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Norbert Michel

In a perfect world, it would be out of bounds to use incidents of horrific violence against innocent people to revive an otherwise unrelated political agenda. Nonetheless, it seems that Senator Elizabeth Warren (D‑MA) and her colleagues are going to use the recent violence in Israel to gather support for the Digital Asset Anti‐​Money Laundering Act, a bill Warren’s been hawking for months.

In December 2022, Warren claimed that “crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers, and for rogue states that want to launder money.” Such a broad and sweeping claim simply does not withstand scrutiny.

Yet rather than deal with the actual problem of terrorism, Warren’s bill would impose stricter anti‐​money laundering rules on Americans who use digital assets (crypto). It would heighten the financial surveillance of individuals and impose possibly unworkable requirements on users of self‐​hosted wallets as well as the operators of technological infrastructure that don’t even interface with transacting parties.

It would do nothing to address specific acts of crime or violence, or even the fraud that occurred with FTX. Simply put, it’s bad policy.

As I and my fellow Cato scholars have argued repeatedly, crypto is used for crime, just as the US dollar and a host of other financial (and nonfinancial) instruments. And all crime should be taken seriously. But it makes no sense to respond to acts of crime or violence by making it virtually impossible for law‐​abiding citizens to use any of these instruments, which is a likely outcome from Warren’s approach. To take just one example, a bill that throws sand in the gears of lawful American crypto activity would undermine those Americans volunteering to send crypto aid to Israel.

Her attempt is just the latest in the long‐​running effort to sacrifice Americans’ rights in the name of security. And if the metric is stopping criminals and terrorists, it’s very difficult to say that this effort has worked.

After decades of experience, spending billions of dollars, and requiring people to file millions of reports each year, the federal government still can’t make the case that the current regulatory regime has made any appreciable dent in criminal activity. Rather than force private businesses to serve as law enforcement and impose costly (and inefficient) regulations on Americans—all while running roughshod over their rights—it would be far better to directly focus resources on catching criminals and terrorists.

But for whatever reason, Warren and her colleagues remain fixated on making it difficult for Americans to use financial services because criminals or terrorists might use them as well. Terrorism and criminal activity are problems that law enforcement should tackle directly, irrespective of what method of payment is involved.

Exaggerating the connection between crypto and crime does not efficiently allocate law enforcement resources, but it does tarnish the great majority of crypto activity that is legitimate. Inflating risks and ignoring benefits will not lead to sound policy. Developing sound financial policy requires a clear‐​eyed assessment of crypto’s risks and benefits, and shamelessly exploiting an otherwise unrelated human tragedy does not fit that bill.

Alex Nowrasteh

Americans widely condemned Hamas’s terrorist attacks on Israel on October 7 and reacted with justified horror at the unconscionable brutality of the terrorists. The images of murdered civilians, children, and even babies should raise the fury and disgust of all civilized people. However, some American policymakers and commentators used the news of those attacks in Israel to draw unreasonable parallels with US‐​Mexico border security. Donald Trump is the most prominent Republican who linked Hamas’s terrorist attack in Israel to US‐​Mexico border security, but Nikki Haley, Ron DeSantis, Vivek Ramaswamy, and Kevin McCarthy also responded to Hamas’s attack in Israel by worrying about terrorists crossing the US‐​Mexico border like they crossed Israel’s border.

Israel’s problems with border security are vastly different from those faced by the United States on its border with Mexico.

Many of Israel’s borders are aspirational ceasefire lines from numerous wars and conflicts over the last several generations. Rockets, terrorists, warplanes, and soldiers frequently cross Israel’s borders, and the Israeli government retaliates with force. Palestinian cross‐​border workers also crossed the border to work in Israel. However, that program is currently suspended and the Israeli government is likely to cancel it entirely, significantly reform it, or limit it to Palestinians from the West Bank.

By contrast, the US‐​Mexico border is riven with arms smuggling, drug smuggling, illegal immigration, and the violence that comes with all black market activity. The US federal government, state governments, and the Mexican government sometimes deploy troops to crack down on crime, smuggling, and illegal immigration. But there are no bomb shelters for civilians to defend themselves against frequent rocket attacks, and acts of terrorism or military incursions don’t punctuate a long‐​simmering insurgency.

In other words, the US‐​Mexico border is standard, while Israel’s borders are anything but. The security situations in both regions are radically different.

For instance, the amount of terrorism in the countries is vastly different. The annual chance of being murdered in a terrorist attack in Israel is about 1 in 108,728 (from 1975 until October 12, 2023). The annual chance of being murdered in a terrorist attack in the United States during that period is about 1 in 3.6 million. The annual chance of being murdered in a terrorist attack in Israel is about 33 times greater than in the United States.

There are other ways to compare. In the United States there were 190 murders for every person killed by a terrorist from 1990–2022. During the same time in Israel there were just under two murders for every person killed by a terrorist (it appears that intentional homicides and murders in terrorist attacks are separated in Israel crime data, but I’m not entirely sure). The American homicide rate was 6.6 per 100,000 during that time, about 3.2 times higher than Israel’s homicide rate of about 2.1 per 100,000.

