The Cato Institute

Twelve Charts Proving Why the Federal Government Should Terminate Transit Subsidies

Current total transit subsidies total more than $50 billion a year, with annual subsidies averaging more than $150 per U.S. resident. And, yet, most Americans rarely, if ever, use public transit — and ridership is declining…

Transit Ridership Is Declining:

Since 2014, ridership has been steadily falling in almost every urban area despite a healthy economy.

Transit’s Recent Decline Is Nearly Catastrophic in Some Areas:

Transit ridership in 31 of the nation’s 50 largest urban areas has dropped 15 percent or more since the year of highest ridership in each region in the last decade. While transit ridership has declined in the past, as it did between 1990 and 1995, it recovered due to high gas prices. Today, moderate gas prices are fueled by America’s resurging oil industry, and when that resurgence is combined with deteriorating transit infrastructure and the growth of the ride-hailing industry, it appears that the most recent decline may be irreversible.

Transit Requires High Downtown Job Concentrations:

Many assume that transit ridership is heavily influenced by population density, however, much more important to transit is the concentration of downtown jobs. A major reason for transit’s decline has been the dispersion of jobs from concentrated job centers to distribution across the urban landscape. O'Toole finds the only urban areas whose transit systems carried more than 10 percent of commuters had more than 240,000 downtown jobs.

Transit is Slow:

The average speed of transit is 15 miles per hour while the average speed of urban driving is at least 27 miles per hour.

Nearly Everyone Has a Car:

Americans have responded to the automobile’s advantages over transit by steadily increasing automobile ownership, with 21 percent of American households having three or more cars and fewer than 9 percent having no car. Making matters even more difficult for transit, about half the households with no cars also have no workers: only 4.3 percent of American workers live in households that have no cars. In addition, more than 20 percent of workers in carless households nevertheless drive alone to work (probably in employer-supplied cars) while fewer than 42 percent take transit to work.

Transit is Expensive:

Per passenger mile, transit costs more than four times as much as driving, and transit subsidies are more than 70 times larger than highway subsidies.

About Half the Cost of Transit Is Because It Is Government-Run:

Today transit carries fewer than 27,000 riders per operating employee compared to 59,000 riders per employee in the decade prior to 1964, the year Congress gave cities and states incentives to municipalize transit systems.

Since 1970, Subsidies Have Exceeded $1.3 Trillion:

Current total transit subsidies total more than $50 billion a year, with annual subsidies averaging more than $150 per U.S. resident even though most people rarely, if ever, use transit. A major problem with transit agencies’ dependence on subsidies is that such dependence makes them more beholden to politicians and their backers than to transit riders. Agencies become willing and eager to approve cushy union contracts and gold-plated infrastructure projects that do little to improve local or regional transportation. Meanwhile, politicians neglect the maintenance of existing systems, leading to frequent breakdowns.

Growing Subsidies Haven’t Boosted Transit Ridership:

At best, the tens of billions of dollars in annual transit subsidies have only slowed the decline in ridership.

Transit Is Increasingly Used By High-Income People:

The 2010 Census found that people who earned $75,000 or more per year were more likely to ride transit than any other income class.

Transit Isn’t Green:

In all but four urban areas, transit uses more energy and emits more greenhouse gases per passenger mile than driving.

Transit Spending Doesn’t Boost Urban Growth:

The fastest-growing urban areas in the 2000s were ones that spent the least on transit improvements in the 1990s, while urban areas that spent the most on transit improvements were among the slowest-growing regions.

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The Most Prominent Arguments For Banning Cash — And Why They’re Wrong

The arguments for phasing out cash or confining it to small denomination bills are, when not entirely mistaken, extremely weak…

Many have argued that banning or restricting use of cash will reduce criminal transactions within the underground economy. However, just how much underground economic activity constitutes truly harmful criminal acts, as opposed to productive activities that evade taxes or other regulations but nonetheless increase social welfare, is unclear. Further, the likely effects of a cash ban on genuinely predatory activities such as extortion, human trafficking, drug-related violence, and terrorism are extremely difficult to quantify. 

Economist Friedrich Schneider estimated that even a complete phasing out of cash would only shrink the underground economy by 10-20 percent. Yet high-denomination bills still account for a substantial volume of licit transactions, so even a ban limited to such high-denomination bills could harm many innocent persons.

Phasing out cash would have a particularly negative effect on the unbanked, including many poor and vulnerable persons, who might find themselves still further excluded from the modern economy. Anti-cash advocates who recognize this admit that any plan to phase out use of cash would have to include corresponding efforts to provide such persons with basic debit cards, if not with smartphones, at a cost that one estimate puts at $32 billion. Phasing out cash would particularly affect illegal immigrants, drastically cutting their labor contributions and creating additional deadweight loss for the U.S. economy. Internationally, a ban on cash would harm those who use U.S. dollars as a refuge for value, sheltering their savings from the influences of unstable currencies and corrupt governments.

