Is There a Link Between Fracking and Contaminated Groundwater?

Fracking, or hydraulic fracturing, has been a process to extract a considerable amount of natural gas from underground shale formations. It has been quite a lucrative endeavor. A recent National Economic Bureau Research study (Gilje et al., 2016) shows that since 2012, fracking has increased aggregate U.S. equity market capitalization by $3.5 trillion, which says nothing of social costs or benefits. As the Brookings Institution points out, while there are economic gains to be made, there are still environmental concerns to be considered.

One such consideration is that of groundwater. Fracking produces the fractures in the rocks by injecting high-pressure amounts of fluids (usually water, sand, and chemical additives). After the injection, the internal pressure causes fluid to return to the surface through the wellbore. This flowback is stored on site in tanks or pits before treating, disposing, or recycling it. In many cases, the flowback is injected underground. The potential for the flowback to seep into groundwater is what has many concerned, but how valid is the concern?

The controversy behind fracking and groundwater dates back at least to 2011. In December 2011, the Environmental Protection Agency (EPA) released a preliminary report hinting at there being an issue with fracking and groundwater contamination in Pavilion, Wyoming, even though the then-EPA Administrator said that there is no definitive determination to be made. In 2013, the EPA handed it over to the Wyoming Department of Environmental Quality (DEQ). The evidence from the DEQ, released in November 2016, found that hydraulic fracturing fluids did not sink into water-supply wells, although a Stanford University study attempted to refute these findings a few months earlier.

Last week, the EPA released its own final report from its original investigation earlier this decade, the report that found no evidence of "widespread, systematic impacts on drinking water sources in the United States." This latest report redacts the portion that says there is no evidence of widespread groundwater contamination. However, the report concludes with hypotheticals in which fracking could be bad, such as injecting hydraulic fracking fluids directly into groundwater (Executive Summary, p. 42). One would think it would be obvious that injecting the fluids directly in the water would contaminate, but that is not inherent within the process. Nor does the disposal of inadequately treated wastewater into surface water (ibid.).

These are not the only studies that point to a lack of a threat to groundwater caused by fracking. A Duke University study (Jackson et at., 2013) saying the issue was faulty steel casings and improper sealing of the wells, and not fracking itself. The United Kingdom's Department of Energy and Climate Change came to a similar conclusion in their 2014 report on fracking that the issue is poorly crafted wells, not fracking per se (p. 3). Another study, this one from the National Science Foundation, found that the introduction of fracking in Colorado did not increase the likelihood of water contamination (Sherwood et al., 2016). There are also a 2011 United States Geological Survey study and a Yale University study (Drollette et al., 2015) showing that fracking does not have these particular systemic effects on groundwater. I don't mind taking measures to avoid preventable, accidental leakages and assessing the costs against the benefits of fracking. However, environmentalist fear-mongering on the hydraulic fracturing process that has brought the American people cheaper energy with less carbon emissions is folly.


6-20-2017 Addendum: The University of Texas' Academy of Medicine, Engineering, and Science of Texas just released a study on the environmental effects of fracking. What it ended up finding is that fracking does not contaminate groundwater, nor does it cause an earthquake hazard.

Parsha Vayishlach: Kissing and Making Up

When people wrong us, we have a number of ways we can react: ignore it, be passive-aggressive about it, berate others that have nothing to do with the wronging, or even take revenge on the one who wronged us. One can see how in Torah, Jacob was worried about his brother, Esau, taking revenge. These two biblical figures have fought since they were in the womb. In past Torah portions, we see that not only did Jacob trick Esau in giving up his birthright for some food (Genesis 25:29-34), but Jacob also tricked Isaac in giving Jacob the blessing that was meant for Esau (Genesis 27:34-40). Esau was angry and wanted to kill Jacob (Genesis 27:41), and it was bad enough where Jacob fled and worked for Laban for 14 years. Fast-forward to this week's Torah portion. Esau is in pursuit of Jacob, and has 400 men accompanying him. Jacob is understandably in fear for his life (Genesis 32:8). When Jacob and Esau finally meet after all those years, how do they react? You would think that Esau would have Jacob slain, but no:

וירץ עשב לקראתו ויחבקהו, ויפל על צוארו וישקהו ויבכו.

