Coloradans Should Vote "No" on Proposition HH to Maintain Fiscal Sanity

"If you don't first succeed, try, try again." Those who are against Colorado's Taxpayer's Bill of Rights (TABOR) are no exception to this rule of thumb. TABOR opponents tried to get rid of TABOR in 2013 and 2019 in the state of Colorado to no avail. What do these opponents have against TABOR? The state of Colorado passed TABOR into 1992 to limit the amount of tax revenue the state can retain and spend. The TABOR formula looks something like this:

Total Spending Limit = Previous Year's Spending + (Previous Year's Spending X Inflation Factor) + (Previous Year's Spending X Population Growth Factor)

As we will explore shortly, I surmise that the TABOR opponents seem to take issue with spending caps hamstringing growth in government spending, which implies as a less flexibility in new government programs. On November 7, the state of Colorado is going to vote on Proposition HH. There are multiple facets to Proposition HH, which do not make it easy to follow. The local NBC 9 News has a good primer (also see video above), as does the Colorado General Assembly (see Figure below as part of that primer) and Ballotpedia.

The first main feature is a reduction in the growth of property taxes. This will entail in a reduction of property taxes for most residential types. More on that in moment. First, I want to point out that there is already something taking place in Colorado related to but independent of Proposition HH: property taxes rates are going to soar. What happened? The value of Colorado homes skyrocketed in value compared to a couple of years ago. In Colorado, the formula used for property taxes is "Property Tax Rate = Actual Value x Assessment Rate x Mill Levy." Looking at the formula and knowing what happened with property values, it should not be a surprise. However, Coloradans were surprised with notices that their property taxes went through the roof. Colorado Public Radio analyzed Colorado Department of Local Affairs (DOLA) data on property valuation to discover that the median Colorado home increased in value by 37 percent.   

What Proposition HH proposes is to reduce the assessment rates on property tax. The reduction in assessment rate does provide some relief to the taxpayer relative to what is the status quo. However, this property tax relief is only part of the Proposition, which is why we cannot look at the property tax relief in isolation. 

The second major component of Proposition HH will be an increase in the spending limit under TABOR. If Proposition HH passes, the spending limit would increase by an additional 1 percent annually until 2032. This would not only boost government spending, but it would shrink the income tax refunds under TABOR. Excess revenue would be distributed to school districts and other local government entities. 

Lower property taxes would likely be offset by higher state taxes, which is especially undesirable if you are a renter who does not pay property tax. The Right-leaning Common Sense Institute (CSI) calculated that Coloradans could save $9.92 billion between now and 2032, whereas state taxes could increase by $9 billion, or a net savings of $0.2 billion. While this does not de facto eliminate TABOR state income tax refunds, it does make it less likely for Colorado's taxpayers to receive these tax refunds.

Proposition HH gives the legislators the opportunity to vote in 2032 whether to extend the tax cut and the spending growth. If the legislature passes the extension, it could mean a tax increase of $20.9 billion between now and 2040 (CSI). The reason for a larger difference between 2032 and 2040 is the compounding nature of adding an additional 1 percent on the spending cap per annum. That is the impact on the statewide level. 

For the median individual, there would be a reduction in taxes of $4,641, whereas there would be an increase in state taxes of $5,119 by 2032. The net impact for the median household? An increase in taxes of $478 per annum (ibid.) if Proposition HH is enacted through 2032. 

It is not only the net tax effect that is worrisome; it is also the spending. The Dean at the CU School of Public Affairs saw this as a "clever strategy" to grow spending levels that are comparable to other states. Since the proposed change is compounding in nature, the amount of spending that would increase would be more grave over time. If Proposition HH passes, that means the spending limit would grow from $170 million in 2024 to $2.2 billion in 2032. If extended, that would mean an additional cap of $5.8 billion by 2040. 

The Left-leaning Bell Policy Center (BPC) brings up two relevant criticisms. One is that the CSI is projecting out too far because it is difficult to make macroeconomic projections, especially out to 2040. I brought up this concern about modeling when discussing climate change as to how difficult it can be. Last year, I tried figuring out if we were in the middle of a recession. While I thought it was likely and I made sure to caveat my prediction, it turns out that the National Bureau of Economic Research did not declare a recession for 2022. I would not take the projections literally so much as I do seriously. Regardless of the exact magnitude of government spending, having a spending cap increase larger than the property tax cut is cause for concern.     

The second criticism from the BPC is that nothing in Proposition HH raises. This is technically true. The second major component on Proposition HH is not a state tax hike, but it is an increase in the spending cap. At the same time, I have to ask myself two questions. The first is how likely it would be politicians, especially in a swing state that has a Democrat majority in both branches of its legislature, is likely to keep government expenditures significantly below the spending cap. The second question is why TABOR came into being in the first place. To reiterate, TABOR limits the amount of revenue the government can retain and spend. TABOR also gives Colorado citizens the power to approve tax increases, which it has not done for state income or sales taxes. When you spend way more money than you have in the long-run, there ends up being debt. Government spending is the major driver in the federal government's fiscal crisis so much so that Fitch's lowered its credit rating for the United States back in August. State government is not immune from the adverse effects of such fiscal irresponsibility. 

Relaxing the spending caps can be problematic since they have been proven as a tool for fiscal discipline and solvency. One study from the European Central Bank shows that spending limits are superior to anti-deficit rules (Benalal et al., 2022). A paper from the International Monetary Fund (IMF) shows that fiscal rules bring about fiscal discipline, especially in election years (Eklou and Joanis, 2019). 