If the US had the same homicide rate as Israel, there would still be over 56 homicides for each person killed by a terrorist. That’s a vast difference between the two countries.

The above numbers include all terrorists and are not separated by their nationality. The Hamas terrorists unlawfully crossed the border from Gaza to Israel before murdering approximately 1,400 people on October 7 (the numbers will probably rise). Meanwhile, zero Americans have been murdered or injured in terrorist attacks committed by border crossers who entered illegally from 1975–2022, including those who entered through the southwest border.

But that’s not the end of it. Nine foreign‐​born terrorists entered the United States illegally during 1975–2022. Three of the nine convicted illegal immigrant terrorists entered illegally by crossing the US‐​Mexico border. They are Dritan Duka, Eljvir Duka, and Shain Duka, and they entered illegally in 1984 when they were aged 5, 3, and 1, respectively. They were arrested almost 23 years later, in 2007, while plotting to attack Fort Dix, New Jersey.

The Duka brothers were “got aways,” which is defined as an unlawful border crosser who (1) is directly or indirectly observed making an unlawful entry into the United States; (2) is not apprehended; and (3) is not a turn back. There have been many “got aways” in recent years, likely over 1.2 million in total. Of the other illegal immigrant terrorists, five illegally crossed the US‐​Canada border (Walid Kabbani, Darren Thurston, Gazi Ibrahim Abu Mezer, Ahmed Ressam, and Nuradin M. Abdi) and one was a stowaway on a ship (Abdelghani Meskini).

Furthermore, the countries bordering the United States are not a significant source of terrorism. There have been zero terrorists from Mexico who attempted, were convicted of attempting, or committed an attack on US soil since 1975. There were three from Canada during that time who didn’t kill or injure anybody. Including Mexicans and Canadians, there were 24 terrorists from the Western Hemisphere who attempted or committed attacks on US soil since 1975. Twelve were from Cuba, three were from Haiti and Cuba each, two were from the Bahamas and Trinidad and Tobago each, and there was a single terrorist from Honduras and the Dominican Republic each. Together, they murdered seven people in attacks and injured one person.

By comparison, almost all the attacks in Israel come from terrorists who are either Israeli, Palestinian, or from a nearby country, if not from a country directly bordering Israel. There is nothing like a Mexican, Central American, or South American Hamas targeting the United States.

The chance of terrorists crossing the US‐​Mexico border and carrying out an attack in the United States is greater than zero—it could happen. Customs and Border Protection should continue to weed out potential security threats to protect Americans’ life, liberty, and property. Still, the chance of such an attack occurring is small if experience is any guide.

It’s so small that Americans must rely on poor measurements like hits on the error‐​filled Terrorists Screening Database or whether illegal immigrants are from Muslim countries (known as Special Interest Aliens) to talk about a terrorist threat along the border. Israelis don’t have to rely on poor measurements to proxy the terrorist threat along their borders. They unfortunately have actual terrorism to analyze. For these reasons, US‐​Mexico and Israeli border security concerns are distinct, and American commentators irresponsibly conflate them.

Romina Boccia

The Fiscal Commission Act is a Promising Start

“It’s time for a bipartisan fiscal commission,” writes the Committee for a Responsible Federal Budget (CRFB). I couldn’t agree more. Congress and the executive should empower a fiscal commission with real authority to stabilize debt as a share of the economy and address the unsustainability of Medicare and Social Security.

Federal debt and high interest rates are squeezing economic growth. Higher interest rates, unsustainable health care cost growth, and unfunded Social Security benefits further threaten Americans with more than $110 trillion in additional borrowing over the next three decades—an amount more than four times the size of the already excessive public debt ($26 trillion). Meanwhile, some market analysts are suggesting that investors driving up Treasury bond yields are doing so to convince Congress to address deficits and debt before the United States suffers a more severe fiscal crisis.

A fiscal commission can resolve America’s predictable fiscal decline, but only if it has the power to act. The CRFB explains that “[h]istorically, commissions have helped policymakers to extend the life of Social Security, consolidate military bases, identify government waste, develop frameworks for tax reform, improve homeland security after 9/11, and draw attention to our unsustainable fiscal outlook.” Time is running out for Congress to merely draw attention to America’s rapidly deteriorating fiscal state. We need action and soon.

The House of Representatives recently voted on the Fiscal Commission Act of 2023. Introduced by the chairs of the Bipartisan Fiscal Forum, Representatives Bill Huizenga (R‑MI) and Scott Peters (D‑CA), this proposal would establish a sixteen‐​member fiscal commission, composed of twelve lawmakers and four independent experts, with all members appointed by House and Senate leadership from both parties.

Its charge: to stabilize the debt at no more than 100 percent of GDP (gross domestic product, the main measure of economic activity) within 10 years, by addressing the growth in direct spending (so‐​called mandatory programs, including major entitlements), and narrowing the gap between projected federal expenditures and revenues over the long‐​term. There’s also the suggestion that any changes to programs that are governed by trust funds (Medicare, Social Security, Highway) should improve 75‐​year solvency.

If a simple majority of the commission members (including at a minimum three legislators from each party) were to agree on a proposal, its recommendations would be expeditiously considered in Congress. More specifically, legislators from both chambers would have to affirmatively vote for the recommendations to go into effect, and would do so without consideration of amendments or points of order, and under expedited procedures, which limit debate time.