Esau ran to meet him and embraced him. Esau fell on his neck and kissed him, and they wept. -Genesis 33:4

What in the world happened? Here I thought that Esau was out for blood. In the Masoteric text [in the Torah scroll], there are dots over the phrase "and they kissed" (וישקהו), and some rabbinic commentary tries to figure out what those dots mean. Some do not want to attribute Esau with any positive motives: the Midrash says that Esau tried to bite Jacob's neck, but Jacob's neck turned into marble shortly beforehand (Genesis Rabbah 78:9). However, given what transpires, I am willing to give Esau at least some of the benefit of a doubt, even if Esau has done some less-than-reputable actions. Right before Esau gives Jacob a kiss, Jacob prostrates in front of Esau seven times. Rashi thinks that the prostration took Esau so aback that he felt the need to embrace him. By prostrating seven times, Jacob performed the exact reverse blessing that Isaac gave Jacob, the one that said "Be master over your brothers, and let your mother's sons bow to you (Genesis 27:29)." Esau could have taken that as a repudiation of the blessing Isaac gave Jacob all those years ago. 

Right after Esau gives Jacob the kiss, they weep. Given how men traditionally remain emotionally guarded, the fact that Esau let his guard down and wept says a lot in terms of how the men were genuinely moved (R. Hirsch, Genesis 33:4). After crying, Jacob gave his tribute. By giving the immense tribute, Jacob was showing the superiority of Esau (Ramban, Genesis 33:8). When Esau said to Jacob "Let what you have remain yours," he was acquiescing Jacob's right to Isaac's blessing (Rashi, Commentary on Genesis 33:9). Jacob then says (Genesis 33:10) that seeing Esau's face is like seeing the face of G-d because of the favor Esau bestowed. We don't see Esau asking for compensation. He doesn't even ask for an apology. The kiss is the signal of the resolution of another kiss, the deceitful kiss that started this whole feud (JPS Commentary on Genesis 33:4).

Was this scene in Genesis 33 truly a resolution? It's hard to say. On the one hand, it could have been a political ploy. On the other hand, Esau was holding all the cards, so it's difficult to say that Jacob had anything to use as leverage. Perhaps this scene was a reminder that Esau is still a descendant of Isaac and Jacob. After all, Jacob and Esau at least able to come together to bury their father later (Genesis 35:28-29). But wait, what about the fact that the Edomites have military conflict with the Israelites later? It might be a new conflict regarding power and resources, but it could also be a continued strain dating all the way back to Jacob and Esau. If that's the case, it says a lot about the importance of forgiveness. The brothers' embrace is a parallel of Jacob's encounter with the angel, which represents both the love and ability to grapple with the struggle of the situation (Dr. Avivah Gottlieb Zornberg). 

How we react when someone wrongs us is a sign of one's character, and that is seen in this week's Torah portion. But we also see the importance of addressing wrongdoings. In the Talmud, R. Eliezer (Shabbat 153a) says that we should repent one day before we die. Since we do not know when we die, R. Eliezer concludes that it is all the more reason that we should repent today. Jacob and Esau waited way too long to bury the hatchet in any meaningful sense, and even whatever that were able to set aside didn't completely remove the tension. We find ourselves with a biblical verse showing us what not to do. We shouldn't let problems or wrongdoings fester. We should be proactive enough to make sure we can have as clean of a slate as possible. I know that each strained relationship has its own unique circumstances, but it's better to have some resolution than to carry it inside. We can take at least one lesson from Jacob and Esau: it's better to "kiss and make up" sooner rather than later, but at the same time, better late than never. 

Are For-Profit Colleges Fraudulent Crocks or Simply Misunderstood?

I need a reprieve from thinking about the upcoming Trump presidency and blog on something less controversial instead, or at least relatively so: for-profit colleges. Intuitively speaking, I would think that a for-profit school would work better than a non-profit school or a public school. The reason for that thought is the idea of profit motive, or that firms operate in a certain way in order to maximize profit. People start up businesses for other reasons, but one of the primary reasons, if not the primary reason, is to earn a profit, and this is because self-interest has strong predictive power. The idea of profit motive is not libertarians being selfish (by the way, libertarians are not more selfish than others) or so-called "evil capitalism": it's standard microeconomic theory. Part of that profit motive is being able to deliver the best good or service at the lowest rate possible relative to the quality of the good or service. At least that is how it works in theory.