Especially for a swing state drifting towards being a blue state, Colorado has been able to maintain fiscal sanity. That is in large part due to TABOR and the spending caps implemented. The American Legislative Exchange Council (ALEC) released a report in November 2022 showing how Colorado's TABOR became a gold standard of state fiscal rules. If Coloradans vote "Yes" on Proposition HH, their fiscal state will look less like one of stability and more of the fiscal dysfunction that is common with such blue states as Illinois. Especially if extended to 2040, Proposition HH would undo all of the fiscal discipline that TABOR brought to Colorado for the past thirty-plus years. If you live in Colorado, please vote "No" on November 7.

Oregon Suspends Basic Skills Requirement for Graduation: Another Example of How Pursuing Equity Dumbs Down Education

Last week, the Oregon Board of Education unanimously voted to remove its basic skills requirement to graduate high school. Prior to 2020, Oregonian high school students had to prove proficiency in mathematics, reading, and writing either through standardize testing or assignments recognized as the equivalent (e.g., work samples), in order to graduate. If students could not pass the standardized test or work sample, they would need to take extra writing and math classes during their senior year. 

In 2020, the state of Oregon suspending the standardized testing due to the pandemic. Although the pandemic has been over for a while, the Oregon Department of Education has decided to extend this suspension until the 2028-29 school year. Why? Because the Department claims that the requirement is unfair to historically marginalized students. 

I decided to take a look at the student assessment results data from Oregon's Department of Education. I looked at the 2018-19 school year, the last year before the state got rid of the graduation requirement. Let's use the mathematics results. What percent of students were considered proficient [at Level 3 or 4] in mathematics? 32.1 percent of students. Yes, it inconvenienced 89.1 percent of Black students and 80.7 percent of Latino students. However, it also inconvenienced 44.2 percent of Asians and 63.7 percent of white students. 

The fact that most students generally are not deemed proficient shows that it does not exclusively create a hurdle for historically marginalized students, thereby undermining the argument. Also, another aspect that undermines the argument. If the requirements were racist now, how would they be less racist in 2028? If they were truly racist, why not simply eliminate them? 

Let's ask another question. By removing the requirement on these grounds, what sort of message are you sending? That minority students are incapable of learning? It is a soft bigotry of low expectations. Of course, these same people would plausibly argue that Asian-Americans are merely "white-adjacent," even though Asians have a history of being marginalized in the United States. It is convenient for these educators to ignore Asian-Americans because they have, on average, become successful in spite of adversity. The Asian-American success story goes against the narrative of the "oppressed minority."

How does removing this basic skills requirement help historically marginalized students? It does not help incentivize students learn better. If the Oregon Department of Education were serious about helping minority students, they would direct resources and supports to help disadvantaged students, not discount a neutral yardstick that measures proficiency. 

If a high school student cannot demonstrate even a partial understanding of the basics in math, English, and writing, what is the likelihood that would succeed in college? As I pointed out a few years back when discussing dropout rates, academic preparation is a major indicator of academic success. Allowing 11th grade students to continue on to 12th grade without additional intervention is irresponsible. Eliminating such a requirement is a tacit admission that public schools are failing their students. Plus, school districts in California, Michigan, and New York cut academic standards. Surprise, surprise, it did not result in better academic outcomes for their students. 

Snopes pointed out that Oregon statute de jure requires that students earn three credits in math; four in English; three in the natural sciences; and three in the social sciences. Even acknowledging this statute, there are still two issues. One issue is that of grade inflation. While grade inflation started as a phenomenon in the 1970s, it really took off in 2016 (Hechinger Report). More pervasive grade inflation means that using school credits is inadequate as a substitute for a basic skills requirement. 

The second issue has to do with what the Oregon Department of Education is contemplating. In lieu of the traditional "A to F" grading scale, the Department is considering the implementation of "equitable grading." What "equitable grading" means varies by district. Some commonalities entail avoiding zeros on the 0-100 scale; giving a minimum score of 50; letting students retake grades to replace former grades; no late points take off; feedback remarks as grades as opposed as to numbers on a scale; and making consequences related to cheating not connected to grades. 

The goal is to try to make education more accessible to those who struggle. Looking at the implications of such a system, however, it means that a student cannot flunk for cheating or get a zero for not showing up. Rather than ensuring that students have the proper resources, it means either giving the same or trying to give as similar of a grade as possible, which is implied in the phrase "close the achievement gap." As we see with the Los Angeles case study, the widening gap between grades and actual academic performance show the perils of "equitable grading."

What should be rewarded? Effort and ability, not failure or laziness. Oregon had put these standards into place in 2008 so Oregonian secondary education did not turn into a participation trophy. Yet that is what an Oregon high school diploma is becoming. It is not only Oregon that is in the process of watering down its education standards. As I pointed out in 2021 when I criticized critical race theory, school districts are findings ways to lower standards in education: removing homework, eliminating the use of quizzes, arguing that mathematics is a form of white supremacy. Earlier this year, a high school in California eliminated honors classes using "equity" as an argument. 

We have to restore our education system to one where educational achievement is more important than hurt feelings. Having standards should be more important than assuming people are "fine just the way they are." Education should be about learning and growth, not propping up a false sense of self-esteem that does nothing to serve high school students down the road. Until our educators realize those salient points, the U.S. education system will continue to slip towards mediocrity.

Israel Didn't Bomb Gaza Hospital: Various Media Outlets Show Anti-Israel Animus Is More Important Than Evidence

On October 7, the terrorist organization Hamas launched a surprise offensive on Israel in which it ended up killing 1,200 Israeli civilians, not to mention kidnapping, raping, torturing, and decapitating civilians. It was the single-worst mass killing of Jews, a pogrom, since the Holocaust. It was also the bloodiest attack in Israel's history. 

