be apropos. What it would take to get sexual assault crime rates down will continue to be a debate. What this does remind me of is that real-life problems, especially on such a large scale, cannot be summarized in a soundbite, hashtag, or Facebook status.

Monday, October 23, 2017

The Jones Act: How This Protectionism Harms Puerto Rico and the Rest of the U.S.

It has been about a month since Hurricane Maria hit Puerto Rico, and the Puerto Rican community remains devastated by the damage caused. Only a small portion of people have water and electricity again. It will probably take months for the island to recover from this tragedy. One of the responses from President Trump is to temporarily waive the Merchant Marine Act of 1920, which is better known as the Jones Act. You are probably wondering what a shipping act that is nearly a century old has to do with Puerto Rico in 2017.

The Jones Act is a law that regulates maritime commerce between U.S. ports in U.S. waters. The Act states that all goods carried between U.S. ports must be done so on U.S. flag-ships constructed in the U.S., owned by U.S. citizens, and manned by U.S. citizens or permanent residents. The law was created shortly after the end of WWI as a national defense measure against the potential of [German] U-boats attacking, specifically to have a solid supply of marine vessels. Essentially, if the United States found itself in a national state of emergency or under attack, it could better secure its shipments and navy, thereby better securing U.S. commerce.

I want to get less into whether the Jones Act should have been law in the first place, and focus more on whether Congress should repeal the Jones Act. Based on the blog entry I wrote earlier this year about Trump's "Buy American," you can already take an educated guess as to how I feel about the Jones Act. We can bypass the irony that Trump is very pro-"Buy American" and yet temporarily rescinded an Act that is about as "Buy American" as it can get, but let's take a look at the Jones Act specifically in further detail.

Economic Costs
One of the major criticisms of the Jones Act is that it makes shipping goods from U.S. port to U.S. port more expensive. This should be no surprise since this is a predictable economic outcome. Why? When foreign-owned or foreign-operated shipping vessels cannot transport between ports in the United States, the competition in this market is subject to less competition. Here is some research to back up the economic theory that the Jones Act causes economic harm:
  • The Congressional Research Service (CRS) released a 2014 reporting finding how the Jones Act made it about three times more expensive to ship petroleum between U.S. ports (CRS, p. 9). 
    • In 2012, the New York Federal Reserve Bank found that shipping a 24-foot container from the mainland to Puerto Rico cost $3,063. It cost $1,503 to ship that same container to the Dominican Republic, which is further away from the mainland than Puerto Rico. The major culprit as to why it costs twice as much to ship goods to Puerto Rico? The Jones Act.
    • In her paper on Puerto Rico, World Bank Chief Economist Anne Kruger points out how the Jones Act creates a particularly negative effect for Puerto Rico and that by repealing it, the Jones Act could help the Puerto Rican economy be on the mend. 
  • In 2012, two professors from University of Puerto Rico estimated that the Jones Act cost the Puerto Rican economy $17 billion from 1990 to 2010 (Valentin-Mari and Alameda-Lozada, 2012; [see infographic below]).
  • The World Economic Forum calculated that the Jones Act costs the United States economy $200 million a year in shipping costs. 
  • The Right-leaning Manhattan Institute estimated in 2015 that the Jones Act increased gas prices in the U.S. by 15¢. Fifteen cents might not seem a lot, but think of how often gasoline is used, both by individuals driving vehicles and business transporting goods. That fifteen cents a gallon adds up very quickly. 
    • As another example of cost, that same Manhattan Institute report estimated that because foreign ships cannot ship liquefied natural gas, Puerto Ricans pay an extra 30 percent for electricity. 
  • One recent study from the Grassroot Institute (Kashian et al., 2017) estimated that the Jones Act creates $163 million of domestic activity for shipping jobs while costing $3 billion in economic costs. Since places like Hawaii, Alaska, and Puerto Rico are disproportionately dependent on shipping, they would benefit from the repeal of the Jones Act. 
  • Drewry, an independent maritime consulting firm, found that Jones-compliant ships cost about four times as much to construct as foreign ships (also see CRS report here). It should be no surprise that the U.S. went from being 16.9 percent of the world's fleet in 1960 to 0.4 percent in 2014 (Grennes, 2017).

National Security Argument
I can hear proponents of the Jones Act arguing that the economic costs could be worth the national security benefits. Let's examine that for a bit. Even if we accept the assertion that the "national security" argument was valid back in 1920, it has much less validity now. Why? Air transport for shipping purposes didn't exist back then. We have made advancements in railroads, trucks, and pipelines. As an additional side note, the Cato Institute argues how the Jones Act endangers seamen, which would be another facet as to how the Jones Act actually diminishes national security.

You know the Jones Act has to be bad when the neoconservative Heritage Foundation, a think-tank that often is in favor of national security arguments, does not even accept the Jones Act's national security premise (Loris et al., 2014). As the Heritage Foundation brings up, 1,072 ships were Jones-eligible. By 2014, that number decreased to 90 ships. There are very few Jones-Eligible ships that are used for military operations. As a matter of fact, the Department of Defense for Military Sealift Command (MSC) vessels is typically to use lease foreign vessels with military capacity (CRS, 2010, p. 3). In its 2017 report on the Jones Act (Grennes, 2017), the Mercatus Center scrutinizes the national security argument, as well as illustrates economic costs.

As an aside point, the fact that Presidents often waive the Jones Act, much like we see with Hurricane Maria, illustrates how the Jones Act threatens national security in disaster response. In short, the national security argument is nothing more than a smokescreen.