However, there are some, like John Oliver (see above), who contest that theory. For naysayers of for-profit schools, they are not simply ineffective. They are also downright immoral. How bad are for-profit schools? If they really are that bad, how should we deal with them? There are certain metrics to compare for-profit schools with public schools or non-profit private schools. Let's take a look at some of them:

Post-Graduation Earnings: A May 2016 paper from the National Bureau of Education (Cellini and Turner, 2016) shows that there is an average decline in earnings after attendance. However, the average is skewed by the number of people who drop out of a for-profit college, not to mention that the study is not particularly longitudinal in nature.

Last month, the Department of Education released graduate earnings data for those who completed certificate programs in public schools versus for-profit schools. The Department found that graduates of public undergraduate certification programs earned $9,000 more annually than for for-profit. The DoE method is slightly flawed in that according to its Beginning Postsecondary Students (BPS) Longitudinal Study, 70 percent of for-profit schools graduate from these programs, while only 45 percent of public school attendees graduates.

On the whole, those who graduate from a for-profit college earn, on average, 4 percent more per year attended than high school graduates who never went to college, according to a Brookings Institution 2015 study. Assuming one graduates from a for-profit college, there is long-term payoff, much like graduating from college in general. This does assume that one graduates, which brings me to my next point.....

Completion Rates: As previously stated, for-profits have a higher completion rate for undergraduate certification programs. For two-year and four-year programs, not so much. The Brookings Institution points out that 60 percent complete for two-year programs and a low 35 percent for four-year programs. For two-year programs, for-profit colleges fare better than two-year public colleges, whereas they do not for four-year institutions. However, given that 81.5 percent of for-profit students are enrolled in four-year schools, the disparity in completion rates for four-year schools is more pronounced. On the whole, completion rates for for-profit enrollees are lower.

Indebtedness. The Brookings Institution released a report in Fall 2015 about indebtedness. In 2011, students from for-profit schools borrowed 25 percent of loans while only representing 9 percent of enrolled students. In 2014, 25 percent of borrowers were from for-profit schools while representing 16.7 percent of the student loan debt (p. 25-26). The findings about indebtedness are paradoxical. For-profit college students are more likely to take out loans. On the other hand, the amount of debt owed is on average smaller. Although there is smaller debt, those who attend for-profit colleges have less access to non-loan aid, which increases their reliance on student loans and makes it more difficult to pay off the debt. This is shown through the default rate. While making up for a quarter of borrowers, those who attended for-profit colleges account for 35 percent of defaults in 2013, which is thankfully lower than the 44 percent in 2011.

Tuition: The College Board puts out statistics on tuition (see below). There's no nice way to put it: for-profit colleges have a higher tuition rate than public colleges. While the tuition and fees are higher, there is argument that the higher tuition is worthwhile. Cato Institute scholar Neal McCluskey postulates that in spite of the higher tuition, for-profit college provides more flexible scheduling, better student services, and more focused training.

Postscript: Comparing charter schools to public K-12 schools was much more straightforward. On average, charter schools outperform public K-12 schools. However, it is more difficult to render a verdict on for-profit schools. Part of the reason can be attributed to poor-performing schools, like we saw during the Corinthian College scandal. Just because an institution or business is for-profit does not mean it is going to succeed. Figuring out what success looks like becomes murkier when government regulation muddies it all up. What do I mean by that?

It starts with the federal government subsidies. I have brought this up before, but when the demand for a good or service is artificially boosted, price also increases. This goes beyond basic microeconomic theory. In July 2015, the Federal Reserve Bank of New York released a report saying that for every dollar that is spent on a subsidy for a student, the tuition goes up by 60 cents. This effect is more pronounced for those in private institutions, e.g., for-profit schools. The National Bureau of Research also put out research in February 2016 concluding that government subsidies accounted for 78 percent of the tuition increases from 1987 to 2010 (Gordon and Hedlund, 2016).