Remember that Israel is a country with about nine million people. When adjusted for population, what Israel went through would have been like 25,000-30,000 deaths in the United States. How did the United States respond after 9/11? The U.S. military went into Afghanistan with the goal to rain hellfire on the Taliban. With such barbarism from Hamas, Israel has responded by attacking militarily. How could you not expect a response when Hamas committed war crimes against Israeli civilians? 

President Joe Biden unequivocally stated that he supports Israel in its fight against Hamas. Last week, Biden made a trip to the Middle East to visit various leaders in the region, including Israeli Prime Minister Benjamin Netanyahu. Hours before his visit on October 17, there was an explosion at a hospital in Gaza City that reportedly killed about 500 people. Shortly after the explosion, the New York Times (NYT), CNN, the Washington Post (WaPo), and the British Broadcasting Company (BBC) were all running early reports claiming that Israel was responsible. Palestinian-American Congresswoman Rashida Tlaib unsurprisingly jumped on that bandwagon. Here is the problem with the whole thing: Israel was not at fault for the explosion. 

First of all, the timing of the explosion was suspect. It was hours before Biden arrived in the Middle East. Why would Israel destroy goodwill and political capital like that? It does not make sense for Israel to undermine its cause by alienating the United States and the support it is offering. Wouldn't such a derailment benefit Gaza? Second, Gaza (and more specifically, Hamas) has a history of blowing up its own citizens with rockets, as well as storing weapons in or near hospitals. Third, the damage caused was more consistent with how Gazan rockets damage Israeli targets than the other way around, as well as the fact that there was no physical evidence of Israeli munitions on the ground of the site.  

That is why it is helpful to have corroborating evidence. The Israeli Defense Forces (IDF) promptly submitted evidence that the rocket was fired from Gaza (also see here). It was not only the IDF that concluded that Israel was not to blame. French military intelligence concluded that it was not an Israeli strike, in no small part because the impact crater was too small to be an Israeli missile. Plus, they ruled out that it was fragments coming from Israel's Iron Dome or that it was fragments from an intercepted rocket. 

Even the Left-leaning NPR acknowledged that "the majority of independent analysts say the damage is not consistent with a standard Israeli airstrike." U.S. intel also confirms that Israel was not to blame. None of this gets into the fact that damage to the structures were limited or whether the death toll has been exaggerated. Whether it was intentional or a failed rocket launch, what evidence shows is that Israel is not at fault. Evidence is showing that it was a sister organization allied with Hamas, the Palestinian Islamic Jihad (PIJ), that launched the rocket. 

This gets at the importance of having evidence and objective analysis, especially with something as hot-button as geopolitics in the Middle East. If one person says it is sunny outside and the other person says it is raining, you do not take one side at its word over the other. You take a look outside and see what the weather is. This is called investigative reporting, which is the jobs that reporters at NYT, CNN, et al. are supposed to be doing. If Israel had actually bombed that hospital, we would be having a different conversation. However, evidence shows otherwise. After multiple countries' military intelligence reviewing the evidence, it is becoming apparent that the PIJ launched a rocket, one that was most probably misfired and went off-course by striking a hospital. 

Why is it that these news sources take the word of a terrorist organization so easily? Reporting the Palestinian claim that Israel was to blame without collecting evidence is as egregious as it is pathetic. It is a journalist's job to investigate the facts of a story and report what they find, not point fingers before the dust has settled. I understand that mistakes and corrections are made from time to time in reporting because journalists are as human as everyone else. However, this level of ineptitude is inexcusable. This sort of irresponsibility has ripple effects. King Abdullah II of Jordan cancelled a peace summit with President Biden. A synagogue in Berlin was firebombed. There are protests in multiple countries over a false account of events. Anti-Israel sentiment and anti-Semitism continues to rise as a result. None of this does anything to subdue tensions. 

These media outlets reported a falsehood solely based on the say-so of a terrorist organization. These media outlets fought tooth and nail against the overwhelming evidence that Hamas had decapitated Israeli babies during its October 7 pogrom. Yet these mainstream media outlets so keen to take the word of genocidal, anti-Semitic mass murderers that carried out a pogrom against Israeli civilians only days earlier. Why are they reporting Hamas claims as facts? What we have seen becomes clearer by the day. These media outlets that supposedly are fighting "disinformation" are not truly concerned with truth or Palestinian lives as much as they are with virtue-signaling that they hate Israel. 

Is it any wonder that Gallup found last week that American trust in mass media is at a fifty-year low? Journalists should be doing their utmost to objectively report on what is happening in the world. Instead, we the people have to keep an eye on media outlets and fact-check. If we have any hope of escaping this post-truth world, we need to have standards as responsible news consumers and sharers not only in the context of the Israel-Hamas War, but indeed in all areas of politics. Not only do I hope that the war in the Middle East ends soon and as with few casualties as possible, but I also hope that truth prevails over misinformation.

10/20/23 Hodgepodge: COVID State Government Bailouts, How Immigrants Challenge Reparations Argument, "Race to the Bottom" Myth

Another busy week for me, which is why I felt the need to go into hodgepodge mode for today to make sure I still published two pieces here this week. Today, I cover three topics. The first is whether the federal government needed to provide state and local governments with bailout money during the pandemic. The second continues to scrutinize reparations by asking who should pay for reparations in light of the fact that so many people's ancestors arrived after the Civil War, and what sort of challenges that creates for the pro-reparations side. The third is whether the "race to the bottom" is an actual phenomenon, especially in the context of its negative connotation.

