Welcome to Cato Audio for August 2023. I'm Caleb Brown. In this month's offering, a discussion about private sponsorship for immigrants of several nations from Kit Tainter of welcome.us. Former Congressman Jeb Hensarling and former FDIC head Jelena McWilliams discuss bank failures and regulatory power. I speak with James Fishback about the troubling evolution and competitive debate. Walter Olson discusses the impactful business cases from the Supreme Court's most recent term. First up, this month's Cato Roundtable. You know, aside from a series of tweets and, you know, trying to repackage.
the regular old democratic policy playbook when it comes to taxes and spending. It's hard to really get a handle on what Bidenomics is supposed to be other than, you know, the standard. left of center wish list for economic policy. We are joined by, wow, four different scholars at the Cato Institute to discuss Bidenomics. Chris Edwards occupies the Kiltz family chair in fiscal studies at the Cato Institute. He is the editor of downsizinggovernment.org, which is a laundry list of really good spending cuts for the federal government. Romina Baccia is the director of budget and entitlement policy here at the Cato Institute. Adam Michelle directs tax policy studies. And Scott Linscombe is Cato's vice president for general economics. Scott, just to put a...
top line understanding on what Bidenomics is. Is it wrong to characterize it as just sort of the standard Democrat playbook of, you know, marginal changes here and there, plus some subsidies and spending hikes? Yeah, I mean, I think it's the same playbook, but I would argue that in a lot of areas, it's the playbook has been dialed up to 11. You know, if you look, for example, at the amount of spending that the Biden administration is taking credit for in the industrial policy space, for example, we're looking at, you know, as Adam and I calculated, could be up to $2 trillion in additional spending for semiconductors and solar panels and clean energy and infrastructure. So while this isn't exactly new or radical in a lot of ways, it's actually a lot very old ideas. The sheer magnitude of it does make it a bit.
a bit unique. Some of the biggest issues facing the United States today are debt, unsustainable entitlement spending. Is there anything in what we know or whatever documents we now have on Bidenomics that tells us there's any serious attempt out of this White House to address them? I don't think there's any serious attempt at fiscal discipline. I would argue that Bidenomics is a serious departure from the bipartisan understanding of the need for fiscal discipline and the need to control the debt that we saw under both the Clinton administration and the Obama administration. President Biden has completely departed from those precedents.
The Biden fiscal agenda is characterized by higher taxes to finance yet higher spending. There's no attempt at holding down debt or forging a grant bargain, which Republicans say. Nevertheless, President Biden has picked up on the fact that the American people think that some of this inflation is driven by very high deficits. And so Biden continues to claim to have reduced deficits, he argues, by $1.7 trillion in two years. But that claim has been widely debunked. He stated that during the State of the Union. I've written about it. The Washington Post, Glenn Kessler, has written about it. And it doesn't matter how many people debunk it. Biden keeps claiming.
for these deficit reductions that had nothing to do with his spending policies, which will actually increase the deficit by about $5 trillion over the next 10 years. All right. Adam, Michelle, to your writings about tax policy, is there anything notable about what the Biden White House, whatever we characterize, whatever he wants to characterize as Bidenomics, is there anything about tax policy here that is surprising or encouraging? I think that you look at the president's recent speech where he outlines sort of how he thinks of Bidenomics. And he points to the economy and says, look, Bidenomics is working. We have low unemployment. The economy hasn't tanked as many economists sort of thought that it would.
And then he says, look, we should do more of this. The missing piece of the policies that have been implemented so far are his historic tax increases that he lays out in his budget and he talks about over and over again. He talks about increasing the corporate income tax rate to levels that are well above our largest trading partners. He wants to increase capital gains taxes to 50% or higher. Our trading partner's average is 20%.
And then he has a whole host of smaller taxes that impact business investment wages. So you go down all of these tax increases on stock buybacks, on millionaires' unrealized gains, on investment managers, on cryptocurrency, on international profits. All of these things would be an additional cost on top of the government getting involved in investment decisions, as Scott was talking about. And so the missing, the sort of shoe that hasn't dropped yet are all of these tax increases. Chris, on fiscal policy, you know, the Biden administration wants to spend more, wants to tax more. Is there anything?
And in fiscal policy writ large, that is notable or promising about whatever the White House believes can be called Bidenomics. What I see as Bidenomics is high deficits and inflation economics, central planning economics. You see that in energy and antitrust policy and other areas. It is cronyism economics. The amount of corporate welfare coming out of this administration is unprecedented in American history. And finally, it's free stuff economics. You know, the student loan.
A cancellation plan was a good example of that. And finally, and I think this is perhaps most important, is that Bidenomics is winner-loser economics. In markets... Everyone wins because transactions are voluntary. In markets, both buyers and sellers win. Markets generate net positive value. Bidenomics is winner-loser economics. It's a zero-sum game. So, you know, with his student loan cancellation plan, some students would win. Taxpayers would lose. Students who've already paid off their debt would lose. With energy, taxpayers lose. Consumers lose with higher prices. And renewable energy would win under Biden's plan, but conventional energy would lose. With Biden's manufacturing subsidies, some companies would win who get the subsidies. Their competitor companies would lose. So big government...