I’ve written previously that a critical function of an effective fiscal commission is to provide legislators with political cover for making fiscally necessary, and yet politically unpopular, changes to entitlement programs. Given that Medicare and Social Security’s long‐​term unfunded obligations (the difference between projected spending and revenues over the next 75 years) jointly make up 95 percent of the federal government’s entire unfunded obligation, there’s simply no way out of the debt crisis without tackling unsustainable entitlement spending. Medicare spending grew by 18 percent and Social Security spending by 11 percent this fiscal year (FY 2023).

Most constituents haven’t yet caught on that their beloved entitlement programs are the main culprits in driving the country toward a debt crisis. And that’s the catch. How to stay in office and reform entitlement programs?

A fiscal commission will likely be most effective in providing Congress with the necessary political cover if legislators are removed from commission proceedings and don’t have to take a public vote to enact the commission’s recommendations. The Base Realignment and Closure Commission is a model example for enacting politically difficult changes by letting Congress off the hook.

The Fiscal Commission Act of 2023 is a promising start but risks suffering a similar doomed fate as fiscal commissions of the recent past. To increase the chances of a fiscal commission succeeding, Congress should consider strengthening provisions in the Fiscal Commission Act in two main ways:

Independent experts should make up a majority of commission members. If legislators insist that the commission must include members of Congress, they should flip the current approach on its head by designating twelve independent experts and four legislators to compose the commission (or some combination that ensures a simple majority of outside experts). Legislative participation can provide valuable insights and oversight to commission proceedings, without potentially undermining the prospects of effective reforms that could prove unpopular with voters.
The commission’s recommendations should go into effect with silent approval from Congress. Instead of requiring legislators to take an affirmative vote before commission recommendations may be implemented, Congress should be able to reject the commission’s proposal in full, without amendments. The default option should be adoption, after presidential approval, unless Congress passes joint resolutions of disapproval in both chambers. Washington Post columnist George Will calls this “the Odysseus measure.”

The rising tide of support for a fiscal commission in Congress is encouraging. Seeing legislators put pen to paper and propose an actual fiscal commission, as Representatives Bill Huizenga (R‑MI) and Scott Peters (D‑CA) have done, is a good first step. Congress should build on this success by ensuring that any fiscal commission they establish has a high potential for success. We can’t afford to waste any more time with a fig‐​leaf proposal that will end in yet another failed commission. This time, Congress should empower a fiscal commission with real authority.

Jeffrey A. Singer

Birthing centers have been gaining popularity as alternative venues for labor and delivery. Nurse midwives usually operate them. In some regions of the country, such as rural Alabama, they enable African‐​American women to give birth in culturally familiar places with more compassionate treatment than hospitals. An added benefit of birthing centers in areas like rural Alabama is that mothers in labor often must travel long distances to deliver at a hospital. For instance, about 28 percent of women in Alabama have no hospital within a 30‐​minute drive.

Alas, the state of Alabama has decided to deny these women the ability to exercise their right to choose from whom and how they wish to seek health care services. Alabama announced new regulations threatening to close many of Alabama’s birthing centers effective October 15.

The new regulations require birthing centers to have a physician on call and within a 30‐​minute drive of the center. In a recent New York Times article, Emily Baumgartner and Erin Schaff powerfully profile the roadblocks many state laws and lawmakers in Alabama and elsewhere place in the way of birthing centers.

In some states, such as Kentucky, Certificate of Need (CON) laws block the opening of birthing centers without a commission—often strongly influenced by entrenched incumbents—deciding that there aren’t “enough” places for women to deliver babies and allowing them to exercise their right to have their babies at a proposed new birthing center.

I have written about how CON laws protect incumbents, raise health care costs, and reduce access to health care services. But CON laws are not the only culprit. States also impose onerous licensing requirements on birthing centers that block pregnant women from access.

Women have had babies in their homes since the beginning of recorded history, and in modern times are increasingly opting for home births. Fortunately, they don’t need to obtain a Certificate of Need or meet other state requirements before having their baby at home.

Yet home birthing carries risks. Meanwhile, free‐​standing birthing centers only take low‐​risk patients. The evidence to date suggests that free‐​standing birthing centers are associated with lower pre‐​term delivery rates, higher birth weights, higher breastfeeding rates, and lower rates of Cesarean sections.

In Alabama, as in many states, most board members who impose regulations on free‐​standing birthing centers are appointed by the state medical association or hospital association. As with Certificate of Need commissions, the entrenched incumbents have a vested interest in making it difficult for innovations and entrants to threaten their positions.

In Recovery, a new book from the Cato Institute, Michael F. Cannon writes, “In many ways, U.S. residents are less free to make their own health decisions than residents of other nations.” Erecting obstacles to free‐​standing birthing centers is just one example.

Chris Edwards

Government legislators pursue spending increases because they believe that spending solves problems in society and benefits their constituents. However, they use methods of fiscal illusion to try to hide the costs of spending. One method is debt. By borrowing, legislators push the costs down the road for future legislators and taxpayers to deal with.