We did not need the COVID-era bailout of state governments. In response to the pandemic, the U.S. federal government went on a spending binge in the name of "pandemic relief." The government tried to pass a bailout of state and local governments in 2020 (see my criticism of bailing out state and local governments here) with the intent of keeping state and local governments afloat during the pandemic. This bailout ended up becoming a $350 billion line item of the American Rescue Plan Act (ARPA) called the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). How did that turn out? The Government Accountability Office (GAO) released a report last week finding that states spent 45 percent of  CSLFRF funding (38 percent for local governments).  This GAO finding implies that the ARPA was unnecessary. Add that finding to the fact that ARPA is a major cause of our current bout of inflation.

The immigration challenge for reparations. The argument for reparations has become a hot-button issue in the United States. The premise of reparations is to recompense for harms and costs incurred as a result of slavery. I first criticized reparations in 2014 based on ethical, legal, and logistical issues. Earlier this year, I scrutinized reparations once more because San Francisco was considering paying $5 million to each eligible African-American. I asked a series of questions to challenge the validity of reparations, including "Who is going to pay for it?" 

Yesterday, a report released from the conservative Manhattan Institute tackles this question at some length. They look at historical immigration details to see how many people immigrated to the United States since the Civil War (see below). What fraction of nonblack Americans have ancestors who arrived after the Civil War? Per this report, the answer is as high as 70 percent, which includes over half of non-Hispanic white people. Reparations are about attempting to undo a past injustice. It is difficult to justify making people whose ancestors never contributed to the U.S. economy prior to 1865 to pay for reparations. This report serves as an illustration of how murky the argument for reparations is and how arduous it would be to implement without inflicting more injustice.

"Race to the Bottom" is a myth. The "race to the bottom" is an argument of how globalization is bad. Essentially, it argues that deregulation and lower taxes are used to attract businesses to other countries. The reason why this is deemed "bad" by those on the Left (Nobel economist Joseph Stiglitz comes to mind) is because it allegedly benefits corporations while screwing over everyone else. I came across this article from a director at the libertarian Cato Institute that was published this week illustrating why that it is a myth. The author cited a June 2023 research paper from the National Bureau of Economic Research showing how an increase in foreign direct investment (FDI) does not result in an erosion of labor rights (Im and McLaren, 2023). As I have argued multiple times on this blog, deregulation or lower taxes are not evil phenomena for the economy, whether global or domestic. Rather than harm, they are generally net goods in our world. To remind us of that reality, the Cato Institute released a report entitled "The (Updated) Case for Free Trade."

The FTC Has No Business Trying to Break Up Amazon: Part III - The FTC Cannot Prove Consumer Harm by Amazon

I was looking to finish this series on the FTC filing an antitrust complaint against Amazon last week. However, Hamas murdering more Jews than have been murdered on a single day since the Holocaust took precedence in my blogging. Now I am back to present Part III. In Part I, I covered Amazon is a monopoly. While Amazon is a large and successful, it does not constitute a monopoly when looking at Amazon's full market footprint. In Part II, I detailed whether Amazon's practices harm the third-party sellers that use Amazon's platform. Using Amazon as a third-party seller comes at a price, these practices do not disadvantage third-party sellers in an illegitimate manner. This final portion of the series covers whether Amazon harms the consumer.  

Even if the FTC could prove that Amazon is a monopoly, it would still need to prove consumer harm. Why? Because the consumer welfare standard has been the foundation of antitrust policy for the past few decades. FTC Chair Lina Khan wants to do away with the consumer welfare standard. Why? Because focusing on consumer harm gives the FTC a narrower scope. As a contributor at The Hill points out, "Khan's FTC instead has expanded its range of considerations to cover size, industry concentration, and other ancillary factors. In doing so, the agency is pushing the bounds of its congressionally mandated scope and authority." 

It should not surprise us that someone with power wants even more power. That story is old as time itself. If Khan wants to go beyond a congressionally mandated scope, that will legally be an uphill battle. It will also be an uphill battle because as I illustrated a couple of weeks ago, Amazon is not a monopoly. Since antitrust law is still based on the consumer welfare standard, the question I would like to ask today is whether Amazon's practices harm the consumer.

The FTC is going to have a hard time proving that prices increased since a study from Profitero found that Amazon provided the cheapest prices in the e-commerce market, not to mention that e-commerce prices remained lower than prices offline. There is also the fact that Amazon's profit margins have been historically low, especially when compared to the profit margins of various non-retail industries. Given the consumer benefits offered by Amazon, Amazon has an even stronger case than a company who bases its operations on blatantly predatory or deceitful practices. 

One of the criticisms from the FTC is that Amazon Prime tricks customers in wanting to consume more in order to "get their money's worth (FTC, p. 37)." By this logic, using bulk food store memberships, coupons, or "buy one, get one free" should also be outlawed. Consumers use Prime because they like purchasing relatively cheaper products and having it delivered to their home in a short period of time. 

Rather than being anti-competitive, Amazon competed and succeeded by providing consumers with the value they are seeking. As I pointed out in Part I of this series, there are reasons as to why Amazon has such a high approval among Americans.  

The FTC is arguing that Amazon punishing third-party sellers by eliminating "Buy Box" eligibility broadly raises consumer prices. However, it is difficult to see how the "Buy Box" function harms consumers. First and foremost, "Buy Box" arguably exists to offer competitive pricing, as well as reduce the search costs of the consumer. Odds are that they are not going to find lower prices elsewhere. Second, the vast majority of products on Amazon can be found on other retailers, which means that consumers are not deprived of what they are seeking. Third, all retail sites would be incentivized to provide quality search functions and consumer interfaces, which improves the customer experience.