Economics, as Biden is practicing it, is winner-loser economics. Bad for the whole nation. Sounds like warmed-over industrial policy, Scott. Yeah. And it's, I would add, more protectionist as well. You know, getting back to the zero-sum theme that Chris mentioned, you know, there is a lot of protectionism baked into all of this spending. You know, you have to be, your batteries have to be made in America. They have to use minerals from a few places. And, you know, that reflects that zero-sum mindset that Chris was talking about. I mean, if you really care about the environment, as we're told they do, you know, the subsidies should go to consuming any sort of renewable energy.
products, regardless of where they're from. You know, for example, one of the best selling EVs is this Korean car, a Hyundai. But that's not eligible for the subsidies because it's not made in America. So, you know, you're going to get less consumption of that. So it's really there's a lot of this winner loser type activity that's embedded into Bidenomics that in a freer market system wouldn't exist. So is there anything to add to what the White House has characterized as Bidenomics and what they seem to be so proud of? I would just add that it also is.
head in the sand economics, because the Biden administration seems to suggest that we don't need to make any benefit reforms to Social Security and Medicare, and we're going to be fine, that we can just tax our way to ever more generous old age benefits. And that is simply not true. And so the president has his head stuck in the sand when it comes to the extent of our fiscal crisis with debt already as large as the economy and very quickly reaching completely unprecedented, and I would argue dangerous levels that will reduce economic growth in the long run, will reduce productivity enhancing investments. So to the degree that the economy really rebounded. quickly after the pandemic that will not last with this administration's policies. This is something that you and I have harped on before in discussions, which is there are things that can be done now that in the event of a fiscal cascade, a negative fiscal cascade related to debt and spending, some sort of shock, those options are no longer available.
Absolutely. That's the case because it seems that members of Congress think that they can just wait for the next 10 years until the Social Security and Medicare trust funds will run out of money and then they'll just deal with the problem. But at that point, a lot of the options will be off the table because many options take five, 10 years to phase in before you see any significant savings. And politically, it will be very difficult to make benefit changes, including increasing the age of retirement or reducing benefits for certain earners without there being a significant lead in time. Because we're talking about old age benefits. Once people are close to retirement, it's very difficult for them to change their plans to make up for the fact that maybe benefits won't be.
as generous as they were expecting. So by waiting, we're really closing off options and we're baking in much, much larger middle-class tax increases in the process. Adam, the U.S. government, when it takes from the voluntary sector of the economy, as Ed Crane likes to say, there's only so much they can really get. And the share of federal consumption of GDP has been fairly stable for a very long time. Is there any reason to believe that the Biden administration can somehow make that better for the purposes of funding his spending plans?
The tax side, the administration also has their head in the sand on how to fund their agenda. They have all of these new spending proposals, and then they have this promise that they'll pay for it all with just tax increases on people earning over $400,000 a year. This is just a mathematical fiction. You can't tax the high-income earners enough to cover the current deficit, let alone all of the additional spending that's being proposed. And so in addition, if you tally up all of the tax increases they have in their budget, they still don't get debt as a share of the economy on a consistent path. They don't address the sort of long-run unsustainability of increases.
deficits. There's simply no way to do this, to cover this agenda with just the tax increases they're proposing. So the fiscal reality is even worse. It requires higher taxes on everyone if we're going to go down this path. And that's a reality they haven't grappled with. Yeah. Continuing the same themes, I think on the industrial policy side of things, there really is little regard for the long-term consequences of all this spending. We see in the press and the White House itself has championed this increased construction spending in the manufacturing space, but there's no regard for whether these factories that are getting built are actually going to be productive investments.
You know, there was a Wall Street Journal story just this week about a Tesla factory in New York that's essentially sitting empty after it got about a billion dollars in government subsidies. No regard for that. No regard for the reaction of other countries to all of this industrial spending. Well, guess what? They are implementing their subsidies, too, which is going to create all sorts of distortions and potential gluts in these areas. And then finally, no regard for the opportunity cost, as we've been discussing a bit, of all of this spending, right? What won't happen in the U.S. economy because the government's putting its thumb on the scale with these preferred companies?
industries? What policies won't be implemented? Because we're taking all of this money and throwing it at these industries as well. And all of that, of course, is ignored. And we just simply look at the short-run sugar high that $2 trillion is giving. Robert Higgs likes to tell us one of the taxes that are underappreciated is what's removed from private productive uses whenever the government spends money on its preferred priorities.
Chris Edwards? I want to build on a little bit of what Scott was talking about energy and Adam was talking about taxation. And this raises another aspect of Bidenomics, which is that Bidenomics is all about internal contradictions. When the government gets really big, it works against itself in many different ways. So, for example, Bidenomics is all about energy subsidies. So it's subsidizing billions of dollars worth of new EV charging stations across the nation, for example. But environmentalists used to always be about reducing energy use. That's the way to go about tackling climate change. And yet all the Biden subsidies would...
would encourage energy use, like with all the EV subsidies. On the tax front, Biden has raised corporate taxes that will induce corporations, including corporations investing in infrastructure and energy and other things, to reduce their investment. So raising corporate taxes, as Biden wants to do, would reduce corporate investment, but at the same time, he's subsidizing some companies to increase their investment. Internal contradiction. And you see this with high-tech subsidies as well. So the Biden administration has billions of dollars of high-tech subsidies, but at the same time, they're going after high-tech companies and cracking down on them in various ways with antitrust.
policy, for example, the Biden administration just lost an antitrust case against Microsoft. So you see these internal contradictions when government gets big and starts intervening all over the economy. All right. Let's talk about what can be done, even if Joe Biden woke up tomorrow as a born-again libertarian and found himself wanting ideas for politically saleable, ideally, ideas to reduce the size and scope of government and put us on more sustainable paths for debt, for spending, for taxation, and for government intervention in the economy. Chris?
You have a whole website that is devoted to these ideas. I hate to talk about low-hanging fruit because we really do want structural reform as well, but in terms of low-hanging fruit, what is there? You know, the hope is that the Republicans who now control the House, can push back against the Biden administration on a lot of its big government policies. They have started to on the spending front. There was a deal, the bipartisan debt ceiling deal passed in May, trims the long-term deficits a little bit. I mean, we need to hope that the House Republicans keep pushing back on spending. I think a lot of the Biden intervention plans will end up backfiring and blowing up in their face, just like a lot of the Obama interventions and energy subsidies ended up being total losers.
I think a lot of these Biden energy interventions will become so obviously failed that the next administration will repeal them. So that's I think, you know, ultimately with areas like energy, you know, reality will reassert itself. These subsidies will fail and they'll be repealed. That's my hope. I think Biden as a born again libertarian, we can only hope, would should say something like.
