Note to Sanders and AOC: Capping Consumer Loan Interest Rates Would Hurt Those You Want to Help

Senator Bernie Sanders (I-VT) and Congresswoman Alexandria Ocasio-Cortez (AOC) teamed up as a "'Dynamic' Duo of Leftist finance public policy" last week. Their legislative initiative du jour? The Loan Shark Prevention Act. The long and short of this legislation is that Sanders and AOC would like to limit the interest rates for credit cards and other consumer loans at 15 percent.

The argument for this bill, as presented in Sanders' op-ed piece in Medium, is that credit card debt has never been higher, and the credit card companies are making an "exorbitant amount" on credit card interest ($178 billion in 2018). For Sanders, modern-day loan sharks are not those who work in the criminal underworld, but rather those who work on Wall Street collecting interest rates on credit cards. That is not a hyperbolic description. That is the introduction paragraph of his op-ed piece.

Sanders then goes on to invoke Dante's The Divine Comedy and proceeded to cite a 1980 piece of legislation that enacted a 15 percent credit card interest rate cap on credit unions, which he thought worked quite well, although the legislation has allowed for the National Credit Union Administration to bypass it. Sanders showed an additional disdain for payday lenders that charge an average interest rate of 391 percent, a service that disproportionately affect the African-American and Hispanic communities. Essentially, Sanders wants to "create a financial system that works for all Americans," and to "stop financial institutions from charging outrageous interest rates and fees."

Sanders really wants to stop predatory lending and make sure that Americans are not consumed by credit card debt. At least his heart is in the right place. Like with so many of his proposals, I have to ask the question of whether there are good results to match the good intent.

Economics of Interest Rate Caps
Proponents of credit card interest rate caps believe that the financial market functions differently than other markets because people need access to credit in order to live a good life. While I believe that access to credit is important, it doesn't automatically necessitate a solution, and it doesn't mean that the credit card industry is different in market functionality. When I discussed student loans in 2013, I explained the purpose of an interest rate, i.e., how interest is the cost of borrowing money. Every business has a product or service. For a bank, its business is money, both the investment of its customers' bank deposits and the loans the bank issues. A credit card company is also a lending institution, and is similarly subject to the supply and demand of money. Consumers make choices on the supply and demand of money, just like they do with any other good and service.

With that being said, how does the interest rate cap function? In economic terms, the interest rate cap is a price ceiling. To quote Milton Friedman from his book Free to Choose (p. 219):

Economists may not know much. But we know one thing very well: how to produce shortages and surpluses. Do you want a shortage? Have a government legislate a maximum price that is below the price that would otherwise prevail. 

Standard microeconomic theory therefore suggests that demand for loans would exceed supply, assumedly because there would be enough lenders that would not want to loan money [to high-risk borrowers] at such low rates. How does the economic theory play out in practice?

Interest Rate Caps and Usury Laws in Practice
Usury laws are nothing new. As the Mercatus Center points out in its analysis on the arguments made by interest rate cap advocates (worth the read if you want more detail on the topic), such laws are the oldest and most tried government intervention in financial markets. Let's forget for a moment that payday loans have lower annual percentage rates (APR) than overdraft fees and bounce checks (Summers, 2013), that payday loans are short-term loans (hence the higher APR), payday loans do not adversely affect credit score (Bhutta et al., 2015), or that customers generally know what they're getting into when they take out a payday loan (e.g., Durkin et al., 2014; Elliehausen et al., 2001). Let's see what usury laws similar to the Loan Shark Prevention Act look like in practice.

After the Great Recession began, Congress passed what is known as the Durbin Amendment. The Durbin Amendment put a cap on the fees that could be charged for using debit cards. This was done in order to lower consumer burden in terms of consumer cost. Did it help consumers? No, not really. Instead of debit fee income, the banks instead opted to charge new fees on the bank accounts and raised the minimum balances required on bank accounts, as a Penn State University research team discovered (Mukharlyamov and Sarin, 2019). Not only did the Durbin Amendment shift more people from debit cards to more expensive credit products (i.e., credit cards), but it made one million Americans unbanked, thereby limiting their access to the mainstream credit system (Zywicki et al., 2014).