Spendthrift legislators can get away with borrowing more and taxing less in the short run, but in the long run taxes will rise to cover the higher interest costs on the accumulating debt. Relative to state gross domestic product, state and local taxes tend to be higher in states that have higher state and local debt, as shown in the chart below. The tax and debt data are from the Census Bureau for 2021.

The chart includes a fitted regression line showing the strong positive correlation between taxes and debt. Perhaps states that borrow more end up raising taxes to cover the rising interest costs. Or perhaps states that favor higher spending tend to pursue it with both taxes and debt. There are some outliers—Kentucky has high debt and average taxes, whereas Maine and Vermont have high taxes and average debt.

People living in the top‐​right states should be asking questions. Residents of Vermont, Maine, and Hawaii should be asking why their tax burdens are almost twice as high as the burdens in the lowest‐​tax states. And residents of Kentucky, West Virginia, New York, and Hawaii should be asking why their states have racked up debt burdens three or four times higher than the burdens in the lowest‐​debt states. And all of us should be asking why the federal government is vastly more irresponsible with debt than the worst‐​run states.

Neal McCluskey

Over the last few years, there has been a surge in challenges to books in public school libraries. These “banning” battles have drawn considerable attention – and alarm – but they miss deeper questions: How do public schools select books in the first place, and do they offer a balance of opinions on controversial issues?

Findings in a Cato Policy Analysis released today, “Are Public School Libraries Accomplishing Their Mission?” suggest that public schools do not tend to stock a balance of views, but lean, perhaps strongly, to the left.

To test whether public school libraries carry balanced viewpoints, we randomly selected 200 “regular” public school districts (no charter schools or special districts) and looked for eleven titles in libraries serving middle and high schools. We selected books seeking a balance of views on race and the fundamental nature of American society.

Basically, is the country grounded in liberty and equality, or has it always suffered from systemic racism?

As the figure above shows, we were far more likely to find titles that suggest the country suffers from systemic racism – books in the Stamped series by Ibram X. Kendi, and Ta‐​Nehisi Coates’s Between the World and Me – than books that take issue with the thrust of Kendi’s and Coates’s arguments, or that present the United States as fundamentally good.

The titles directly addressing the kinds of arguments put forth by Kendi and Coates are Woke Racism by John McWhorter and Cynical Theories by Helen Pluckrose and James Lindsay. Books in the Rush Revere series by Rush Limbaugh represent the view that the United States is fundamentally good.

Far more schools had libraries that made the Kendi and Coates books available than the others. Especially stark was that almost 40 percent of schools with searchable libraries – 135 total – had access to Stamped: Racism, Antiracism, and You, but less than 1 percent had access to Woke Racism or Cynical Theories. Each of those conservative books was found in just one school.

And as seen in the next figure, when we broke districts down by the 2020 presidential election winner in their county, schools in Trump‐​won counties were much more likely to stock at least one Rush Revere title than in Biden‐​won areas. But more schools in Trump‐​won counties held Stamped: Racism, Antiracism, and You, and Between the World and Me than held a Rush Revere book.

These findings suggest that public school libraries have a yawning left‐​leaning bias in acquiring books. As the paper lays out, this is consistent with substantial evidence that the library profession has a pronounced liberal lean.

This seems to be assumed within the profession, and librarians who donate to Democrats outnumber those who give to Republicans roughly 9 to 1.

It also appears that publications on which librarians draw to assess what books to stock, such as School Library Journal and Kirkus Reviews, have liberal biases. They were more likely to have reviewed the liberal books on our list than the conservative books, and to have done so favorably. So not only might librarians favor liberal views, they also draw on recommendations from sources with their own liberal filters.

Is it, then, case closed that liberal bias among librarians and their preferred reviewers has created unbalanced inventories? No. The paper discusses other, very plausible explanations for some or all of the imbalance we found.

Based on our sample of books, it appears that conservative authors might not target public school libraries as aggressively as liberal writers. In particular, Stamped: Racism, Antiracism, and You has been heavily marketed to schools, including through a giveaway by the publisher in 2021. The Rush Revere titles have been significantly marketed, especially on Limbaugh’s own site, but that appears to have been more toward families directly than schools.

And Woke Racism – which is written in a clear way most high schoolers could likely follow – does not appear to have had any special outreach to schools. Nor has Cynical Theories, though it might be more complex than would be read by most high schoolers.

Another possible explanation for our findings that undermines the librarian‐​bias conclusion is that our list might not have included some balancing conservative books. We simply might not have thought of them. In addition, most public school book conflicts have been about fiction, often for kids younger than middle school. We did not examine fiction (Rush Revere is probably best described as historical fiction) and we focused more on older students. Our results, then, tell us little about book selection in the more commonly disputed areas.

As we were working on this paper, Columbia University professor Kirsten Slungaard Mumma released a much broader analysis of public school library holdings than ours, which suggests that school libraries tend to reflect the political makeup of their district populations. It included possible evidence of an overall left‐​leaning bias, though that was not a focus of her research. She also noted what motivated our paper: There is almost no research on public school library holdings and what leads to them.

If there is one clear conclusion about public school libraries, it is that they need to be studied more closely. Our paper, which includes not only the findings of our balance analysis but an overview of what researchers know about how these libraries work, is a step in that direction.