We believe in a strong and vibrant economy, and we recognize the errors of our ways that that doesn't come about by picking winners and losers with government subsidies and regulation, but rather by unleashing the economy, the entrepreneurial spirit that resides in the American people. And we will do that by keeping taxes low, avoiding higher taxes on all Americans by finally tackling the largest drivers of growing spending and debt. And I will work together with Representative McCarthy to finally stand up this BRAC-like fiscal commission, and its mandate will be... to control the growth in the debt so that debt doesn't grow larger than the economy, and we will reduce it down to 60% of GDP over the next 20, 30 years to make sure that we will have a robust economy that can support our strong military and our freedoms. Yeah, base realignment and closing, of course, the answer to the political problems associated with military bases and doing that for fiscal policy might give representatives some cover as they allow themselves to vote for reduced spending overall. Scott?
Romina is talking about a potentially massive deregulation on behalf of the economy. There's, of course, no indication that the Biden administration ever even considers that as a realistic possibility in almost any area of endeavor. Yeah. Yeah, I mean, taking a bit more of a pragmatic tap here with what libertarian President Biden might do tomorrow. I mean, if you if you look at all of this spending, if you look at a lot of the industrial policy, you know, one of the things I've written about a lot is how you have about you have a fire hose worth of water that they're trying to fit through a garden hose right now because there are all these supply side restrictions that have not been addressed. So, you know, you could a slightly more pragmatic approach might be looking at things like permitting reforms to speed up regulatory permitting and the approval of these projects that sit around forever that allow mining projects to actually.
get underway here in the United States. There's a ton of low-hanging fruit, I don't know politically, but low-hanging fruit on trade and immigration, where the United States really, really needs high-skilled immigrants to work at these semiconductor factories and everything. But of course, we haven't done anything to encourage that. Trade agreements sitting out there are called the Trans-Pacific Partnership that joining might actually, you know, again, free up some of the supply side on this. And then we have a bunch of dumb tariffs that are blocking construction equipment and steel and the rest that could also be lifted to improve the supply side a bit. Now, you know, again, I'm dreaming, of course, on all this, but there are a ton of supply side reforms that would help achieve the objectives of Bidenomics, but do so in a far more market-friendly way. Well, and I imagine a lot of these changes would not even be noticed by the average American, except to the extent that their wages went up and their ability to secure their own happiness would be enhanced.
Yeah. And you see a lot of progressives cheering these types of supply side reforms because they have, whether it's environmental objectives or other goals, and they see the supply side restrictions, these impediments, you know, really kind of thwarting those objectives. The reality, though, is that it's classic interest group politics, right? You know, lifting certain trade restrictions, liberalizing immigration. These are things that they have very core political constituencies that fight against, and it's difficult to overcome them. And of course, several of them are major contributors to the Democratic Party. So, you know, good luck breaking through those blockades. Adam, on taxes, President Biden wakes up and rubs his eyes and...
says, here's what I ought to do. Well, as Romina mentioned, the true... tax rate is the level of government spending. So the most important thing to do to keep taxes from having to go up in the future is to constrain the growth of spending and get the sort of fiscal house in order. There's also a large pending several trillion dollar tax increase at the end of 2025 when a lot of the Tax Cuts and Jobs Act expires. So getting our fiscal house in order so that we can keep those taxes from going up is going to be incredibly important. And then as Scott and I have written about, instead of all of this industrial policy spending, the administration could do things like full expensing for equipment and for research and development costs. These are reforms that make it easier for all investors.
businesses to invest in the American economy rather than picking winners and losers. But the most important thing is to ensure that taxes don't go up on all Americans by addressing the growth rate of spending. There is one opportunity coming up for President Biden to show that he's changed direction and is willing to enact some restraint in the federal budget, and that is the giant farm bill, which Congress considers every five years, comes up this fall. It's going to be probably a $1.5 trillion bill. So Biden can set a lower number, can say he's not going to sign anything that big and, you know, demand cuts in farm subsidies that are really corporate welfare that go to high income farmers across the nation. So we will see President Bush, who was a big spender himself, veto the 2008 farm bill. So, you know, I'd suggest to the Biden administration, they start thinking about demanding some reforms to farm subsidies leading up to this fall's farm bill. And how much of the farm bill is?
straight up handouts like that. Well, most of the farm bill actually goes to SNAP or the food stamp program. But, you know, farm subsidies are about $25 billion a year. And again, the vast majority of these subsidies go to very wealthy farmers. And so it's an example of either corporate welfare or subsidies to high earners that the Democratic Party often says they're against those sorts of handouts. And so here's a chance for Biden to step up to the plate. Scott?
Oh, no, I was just I was kind of laughing at the thought of the president cutting farm subsidies as he's running for reelection. Hey, look, we can always dare to dream. Right. But unfortunately, you know, as Chris well knows, farm bill economics are trumped by farm bill politics. I was going to ask, is there energy in Congress to confront a lot of this? That is to say, propose something that is substantial as an alternative to almost any area of endeavor that the White House wants to call Bidenomics.
Not on fiscal policy, unfortunately. And we know this because Republicans agreed to push the debt limit all the way to pass the election that will not return until 2025. And that was the number one way in which they strongly signaled that we will not be tackling the drivers of growing spending and debt until after this election. ball that's still in the game is discretionary spending at the end of September, though I likely think that won't get dealt with until Christmas again and possibly after that. And even there, they struck a deal with the debt limit deal that comes with a lot of side deals and loopholes, and I don't think we'll even see them stick to the spending limits that they agreed on when they raised the debt limit. I think that was more of a hand-waving type of policy, and we'll see spending go up on defense and domestic spending once we get to that.
To the Republicans' credit, though, I mean, the Biden administration has enacted, you know, when they had a Democratic Congress, what looked initially to be $400 billion of tax breaks and loopholes for renewable energy of all types and EVs and all that sort of stuff. The cost of those tax breaks has gone up now to around a trillion dollars. So, as Republicans have proposed getting rid of most or all of those. So, obviously, the Democrats aren't going to move very far on that. But if the Republicans, you know, retake Congress and maybe the White House, hopefully some of that huge sort of corporate tax pork will be cut back.