The phenomenon of making up the loss of the lower interest rate is not confined to debit cards. It has played out in the auto loan industry, as a working paper from the Consumer Financial Protection Bureau [CFPB] illustrates (Melzer and Schroeder, 2017). In the case of the auto industry, it did not restrict loans per se. What happened in the auto loan industry was two-fold. Although auto dealer lenders issued similar monthly payments, they compensated for the loss induced by the usury lawny raising the mark-up on the product sale instead of the loan interest rate. Second, higher-risk borrowers who borrowed from non-dealers received lower interest rates, but also received smaller loans relative to the collateral, i.e., they had restricted access to credit.

Shifting the costs to make up for profit loss did not only happen in the auto industry. In 2015, a federal court issued a ruling that voided usurious loans (i.e., no obligation to pay on the principal) in New York and Connecticut. The good news was that there was no evidence of strategic default. However, a look a secondary markets found that investors priced the increased legal risk about the usury amount when a borrower is late on payments. It was also found that credit availability for risky borrowers decreased significantly (Honigsberg et al., 2016).

In Ohio, a de facto payday loan ban resulted in the proliferation of pawn shops (Ramirez, 2019). Why? Because the demand for these financial products doesn't disappear with the cap. In the case of Ohio, it simply incentivized people to sell valuable possessions to get access to that money. Arkansas had a similar story in the 20th century. Not only did Arkansas have a spike in pawn shops, but small loan credit was not readily available and many consumer finance companies stopped operating in Arkansas (Peterson and Falls, 1981).

Conclusion
As hard as lawmakers have tried, it is very difficult to eliminate the concept of interest. We see one of two main unintended consequences take place. One is that high-risk borrowers have their access to loans and credit limited, thereby isolating them from the mainstream credit system (see Zinman, 2008 as an example). The second is that lenders add clever elements within the loan deal in order to keep within the letter of the law while making up for the financial loss caused by the interest rate cap, as we saw with debit cards and auto loans (i.e., borrowers, especially high-risk ones, are de facto paying [close to] the same price in either case).

Much like with rent control or minimum wage laws, a credit card interest rate cap would simply hurt the people advocates are purporting to help. A very generous best-case, but nevertheless improbable, scenario of the Loan Shark Prevention Act is that it would do nothing to improve credit access for millions of Americans. The worse and more likely scenario is that credit will be more difficult to access, and that financial hardship will increase for a number of economically disadvantaged individuals. I hope that the American people can escape these jaws of death by not having Congress pass the Loan Shark Prevention Act.

Maybe Career and Technical Education Isn't Working So Well

I have said it before, and I will say it again: college isn't for everyone. The fact that the college dropout rate is nearly half in the United States reaffirms that notion. Not everyone was cut out for a four-year college, but that doesn't mean those individuals are doomed to mediocre economic well-being. This is where career and technical education (CTE) enters the scene.

As the Brooking Institution's primer explains, CTE is a vocational education in secondary schools that dates back to 1917. The purpose of CTE is to prepare students with skills that are in high demand in the labor market while simultaneously preparing them for a post-secondary degree program in a technical field. CTE can include career-oriented classwork, internships, and apprenticeships. The premise of CTE is to provide those who were not bound for the traditional four-year college to have enough skills and training to be attractive enough upon graduation (or at the most, after a two-year, post-secondary degree). While CTE started to decline in the 1980s, it made a comeback this decade. It has become all the rage now as young adults try to find a lucrative alternative to the four-year college degree.

The idea behind CTE seems intuitive enough: provide people with an alternative so they do not have to live a life of squalor or constantly have to struggle economically. How has CTE fared so far? As the Brooking Institution illustrates, the amount of research on CTE is extremely limited. Some research shows success in terms of higher high school graduation rates, attendance at a two-year college, employment rates, and wages (e.g., Doughtery, 2018). Some research is mixed, such as the research that shows that while CTE helps with high school dropout rates and graduation rates, it doesn't help with college attendance rates (Gottfield and Stratte Plasman, 2017). There has been some academic literature from Stanford criticizing CTE, suggesting that CTE students have diminished earnings later in life because they are less able to adapt to the labor market when it changes (Hanushek et al., 2017). The American Enterprise Institute (AEI) adds to the research that questions CTE's success. Earlier this month, AEI released its CTE report, entitled The Evolution of Career and Technical Education: 1982-2013.