I don't think Trump temporarily rescinding the Jones Act will do much because a) it is to only last for 10 days, and b) Puerto Rico gets most of its oil from outside the U.S. due to the adverse effects of the Jones Act. But I will say this: the research on the Jones Act over the past 25 years consistently tells us that the Jones Act incurs considerable economic costs and contributes to increasing energy costs. What's more is that the national security justification has outlived its usefulness. The Jones Act is another example of why protectionism is harmful: because it protects and benefits a small group of well-connected producers while harming everyone else. The reason customers don't complain about something like the Jones Act is because like with other forms of protectionism, it is difficult for the consumer to see the costs. When I point out how shipping costs are increased because of the Jones Act, this is not just about numbers. Especially when looking at a place as greatly affected as Puerto Rico, we are talking about the ability of people to afford cost of living. The Jones Act makes it that much harder for people to have a livelihood, which affects people in more ways than one.

The Jones Act should not just be waived, but repealed. Aside from the aforementioned reasons, repealing the Jones Act would lower the costs of coastal shipping by 67 percent (Lewis, 2013). Do I think that repealing the Jones Act will solve all of Puerto Rico's woes? No. As I have mentioned before (see here and here), Puerto Rico contends with multiple issues, ranging from economic barriers to harmful tax code exemptions to debt issues. I hope that this blog entry can help shatter the illusion that the Jones Act is of benefit to the American people.

Thursday, October 19, 2017

Parsha Noach: Was Noah Really All That Righteous?

It's all relative. The intuition behind that idiom is that something may or may not be what it seems depending on what that something is being compared to. I think that goes for people, as well. Someone like Thomas Jefferson was considered enlightened for his time. However, we would not consider his views on slavery enlightened for a 21st-century, democratic society. We actually see this notion play out in this week's Torah portion with Noah:

נח איש צדיק תמים היה, בדרתיו. את האלהים התהלך נח.
Noah was a righteous and whole-hearted man in his generation; Noah walked with G-d. - Genesis 6:9

This passage in Genesis calls Noah a righteous man (צדיק). The word צדיק is not thrown around lightly in Judaism. Think of it as analogous to the "one percenters" of Jewish spirituality. Noach was righteous enough where he and his family were the only ones on the planet spared from the Flood.  Noah is also referred to as תמים (whole-hearted). The word תמים can also mean unblemished or simple, which brings up some ambiguity. The word תמים, however, is generally viewed in a positive light in this verse (also see Psalms 15 and 101:6). You would think that Noah's status is unblemished and beyond reproach. However, there is a clarifier that casts doubt on Noah's righteousness: "in his generation" (בדרתיו). This caveat is so important that it caused a debate amongst the rabbis.

The phrase בדרתיו can be used to argue either in favor of or against Noah. One can argue that because Noah prevailed in such a corrupt society, Noah would have been, a fortiori, even greater had he lived in another generation (Rashi; Resh Lakish in Talmud, Sanhedrin 108a). On the other hand, one could argue that only by comparison to the rest of his generation was Noah righteous. Another way to say this: If Noah had lived in another generation, he would not have been considered righteous (Ramban). Which one is it? Was Noah adequately righteous or was his righteousness merely relative to his contemporaries?

One can argue that being average in absolute terms during such a time of such depravity is precisely why Noah is referred to as righteous. This is why R. Eliyahu Kitov argued that the righteous of each generation ought to be judged in the terms of their own time (Sefer HaParshiyos). Even so, this solidified why I am inclined to believe that Noah's righteousness was relative for three reasons. One is that Noah walked with G-d. As Rashi points out, walking with G-d meant that Noah needed G-d's support to spiritually advance. Conversely, Abraham walked in front of G-d (Genesis 17:1), meaning that Abraham's righteousness was good unto itself. The second reason for thinking his righteousness was relative was how Noah reacted after the Flood. My take on Noah post-Flood is that he was dealing with a combination of PTSD and coming off a spiritual high. Noah built the ark and survived the Flood. His mission was complete. He ended up building a vineyard (Genesis 9:20), getting drunk (Genesis 9:21), and according to the Talmud (Sanhedrin 70a), was either castrated or sodomized by his son. Noah fell low enough where his sons were ashamed to look at him (Genesis 9:23). Needless to say, Noah did not handle his emotions well post-Flood. If Noah were that righteous, he would not have faltered the way he did.

The third reason is even more intriguing: Noah did not protest G-d's verdict nor did he attempt to save his contemporaries, which is contrasting to Abraham's response to Sodom and Gomorra. This reason is implied in the Talmud (Shabbat 55a) and explicitly stated in the Zohar (Zohar Mashatot, Bereshit 254b). According to the Zohar, Noah did not attempt to save a single person or beg G-d to change His verdict. The Hebrew for Noah (נח) has the same root for the word "comfortable" (נוח). While it is true that Noah did not harm others and he was able to withstand corruptive influences of his generation, he did not do good towards others. This is why in the Zohar, G-d calls Noah a "foolish shepherd." He receded into his comfort zone. In terms of individual responsibility, Noah was fine. As for collective responsibility, Noah did nothing to contribute to the betterment of mankind. The Golden Rule is important and vital. It creates a basic respect for humankind. However, that is not all we are here to do. Certainly from a Jewish point of view, a spiritual vocation does not mean isolation or a monastic lifestyle. It means contributing to the world so that it is better than when you found it. This lack of responsibility towards others is why Noah's righteousness comes with a big caveat. If we want to avoid the downfall of Noah, the righteousness we express through our thoughts, words, and deeds cannot be in isolation and cannot be done strictly for our own benefit. We need to help others, and by doing so, can we truly live a life towards righteousness.