Category Archives: Economics

Miscellaneous economy stuff

More on Birthright Citizenship

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Jed Rubenfeld, Professor of Law at Yale Law School, had an op-ed in Sunday’s Wall Street Journal in support of the concept of birthright citizenship. In it, he hung his hat on the “visitor” aspect of our Constitution’s 14th Amendment jurisdiction phrasing.

The 14th Amendment guarantees citizenship to everyone “born or naturalized in the United States, and subject to the jurisdiction thereof.” The opacity of the “jurisdiction” language allows reasonable people to land on either side of this issue. But in 19th-century legal usage, being “subject to the jurisdiction” of the US had a long-settled, straightforward meaning. As Chief Justice John Marshall explained in Schooner Exchange v McFaddon (1812), it meant being subject to US law.
Could you be prosecuted in an American court and imprisoned in an American jail for violating American law? If so, you were subject to US jurisdiction.

That “vulnerable to prosecution and jail” means “subject to US law” is at the core of the misunderstanding here (I’m eliding the question of whether a then-56-yr-old “settled meaning” remained settled after the 14th Amendment was ratified), including to birth tourism—whereby a pregnant woman enters the US for the express and sole purpose of giving birth on US soil so as to garner citizenship for her baby, after which the now-mother leaves with her baby to return to her home nation. Such “visitors,” while so subject, are not subject to US jurisdiction, but only to US government power and authority.

Birth tourists subject themselves only to some of our laws—that small subset of them that lets them enter our nation legally and then avail themselves of our medical-related duty of care laws. They otherwise remain within the control of their home nation laws and so retain the jurisdiction of their home countries, to which they fully intend to return as soon as they’re able to travel after giving birth. They’re holding themselves apart from and outside of our nation’s full and complete jurisdiction—which is what our 14th Amendment requires, even for birth tourists.

Illegal aliens go even farther: they hold themselves completely outside our jurisdiction by holding themselves completely outside our laws: they’ve disregarded our laws from the outset by their entering illegally. They render themselves subject only to the power of our government even as they, too, are subject prosecution and jail—or deportation.

This misunderstanding by Rubenfeld (and others) expands on the matter:

When a foreign army invades and conquers another country’s territory, that land becomes subject to the conquering country’s laws.

Not at all. That conquered territory becomes subject only to the conquering country’s power and ability to impose its laws. Even as long ago as Emer de Vattel, in his The Law of Nations, this was well understood.

The Left’s repeated ignoring of these simple facts does not make those facts nonexistent.

Unfortunately (cynically?), Rubenfeld, like others pushing this argument, leave wholly unaddressed those last.

Overreaction

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This is one such. The headline and subhead say it:

The Days of Set-and-Forget Investing Just Ended for Many Americans
President Trump’s economic policies are sending investors out of US stocks and into cash, bonds, gold and European defense stocks

The newswriters illustrate their claim with this anecdote:

For years, Yoram Ariely hadn’t touched most of his investments, preferring to ride the stock market’s ups and downs. Last Tuesday, he decided he had enough.
The 82-year-old unloaded almost half of his stock investments, fearful of the effects of President Trump’s economic agenda, and tariffs in particular. He may get rid of more still.
“The decisions are changing daily,” said Ariely, a retired business owner in Longboat Key, FL.

Therein lies the problem with this sort of reaction. Buy and hold—set and forget in newswriters’ lexicon—has always been a fine, if not flashy, way to build wealth when it’s done from a young age and continued through retirement/geezerdom. That includes riding through the ups and downs, including corrections and bear markets. Some investors, who change the stocks (and/or bonds, real estate, gold and silver with their reputation as inflation hedges, etc) occasionally (over weeks to months), will do better and others worse than buy and holders. Some traders, who change their vehicles on a more frequent basis, down through daily trades, also will do better and others worse. Slow but steady produces, over the long term, steady and favorable results, if without the flash and the heady rush.

And that’s the key: over the long term, which takes lots of patience and an emotional willingness to ride through the inevitable downturns, corrections, and bear markets, even more to add to holdings during those down turns. Worries about the disruptions and dislocations associated with President Donald Trump’s (R) economic and political moves are overblown in the sense that these are just another of those inevitable disruptions. Buy and hold remains a viable, middle of the road wealth building technique.

On the other hand, buy and hold has never been the right path for those of an age—those retired geezers—for whom there’s little time left in their lives in which, and reduced steady income with which, to recover from a sharp or relatively deep (or deep) market downturn. For those folks, preserving the wealth, the capital, that they have accumulated becomes more important than continuing to try to increase their wealth. The latter entails more risk than is optimal for those with shortening remaining life spans and reduced regular income.

Trump’s moves are just another of the disruptions inevitable in an investing environment; they present no reason for anyone to change their investing style.

A Modest Proposal

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The Wall Street Journal editors (I seem to have been picking on them lately…) have a modest proposal regarding student debt and forgiveness.

Congress created the Public Service Loan Forgiveness Program in 2007. It lets borrowers who work for government or tax-exempt organizations get unpaid debt forgiven after 10 years of payments. Its supposed goal was to help government and nonprofit employers compete with private businesses that can pay more.

The editors correctly note that in the years since its inception, the program has become badly abused and used to reward[] a politically favored group of workers and can make it harder for private businesses to compete. Based on that, the editors recommend the Republican-majority houses of Congress repeal the program altogether.

They’re correct in that, but I’d go a ways farther. Congress should make student loan relief available through our existing bankruptcy laws. Additionally (critically additionally), Congress should take the Federal government out of the student loan business altogether: no more Federal government student loans and no more Federal government guarantees of other lenders’ student loans.

And one more step: require colleges (including junior and community colleges) and universities and trade schools to publish the regionally average salaries and wages for each major the school offers or each trade certification program the trade school offers at the five-years employed mark. Associated with that, those schools should be required to be the ones extending the student loans or be either co-signers or guarantors of other lenders’ loans to their students.

Without the ability to hide behind Other People’s Money in the form of purely third party or Government loans, the abuses likely would screech to a halt.

Why Would They Want To?

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The lede says it all, even if the article is a bit dated now.

The leader of Senate Democrats moved to take the threat of a government shutdown off the table, following a grueling intraparty fight in which lawmakers struggled with how best to resist President Trump’s fast-paced efforts to slim down federal agencies.

Why would the Progressive-Democratic Party object to slimming Federal agencies and making them more efficient?

Oh, wait—this is the Party that insists Government knows better than us poor, benighted and ignorant average Americans, and that the way to make Government more efficient is to grow it in both financial and physical size and give it more control over our lives.

Circular Pseudo-Logic

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William Galston had this bit of circularity in his Tuesday op-ed in The Wall Street Journal:

Economists studying past tariffs have found that their effects endured even after the tariffs were removed. … Further, the Federal Reserve Board is concerned about Americans’ increased inflation expectations, which could trigger a damaging price spiral.
The American people smell a rat. In a recent poll by the Economist/YouGov, 68% said that higher tariffs mean higher prices and that consumers will bear a large share of the burden.
They’re right. Tariffs are import taxes paid in the importing nation.

It couldn’t possibly be that we Americans poll that way because that’s what we’re told by a steady stream of news writers, including a plethora of them who cite “economists” or who cite named economists without also citing those economists’ data.

Instead, these news writers just make their bald, unsubstantiated claims, providing no data at all.

It may well be true that tariffs, by their nature, are inflationary. That certainly seems plausible. However, plausibility isn’t fact, and it would be good to see the evidence—including evidence indicating how inflationary tariffs are, if they are, and under what circumstances.