What AEI's report does is cast some doubt on the overall success of CTE. The report segments the students by two main types: Traditional Vocational course takers and New Era course takers. Traditional Vocational courses include such subjects as construction and manufacturing, whereas New Era is more of the Computer Sciences and Engineering. In aggregate, average test scores and graduation rates are improving for CTE concentrators. On the other hand, when you look at Traditional Vocational course takers as a segmentation of the CTE course takers, they are not doing so well.

The shift from Traditional Vocational courses to New Era courses shows that vocational education is less focused on the academically weaker than it has ever been. What the AEI report is suggesting is that the aggregate data are hiding the problem of vocational education, mainly that it is not adequately helping the students that it was meant to help. As long as there is a population of academically disinclined students, vocational education (and its successor, CTE) is going to have the challenge of providing students with enough skills that do not require a post-secondary degree. This will continue to be a challenge since there is a societal expectation that true success comes from a four-year college degree, which is not true. We should remove the stigma from vocational education, CTE, whatever you want to call it, and realize that because people are diverse in their interests, academic inclination, and skill set, so too should tracks of learning be diverse to meet their learning and career needs. Anything less is going to cut off access for a number of those who would like to live the American dream.

CTE demographic information from the Institute of Education Sciences can be found here.

CBO Report on Single-Payer Healthcare Shows How Complicated and Painstaking Implementation Would Be

Health care costs have been skyrocketing in the United States, well beyond overall inflation. Going to the hospital should not be an experience that bankrupts American citizens, yet it has become increasingly commonplace. One solution proposed, particularly by those on the Far Left, is that of single-payer health care. In short, single-payer healthcare is a mechanism in which taxes cover essential health care needs for its citizens. It is one way that can bring about universal health care. Senator Bernie Sanders (I-VT) has really been clamoring for it since his presidential campaign (see my analyses on Sanders' previous proposals here and here). More recent was Congresswoman Pramila Jayapal's (D-WA) single-payer proposal, which is even more extreme that Sanders' proposals.

To weigh in on the conversation is the Congressional Budget Office (CBO), an entity that is often seen as the gold standard of estimating the effects of U.S. legislation. Last week, the CBO released a report last week entitled "Key Design Components and Considerations for Establishing a Single-Payer Health Care System." This CBO report is not an analysis on specific proposals, such as those from Sanders or Jayapal. The report details features of the single-payer system, as well as questions that would need to be answered (see below).




I am sure that proponents liked this report in part because it provides a blueprint of making single-payer a reality. I read the CBO report this weekend, and what I realized is that proponents of single-payer health care would have to answer a lot of practical questions before making it a reality. Officially speaking, CBO is not taking a position on the merits of single-payer healthcare. Even so, it implicitly provided a fair amount of criticism of single-payer health care. Here are the highlights from the report.....