Gabriela Calderon de Burgos

Since Javier Milei not only made the campaign for Argentina’s presidency a three‐​horse race but became the likeliest to occupy the Casa Rosada this coming December, there has been much reporting in the international press about dollarization, his frontline proposal. On this topic, there seems to be plenty of confusion, and so I’d like to recommend what I consider are essential readings to clear the fog.

Let’s begin with the books. Central bankers and their fans tend to be allergic to the very idea of dollarization. By and large, they have not been trained on the topic. For a quick monetary history lesson, I recommend Nobel laureate F.A. Hayek’s classic The Denationalisation of Money (originally published in 1976). This will give you a brief background on the history of money and central banking and the philosophy behind what makes money universally accepted.

If you want to jump straight into dollarization, the best and most practical book is Manuel Hinds’ Playing Monopoly with the Devil: Dollarization and Domestic Currencies in Developing Countries (2006). Hinds explained to me that he did not intend to write a book on dollarization, but merely a practical manual to persuade his fellow Salvadorans that it was the right monetary regime for El Salvador when he was Minister of Finance. In the end, he ended up putting together a clever way of explaining why national currencies in developing countries fail to live up to their promises.

One should also view the recent online event Cato held with Hinds and Emilio Ocampo, Milei’s main adviser on dollarization.

After this, you can follow up with Hinds and Ben Steill’s Money, Markets and Sovereignty (2009) where, in offering a superb defense of economic liberalism, they explain how eras of liberal trade have coincided with a universal monetary standard (a.k.a., the US dollar).

There has been a lot of talk in recent years about the supposedly imminent fall of the dollar’s reign. For this, it is worth reading Ronald McKinnon’s The Unloved Dollar Standard: From Bretton Woods to the Rise of China (2012). He explains how the US dollar came to be the international currency it is today and how this standard facilitates international trade. I found this book helpful in the dollarization discussion in Ecuador because it demolishes one of the most enduring macroeconomic fallacies: that the exchange rate should be used to correct trade imbalances across countries.

To understand why dollarization is essential for a developing country with weak institutions, read Steve Hanke’s essay, “Reflections on the Rule of Law and Dollarization in Ecuador” (2015). More recently, but along the same lines, Cato published “Money, Stability and Free Societies” (2020), also by Hanke. It is worth quoting the beginning of this essay to get a taste of why this matters so much:

“Monetary instability poses a threat to free societies. Indeed, currency instability, banking crises, soaring inflation, sovereign debt defaults, and economic booms and busts all have a common source: monetary instability. Furthermore, all these ills induced by monetary instability bring with them calls for policy changes, many of which threaten free societies. One who understood this simple fact was Karl Schiller, who was the German Finance Minister from 1966 until 1972. Schiller’s mantra was clear and uncompromising: ‘Stability is not everything, but without stability, everything is nothing’ (Marsh 1992: 30). Well, Schiller’s mantra is my mantra.”

In fact, since at least the 1990s, Cato has been publishing some of the most important studies regarding dollarization. I especially recommend the essays in the Cato Journal Winter 1999: “A Monetary Constitution for Argentina: Rules for Dollarization” by Steve H. Hanke and Kurt Schuler; and “Lessons from the Monetary Experience of Panama: A Dollar Economy with Financial Integration” by Jose Luis Moreno‐​Villalaz. This last paper explains why a dollarized economy with an internationally integrated banking system is far superior to the national lender‐​of‐​last resort model for many developing countries.

Also in 1999, Cato published a paper by Hanke (“A Dollarization Blueprint for Argentina”). Since Hanke’s and Shuler’s proposal, the Argentinean peso has collapsed twice (2001 and 2018), and three times if you count the peso’s ongoing freefall (it just passed the 1,000 pesos per dollar barrier).

In 2005, Cato Journal published “Some Theory and History of Dollarization” (2005) by Schuler. More recently, “Dollarization: The Case of Zimbabwe” (2011) by Joseph Noko explained how dollarization played out in Zimbabwe. And in regard to the constant debate surrounding dollarization in Ecuador, Cato’s Senior Fellow Lawrence White explained why “A Strong Currency is No Reason to Keep Tariffs High” (2019).

Finally, my colleague Daniel Raisbeck and I wrote a policy brief on why “Argentina should dollarize, pronto” and several blog posts reacting to the most common criticisms leveled at the proposal.

Most recently, the Argentineans Nicolás Cachanosky and Emilio Ocampo, have published several studies that might be of interest to those wanting to study dollarization and its effects. Among these are: “Can dollarization constrain a populist leader? The Case of Rafael Correa in Ecuador” (Nicolás Cachanosky, Alexander W. Salter and Ignacio Savanti); “Dollarization Dynamics: A Comment”; “Lessons from Dollarization in Latin America in the 21st Century” (Nicolás Cachanosky, Emilio Ocampo, Alexander William Salter); and “Synthetic Control Analysis of Ecuador’s Dollarization” (Nicolás Cachanosky, Emilio Ocampo, Karla Hernández, John Ramseur). These are academic publications, but Cachanosky is also involved in the public discussion of dollarization through his Substack, which you can read here.