Advocates of phasing out currency also see it as a means of allowing monetary authorities to implement negative interest rate policies. Negative rates could then be imposed on all money holders, acting as a direct tax on their money monetary balances. The necessity of this tool is questionable at best – there are only three instances in the past quarter century where negative interest rates could possibly have been helpful, hardly meriting the extreme measure of eliminating cash. Negative interest rates in a cashless economy end up giving an unelected regulatory body discretionary power to tax money and would require massive restructuring of financial institutions and norms.

Finally, most arguments for doing away with cash ignore the public-choice dynamics of the myriad regulations that such a reform would require. Even if banning cash produced benefits such as a reduction in crime, do those benefits offset the harms and costs to those who use cash for legitimate reasons? Consideration should be given to alternative means for preventing crime and tax evasion that do not cast their web so widely.

In short, none of the arguments favoring restrictions on cash withstand close scrutiny.

It is the advocates of restricting hand-to-hand currency who bear the burden of proof for such an extensive reshaping of the monetary system, no matter how cautiously or slowly implemented and no matter whether all cash is eliminated or just large-denomination notes. 

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Midterms Result in the Most Pro-Immigration House of Representatives in Over a Century

Could the midterm elections spell good news for much-needed immigration reform?

In this election, journalists following the immigration beat will focus on the outcomes of individual races. Dave Brat, the Virginia nativist whose defeat of House Majority Leader Eric Cantor in 2014 doomed hopes of immigration reform, lost in a previously safe GOP seat. Democrats blew out Corey Stewart in Virginia and Lou Barletta in Pennsylvania, the most anti-immigrant Senate candidates. Kris Kobach, the author of state anti-immigrant laws across the country, cost Republicans the governorship in Kansas.

But, when it comes to immigration, the two most important outcomes of this election are in the big picture. 

First, nativists have officially squandered their last, best chance to restrict legal immigration. There may never be another moment like the one in 2017 and 2018, where the House, Senate, and White House were all controlled by Republicans with nativist agendas. They held multiple votes in the House and Senate on various measures to make legal immigration cuts, and all their efforts went down in flames.

The second outcome is even more important: the House of Representatives is now the most pro-immigrant that it has been since the 19th century. Current House Democrats would not only pass the broadest legalization in the history of the United States — they also would greatly expand legal immigration. No elected House Democrat is opposed to legalization, even if they would want it paired with some enforcement measures.

Better yet, this House will have the backing of the most pro-immigration general public in recorded history. More Americans oppose cuts to immigration and favor expanded immigration than at any point since at least 1965. 

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Permission to Work

In the 1950s, 1 in 20 U.S. workers needed government permission to work. Today licensing has ballooned to 1 in 4 workers…

The story of state occupational licensing is the same across most occupations. Insiders want to block outsiders — people they deem less professional — from practicing their occupation. Thus, they lobby state legislators or licensing boards to restrict entry into the occupation.

Licensing advocates will typically argue that requiring a state license is necessary to guarantee quality or to protect public health and safety from unprofessional or dangerous workers. However, advocates lobby vigorously to protect their turf by creating barriers to entry with scant evidence that those barriers will improve quality, public health, or public safety. Once an occupation is licensed, workers are motivated to increase the costs to outsiders by changing requirements to include more hours of education, higher grades to pass exams, or increased fees. 

Unlicensed workers operating in the shadow (or informal) economy have a harder time standing up to such threats. Those workers will earn less than they could out in the open. Hiring employees and paying taxes might expose them as unlicensed operators. 

Licensing harms consumers by increasing the price of services and decreasing innovation — without ensuring quality. Consumers may purchase fewer services. Consumers who choose to save money by hiring unlicensed practitioners may face fewer legal protections. And people who chose to save money by performing potentially dangerous work themselves, like electrical work, place themselves at a greater risk of harm.

On top of those tradeoffs, consumers still face the costs of finding reputable service providers, despite claims that occupational licensing establishes professionalism and quality. Remember experiences you may have had with a bad haircut, a slow home contractor, an angry nurse, or a painful dental procedure.

Licensing is not a substitute for reputation. Word of mouth is a typical method for finding quality service providers, even in licensed occupations. Today it is easier than ever to find a provider who will best fit your needs. Technology reduces search costs through website reviews from Yelp, Angie’s List, and TripAdvisor, for example, and through crowdsourcing on sites like Facebook and Reddit.

In addition to failing to ensure quality, there is little to no evidence that occupational licensing improves health and safety outcomes for consumers. And consumers do not require occupational licenses to feel safe.

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Jamal Khashoggi’s Death Is the Latest Chapter in A 300-Year War

Prominent Saudi journalist Jamal Khashoggi’s suspected murder, and its aftermath, is the latest battle of a 300-year war over Sunni Islam…

The apparent abduction, and probable murder, of the prominent Saudi journalist Jamal Khashoggi at the Saudi consulate in Istanbul on Oct. 2 unmasked the ugly despotism behind the reformist image of the kingdom’s crown prince, Mohammed bin Salman. 

The U.S./Saudi relationship should be under the microscope like never before following Khashoggi’s probable death. 

Less noticed, however, is the way this scandal revealed a long-running rivalry between the two countries that directly butted heads at the outset: Turkey and Saudi Arabia.