But wait, it gets weirder because the government does not treat for-profit schools the same way it does for-profit schools. If anything, there is greater regulatory scrutiny. The effects of government subsidies gets further distorted with what is called the 90-10 rule, which states that a for-profit college receive no more than 90 percent of their funding from the federal government. Both public schools and for-profit schools depend on federal government subsidies. Public schools can at least rely less heavily on federal government subsidies and lean more on state funds. For-profit colleges don't have that luxury, and thus have to recruit more students, which would explain why this U.S. Senate report found that for-profit colleges spend 22 percent of its revenue on advertising. This 90-10 rule creates perverse incentives, e.g., high levels of advertising, because more students means more money from the federal government.

The effects of the 90-10 rule are even further distorted by the "gainful employment" rule, which was implemented by the Obama administration in 2015. This rule was created to stop for-profit colleges from abusing the 90-10 rule by requiring that "for-profit schools that receive federal funding ensure their graduates have high earnings relative to the debt that they have accumulated." This is a perverse incentive because it encourages for-profit colleges to help the students with the highest potential to graduate, which would have even more adverse effects on completion rates.

Can I say that for-profit colleges are preferable to public colleges? Given the distortionary effects of federal government subsidies and other regulations, it is hard to ascertain without broad, systemic data that provides apples-to-apples comparisons. The evidence is skewed based much more on the perverse incentives than it is the supposed evils of profit-making. We don't live in a world in which the government has little to no influence on for-profit colleges. The federal government has a huge sway over for-profit college operations. For-profit college enrollment growth shows that demand has not slowed down. We even see the growth of for-profit colleges in such countries as Sweden, Australia, and the United Kingdom. Given that the President-Elect owns Trump University, I wouldn't be surprised if government policy ends up being friendlier towards for-profit colleges than the Obama administration has been.

What I do know is that neither public college nor for-profit colleges have statistics that are worth bragging about, and given the current statistics, it looks like for-profit colleges overall underperform in comparison. What would be more interesting to see is how for-profit colleges performed if these regulations were removed and if they had more limited access to federal government subsidies. It would be nice to see what would happen if private lenders had a greater role because they would have a greater incentive to weed out shady for-profit colleges. That would be a fun social experiment to watch unfold, but until reforms are made, let's just say that I'm glad the days of attending college are behind me.

Are Medicaid Block Grants a Stumbling Block to Quality Healthcare?

Given how President-Elect Trump campaigned about the Affordable Care Act, more colloquially known as Obamacare, the odds of Obamacare surviving a Trump presidency are next to nil. Obamacare is not the only healthcare initiative to expect reform under a Trump presidency. One that Republicans have been eyeing for a while is how to fund Medicaid, specifically in the form of block grants.

In its report on block grants, the Congressional Research Service defines block grants as "a form of grant-in-aid that the federal government uses to provide state and local governments a specified amount of funding to assist them in addressing broad purposes." Using block grants to fund Medicaid is hardly a new policy proposal: it goes back to the Reagan administration.

The Left-leaning healthcare think-tank Commonwealth Fund criticizes block grants for departing from the normal structure of providing flexible spending. The issue for Commonwealth Fund is that because block grants are based on a preset formula that does little to nothing to account for population growth or number of beneficiaries since the federal contribution would remain roughly the same. Another Left-leaning think-tank, the Center for Budget and Policy Priorities (CBPP) finds that based on previous Republican proposals, we would see 14 million less Medicaid enrollees, costs shift over to states, and that block-grant funding would decrease Medicaid funding by 33 percent over the next decade. One comment I do have to make about the fear-mongering around losing 14 million enrollees is that just a decade ago, there were only 42.5 million enrollees. As of date, that number is at 73.1 million enrollees! A little over a third of that growth is thanks to Obamacare's Medicaid expansion of bringing in 11 million Americans under Medicaid. Interesting what happens when you put enrollment rates into a more historical context. Plus, let's not forget the irony of block grant critics, which is that because the federal government pays a majority of Medicaid expenditures, the status quo allows states to shift costs to other states.