How does "Fulfilled by Amazon" harm the consumer? It is a fulfillment center in which Amazon picks, packs, and ships third-party orders. With Prime, that typically means delivery within two business days. Prime has reached the membership numbers that it has because that sort of convenience is highly valued by millions of Americans. Interfering in the fulfillment center would likely entail a loss in consumer welfare.  

Postscript

I am not here to say that Amazon is perfect. Like any large company, it is bound to have its flaws. Amazon violating consumer privacy with Alexa and having to pay on a $30 million settlement is one example. However, the argument from the FTC is that Amazon is so harmful that it requires government intervention. It hardly surprises me that the FTC complaint does not even consider the possibility of benefit to consumers. It has become clear that the Biden administration does not care whether American consumers are satisfied with Amazon, what their consumer preferences are, or whether they actually pay lower prices. Such is the narrow-mindedness of having an agenda-driven axe to grind. 

Amazon's economies of scale is what allows for its to have a large distribution network that can achieve next-day shipping. According to a recent survey from Adlucent, three main reasons why millions of consumers select Amazon are because of a wide product selection, free shipping through Prime, and good customer service. Speaking of Prime, J.P. Morgan calculated that a $119 Prime membership provides a value of $1,000 to the customer. 

Dismantling that platform would not only hurt Amazon. Breaking up Amazon or forcing third-party sellers off of Amazon could very well make for a worse customer experience and drive up consumer prices, which is the last thing we need with all the inflation we have endured in the past couple of years. 

As previous FTC General Counsel Alden Abbott stated, "Amazon's success derives from an innovative system that consumers enjoy patronizing. This is a manifestation of pro-competitive, consumer-welfare-enhancing innovation, not exclusionary anticompetitive harm. The FTC's plans to dramatically change Amazon's business practices are therefore nothing less than an attack on a vibrant competitive process."

Aside from blatant political motive, the other thing that the FTC is signaling is that it wants to punish a successful and innovative company precisely because it is successful and innovative. Such a worldview is contrary to the notion of progress. That is not the country that our Founding Fathers envisioned and we in the twenty-first century should certainly not use government to disincentivize achievement and prosperity. 

To Support Hamas Is To Support Genocide, Hatred, and a Litany of Crimes Against Humanity

October 7, 2023 is a date that will live in infamy for Israel, as well as the Jewish people. Last Saturday was not only the 50th anniversary of the Yom Kippur War of 1973. It was also Shabbat (the Jewish Sabbath) and the Jewish holiday of Shemini Artzeret. This holy time on the Jewish calendar was when militants from the terrorist organization Hamas crossed into Israel, took hostages, and slaughtered Israeli civilians. As I am writing this piece, Israeli death toll is at 1,200 people, almost exclusively civilians. This included the murder over 200 young civilians who were simply enjoying a music concert. Not since the Holocaust had this many Jews been murdered in a single day. In response, Israel's security cabinet voted to go to war for the first time since 1973. 

What appalled me was the reaction by the pro-Palestinian side. There was no condemnation of these heinous acts. Protestors in Sydney, Australia were chanting "Gas the Jews" and "Fuck the Jews." Student organizations at elite U.S. universities blamed Israel for the civilians' deaths. The Black Lives Matters Grassroots said, "When a people have been subject to decades of apartheid and unimaginable violence, their resistance much not be condemned, but understood as a desperate act of self-defense." Such hateful, anti-Semitic protests were taking place all over the developed world. First, I want to concisely address the major pro-Palestinian accusations before delving into the issue with providing such support since, as we shall see shortly, it has bearing on what Hamas truly is.

Israel's presence is not occupation. Under international law, Gaza and the West Bank are disputed territories, not occupied territories. It is a designation given to multiple entities, including West Sahara and Kashmir. This is a concept I have explained in 2017, in 2015, and in 2011. The legal status has not changed since then because it is still in dispute. I would also point out that Israel removed troops and 8,000 Israeli settlers from Gaza in 2005. Until recently, the Israeli military had no reason to enter Gaza. Let's also remember that Jordan had illegally occupied the West Bank from 1948 to 1967, which was condemned by most of the international community. Jordan's illegal occupation brings up another inconvenient point: there was no Palestine prior to 1967. The United Nations proposed a Palestinian state in 1947 (UN Resolution 194), but refused. Why? Because part of that proposal was allowing a Jewish state alongside, which was unpalatable and remains unpalatable to the Arab world up to this day. 

Israel is not a colonizer. After all of these years, Israel is roughly 8,469 square miles. To put this into context, that is about the size of New Jersey. Let's ignore Gaza and West Bank for a moment since they are disputed territories. Some other points on the topic:

• What other countries has Israel conquered? Israel has not conquered sovereign nations since it became a state in 1948. Israel annexed the Golan Heights, Sinai Peninsula, and all of Jerusalem in the Six-Day War of 1967 fighting a legitimate war of self-defense. I remember writing a paper on that topic in college...good times! 
• Israel gave the largest parcel of land (the Sinai Peninsula) back to Egypt vis-à-vis a peace treaty in 1979 in exchange for a cold peace, as well as leaving Gaza in 2005. Giving up land for peace is not the behavior of a ruthless colonizer. 
• Compare that to Spain conquering most of Latin America, the 57 countries and territories the British colonized, or the vast territories of the French empire. Even the Portuguese and Dutch acquired more land than Israel did. 
• Let's not forget that the Jewish people have a 3,000-year-plus-old presence in and connection to the land. Furthermore, many Jews in the 1940s were fleeing their nations that were looking to expel them, which is also not behavior of colonizers. 

Israel is not committing genocide against the Palestinian people. Genocide is the deliberate killing of a large group of people with the aim of destroying the people. The Global Firepower Index ranks Israel in the Top 20 for having the most firepower. If Israel wanted to, it would have wiped out Gaza already. 