• Big Picture: "The transition toward a single-payer system could be complicated, challenging, and potentially disruptive (p. 3)." 
• Costs and Ambiguity About Cost Savings: Regarding costs, CBO said that "shifting such a large amount of expenditures from private to public sources would significantly increase government spending and require substantial additional government resources (p. 6)." What is more intriguing is that CBO remains agnostic on whether single-payer will save money: "Total national health care spending under a single-payer system might be higher or lower than under the current system depending on the key features of the new system (p. 6)." This part is significant because the cost savings is one of the primary arguments used by single-payer proponents. 
• Increased Waiting Times and/or Reduced Access: Since single-payer healthcare would increase demand for healthcare, it would put pressure on the supply of healthcare: "If the number of suppliers was not sufficient to meet demand, patients might face increased wait times and reduced access to care (p. 6)." This isn't mere theory. This already happens in other countries. Canada is notorious for its waiting times, and the United Kingdom reduces access since demand for medical services exceeds supply. 
• Issues with Fewer Choices and Lack of Customization: The CBO states that "compared with the options available under the current system, the benefits provided by the public plan might not address the needs for some people," as well as "the public plan might not be as quick to meet patients' needs, such as covering new treatments (p. 8)."
• Tradeoff with Greater Access: "Although covering a wide range of services under a single-payer system would provide greater protection to enrollees, it would increase costs to the government (p. 9)." This is especially true with long-term services and supports [LTSS]: "Public spending would increase substantially relative to current spending if everyone received LTSS benefits."
• Potential Issues with Paying Providers and Setting Payment Rates: There are different methods to pay providers and setting their payment rates. Both of these factor affect government spending and providers' revenues, the latter of which could affect providers' incentives to deliver services (p. 18).
• Potential Issues with Drug Pricing: Under a single-payer system, the government acts as a single buyer, also known as a monopsony. Depending on whether the government uses negotiated pricing, value-based pricing, reference pricing, or administered pricing, the government could affect the profits of drug manufacturers, thereby affecting their incentive to produce new drugs (p. 23). 

Postscript
As we see, the extent of the effects of single-payer depend on multiple factors, including administration, eligibility, cost-sharing, the role of private insurance, provider participation, provider rates, and system financing. The CBO report might provide a blueprint for single-payer proponents, but the it also provides the single-payer skeptic with plenty of ammunition because the report shows the sheer number of obstacles facing single-payer implementation, as well as tradeoffs. With the policy discussion surrounding single-payer healthcare in recent months, it is amazing how many unanswered questions there are surrounding the specifics.

If I were to take an educated guess, single-payer proponents are delaying answering such questions because it would be a repeat of trying to implement Obamacare. The politicians advocating for Obamacare made such promises as lower premiums, greater competition, and the ability to keep one's current provider. Because Obamacare proponents were more concerned with pushing their legislation through than answering some basic questions about implementation and other considerations, Obamacare ended up being a downright disaster. I hope that the U.S. legislature does not reach the point of seriously enacting a single-payer system into law because in theory and in practice, it is policy that does not do favors in the healthcare market. However, if we reach the point where single-payer healthcare has actual potential to become enacted policy, the burden of proof will be on proponents to answer the questions that are laid out in the CBO report. In either case, the CBO report illustrates that there are more questions than answers in the single-payer healthcare debate.

Should Denver Vote to Decriminalize Psychedelic Mushrooms?

In 2012, Colorado was one of the first states that made recreational marijuana legal. Now it looks as if Colorado is making headlines in the United States' drug policy. Next week, on May 7, the City of Denver is going to vote on the Psilocybin Mushroom Initiative (Initiated Ordinance 301). Essentially, the ballot initiative is to determine whether psilocybin mushrooms, more colloquially known as psychedelic mushrooms, should be decriminalized to the lowest law enforcement priority possible. This is in contrast to current law that states that possession of psilocybin is considered a felony.

Much like with marijuana use, the word "psychedelic" invokes images of the hippy counterculture of the 1960s and the "Summer of Love." As such, there are those who are instinctively against the use of psychedelic mushrooms. Conversely, there are those who are instinctively for all drug legalization while simultaneously being against the War on Drugs. With regards to marijuana use, time, research, and evidence have proven the naysayers wrong. Looking at Colorado's marijuana laws at five years, it looks like marijuana legalization has done more good than harm. Although marijuana legalization seems to be beneficial in net, we should not automatically assume the same outcome would happen with psilocybin mushrooms. After all, different drugs have different effects and outcomes, which is in part why the Drug Enforcement Agency (DEA) schedules drugs. Psilocybin mushrooms are currently ranked by the DEA as a Schedule I drug, a scheduling that is inappropriately applied to marijuana. The question to answer here is whether psilocybin mushrooms get a similarly unjustifiable reputation like marijuana or not.