Thank you for giving us that positive note to end on there, Chris. Thank you very much. Chris Edwards occupies the Kiltz family chair in fiscal studies at Cato. You can find his laundry list, his soup to nuts list of spending cuts at downsizinggovernment.org. Romina Baccia directs budget and entitlement policy. Adam Scheldt is directs tax policy studies at Cato and Scott Linskin is vice president for general economics at the Cato Institute, who is also the editor of a book contributed to by many of our other guests here today, Empowering the New American Worker, which is available at our website, cato.org.
The Biden administration recently launched ambitious private sponsorship programs for Ukrainians, Venezuelans, Haitians, Cubans, and Nicaraguans, which could be the largest expansion for legal migration in decades. At the Cato Institute in June, Kit Tainter of Welcome.us discussed the role of private sponsorship in U.S. immigration policy. You know, underneath Operations Allies Welcome in August of 2021, there was a small sponsorship program that was piloted. And we were really excited to see that because it showed how sponsorship can complement all the other government pipelines and government systems that came into play. So states, the federal government, refugee resettlement agencies all leaned in to figure out how we welcome our Afghan allies. But we also used the tool of sponsorship. We knew that it was a tool that could be complementary to other systems. And, you know, watching that happen, we were overwhelmed with interest from people from all across the nation. And it really sparked, you know, to think about what is the power of sponsorship if it wasn't just about Afghans underneath Operations Allies Welcome. What if it was?
was, you know, to our points up here, for more nations and for more people fleeing safety. And so that's why we were and we really are excited about the government's programs, you know, Uniting for Ukraine, the process for Cubans, Haitians, Nicaraguans, and Venezuelans, and really welcome core, because they offer us as a nation a whole lot. Like one, they offer us the ability to act really quickly when there's a humanitarian challenge. So you imagine the Ukraine war started the end of February, actually my birthday, at the end of February. And by May, we were welcoming folks into the United States. Like this is huge. This is so fast. You know, I have friends and colleagues who fled war in the Democratic Republic of the Congo, and they are still in refugee camps 5, 10, 15, 20 years later.
So the amount of speed that we can respond as a nation through these pathways is really key. You know, we all see, you know, the news about an earthquake in Haiti, or we see the news about Sudan, or we see the news about Ukraine, and we think we want to help now. We don't necessarily want to help in five or 10 years. We're seeing those pictures on our screen now. And what these pathways really allow us to do as a nation is respond in an emergency situation to a humanitarian crisis. You know, secondly, the thing that it really allows us to do is to create pathways that complement other systems. So, you know, we have a very complex immigration system in the United States. You know, it is not clear how you get here, how you find a path to safety. But this is one that adds value, if you will, both to our refugee resettlement program.
program for humanitarian purposes and to sort of the greater programs that we have to welcome those fleeing persecution and violence. You know, they're agile, they're responsive, and most vitally, you know, when they wait 20 years in camps again to resettle, these programs are offer, they prioritize speed. And if you've ever interacted with our immigration system, I don't think saying prioritize speed is something that happens very often. So the fact that I get up here and I get to say, you know, our government prioritized speed to get people here really quickly is really, as David mentioned, like in the title of the session today, revolutionary. You know, we have been so inspired by the amount of Americans raising their hands to welcome people from all over the world. And so
You saw the numbers before. It's about 250,000 people in a little bit more than a year have raised their hands to do this. But I think it's really kind of cool to see the other data that we have at welcome.us as being sort of a central place where Americans can go to learn more about sponsorship and more about these programs. So we did a survey with More in Common earlier this year, and it indicated that 50 million people in the United States are interested in sponsorship. 50 million people. So imagine that that 100 million number that I talked about before about UNHCR, people fleeing violence, 50 million people in the United States want to be the answer to that. That's incredible. We've never seen that sort of number to really begin to address some of our global challenges. And Ilya mentioned a lot.
lot of reasons why we should, as a nation, begin to address these global challenges. You know, our website receives up to 60,000 visits a day. Our guide, our kind of tools and resources, everything from like, this is how you do that 134A if you're not a lawyer, that sort of stuff, or how to be a sponsor, how to set up an apartment. You know, those have seen almost a million downloads. It's so incredible to see that when people learn about this program, like many of you, I hope, will go to our website, learn a lot more and become invested in it. You know, other things that have been really inspiring, I think, to us is the fact that organizations like the Lions Club or Rotary have really leaned in and say, how can our members who are already used to acts of service in their community?
How can they get involved? This is awesome. You know, we're bringing in new partners to the work. We're bringing in new institutions to really take up an act of welcoming as a core component of what they do. You know, we've had companies like T-Mobile, Airbnb, and Amazon that have leaned in. Both of their capacity as companies, but I think more importantly, through the generosity of their employees. You know, 20 or so organizations across the United States have made mobilizing sponsors to be one of their number one key opportunities. Again, because they're hearing from their constituents and their members. They want to be involved. They didn't know how to be involved before. Here's a pathway to get involved, and they want to do this work. You know, looking back, and David and Ilya kind of talked about this, you know, in 2020, the refugee resettlement system.
welcomed 11,000 refugees. And every one of those 11,000 is a life who all of a sudden has opportunity in the United States to give back. But that's very small. The number of children born in refugee camps is probably more than that on any given month or any given year. And so the fact that we are able to welcome not only refugees through the refugee process, but also parolees through the humanitarian processes really gives me great hope that eventually we will have a system that's able to be responsive to the national need. And I think what's really, really cool about the humanitarian programs, if I can use cool here at the Cato Institute, it is to acknowledge the fact that we are able to unleash the desire of the American people.