Jeffrey A. Singer

In April 2022, when the Food and Drug Administration announced plans to ban the sale of menthol cigarettes and cigars, I blogged about it, explaining why it was a bad idea. Later, in response to the agency’s request for public comments on the proposal, I submitted these comments, which stated the agency’s war on menthol tobacco is not evidence‐​based and warned that a ban would fuel a black market and worsen criminal justice inequities.

Alas, my warnings went unheeded. Last Friday, the FDA formally submitted its proposed ban to the Office of Management and Budget. The OMB can make final tweaks to the proposed rule, but this is one of the last steps the FDA must take before the rule goes into effect. The Biden administration supports the ban and will likely encourage the OMB to sign off.

In my comments, I stated that, according to the National Survey on Drug Use and Health, in 2020, 81 percent of Black and 51 percent of Hispanic smokers preferred menthol‐​flavored cigarettes. While the proposed rule is intended to reduce tobacco‐​related health outcome disparities in Black and Brown communities, a closer look at the data on menthol cigarettes, as well as the European Union’s experience with a menthol ban, suggest that the proposed product standard will not work, and will likely foster a black market. Perhaps even worse, the ban might further aggravate criminal justice inequities.

Interestingly, researchers from Yale and Duke universities reported on what is already happening where states have banned menthol tobacco just last week in the Journal of the American Medical Association:

Synthetic chemicals that mimic menthol’s cooling sensations are being added to newly introduced “non‐​menthol” cigarettes in states that have banned the additive. The additives appear to be an effort to circumvent an expected federal ban of menthol cigarettes by the FDA later this year. Already, California and Massachusetts have enacted laws banning sales of menthol cigarettes.

In 2011, researchers conducted a prospective cohort study with over 85,000 participants in twele southern states. They concluded: “The findings suggest that menthol cigarettes are no more, and perhaps less, harmful than non‐​menthol cigarettes.”

Interestingly, research conducted by Dr. Brian Rostron of the FDA Center for Tobacco Products and reported in the October 2012 journal Nicotine and Tobacco Research concluded: “We found evidence of lower cancer mortality risk among menthol smokers compared with non‐​menthol smokers among smokers at ages 50 and over in the U.S. population.”

A study published in the Journal of the National Cancer Institute in April 2022, involving a large cohort of African Americans and Whites in twelve southern states recruited between 2002 and 2009, found that menthol smokers had no greater difficulty quitting tobacco than non‐​menthol smokers. Perhaps more significantly, the researchers performed a meta‐​analysis of all the research on menthol cigarettes and cancer risk and concluded, “A significantly lower risk [12 percent lower] of lung cancer is seen among menthol smokers.”

A January 2020 study by the Reason Foundation found states with the highest menthol cigarette consumption had the lowest youth smoking rates.

If the FDA is basing its ban on concerns about teen smoking, the agency’s regulators should know that the US Centers for Disease Control and Prevention reported in March 2022 that 60 percent of teen smokers choose non‐​menthol cigarettes.

Menthol smokers tend to smoke fewer cigarettes per day. This might help partially explain the lower lung cancer mortality rate among menthol cigarette smokers.

The EU banned menthol cigarettes in 2020. A recent EU survey finds 40 percent of menthol smokers switched to non‐​menthol, and only 8 percent quit smoking. And menthol smokers have come up with workarounds, such as “mentholizing” recessed cigarette filters and menthol flavor inserts, or have added menthol to their tobacco.

More importantly, however, 13 percent reported getting menthol cigarettes from “other sources.” A black market for smuggled menthol cigarettes has emerged. A significant source is Belarus, where menthol brands such as Minsk, Fest, and Queen are smuggled into EU countries. The UK press reported that such “illicit whites,” as they are called, are smuggled into the country by gangs and can be purchased “under the counter” from small British tobacconists for the right price.

But worst of all, banning menthol cigarettes can exacerbate racial and ethnic inequities in law enforcement and the criminal justice system.

As I wrote to the FDA in my public comments on the proposed rule:

Prohibition fuels an underground market where peaceful, voluntary transactions become crimes. It gives law enforcement another reason to interact with non‐​violent people who commit these victimless crimes. Like everyone else, police respond to incentives. They are rewarded by arrests and convictions. Low‐​level street dealers in illegal substances are “low‐​hanging fruit.” They are much easier to find in dense inner cities and less dangerous to confront than violent felons. Law enforcement tends to scour racial or ethnic minority communities for victimless crimes because they are “easy pickings.” That’s how we wind up with African Americans arrested for marijuana violations four times as often as whites, even though both groups use marijuana roughly equally.

And never forget Eric Garner. New York City’s exorbitant taxes on cigarette packages generated an underground market in untaxed individual cigarettes, called “loosies.” In 2014, police infamously encountered 43‐​year‐​old Eric Garner selling loosies on a street corner, and a policeman’s chokehold led to his death as he repeated, “I can’t breathe.” This happened without a menthol ban. With menthol cigarettes more popular among Blacks and Hispanics, expect police to focus their attention on minority communities.

The last thing this country needs is yet another reason for law enforcement to engage with minorities they suspect are committing the victimless crime of selling menthol cigarettes in the black market.