• Instead, Israel has used the tactic to warn Palestinian civilians before they strike. No other country on the planet uses that tactic because it loses the element of surprise. That is how painstaking it is: because Israel would rather avoid civilian bloodshed. 
• There has been considerable population growth in West Bank and Gaza. According to World Bank data, the population of West Bank and Gaza increased from 1.97 million in 1990 to 5.04 million in 2022. That is an increase of about 156 percent! Even the United Nations show that the Palestinian population was slightly below 1 million in 1950. The numbers do not support that genocide of the Palestinians is the intent or the result of Israel's foreign policy. 
• This charge from the pro-Palestinian side is rich with irony give that, as we will see shortly, Hamas has openly expressed genocidal intent when it comes to exterminating Israel. 

Israel is not an apartheid state. This accusation affects the Israeli Arabs more than it would the citizens of Gaza. This is an argument I refuted in 2016 and in 2012. Israeli Arabs can vote in elections, sit in Israeli Parliament or the Israeli Supreme Court, or become doctors, none of which could be done in a genuine apartheid state. As I pointed out in 2021, all Western nations have had issues with how they treat minorities, including the United States, France, Sweden, Denmark, the United Kingdom, Canada, you get the idea. Israel is a younger nation, which means that it has growing pains. It is not to excuse the marginalization of people, but rather that it does not amount to being an apartheid state. If we were to follow that logic, virtually every developed nation would be apartheid states. 

As I have clearly illustrated, Israel withstands scrutiny from these fallacious allegations. These charges even more problematic given who Hamas is. Israel is the only democratic state in the Middle East surrounded by hotbeds of authoritarianism. Hamas is an anti-Western, anti-Semitic, anti-gay military group that has been declared a terrorist organization by the United States (and reaffirmed in President Biden's remarks on Hamas earlier this week), Australia, the United Kingdom, and Japan. 

Hamas does a fine job of restricting the political and civil rights of its people (Freedom House), not to mention that it uses its own citizens as human shields whenever it is fighting with Israel. As for how it treats its Israeli neighbor, Hamas has openly declared its hatred for Jews. In its original charter, it explicitly called for the extermination of the Jewish state. In its revised 2017 version, Hamas does not recognize the state of Israel and views Israel as "racist, aggressive, colonial, and expansionist." How are you supposed to negotiate peace with a side who will only be satisfied if you are wiped off the planet? 

It is not simply some minority faction of government that has held an authoritarian grip on power in Gaza. According to the latest survey data from the Palestinian Center for Policy and Survey Research (PCPSR), only 28 percent of Palestinians support a two-state solution (PCPSR, p. 9).  Even more disturbing are the survey questions about how Gazans would vote if there were elections held soon. If Abbas ran, 65 percent of Gazans would vote for the Hamas incumbent: Ismail Haniyyah (PCPSR, p. 14). If it were between Haniyyah and the popular Marwan Barghouti (the guy responsible for the Second Intifada and is sitting in Israeli jail), 49 percent would vote for Haniyyah and 49 percent for Barghouti (ibid.). The majority of Gazans support leadership that would do away with Israel if they could. This all implies that neither Hamas nor a majority of Gazans want a two-state solution. 

I already pointed out how Israel is not a colonizer, an occupier, an apartheid state, or committing genocide. Strictly for argument's sake, let us assume that Israel was some or all of those things. It does not matter. Rape is not resistance. Taking hostages, including a Holocaust survivor, is not social justice. Shooting children or parading unconscious women around like trophies does not make you righteous. No amount of "the situation in Middle East is complex" makes it acceptable to decapitate babies. It makes you the bad guys. Hamas did not hide its perversion this past weekend; it bragged about it and posted its heinous acts on social media. In case it was not clear beforehand, Hamas' hatred of the Jewish people outweighs the love of the Palestinians. 

Such reprehensible behavior is not simply defined as war crimes as laid out in the Geneva Convention (Section II). It goes well beyond "two wrongs do not make a right." Anyone who resorts to or supports such tactics are not noble. If your politics are so dogmatic that you support the depravity that Hamas committed, it does not make you a hero. It leaves you susceptible to condone blatant human rights violations, including the butchering of Jewish citizens. There is no moral equivalence argument or "one man's terrorist is another man's freedom fighter." There is no instance of "some very fine people on both sides." There is no "on the other hand." 

Hamas represents some of the most depraved aspects of humanity. What Hamas did was revolting, plain and simple. This is about human decency, an element that Hamas clearly lacks. Those who protest in favor of Hamas are saying that it is acceptable to slaughter innocent civilians, to shoot children in front of their parents, to massacre the elderly, and parade around naked, unconscious women. 

These pro-Palestinian protests sadly remind me that their support for Hamas is not in opposition of Israeli foreign policy or a certain prime minister by the name of Bibi. Chanting genocidal slogans against Jews (instead of just against Israelis, not that either is acceptable) and openly celebrating a terrorist organization shows that its animus is not about Israel, but another manifestation of Jew-hatred (If you have doubts about the difference between merely criticizing Israel and downright anti-Semitism, you can read my 2016 analysis here). We must oppose anti-Semitism much like we must oppose other forms of bigotry. If this hatred is not confronted, the Western world will lose its ability to earnestly call itself civilized.

The FTC Has No Business Trying to Break Up Amazon: Part II - Do Amazon's Practices Harm Third-Party Sellers?