Like the government made these pathways available, but it's the Americans, it's people like you and me that have made them successful. And that is really powerful. Like we've opened up the path, we've made the opportunity through our government systems, but it's really folks like those in the room and who are watching virtually that have made it successful. You know, sponsors do a lot of things for newcomers. They provide support. It can be the light touch stuff, financial support, temporary housing. It can be help with really not necessary government forms to help people get health insurance. You guys know how complicated that can be. It's especially complicated for a newcomer. But more importantly, sponsors are friends. They teach you things that anybody moving to a new community would need to know, how to ride the metro, where to buy fresh vegetables.
you know, how to get kids enrolled in school, all those important things. And we really think that sponsors also help integrate newcomers. So a couple of years ago, Colorado did a five-year longitudinal study that studied refugee integration over time. So over five years, we studied what factors contribute most to integration. And integration serves all of us. You know, people who feel included in belonging, like they belong in our communities, are more likely to give back in the ways that really propel our economy forward. And what we found was that, you know, over five years, refugees integrated, right? That was great. But we found that there were two factors that were the leading causes of integration. One was English proficiency. That makes sense, right? If you live in the United States to speak English, helps you integrate quicker.
or just as important as English language was social bridging. And what that means is you've got a friend outside your own community that can help guide you, that can help connect you to their professional networks. And so that's what sponsorship is, right? It's providing that friendship and that guide to a newcomer that really helps them thrive. And so you might not have to do a lot of things, you know, legally to make, to have the sponsorship program work, but there's a lot of contributions that you can give to give somebody else on the right foot. You know, just by being a friend, by being a guide, you can help that person integrate. And when you help somebody integrate, they have higher earnings, they learn English, their kids are happier in schools. All the things that we want, you can get by just by being a sponsor.
I have a couple stories that I want to highlight. I'm going to be pretty brief here because I actually want you to go to our website, welcome.us, and watch them for yourself. One is an awesome 25-minute documentary that we just debuted at the Tribeca Film Festival a couple of days ago. It's called One Good Reason, and it showcases a story about a couple who are living on a farm in rural Wisconsin, saw the news about what's happening in Ukraine, thought, I can do one good thing. I can contribute here, and they welcomed a family from Ukraine. The family is doing well after a long Wisconsin winter. Kids in school, playing soccer, all the things that you would want your own family to do, this couple in Wisconsin has made.
possible for these Ukrainians. One of my other stories that I feel like is close to my heart is the story of Laura and Denise. They are a lesbian couple that lives in Las Vegas. They saw the news about what's happening in Venezuela. They saw the same pictures that you guys did about the Darien Gap, and they said, how do I help? They ended up sponsoring another lesbian couple who is currently living with them. Their story is beautiful. It's about two people, Denise and Laura.
you know, looking around, realizing they're relatively privileged and then sharing that privilege with two newcomers. And they'll reflect, and they do reflect in our videos that what they have gotten is what Ilya talked about, which is like a positive experience for them as well, helping them feel like they've got a purpose, if you will, in this world and that they were able to make a big difference. We've had full community stand up. So Hartsville, South Carolina, Western South Carolina, surrounded by lakes. They have welcomed four Ukrainian families. Group of friends got together and decided that they could do it. And collectively, they made this possible. You know, Boone, North Carolina is another good example. Places like Grand Junction, Colorado, Tempe, Arizona, Sacramento, you know, Eastern Oregon. There are over 300 or 250,000 rather strong.
raise like this that we really want to make sure to celebrate. You know, one of the things that we haven't mentioned yet, but I think it's important to mention is, you know, last week, 26 business letters sent a letter to President Biden indicating that they really needed new pools of talent to come into our nation to help propel our economy. And so when we're thinking about these folks coming in, yes, it's about the humanitarianism. Yes, it's about giving people opportunity, but opportunity often looks like good work and good work helps us all. So just acknowledging that there's a lot of merit to these programs across the different dynamics and across the different pathways for us to think about.
You know, I just think, you know, about the 100 million folks that are displaced worldwide and the fact that that number keeps growing and it's going to keep on growing. And so we need these revolutions. We need these innovations in our immigration policy today for the current challenges. But we definitely need them for tomorrow in five years and 10 years and 20 years. And by sort of, you know, figuring out that if you ask the American people, do you want to welcome and they say yes, this is so powerful can really help us prepare for the future. Kit Tainter is vice president of policy and practice at welcome.us.
The failures of Silicon Valley Bank and Signature Bank have shed light on the need for a major overhaul of the United States banking laws. For a century, the government has increased federal backing, regulation, and micromanagement of the financial sector. At the Cato Institute in June, former Republican Representative Jeb Hensarling and Jelena McWilliams, former chairman of the Federal Deposit Insurance Corporation, discussed crises in the financial sector and the now routine demands for new federal power. Again, the idea that when you also have failures of public policy, you have failures of prudential regulation, and yet no one is held accountable for those failures, and yet we see somehow some supposed new level of accountability being placed upon bank execs. Now, conceptually, the idea that everyone should have skin in the game if there is some type of federal backstop, and as you well put it, maybe it's time to...
kind of reexamine some of these federal backstops. But the concept that those, to some extent, who are responding to government incentives, be it the risk weighting of sovereign debt, be it casualties, if you will, of unprecedented monetary policy experimentation, they pay a price that those who were responsible for the underlying policies in the first place don't pay. There's just something that is somewhat amiss. And then you hit a very good point as well, and maybe it's a different forum, best left for a different day. But the sheer volume and I guess the quality of discretionary power that has now been outsourced from Article I of the Constitution to Article II is absolutely frightening. And so Congress, frankly, for decades, have had this habit of writing these kind of broadly descriptive statutes and then leaving the real legislative powers to those who are unaccountable and unelected.
And I can tell you from personal experience, Congress can exceed an unintended consequences. So number one, it begs the question, the relative accountability versus unaccountability, the amount of Congress, perhaps even an unconstitutional delegation of their authority. And then how would this discretion be exercised by those who would enjoy it? And would they use this discretion ostensibly for the purpose of which it was designed, or will it be used to further politicize financial regulation, which we are seeing from the FDIC to the OCC to the Fed? So, again, there's a lot of issues here. But I think, you know, although appealing on the surface and particularly Congress wanting to react to something that is topical and something that may appear to be populist, which is gaining popularity in both predominant political parties.