Sadly, it appears the menthol‐​ban train has already left the station. This means more business opportunities for purveyors of black market products—ranging from illicit drugs to cigars and cigarettes. And if history teaches us anything, we can expect to witness many harmful unintended consequences.

Michael F. Cannon

I am happy to announce the release of my latest book, Recovery: A Guide to Reforming the U.S. Health Sector.

If I have any notoriety in this crazy world, it is for the work I did trying to stop ObamaCare. For my pains, The New Republic called me “ObamaCare’s single most relentless antagonist.” Vox called me, “The man who could bring down ObamaCare.” The Week called me “ObamaCare’s fiercest critic.” The New York Post called me, “ObamaCare’s Enemy No. 1.” You get the idea. Most of the editors who wrote those things did not mean them as a compliment.

Unfortunately, in the United States’ hyper‐​partisan political climate, this means that half of the country will be open to my new book while the other half will not. Doubly unfortunate, most people who work in health policy are in the second group.

Reader, if you are in that second group, I beseech you: give Recovery a chance. There may be more for you in this book than you might think. Recovery is fundamentally about making health care more universal and restoring your right to make your health decisions.

How so? Let’s start with a chart from the book. It may be the most important chart you will ever see in health policy.

The following chart shows the results of a series of experiments that several employers ran. An amazing thing happened in those experiments. Something you almost never see happening in health care: prices fell.

In these studies, employers tested an innovation that consistently and dramatically reduced health care prices, in a very short period, across a wide range of services. Those services included:

MRI scans
CT scans
Knee and shoulder arthroscopy
Cataract removal
Hip and knee replacement
Colonoscopy
Lab tests

For every one of these medical services, the innovation these employers tested caused prices to fall immediately and significantly—without denying medical care to anyone. Everyone got the care they needed. The innovation was even able to overcome the market power of monopolistic hospitals and get them to reduce their prices, too. The academics who published the results, including health economist James C. Robinson of the University of California‐​Berkeley, believe this innovation could bring prices down even more than it did in these experiments.

For we supporters of universal health care, this is the best news you’ve ever heard and the most important chart you’ve ever seen. If you want health care to be universal, what you want more than anything is falling medical prices. Falling prices make health care more universal three times over:

They bring health care and health insurance within the reach of those who previously could not afford them. It thereby shrinks the number of people who cannot afford the medical care they need.
They reduce the cost of helping people who still cannot afford the care they need: that group is now smaller and health care prices are lower.
They leave the rest of us with more resources, because we too benefit from lower medical prices, making it easier for us to help that now‐​smaller group of people.

If universal health care is your goal, falling prices—this chart—should be your obsession. It was not government programs that made food so universal that we are now keeping a record 8 billion humans alive on this planet. It was first and foremost falling food prices.

As always, there’s both good news and bad news here. The good news is someone discovered an innovation capable of overcoming the market power of monopolist providers to reduce prices to make health care more universal without denying care to anyone. The bad news is that this innovation is…giving people less health insurance.

The employers and insurers who ran these experiments noticed three things.

Providers charged wildly varying prices for certain services. Hospitals charged anywhere from $12,000 to $60,000 for hip and knee replacements, for example.
Those higher prices did not correlate with quality. They were pure exercises of hospitals’ market power.
For all their vaunted purchasing power, not even yuuuge insurance companies (e.g., Aetna) and employers (e.g., the State of California) could, for the life of them, negotiate those prices down.

The innovation those insurers and employers decided to test is something health wonks call a “reference price” or a “reverse deductible.” Those are needlessly dorky terms, though. All they mean is that the insurers told patients they could go to any hospital they wished for hip or knee replacements but the insurer would only pay $30,000. If their hospital charged $60,000, the patient would be on the hook for 100 percent of the difference. In other words, this innovation gave patients less insurance than they had before.

It therefore changed whose money was at stake. Instead of the insurance company being on the hook for prices in excess of $30,000, it was the patient’s money on the line. That change made patients care a lot more about prices than they do when they’re spending someone else’s money.

As a result of that one simple change, all sorts of amazing things happened. Things that definitely do not happen in health care. Because health care is a special sector of the economy. Where these things. Definitely. Do. Not. Happen.

Patients started demanding price information from hospitals.
Hospitals furnished patients with clear, useful price information. (Transparency!)
Patients responded to high prices by changing their behavior. Patients increased the market share of low‐​price hospitals from one‐​half to two‐​thirds.
Hospitals responded by reducing the prices. (*Taps the chart.*) The chart shows average price reductions but high‐​price hospitals reduced prices for hip and knee replacements by 37 percent—about $16,000 per procedure—over a two‐​year period. Some hospitals approached insurance companies about reopening their contracts so they could reduce their prices.

Price‐​sensitive consumers did what large employers and insurance companies—and for that matter, the Department of Justice—could not: they broke the monopolies. All without denying care to anyone.

There’s an important lesson here. In the United States, the pursuit of universal health care has largely taken the shape of having the government encourage more and more health insurance coverage. All sorts of government policies push in that direction. The tax exclusion for employer‐​sponsored health insurance. State and federal laws requiring health insurance purchasers to buy “essential” types of coverage that they might otherwise not. Medicare. Medicaid. CHIP. HIPAA. ObamaCare. And all the while, we advocates of universal health care wonder why prices keep soaring.