This is a story that goes back to the 18th century. Then, much of what we call “the Middle East” today, including the more habitable part of the Arabian Peninsula, was part of the Ottoman Empire, ruled from Istanbul, then called Constantinople, by a cosmopolitan elite of mainly Turks and Balkan Muslims, including Bosnians and Albanians. The Hejaz, the western region of the Arabian Peninsula that included the holy cities of Mecca and Medina, was revered for religious reasons, but it was a backwater with no political or cultural significance.

In the 1740s, in the most isolated central area of the Arabian Peninsula, called Najd, a scholar named Muhammad ibn Abd al-Wahhab emerged with a fiery call for the restoration of “true Islam.” Wahhab soon allied with a chieftain called Ibn Saud—the founder of the Saudi dynasty.

The First Saudi State they established together grew in size and ambition, leading to a big massacre of Shiites in Karbala in 1801 and the occupation of Mecca in 1803. The Ottomans crushed the Wahhabi revolt in 1812 via their protectorate in Egypt, and Wahhabism retreated to the desert.

Another tumult in Hejaz occurred in 1856 when the Ottomans, thanks to the influence of their British allies, introduced another heretical “innovation”: the banning of slave trade, which was then a lucrative business between the Africa coast and the Arabian city of Jeddah. At the behest of angry slave traders, Grand Sharif Abd al-Muttalib of Mecca declared that Turks had become infidels and their blood was licit. As we learn from the chronicles of Ottoman statesman Ahmed Cevdet Pasha, Turks’ sins included “allowing women to uncover their bodies, to stay separate from their fathers or husbands, and to have the right to divorce.”

These were the changes introduced during the Tanzimat, the great Ottoman reform movement in the mid-19th century by which the empire imported many Western institutions and norms. The Tanzimat allowed the Ottoman Empire to ultimately become a constitutional monarchy with an elected parliament—something still unimaginable in the absolute monarchy of Saudi Arabia. It also allowed the rise of the modern Turkish Republic, where secular law became the norm, women gained equal rights, and democracy began to grow.

Today, admittedly, Turkey became the home of jailed journalists, crushed opponents, hate, paranoia, and a new cult of personality that has been called “Erdoganism.” Yet Erdogan and his fellow Islamists are still Turkey’s Islamists—that is, compared with Saudi Arabia’s elites, they are still operating within a more modern framework that reflects a milder interpretation of Sunni Islam.

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India’s Modi is No Great Champion of Economic Freedom

Indian prime minister Narendra Modi has been hailed as an economic liberalizer, but new import duties on more than 40 items threaten to reverse the major gains India has made since economic reforms began in 1991…

When Indian prime minister Narendra Modi came to power in 2014, he was seen as a liberalizer, bearing the slogan, “Minimum government, maximum governance.” He has since sharply criticized rising U.S. protectionism under the Trump administration. 

In reality, Modi has expanded the role of government in welfare even while liberalizing the economy incrementally. Most recently, just like President Trump has done in the United States, Modi has promoted measures to protect and support manufacturing jobs in India.

The latest Indian budget — from February 2018 — raised import duties on more than 40 items, ranging from auto parts and toys to candles and furniture, in order to protect uncompetitive small businesses and create jobs in labor-intensive industries. Even before that, India raised import duties on several electronic items, from phone components to TVs and microwave ovens — all done in pursuance of a Phased Manufacturing Program aiming to check massive imports from China and ensure that cellphone assembly and the manufacture of components are done mostly in India. An official task force has also been appointed to look into ways of reducing import dependence.

Modi’s Bharatiya Janata Party (BJP) is not a conventional right-wing party. It rejects both socialism and Western capitalism and seeks a homegrown solution called Integral Humanism. It supports private enterprise but also runs India’s biggest trade union and believes in a wide-ranging welfare state. It has highly protectionist affiliates that have always been wary of multinational corporations and international institutions. It believes in government intervention to create national champions, increase employment, and protect small businesses. The party also contains many liberalizers who succeeded in opening up the economy when the party ruled from 1998 to 2004, overcoming objections from BJP affiliates.

Modi now faces the same global headwinds that Trump does: fear of China, automation, and lack of good jobs. These pressures are driving India’s new protectionism, just as they have done in the United States. Optimists hope the new import tariffs are only temporary. The risk is that the new protectionism will get entrenched and reverse the major gains India has made since economic reforms began in 1991.

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Immigrant Wages and Economic Assimilation

The American Dream is still alive: America’s overly generous welfare state has not stopped immigrants from assimilating into the U.S. economy…

The degree and speed at which immigrant wages converge with the wages of native-born Americans are important indicators of economic assimilation. 

According to new research from Cato scholars, newly arrived immigrants have wages lower than otherwise identical natives, but those wage differences diminish greatly or disappear entirely after about two decades of working in the United States. 

Over time, the wages of immigrants converge with those of similar U.S.-born Americans. While illegal immigrants never close that gap, providing these workers with legal status would allow them to demand the same wages as similar American workers. 

The fact that immigrants tend to achieve the same or greater levels of economic prosperity in the United States shows that the American Dream is still alive and that America’s overly generous welfare state has not stopped immigrants from assimilating into America’s economy.

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