It's really, in some respects, treating a symptom and not the underlying cause. And we really ought to be examining the underlying cause, which we're not. And I'll say, as somebody who spent a little bit of time at the Federal Reserve during the financial, great financial crisis, those were good years. and then went to the Senate, and then I was the general counsel, the regulated entity of the bank, before I became the FDIC chairman. I will say that I'm always surprised, and I shouldn't be, because it's like a pattern. Every time we have a crisis in our hands, the regulatory agencies come out and say, oh, we need additional powers. And when you ask them, well, what is it in your arsenal of powers that you don't have, that you couldn't use? You know, I briefly looked at those bills. As Chairman Hanserling knows, bills move, they get introduced, they change quite a bit. And I like to look at the next to final version as they reach their compromises. But the truth of the matter is that the regulatory bodies, the Fed, the OCC, and the FDIC have the powers to claw back.
compensation. They have done that in past cases. There are some consent orders that you can read publicly where large bank executives had to forfeit profits and give back. There's a so-called golden parachute stock that is investing, but the bank may be in trouble, and the regulars don't want to approve those golden parachutes, even though that was compensation given to the executives over the years. What I think is really...
interesting about the bills, it's a reaction from Congress that, you know, we've got to do something. And then you look at, you know, I think first when you mentioned this, people said it was the rollback of S2155 that caused this. And then when you couldn't find real nexus to point out to the provisions that were quote-unquote rolled back to what happened in Silicon Valley Bank, then they said, okay, it's the executive scomp. It's this and that. The truth of the matter is none of that would have prevented what happened, which was a good old-fashioned bank run.
And that was the case. You know, Silicon Valley Bank lost $42 billion in deposits in a matter of a few hours. I think it was less than five. And that's, I think, I forgot percentage-wise, but it was such a high percentage of their deposits that almost no bank in the United States on a percentage basis could withstand that kind of a run on the bank. So think about that. And no matter what provisions, you know, you can, basically what we did post Dodd-Frank, we built a space shuttle, you know, to basically do, look at derivatives and syndicated loans and everything else. This was people just being, losing confidence and literally.
Same thing that happened in the 30s, lining up this time electronically to get their money out. Why? Because they didn't trust that money would be available at the bank. And so when you think about that, I think there's going to be a lot of postmortem studies, I'm sure, on what the banks did wrong, how they should have diversified, looked at interest rate risks. There should be some examination of the Federal Reserve, frankly. They have the dual mandate about the monetary policy and the maximum employment. Part of their monetary policy and financial stability is making sure that the banks, that's where their bank supervision comes. And when you really think about it, they had 13 consecutive interest rate raises.
And, you know, these banks have long term assets and those assets don't adjust overnight. So, you know, managing that becomes, frankly, not easy. So I think studies will be done to look at all that. But I do think we need to take a look at the regulatory response as well. I was shocked, frankly, when I when I heard testimonies, the first testimony on Silicon Valley Bank failure. And the vice chairman for supervision of the Federal Reserve basically said, answer the question, when did you first hear about the volatility at Silicon Valley Bank? And he said Thursday morning. And they asked the FDIC chairman, when did you hear about it? He's like Thursday night. I mean.
We're talking less than 24 hours than when this bank was taking into receivership. So there's something to be said about the regulatory response in those 24 hours. and what could have been, should have been, and wasn't done. No, if I could, just real quickly to hit a point that Yellen says it hits close to home. So I work for a global bank today, at least for another 10 days. And I can assure you they have deferred... Going to claw back your compensation. For the next five years, there are so many different ways they can claw back my compensation, but it's imposed by the board of directors of the bank. And so this is where, again, if we would allow there to be greater market discipline, you would see some of these outcomes without them having to be imposed by the regulators or by Congress.
Jeff Henserling is the former chairman of the House Financial Services Committee. Jelena McWilliams is the former chairman of the Federal Deposit Insurance Corporation. Competitive debate as practiced in high schools and universities is supposed to center on the presentation of evidence and arguments. And for young people, it's a tremendous exercise in thinking clearly and convincingly articulating a point of view. But debate has changed, and not for the better. That from James Fishback, the founder of Incubate Debate. We spoke for the Cato Daily Podcast in June.
What's happened to high school debate over the last couple of years, it's become less and less about a competition of ideas, and it looks more and more like an echo chamber. This manifests in a number of different ways, Caleb, but the one way that I talk about in the article is the emergence of something called a paradigm. And a paradigm is an online blog post, a collection of them, where the people who judge you at high school debates, that same Saturday morning where you get together, they put out statements that students read before the round to prepare for the debate. Now, paradigms 10 years ago were very different. A paradigm might say something like, I don't want you to speak 250 words a minute.
I'd like you to speak at a more measured pace. They might say, I like primary source evidence over secondary. They may say, I prefer students to spend a lot of time explaining their impacts, in essence, explaining why their argument matters. Something changed with these paradigms. They became riddled with political and ideological statements. I'll read you one here. This is what a student would read before a debate round.
when they'd have a debate on a number of important issues. They would read, and this is from the article, it says, quote, before anything else, including being a debate judge, I am a Marxist, Leninist, Maoist. I cannot check the revolutionary, proletarian science at the door when I'm judging. I will no longer evaluate and thus ever vote for rightist, capitalist, imperialist positions and arguments. Examples of these include capitalism good, neoliberalism good, Zionism or normalizing Israel, colonialism, US white fascist policing. So that sophomore who's competing that Saturday morning before she goes into the room, she's told what types of arguments.
she can't make. And in essence, she has to conform to win the judge's ballot. From a very high level view, don't you try to win a debate in front of the audience that has presented itself to you to be convinced? You do. You absolutely do. And there has to be some level of adaptation. You see that on the campaign trail, right? When Barack Obama was campaigning on the south side of Chicago, the way he would present certain ideas, the way he would communicate would be very different if he were in Des Moines, Iowa or in Manchester, New Hampshire. What I would say is this.