This next point has more validity than those made by the CBPP. The Left-leaning Urban Institute also released research on Medicaid block grants back in September. The Urban Institute found that there would be major disparities from state to state (see below), which would not only value a patient more highly simply because they live in a different state, but would also burden taxpayers to pay more if the state expanded eligibility. This would ultimately reduce state flexibility and threaten current coverage levels.

If the next Congress decides to go the route of block grants, there are a number of questions that would need to be answered: What is the amount of the initial federal allotment? How much flexibility will be given for population growth, healthcare industry price growth, or economic downturn? Does this mean that states would still need to spend money on Medicaid? These are important questions, but they obfuscate an even more question: how well does Medicaid work?

[As a caveat to Medicaid block grant criticism, the Congressional Budget Office (CBO) also recognizes that Medicaid's financing and the degree of flexibility are two separate issues. If the spending cap. e.g., block grant, was coupled with state flexibility over such facets as "administrative requirements, ways to deliver health care, cost-sharing levels, and covered eligibility categories," it could make it easier for states to adjust their Medicaid spending.]

There is much detail that can be delved into regarding Medicaid because it is so complex, but here is a high-level view. In 2015, the United States spent $532 billion for Medicaid. $29.1 billion of that money spent, or about 5 percent, was spent in improper payments. This is just one reason why the Government Accountability Office (GAO) has Medicaid rated at "High Risk." 33 percent of physicians don't even accept Medicaid beneficiaries. Projected growth in annual Medicaid expenditures over the next decade is projected at 6.1 percent, which is slightly higher than the overall healthcare growth of 5.8 percent. Medicaid enrollees only have a slightly better chance of surviving cancer than the uninsured. About a decade ago, Jonathan Gruber, who is referred to as "the architect of Obamacare," found that public-sector healthcare (e.g., Medicaid) crowds out private-sector healthcare to the point where the government covers four patients at the price of ten (Gruber and Simon, 2007).

Simply throwing money into an already-failing system neither addressed fiscal insolvency nor structural incentives to improve upon enrollees' healthcare, which is why there are those who advocate for block grants. The advocates argue that because they are of the view that block grants would cut back on waste while giving states more flexibility to experiment with potentially more cost-effective options. This 2012 report from Right-leaning Manhattan Institute outlines how block grants can better target Medicaid funds, improve healthcare quality, and cut back on costs. The Texas Public Policy Foundation published a 2015 report on what block grants could look like for the state of Texas, which is the largest state that did not accept the Medicaid expansion funds under Obamacare. The libertarian Mercatus Center also has a report showing how welfare block grants can act as a model for Medicaid reform (Sutter, 2013).We need to try something that will better incentivize more responsible spending while ensuring as much healthcare as possible. Since Trump has not released details on how exactly he would go about block grants, although the bipartisan Committee for a Responsible Federal Budget (CRFB) has estimated 10-year savings based on certain scenarios. Block grants are not a silver bullet, but implemented adequately, they can be a first step in the right direction to make sure all Americans can access high-quality healthcare.

Why Another Glass-Steagall Would Be Ineffective Banking Reform

Deregulation. It's that word that many on the Left are fond of using to scare you in thinking that a world without heavy-handed government intervention would be a scary, unguided one. This is especially true when we're talking about something like the financial sector, or more specifically with banking. During the presidential election, Democratic candidate Bernie Sanders called for breaking up the big banks, which would not have been a smart move. Democratic Senator Elizabeth Warren tried passing a 21st-century version of Glass-Steagall, which was a bill passed back in 1933 that required commercial banking and the investment market (i.e., securities trading) to be separate. What is more peculiar is that Trump has called for a bill similar to that of Senator Warren. What is it about Glass-Steagall that causes such controversy? What sort of role has it played in shaping the banking sector, and do we need legislation similar to that of Glass-Steagall?