Psilocybin mushrooms, also known as psychedelic mushrooms, magic mushrooms, or shrooms, are fungi that produce auditory and visual hallucinations followed by perceived changes in time and space. Emotionally speaking, the experience varies, from depression to hilarity to relaxation. Environment helps set the tone for the trip. The feeling of psilocybin mushrooms is subjective, and is variable from user to user. The underlying question here is the level of harm that psilocybin mushrooms cause, both to the user and others.

Let's start by saying that there are real risks, much like with any other substance. There is a real chance of the hallucination becoming so real that it could cause the user to do something life-threatening. There is also the possibility of causing real psychological damage, especially if one is prone to psychotic conditions. It is why it is highly recommended that psilocybin mushrooms are taken in a safe, supervised setting.

That being said, research has found psilocybin mushrooms to reduce anxiety and depression, especially in cancer patients (Griffiths et al., 2016; Cahart-Harris et al., 2016; Grob et al., 2012).  There have been other studies showing psilocybin mushroom use is safer than other substances, including such licit substances as alcohol and tobacco (e.g., Morgan et al., 2013; Nutt, 2010). The 2017 Global Drug Survey states that magic mushrooms are the safest in terms of requiring the lowest rate of emergency medical treatment. A series of studies in the December 2016 issue of The Journal of Psychopharmacology show just how much potential there is to its benefits. Even more indicting and damning is that last year, researchers at Johns Hopkins found such minimal harm that they went as far as saying that psilocybin mushrooms should be at a much less stringent categorization of Schedule IV (Johnson et al., 2018), a classification that applies to prescription sleeping pills and other substances for low abuse potential.

While psychedelic mushrooms are in the initial research stages, they are promising enough where the FDA decided in 2018 to expedite its development and review of a psilocybin-based drug. What research is showing is that psilocybin is a relatively non-addictive and is not particularly toxic. It is also showing an ability to treat anxiety, depression, and other ailments (e.g., tobacco addiction). The research does not provide justification for criminal proceedings for possession or usage, certainly at the level of felony. Think of how time and money could be spent better than chasing psilocybin mushroom users. Given where the research is taking us, the citizens of Denver should vote "Yes" on the Psilocybin Mushroom Initiative come May 7th.

Warren's Student Debt Forgiveness and Free College Tuition Plan Would Worsen Higher Education

Senator Elizabeth Warren (D-MA) is getting ready for the 2020 presidential election and positioning herself as a populist who is out there to help hard-working Americans. This was made clear when she proposed the wealth tax earlier this year. Now, Warren is building on the tax plan with the college plan she announced last week. Her plan can be divided into two main sections: student debt forgiveness and free college tuition. We will scrutinize the two sections separately.

Student Debt Forgiveness

Part one of Warren's plan is to cancel up to $50,000 in student debt for the 42 million Americans with student debt. The plan starts to phase out if a household makes over $100,000, and offers no debt cancellation for those making above $250,000. Warren's argument is that because student debt delays certain life events (e.g., starting a business, buying a home), the government should step in to forgive the debt. Essentially, Warren wants to remove a major financial burden so people can better live the American Dream. I like the fact that Warren puts a cap on the forgiveness, and I like the fact that she has come up with a detailed plan instead of some pie-in-the-sky thinking like certain peers of hers.

That being said, Warren's plan runs into problems (please read my analysis on student debt forgiveness from seven years ago). College graduates on average make an average of $1 million more than those with high school degrees (Georgetown University). As of 2018, 32.5 percent of Americans have a Bachelor's degree or higher (Census). As the libertarian Reason Magazine and the conservative American Enterprise Institute argue, Warren's plan would be a subsidy to those who are better off that is paid by those without a college education. 

[Other factors I considered seven years ago were the fairness to those who managed to pay their student loans (myself included), the fact that those indebted were forced to take out the loans, why student loans should get preference over other loans, or how it would affect lending to future students.]

But I want to consider something else here today: the dropout rate. Why does this come into play? Because only about 49.1 percent of full-time, first-time college students graduate from a four-year institution within six years. That figure is a lower 39.8 percent for two-year institutions. This is significant for two reasons. One is that college completion is a major determinant in whether going to college ends up being a good investment. The first reason leads into the second reason, which is that there are many people who drop out of college with nothing to show for it except debt and foregone time that could have been used developing workforce experience. 