The Federal Trade Commission (FTC) has issued what has been anticipated for a while: a lawsuit filed against Amazon. Part of this lawsuit is accusing Amazon of being a monopoly. As I pointed out last week, Amazon is not a monopoly. In 2017, FTC chair Lina Khan wrote an academic paper with Yale on Amazon's tactics. Even after skimming this academic paper, it is clear as day that Khan is Captain Ahab and Amazon is her white whale. It does not shock me that this lawsuit is Khan's attempt to have her fifteen minutes of fame or as "her time to shine." 

Aside from accusing Amazon of having monopolistic power, one of the FTC's major accusations has to do with third-party sellers. From Khan's viewpoint, Amazon is problematic because using its Prime Badge to extract unfair conditions from third-party sellers (especially price-parity clauses), entrench its power in the retail market, and work its way into other markets. What I would like to explore today are three practices that are the focus of the FTC complaint: the "Buy Box", "Fulfilled by Amazon," and self-preferencing. I would then like to figure out whether they cause harm to third-party sellers, and if so, to what extent.

Does the "Buy Box" Harm Third-Party Sellers?

Amazon's "Buy Box" is a segment of its website that features top-ranked products.  In order to qualify as a "Buy Box" seller, a seller's product has to generally be the lowest price. If a seller offers the same good at lower prices on other platforms, Amazon penalizes that producer in two ways. First, the producer no longer qualifies for "Buy Box." Second, their product ends up lower is the search results. Amazon still allows the producer on their platform, but not with the added benefits that come with "Buy Box." 

The FTC is arguing that these third-party sellers are aggrieved because it ends up being more difficult to sell on Amazon without "Buy Box" status. If the FTC had their way, it would mean forcing Amazon do undermine its own business. How so? 

Amazon's platform would become an advertising platform and third-party sellers could simply sell the product on their website. What Amazon's price parity policy does is disincentivize free-riding while doing its utmost to keeping prices low. This is part of what Amazon needs to do in order to maintain the combination of first- and third-party sellers, a feature that improves the platform's appeal to customers. Rather than be anticompetitive, economic research from the International Center for Law and Economics suggests that these price-parity clauses have the potential to be pro-competitive.

What About "Fulfilled by Amazon?"

Amazon provides a centralized distribution system with packaging, shipping, and storage known as "Fulfilled by Amazon." One of Amazon's practices is that it prioritizes sellers who use "Fulfilled by Amazon" over those who do not. Third-party sellers pay a price to be on "Fulfilled by Amazon." These prices range from 8 to 45 percent for each item, although most sellers pay 15 percent. 

What do third-party sellers gain in return? The benefit of paying such a price is to have access to the 200 million Amazon Prime members and the revenue that comes along with the sales, as well as two-day shipping. If third-party sellers think Amazon's prices are excessive, they are welcome to take their business to a competing site (e.g., Wal-Mart), a social media marketplace, independent websites, or sell exclusively at their own stores. It would also mean that their products would not receive the same exposure, which translates into increased marketing costs for the third-party sellers. 

The FTC thinks that if third-party sellers could participate in Prime without the fulfillment services, they could provide comparable services (FTC, p. 107). The issue is that Amazon tried that pre-COVID with a service called "Seller Fulfilled Prime." How did that turn out? Fewer than 16 percent of sellers were able to make good on the two-day promise. Delayed shipping and angry customers do not exactly make for a solvent business model. Business should have deference on how they produce and deliver their products. Prioritizing timely delivery should not be demonized, but rather deemed praiseworthy.  

Amazon's Self-Preferencing Practices

A tertiary accusation in the FTC complaint is that Amazon sets its search results in a way that it biases its products over third-party products. Forget that such a practice is a form of commercial speech afforded by the First Amendment (Central Hudson v. Public Svn. Comm'n, 1980). This practice of self-referencing is a common business practice among multiple sectors. Take supermarkets as an example. They give their brands placement, even as they sell other brands in the same store. Alternatively, they charge third-party brands extra to be sold side-by-side the first-party brand. This practice has been widely accepted as competitive, and Amazon is no different.

Postscript

We want the market to be tough on sellers, especially in comparison to consumers. As Washington Post columnist Megan McArdle puts it, "The relentless race to sell better, cheaper, faster has driven two centuries of prosperity. To merit getting involved, the government needs to show that sellers are being disadvantaged in some illegitimate way that's broadly bad for society." 

There is a burden placed on sellers. Depending on what is being sold and a seller's costs of operation, one could argue that Amazon's fees and contractual obligations are too onerous. Others could argue that access to a wider audience are worth the cost. The tradeoff between the cost of selling on Amazon's platform and the benefits is a decision each seller should make on their own. Each seller should determine whether or not it is good business acumen to sell on Amazon's platform or take their business elsewhere. 

As the think-tank R Street points out, Amazon's practices that are accused of being anticompetitive are actually widespread competitive conduct in the retail industry, whether that is product self-referencing, sponsored product placement, or pricing agreements. The burden on the FTC is to prove that a) Amazon is forcing third-party sellers on "Buy Box" and "Fulfilled by Amazon," and b) third-party sellers have no other options. 

Aside from vilifying commonly accepted business practices, such a conundrum comes with an irony. If the FTC were to succeed, Amazon's best recourse very well might be to disallow non-Prime members to be on Amazon or even remove all third-party sellers from its platform. After all, if there are no third-party sellers, then there are no conflicts of interest or self-preference. Such a move neither helps Amazon nor third-party sellers. It would also give an upper hand to Target and Wal-Mart, the latter of which has a special irony given how much the political Left vilified Wal-Mart a decade ago. The FTC has no business picking winners and losers, and it has no business trying to break up Amazon without actual proof of causing considerable and measurable harm.    

As we will see in the next Part covering consumer harms and benefits, the FTC's complaint is oblivious to the possibility that Amazon actually provides consumer benefit.  