The Glass-Steagall Act, also referred to as the Banking Act of 1933, was a Depression-era bill that prohibited commercial bankers from engaging in investment banking. The primary idea behind the bill was to make sure that commercial bankers were not exacerbating the financial situation by gambling with depositors' funds in the stock market. This seventy-plus-year old piece of legislation still plays a role in the public policy realm because the narrative that is common on the progressive Left is "watering down Glass-Steagall and deregulation of the financial sector caused the Great Recession, and only further regulations, such as an updated Glass-Steagall, will save us." While this wonderful, recently-released paper from Cato Institute scholar Oonagh McDonald covers the more historical aspects of Glass-Steagall, as well as these reports from Congressional Research Service and Heritage Foundation, let's briefly take a look at the history to see why I take issue with this narrative.

• A Rugters University study (White, 1986) found that banks from 1930 to 1933 (a time period where banks were massively failing during the Great Depression) that dealt both with commercial and investment banking were more than twice as less likely to fail, not to mention that none of the 5,000 bank failures in the 1920s involved securities dealings affiliates. In short, there was no evidence that banks with securities affiliates, which is what Glass-Steaggal was targeting, were more susceptible to failure. 
• The Clinton Administration signed off on the Gramm-Leach-Biley Act (GLBA) in 1999. The GLBA was a partial repeal of Glass-Steagall, specifically that of Sections 20 and 32 of the Glass-Steagall Act. Section 20 stated that a bank could not have a majority or controlling share in a securities firm. Section 32 prohibited banks from having interlocking directorships primarily engaged in the underwriting, dealing in, or distribution of securities. What the GLBA allowed for was affiliations between commercial banks and firms involved in securities underwriting, as well as interlocking management (McDonald, 2016, p. 12).
• The GLBA did not cover Sections 16 and 21. Section 16 limits commercial banks to purchasing and selling securities for customers, as well as prohibiting them from dealing in or underwriting securities on their own accounts. Section 21 prevents securities firms from taking deposits. Both of these Sections are still in effect to this day. What this means is that while commercial banks can be affiliated with investment banks, they are still considered two separate institutions. 
• The interesting part is the effects of the GLBA, which were negligible. Politifact determined that altering Glass-Steagall in 1999 did not cause the Great Recession, at least in part because it was so whittled down, but mostly because there is not an economist out there arguing that Glass-Steagall was the sole lynchpin holding together the financial market. Even NPR said that, at best, Glass-Steagall was one of many other underlying causes. 
• Even when Glass-Steagall was gradually being eroded over the past few decades, American banks in Europe operated the same way as the banks in the local jurisdictions, and guess what? There were not any severe or adverse consequences as a result of not having Glass-Steagall (McDonald, p. 9). 
• Given the institutions that started the domino effect of the Great Recession, it's difficult to see how Glass-Steagall would have prevented it. Bears Sterns, Lehman Brothers, and Goldman Sachs were stand-alone investment banks that did not take deposits. Fannie Mae and Freddie Mac were not even banks. Wachovia and Washington Mutual got into trouble during the Great Recession because of their mortgage portfolios. Another way of saying this: Glass-Steagall would have done nothing to prevent the Great Recession.
• Between 1997 and 2008, the number of financial regulatory restrictions actually grew from 40,286 to 47,494 regulations. From 2000 to 2008, the Federal Register added 7,100 pages of financial regulations. Looking at the regulatory measures leading up to the Great Recession show that deregulation did not cause the Great Recession.
• Even better, one of the most basic rules you learn in Finance 101 is that diversification reduces risk. The banks that were in the most trouble in 2008 were the ones that lacked portfolio diversification. This lack of diversification was also a major issue with the small unit banks during the Great Depression (McDonald, p. 8).
• Two things that Glass-Steagall was never designed to do: regulate the size of banks and prevent banks from buying and selling securities for their own investment purposes. 

Understanding the history of public policy, especially with something as complicated as Glass-Steagall is important because it helps us understand policy today. We can focus on a more noble goal of helping prevent losses to the depositors, but at the same time, prohibiting affiliations between commercial banks and investment banks does not help with that noble goal. We already have evidence that Glass-Steagall did not help with the Great Depression, or that a partial repeal of Glass-Steagall caused the Great Recession. While you can argue that "just because it didn't help in the past, it can help in the future," the burden is on the advocate for Glass-Steagall, especially in light of its past inefficiencies. After all, it's not just libertarian or conservative think-tanks that think Glass-Steagall was and is bad policy. It is also coming from the centrist Brookings Institution.