The reality about dropouts is further illustrated by student loan demographics. According to the Federal Reserve, the average debt is $32,000, whereas the median is $17,000. In layman's terms, this means that half of those in debt have $17,000 or less. This statistical distribution means that those owing a ton of money is less common than perceived (see below). There are those who have a large amount of debt, but those large amounts tend to be caused by graduate school loans. The issue I take with Warren's plan is that it does nothing to address the dropout rate, a phenomenon that makes it more difficult for people to pay back many of the smaller loan balances. 

Free College Tuition

The second component of Warren's plan is to eliminate the cost of tuition and fees at every two-year and four-year public institution. Free college tuition is in part to make sure that indebtedness is never a problem again, and in part to provide the American people with what she perceives as a public good and a right. There are multiple problems of trying to provide "free" college tuition, a topic that I covered in 2015. 

One of my bigger gripes about free tuition being presented as a solution is that it drives up the cost of college. In addition to my 2013 analysis about artificially low interest rates for student loans, there is a Federal Reserve Bank of New York research paper (Lucca et al., 2015) and a National Bureau of Economic Research paper (Gordon and Heldund, 2016) amply illustrating how federal subsidies are the primary culprit in the skyrocketing college tuition costs since the 1980s (also see Warshawsky and Marchand, 2017). And for added measure, here is another National Bureau of Economic Research paper (Murphy et al., 2018) showing how ending free college in the United Kingdom actually allowed for more students to attend college. My questions to Senator Warren are the following: "How is doing more of the same going to make college cheaper?" "How does subsidizing incentivize students to make smarter choices about what to study in college or even if they should go to college?" "How do these subsidies create better schooling, especially considering so many are dropping out already?"

Conclusion

None of this gets into the effects of a wealth tax (see my January 2019 analysis here), how this would not be a one-time occurrence, or how public schooling would cost the taxpayer more than what her wealth tax would earn in revenue. What I will end with is this: I will give Warren the benefit of the doubt by saying that she is not proposing this plan as political pandering, but rather because she legitimately wants to fix higher education. Even so, Warren's plan is not about fixing the system so much as it is about expanding federal government control in higher education. Her plan does not address the moral hazard of forgiving student debt, nor does it make the case of how higher education is going to improve as a result of throwing more money at the problem. Yes, there are problems with higher education affordability, but Warren's plan does not do any favors for tertiary educational attainment.


4-24-2019 Update: Centrist think-tank Brookings Institution shows just how regressive the loan forgiveness proposal is.

4-26-2019 Update: The American Enterprise Institute points out how the U.S. already has a loan forgiveness program, one that is arguably more generous than Warren's proposal.

4-30-2019 Update: The libertarian Cato Institute lays out five reasons why Warren's plan is problematic. 1) It's unfair. 2) There is no student loan crisis. 3) Misdiagnosis of the problem. 4) We don't need that many people with a college degree. 5) There is no indication that student debtors would use their economically more productive.  

Why We Should Get Rid of Solitary Confinement

This past Friday, the New York state assembly picked up enough votes to pass the Humane Alternatives to Long-Term (HALT) Solitary Bill. As is alluded by the bill name, the bill addresses the issue of solitary confinement. Solitary confinement is a type of imprisonment in which a prisoner lives in a single cell and has little to no outside contact, as well as additional security measures and strict contraband measures. According to Yale Law School, a minimum of 61,000 prisoners are in solitary confinement at any given time. Proponents claim it is a valid security measure, whereas opponents claim that it is a harmful measure with few to no desirable effects. Which version is correct?

First, a bit on the history of solitary confinement. Solitary confinement was used in the 1700s by the Quakers (of all people) to encourage repentance and rehabilitation. This practice caught on in the colonial era, and was abandoned in the early 20th century because it was deemed unethical and lacking efficacy. The "tough on crime" mentality combined with the opinion "nothing regarding rehabilitation works" allowed for solitary confinement to make a comeback.