Paradigm is originally designed where you had procedural expectations. Don't speak a mile a minute. Don't. bully your opponent, be respectful, be civil. That's perfectly, perfectly fair game. But the idea that the judge makes the roundabout them, makes the roundabout, I'm a Marxist, therefore I don't want to hear any arguments about capitalism being good. What that does is not just hurt that student and their ability to have a conversation, to present ideas outside of the norm, but it affects the entirety of the debate scene because now you're creating an echo chamber where certain ideas aren't really allowed. And in essence, students aren't able to have their views challenged. You know, if you can never bring up the fact that capitalism has saved people from poverty in sub-Saharan Africa.
then you can never truly have your views challenged even if you believe that capitalism is a force for bad. So it's really about creating a forum where certain ideas are not rewarded, not because they're on their merit. Look, we can have a debate, Caleb, about whether capitalism is good or bad or whether policing in the U.S. is an instrument for good or bad, and that's fine. But you can't have a judge come in and say it doesn't matter what evidence, what logic, what rhetoric you use. Even if you win the debate on paper, I will never vote for an argument on why capitalism is good or why the police are good.
How rare is that? Like I said, I'm not super familiar with the ins and outs of competitive debate, but how rare is it for somebody to walk into a room as a judge and say, if these are the kinds of arguments you're prepared to make, you've lost already. There's no chance for you to win. If you look at it, numerator over denominator, tab room says they have, which is hosted by the National Speech and Debate Association. They say they have 47,000 paradigms. Now that number doesn't really tell you the full story because how many of those judges are regular judges? The difference between the judge that I just brought up is that this particular judge was the 2019 national debate champion in college debate, has judged hundreds of rounds of debate.
hundreds of students over just the last couple of years. So it's not an even thing. What I would say is this, Caleb, is that the number really doesn't matter. What matters is the general atmosphere. When you look at government censorship in communist China, we don't say, well, government censors the people who actually go on sites like WeChat or QQ and shut down comments or shut down dissent about Xinjiang or about capitalism or about Chinese influence. They represent the smallest minority of the Chinese population, yet they wield unbelievable influence. So paradigms are one way, just one of many ways to measure.
what types of arguments can be made. There's a reason why in semifinal, quarterfinal, final rounds of big national speech and debate association tournaments, you don't see arguments on capitalism being good or defending Israel or defending the police. So paradigms are one way to measure what has become really this two-sided debate in high school debate. One side is moderate left. One side is left wing. That is sort of the range of arguments that are allowed these days. And when I say allowed, nobody's going to arrest you or kick you out of the tournament or disqualify you. But at the end of the day, it is a competition. And the arguments that win are in effect the arguments that are allowed because students have one or one of two choices here. They can conform to not just the particular judge, but the general atmosphere, which limits the number of arguments. They can conform to that.
and adjust their arguments accordingly, or they can simply drop out of high school debate entirely. And that further entrenches the echo chamber where certain ideas are just not welcome. And I think that's really the issue here is that at a time of great division in this country, recent Axios-Ipsos poll found that 70% of young Democrats would not be friends with a young Republican. 30% of young Republicans said the same about young Democrats. Growing up, Caleb, I'm sure, same for you as it was for me. Didn't matter. Didn't matter who you voted for, who you supported. And this just further exacerbates that issue by keeping those ideas out of the public square. James Fishback is the founder of Incubate Debate. We spoke for the Cato Daily Podcast. They might not have been blockbusters, but they will have far-reaching implications for business going forward. Cato's Walter Olson and I discussed the most important business cases before the U.S. Supreme Court in this most recent term for this Cato Audio exclusive.
In the context of elections, when did we first hear of this independent state legislature theory? Most people who heard of it heard of it first around the 2020 election, when the question arose of whether state legislatures in states that had voted for Biden could change the result, get together and declare either that the vote count was inaccurate or for some other reason, throw out Biden's victory, or perhaps also declare Trump to be the winner in their state. Okay. So in that context, then, what did North Carolina try to use that theory in order to do? Well, let me step back because what happened in the 2020 attempt to change state outcomes was...
the application of a very extreme version of a theory that comes in about six different flavors. And so I'd like to step back and talk about how people got to the theory, why not all of the versions were necessarily crazy, even though the most extreme one, in my view, was crazy. Okay, well, let me stop you there. What's the best version of that theory? The most plausible version of the independent state legislature theory starts with the wording of the elections clause, which deals with federal elections, which, of course, are mostly administered by states, but with Congress being able to set rules for them. And in its relevant wording here, it says that the state legislature shall have the power to do thus and such, to set the rules for the states.
elections for federal office like Congress. And the argument is that by using the wording state legislatures rather than states, and the Constitution does say states in many other places, but it says state legislature there. And the argument is they were trying to make a distinction there in which the state legislature was being given an unusual amount of power more than it would in an ordinary state situation. And to think of one analogy, if you think of the ratification of constitutional amendments, that's one where state legislatures do have a kind of special role. One of the questions that...
you can ask to get into this question is, can the governor veto what they do? The argument, therefore, is not really frivolous. You need more information to process it in the view of most of the Supreme Court. But it's not completely crazy to think that maybe the state legislature is being given a special power there that isn't part of the regular legislative power. So for certain constitutional purposes, the state legislature, according to this theory, is the decider.
of certain questions. Is the decider. And from there, versions of the theory or doctrine, as they get a little more radical, consider and reject various checks on the power of the state legislature. I mentioned... governors veto, so they might reject that. Another one, which might seem a little bit harder to take, is the power of state courts. If the state courts came in and said, look, there's a law saying you can't meet on Thursdays, and you didn't meet on Thursday, could the state judiciary hold them to the law of their state? Which is a different way of saying, are they in fact bound by the law of their state? If the law says they can't meet on Thursday, can they just ignore that? Does the Constitution give them a right to ignore the laws of their own state? And then to get really creepy music begins playing at this point, can they ignore their own state's constitution? Because maybe the Constitution limits the way in which they can address the enactment of election law. Can they also...