If we are to forget for a second that Glass-Steagall has not worked, what would a revival of Glass-Stegall look like? A major part of what resulted in the whittling down of Glass-Steagall was technological. By the 1970s and 1980s, technological development allowed for greater access to financial data, which made it cheaper and easier for businesses to decide what financial investments to make. Also, the line between commercial and investment banking has been since blurred, making Glass-Steagall all the more irrelevant. By the mid-1980s, securities firms were getting a huge advantage, and if it were not for the GLBA, commercial banks would have been forced out of financing for all but the smallest of businesses. If we revive Glass-Stegall, it would make it more difficult to support subsidiary banks, which would make bank failures and taxpayer bailouts more likely in the future. There is no sense in weakening banking institutions further. Even the centrist Brookings Institution concludes the following:

"Combined groups benefit from the diversification effect of having both businesses together. Usually, one side does better than the other in troubled times, reducing the risk of failure. Since the Crisis demonstrated that investment banking failures can be nearly as devastating to the economy as commercial banking failures, there is clear value in diversification to protect both sides. This is a major reason the big failures were in firms with purer focuses."

Let's talk about whether Trump's idea to dismantle Dodd-Frank is a good idea. Let's talk about how we can prevent the government from propping up another housing bubble, we can create sound monetary policy to mitigate financial pressures, or why breaking up big banks is a bad idea (see here and here). But let's stay away from an antiquated, irrelevant piece of legislation that did nothing to help with past financial crises and does not show any promise of helping prevent future ones.

Trump's Flag-Burning Comments: One Way to Set the Constitution Ablaze

President-Elect Trump has turned heads in more ways than one. During the election, he used Twitter as a social media platform to develop a connection with his supporters, and even now, he uses Twitter to convey his thoughts and opinions. His latest communiqué on Twitter (see below) has those both on the Left and Right worried about whether Trump will respect the Constitution.

Let's start off with a primer on the Constitution. For one, Trump can't revoke an American's citizenship simply because they burn an American flag. There's this not-so-new thing called the Fourteenth Amendment, which starts off by saying that "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are Citizens of the United States and the State wherein they reside." It's similar to the right of a speedy trial or a jury of one's peers: it can't be revoked because you're offended. The Constitution doesn't contain a right to not being offended, which was the whole point of the Supreme Court's ruling Texas v. Johnson (1989). The Supreme Court found that burning the flag is protected speech under the First Amendment. Even after Congress' attempt to make it illegal, the Supreme Court ruled yet again in United States v. Eichman (1990) that flag-burning is protected under the First Amendment, and that symbolic expression has been a part of the First Amendment. And let me point out that in both of these cases, conservative Justice Anton Scalia voted in favor of the constitutionality of flag burning, even in spite of his personal aversion towards flag burning.

Even if we go back to the tenuous idea of banning something simply because someone is offended, the burning of the flag itself is not offensive because you want to know what the Veterans of Foreign Wars consider the proper way to dispose of a flag? Burning it. So it can't be the action of setting the flag on fire that sets people off. What certain individuals find offensive about the burning of the American flag is the symbolism of burning the American flag in protest. In short, the flag is important because of the meaning ascribed to it. It is about national unity and pride, and thus represents the spirit of the nation.

Is burning the American flag the way I would go about protesting and criticizing America's policies? Personally, no. I have a blog to exercise my free speech and express my discontent with public policy because I find it to be a better form of expression. I also happen to find it to be a more profound form of patriotism than blind, unconditional patriotism. But some people feel they need to express their discontent in different ways, and it would hardly be a free society if we began silencing dissent. Republican Senator Mitch McConnell opines that burning the American flag is free speech, and that the United States has a "long tradition of protecting unpleasant speech." For those who are offended by flag burning because of symbolism, let's remember that what is by far more important than protecting a piece of fabric, even one imbued with cultural reverence, is protecting the values that the flag is supposed to represent: freedom, democracy, and the American way. Not only is it virtually impossible to erode national security by burning the American flag, but it does not violate anyone's rights because burning the flag does not violate others' safety, health, property, or involve intruding upon the private space of another individual.