Note that the experiments in this chart were pure austerity. All they did was take something away from patients: coverage of the cost of these services in excess of the reference prices. (Sorry, wonky, I know.) And yet, no one lost access to care. Everyone was fine. (Well, not everyone. Inefficient, price‐​gouging, monopolistic providers lost market share. That’s a feature, not a bug.) The price reductions even reduced the cost of health insurance for every one of these patients’ coworkers.

Recovery does not advocate austerity or taking coverage away from consumers. It does not propose to have government mandate “This One Successful Innovation We Found.” Such a mandate wouldn’t work, anyway. The health care industry would hate it and spend tons of money lobbying against it. (Remember, this is the industry that for decades has led all other industries in lobbying expenditures.) The benefits would not be salient to workers and consumers, who would therefore be susceptible to industry fear‐​mongering.

Recovery proposes to make health care more universal by letting consumers control the $4.7 trillion sloshing around in our high‐​priced, wasteful U.S. health sector. That way, consumers can choose whether this type of insurance feature is right for them. It would do so by using traditionally Democratic “public option” principles to reform Medicare—which would put an end to how the pharmaceutical, hospital, and insurance industries have captured that program. And by discarding the worst parts and keeping the best parts of tax‐​free health savings accounts.

Recovery further proposes to make health care more universal by eliminating barriers to proven ways of reducing the problem of preexisting conditions. And by eliminating barriers to nurse practitioners and other mid‐​level clinicians. And by reducing barriers to women exercising their right to choose contraception. And by eliminating unwise medical malpractice liability “reforms.” And by improving care for veterans…

If you support universal health care and the right of patients to make their own health decisions, there might be more for you in Recovery than you might think. I hope you’ll give it a look.

Justin Logan

Like many Americans, since last Saturday I’ve been watching events in Israel with sorrow and horror. I woke up at 5 am for some reason, picked up my phone, and saw image after image that turned my stomach. Terrorism, and the targeting of civilians, especially children, cannot be justified. Civilized people across the world were horrified by it.

As a foreign policy analyst, I expected a host of U.S. policy issues would pile up and require comment, but to my surprise, there haven’t been a ton of them. Biden sent a carrier strike group to the eastern Med, volunteered to rearm Israel, and supported Israel’s right to defend itself.

Biden’s speech distinguished between the Hamas terrorists and “democracies like Israel and the United States.” He argued that “terrorists purposefully target civilians, kill them. We uphold the laws of war. It matters. There’s a difference.”

The opening phase of Israel’s campaign in Gaza has been unprecedented in scale. In the first six days, Israel dropped 6,000 bombs. By way of comparison, the counter‐​ISIS campaign, which took place across all of Iraq and Syria, dropped between 2–5,000 bombs per month.

Brig. Gen. Dan Goldfuss sensibly argued that the goal of the campaign is to “change the reality within Gaza to prevent such a thing from happening again.” IDF spokesman Daniel Hagari echoed this: “to eliminate top Hamas officials, this is a top priority.”

Israel has every right to defend itself and, speaking for myself here, it has every right to be in a frothing rage, too. If it can kill or capture the perpetrators, deter future ones, and/​or destroy Hamas military assets, those are righteous and just goals.

Speaking again for myself, when I’m in the throes of a frothing rage, I sometimes don’t think clearly, much less strategically. So I share many of the concerns Nahal Toosi raises in this article. Toosi spoke to a number of Israeli analysts and officials, all of whom seemed to be either coming from or headed to funerals, or both, and found them understandably rent by grief and grasping for a strategy: “The problem, from what I could gather in conversations with Israeli and U.S. officials and analysts, is that no one seems to know exactly how to end this particular evil without unleashing more of it.” She mentions the lessons of the Global War on Terror and admits:

It is tough to raise such lessons with Israelis now given their heartbreak. But early decisions are what could have the most long‐​term impact. This is not just a moral argument about avoiding killing innocents. It’s a practical one about how to win a war. (emphasis mine)

This seems like an essential point. All civilized people have concerns about the innocent people in Gaza, who are suffering as a result of the war Hamas started, just as they should for the innocent men, women, and children in Israel who were butchered by Hamas terrorists. (We can exempt from the category “civilized people” the contemptible groups who have proudly paraded their bigotry in the intervening week.) But even if one didn’t give a whit about people in Gaza: do we have a clear picture of how Israel’s incipient campaign ties in to its objective of making another 10/7 much less likely?

Lawrence Freedman raises similarly stark questions in his long read in the FT this weekend.

For our part, we Americans weren’t in an advice‐​taking mood after our 9/11. We made a host of decisions, many of them bad, and the consequences are still with us. But if Israel makes any bad decisions, it will live next door to them. We Americans had the luxury of just throwing our hands up and coming back to North America.

So I hope, for Israel’s sake but also for the sake of innocent civilians in Gaza—and, as an American, for the prevention of escalation in the region that would risk U.S. involvement—that Israel makes better decisions than we Americans did in our rage after 9/11.