The FTC Has No Business Trying to Break Up Amazon: Part I - No, Amazon Is Not a Monopoly

Amazon went from a small operation in Jeff Bezos' garage in 1994 to being the well-known multinational company that it is today. It has become a true force in the retail sector, accelerating the prevalence of e-commerce. Amazon ranks amongst the most popular companies in the United States, which is more than I can say for Congress' approval rating of 17 percent (Gallup). Amazon has become ubiquitous to the point of becoming an integral part of the American way of life. I personally enjoy the fact that I can use Amazon Prime to purchase a lot of goods and have it sent to my home within two business days. 

In spite of its popularity, not everyone is thrilled with Amazon's success. Last week, the Federal Trade Commission (FTC) joined 17 State Attorneys General in filing a lawsuit against Amazon. In the complaint filed, the FTC alleges that Amazon a) has monopolistic power, and b) acts in a way that to "stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon." Ultimately, the FTC is trying to seek a permanent injunction against Amazon's monopolistic situation, which could mean breaking up Amazon. Does the FTC complaint withstand scrutiny? 

First, what is a monopoly? In economics, a monopoly is a single seller with no competitors. Another characteristic of a monopoly is that it there are high barriers to the entry of other firms in that market. A pure monopoly rarely exists in practice. For regulatory purposes, monopoly power refers to the extent to which a seller can influence the price or quantity of a good or service in a given market. As we see below, monopolies gain greater profit at the expense of everyone else. These economic inefficiencies referred to as deadweight loss.  

The FTC is claiming that Amazon has had 69 percent market share since 2015 (FTC, p. 57). The FTC defines the market as "the online superstore market and...the online market for online services (p. 43)." If we used this narrow definition, it would mean that Amazon only competes with eBay, Wal-Mart, and Target (p. 57). The issue with this definition is that Amazon has more than those three large competitors, including hundreds of brick-and-mortar stores and multiple smaller e-commerce retail firms. 

Amazon competes in the e-commerce market specifically and the retail market more generally. An accurate market size means including all of Amazon's competitors, not cherry-picking a select few for the sake of political grandstanding. In the e-commerce market, Amazon possesses a 37.8 percent market share. This sounds high, but there are more concentrated markets out there. When looking at the overall retail market, Amazon has even less clout. According to market research firm IBIS World, Amazon has a retail footprint of $318.3 billion. While that is a lot of money in as fragmented of a market as retail, it makes up 3.9 percent of the $8.1 trillion market size. A market size of 3.9 percent is a lot less dire of a situation than the 69 percent the FTC is claiming.

Furthermore, there are certain markets that have proven difficult for Amazon to enter. Even after purchasing Whole Foods, Amazon owns 1.8 percent of the grocer market share. Amazon's acquisition of MGM bought it 7.05 percent of the market share for film studios. Amazon Music ranks fourth in the music streaming services market, at 13.5 percent. Amazon had to shut down its telehealth services firm, Amazon Care, because it was too difficult of a market for Amazon to enter. Plus, if Amazon is doing so well, why did Amazon cancel, close, or delay 99 facilities this year? Yes, Amazon's success has made it a sizable company, but it is nowhere near being the monopoly that the FTC is claiming.  

In the next part, I will explore the FTC's complaints against certain business practices of Amazon and whether they harm third-party sellers.

UK Government Study Shows Lockdowns and Other NPIs Lack Evidence Base

When the pandemic began, I remember how politicians were clamoring that we needed to lock down large swathes of the economy to prevent the spread of COVID-19. Whether it was "Stay home, stay safe" or "you wouldn't want to infect Grandma," there were various tactics used to keep businesses locked down and people isolated from one another. What is interesting is that these Lockdown Lovers are nowhere near as loud now as they were in 2020. I cannot imagine why that would be the case. Maybe it is because the lockdowns were the disaster that I and others predicted back in 2020. 

In 2021, studies started coming in to show how ineffective they were, my favorite being a RAND Corporation study showing that lockdowns actually caused increased excess deaths. 2021 was the beginning of evidence arising showing how little good lockdowns brought about in the world. A report from the British government continues building that evidence base. 

Last week, the U.K. Health Security Agency (UKHSA) released a report on non-pharmaceutical interventions (NPIs). NPIs included in this study were lockdowns, test and isolation, face masks, and travel restrictions. What did UKHSA find after reviewing 151 studies that were conducted in the United Kingdom? 

"The body of evidence available of effectiveness of NPIs in the U.K. provides weak evidence in terms of study design, as it is mainly based on modeling studies, ecological studies, mixed-methods studies, and qualitative studies." 

Much like with the Royal Society's recent report on lockdowns, the concept of effectiveness in the UKHSA report suffers from a similar definitional flaw. It decides to look at effectiveness as one-sided, i.e., what primarily or solely matters is preventing COVID transmission. This approach is the opposite of what a cost-benefit analysis or standard risk assessment should look like. In its 2022 meta-analysis, Johns Hopkins researchers acknowledged that in spite of there being some lives saved, there were considerable costs. Some of those costs included unemployment, reduced schooling, and undermining liberal democracy. This past year, I came across two systematic reviews in which the cost ($9.3T) of lockdowns in the United States by far exceeded the benefits ($189.1B). 

It is nice to see that governments are starting to see how ineffective the lockdowns were. Rather than own up to supporting a terrible policy decision, people would rather distance themselves from lockdowns to the point they deny their initial support. Yes, acknowledging that lockdowns were disastrous is a good start. If we want to make sure we can adequately respond to the next pandemic, politicians and government officials need to ask the tough questions and do some major introspection to not make the same stupid mistakes again.