Let's bring it back to one of the motifs behind American ideals: if you're not hurting anyone, you have the right to do what you want with your property and live your life the way you want, even if others find it offensive. If we value what the flag stands for, then flag burning has to remain legal, in spite of adverse reactions to the flag being burned. After all, it is the freedom for which American soldiers fought over the years. Freedom of the press, freedom of speech, freedom of religion, freedom of protest, pornography, obscenity. These freedoms have offended Americans over time, and yet they are protected precisely because that protection not only prevents tyranny of the majority over the minority, but also represents the values we hold dear. A society would hardly be free if people are not allowed to challenge values, even if that challenge goes against societal norms. The right to burn the flag remains a litmus test of freedom of speech, and making it illegal could very well be the beginning of the Constitution going up in flames.

Social Security Helps Reduce Poverty, and Your Point Is.....?

Social Security is one of those policies that can be politically difficult to criticize without being hit with some argument of "you don't care about the elderly." Not only do many Americans receive these benefits, but many on the Left laud it as the American government's most successfully anti-poverty program (see here, here, here). Most recent is the Left-leaning Center for Budget and Policy Priorities' study that breaks down state-by-state the levels of poverty reduction. Essentially, the CBPP researchers calculated the number of households that would have been below the poverty line without it, and compare it to the number that are below it with Social Security. By using Census data in that fashion, they found that Social Security saves 22 million Americans from poverty. This is not to say the finding is wrong per se, but it could use a little more contextualizing, instead of being used as a non-starter for Social Security reform:

1. Even with Social Security, 10 percent of the elderly are still in poverty, which is unsurprising given how low Social Security benefits are in the first place. 
2. Many elderly depend on this as a sole source of income. This is going to be all the more pronounced when the Social Security Trust Fund runs out of money and the current protocol of reducing benefits by 21 percent sets in. This is worrisome for the elderly because for 33 percent of elderly beneficiaries, nearly 90 percent of cash income comes from Social Security. 61 percent of elderly beneficiaries depend on it for most of their cash income. 
3. This problem framing assumes a false dilemma between Social Security and elderly people dying on the streets because they have no money in their savings. It makes the all-too common erroneous assumption that a lack of government intervention means that the only alternative is inaction. If Social Security were to go by the wayside, the question is whether individuals are able to procure alternative sources of income when they retire. This is coupled by the fact that removing Social Security would also remove a significant portion of the payroll tax, which would mean higher wages for employees. Given the substitution effects, the poverty reduction effect of Social Security is overstated. 
4. This false dilemma assumes there is not a better option for those saving for retirement. Considering that Social Security functions both as a retirement plan and and an anti-poverty measure, the primary metric of Social Security is rate of return. As I pointed out a while back, there are better ways to invest for a better rate of return, such as stocks or AAA-corporate bonds. Even voluntarily investing in government bonds yields a higher rate of return. Being able to invest your payroll tax into capital assets is all the more important, especially when Social Security's annuitized benefits are not inheritable. 

According the Social Security Administration, the Trust Fund is expected to run out in 2034. I'm sure that Americans are more interested in the here and now, especially with President-Elect Trump. However, if we want to help the poor out and make sure their retirement savings are solid enough where poverty is a minimal-to-non-existent issue, then we need to think differently about the issue. Because of the superior rates of return on private investments, I am for keeping retirement benefit accounts in the private sector. I know there are some out there who think that "privatization" is the "p-word," which is why next-best alternatives include President Bush's idea of putting part of one's payroll tax in a personal retirement account (PRA) or New Zealand's approach of having the Social Security Administration pay a flat dollar benefit with the intent of helping lift seniors out of poverty, the latter of which would help Social Security return to its anti-poverty roots. We need better ideas than raising payroll taxes, raising payroll tax caps, lowering benefits, or increasing the retirement age. It might be easy to kick the can down the road because the Trust Fund expiration date is so far away, but if we don't find innovative and effective ways to deal with Social Security, we could very well see social unrest on our hands because at that point, the poverty reduction effects of Social Security will be ever diminished.