ignore their state constitution, as well as their state judiciary and their governor. Now, at this point, you are kind of out on a limb. And even the litigants in the North Carolina case admitted that they didn't want to ask the court to go that far. They said, okay, we admit state constitutions do bind the legislature, even in this case, but we're going to say, in part, as a way of explaining earlier cases, the court has decided that they can bind them on procedure, but they can't bind them on substance. And now we're getting into the North Carolina case in more detail. For the purposes of drawing lines, what version of this theory did North Carolina adopt?
critics of the North Carolina Supreme Court that litigated this case. And what had happened in North Carolina, and I'm going to simplify the detail because we don't need most of it, but North Carolina's had battles over redistricting cycle after cycle, and the legislature passed a gerrymander. And the state Supreme Court, which at that time was considered a pretty political one in the opposite hands, i.e. Democrats of the Republican legislature, they stepped in and said, the North Carolina Constitution, in our reading, doesn't allow that gerrymander, and it does allow courts to order their own districting. Now, that made it ripe for Supreme Court review because there are a couple of different questions there. First,
If you accept the idea which the North Carolina legislature strongly proposed that the North Carolina Supreme Court was being kind of activist, it had vague language in the state constitution that was taking and running without language, should that be reviewed as an improper check on the constitutional power, federal constitutional power of the state legislature? What about the possible stage which might have been reached of the court actually drawing lines and ordering a new map into effect? Doesn't that allow the court to usurp what is pretty clearly a core legislative power there? Cut the legislature completely out of a power that the federal constitution clearly contemplated they at least have. some input on. And so it teed up a couple of questions like that. And as I say, the defenders of the legislature admitted that there were certain ways in which the legislature would be bound. If the state constitution said they couldn't meet on a particular date, then they weren't trying to deny that. But they said, if the fair reading of the elections clause rule for the state legislature means that we generally need to be the decider and the North Carolina Supreme Court wouldn't let us do that.
All right. The Supreme Court enters the chat. What was their decision and what was the reasoning? The case was in a complicated procedural posture. I know people's heart sinks when they hear that. And I'm going to skip over most of the complicated procedural posture, except to say that for the three dissenters, they dissented on the grounds that the Supreme Court shouldn't have heard the case because it was moot. And there was some plausible arguments that if the court had wanted to kick the case down the staircase and not decided, it could have jumped on that and said it was moot or improvidently granted, as they call it. But it's important because the three dissenters were not all necessarily endorsing the strong...
independent state legislative doctrine in principle, and in particular, Justice Alito Scott stopped there. He said, Moot shouldn't have decided, and I'm not going to talk about the merits of the case. So you had one Alito who just wanted to end it procedurally. You had two dissenters, Thomas and Gorsuch, who said, not only is this moot, but if it weren't moot, you know, there might be reasons to take a good look at this theory because there might be something to it. And then you had six, namely the three liberals and the three swing votes, as you often see them now, Chief Justice Roberts, Brett Kavanaugh and Amy Coney Barrett, joining with liberals with a Kavanaugh concurrence, but essentially in all important points, joining with liberals to say, look, first, we know enough about this case and we know enough about how the court has ruled in the past. So the sixth justice majority said, you're out of here permanently on the more extreme versions of the independent state legislature doctrine. We're not going to reach the
question of whether the North Carolina Supreme Court went overboard because it wasn't properly presented to us. So that part we're going to duck. And as part of the package, we're going to reassuringly say that there is a role for federal courts to review what goes on in this area because if state courts go crazy, they didn't put it this way, but if state courts go crazy, all of us, the three liberals and the moderate conservatives agree that there is some role for federal courts to intervene in the future if they decide state courts have gone crazy. And this is because... the U.S. Constitution is what's designating state legislatures as having some special authorities. Yeah. State legislatures are going to take the lead. That no one disputes, but it's a more complicated process than that. There is a national interest in having the overall process fit what the framers in Congress spelled out, and the states are not entirely on their own. If they do things that, for example, plainly violate their own constitutions or their own laws, we reserve the right to step in. What does this mean for people like John Eastman? Well, John Eastman is famous for having
proposed the most extreme versions of this under which the state legislature could change the rules and change the outcome even after the vote was held. Now, I have to say that was bound to be a non-starter under even an extreme version because what Congress sets as the election date has to rule. Congress is supreme in this area and election date means you can't change the rules afterward. So Eastman's theory was dead under any of the different theories. Nonetheless, Eastman had advanced a very strong view of state legislatures as being laws unto themselves. That clearly ended when the Supreme Court ruled. What did Justice Thomas say in his
dissent. Thomas spent a while on the historical reasons for reading it his way, and we've talked about that. Thomas also had a practical prediction, which is interesting and I think has some merit to it, about the problems the court might be creating by opening the door to litigation challenges in federal court over how states run congressional elections. He said people are going to take advantage of that open door. They are going to file more suits trying to get federal court review. And we don't know where that's headed, not only as far as could there be lots and lots of suits that pose a burden to the federal courts and cause uncertainty about election outcomes, but also we don't know about the standards because the court did not spell out very clearly the standards under which the federal courts should consider those challenges.
So it's something to watch. Walter Olson is a senior fellow at the Cato Institute. If you have a topic you'd like to hear aired out on this Cato Audio exclusive segment, please send us a note at catoaudio at cato.org. When you've burned through your Cato Audio stash, please check out our premier audio product, the Cato Daily Podcast, produced and hosted by yours truly. Each weekday I speak with Cato Institute scholars, outside authors, journalists, filmmakers, and people with something compelling to say. It's available on the same podcast outlets where you get Cato Audio, so please do subscribe to the Cato Daily Podcast today. That will do it for this edition of Cato Audio. I'm Caleb Brown. Talk to you again next month.