Does solitary confinement help with prison violence rates? The main argument used in favor of solitary confinement is for safer security in prison, both for the prisoners and for the prison staff. A 2016 report from the National Institute for Justice (Frost and Monteiro, 2016) concluded that "there is little evidence that administrative segregation has had effects on overall levels of violence within individual institutions or across correctional systems (p. 3; also see Labrecque, 2015; Briggs et al., 2006)." The NIJ report continued by saying that "it is virtually impossible to find empirical evidence supporting its utility or efficacy (p. 4)." As a matter of fact, there is some evidence suggesting that solitary confinement increases recidivism and violence (Gordon, 2014).

Does solitary confinement cause harm? While there is some skepticism on the harm of solitary confinement (Morgan et al., 2016), the short answer to this question is a resounding "yes" (Frost and Monteiro, 2016, p. 3; also see Morgan, 2017). Solitary confinement causes heightened anxiety, irrational anger, greater confusion, and greater sensitivity to external stimuli as a result of sensory deprivation (e.g., Shalev, 2008; Smith, 2006; Grassian, 2006; Haney 2003). Suicide rates are much higher among those in solitary confinement (Kaba et al., 2014; Patterson and Hughes, 2008; Way et al., 2005). Those who are mentally ill or members of the LGBT community are more susceptible to greater harm while in solitary confinement.

Conclusion: Canada's top court ruled last month that solitary confinement over 15 days is cruel and unusual because based on the evidence, it is. Not only does solitary confinement cause harm without the intended benefits, but it costs about an extra $20,000 per prisoner per year as regular imprisonment. I hope that countries continue to limit or even eliminate solitary confinement, much like we should remove any other relics institutionalized during the "Tough on Crime" era of the 1980s.

For more on alternatives to solitary confinement, visit the websites for the Vera Institute, American Civil Rights Union, and the American Bar Association. 

How Is Myanmar's Economy Shaping Up for 2019?

Myanmar is mainly in the news for its internal ethnic conflict and humanitarian abuses. Much less frequently covered is its economic outlook, which might be in part because its economy is the 70th largest in the world. Whatever the reason, I would like to give it some coverage here, especially in light of the IMF's Article IV Consultation on Myanmar that was released last week.

While one could think of economic health and civil liberties as separate, the fact of the matter is there is some linkage. Yes, there has been some progress on refugee repatriation, although freedom of movement of returnees has been limited. This stalled progress decreases positive foreign sentiment, which has an impact on foreign investment in Myanmar (IMF, p. 4). Not only has manufacturing declined since mid-2018, but so have tourist receipts and consumer goods (IMF, p. 5). In spite of some of the shorter-term issues, the IMF is still optimistic about longer-term outlook because of demographics and its commerce with China, India, and Japan (IMF, p. 6).

The World Bank had similar mixed outlook per its December 2018 Myanmar Economic Monitor. The World Bank has concerns with declining foreign direct investment along with global risks being entangled with domestic risks. Nevertheless, services sector liberalization and the loosening on foreign bank lending provides World Bank with a more optimistic medium-term outlook. Even so, Myanmar is dealing with an agricultural sector with stunted infrastructure (which is significant because nearly 70 percent of Burmese work in that sector), and its garment industry might lose the European Union's generalized scheme of benefits (GSB) preference, which would be significant since its productivity in the garment sector was reducing its deficit. Growth in the tourism and transportation sectors have also slowed for Myanmar.

As some additional notes, the Asian Development Bank is anticipating 6.6 percent GDP growth for Myanmar, which is higher than its Southeast Asian peers. Oil and gas reserves at Myanmar's offshore banks are now approved for commercial activity. Myanmar also launched its updated Companies Law in August 2018, which had not been updated for nearly a century. This Law will allow for easier foreign capital flow.

If we're looking strictly at GDP growth, things look good for Myanmar. However, an economy is more than its GDP. With a developing economy that could be easily shaken by global events, I am concerned about such potential issues as Brexit. It makes prognosticating an overall direction more difficult. If Myanmar can get past its internal conflict and improve growth in key sectors, I think that Myanmar can expect an increasingly healthy economy.