How the German welfare state punishes performance

By Alex Tabarrok.

"The German welfare state is generous but this leads to implicit tax rates for those on welfare that can exceed 100%. Here’s a useful summary from the German newspaper Handelsblatt. (The original is in German, this is a Google translation.)

Poorly coordinated state benefits such as the citizen’s allowance, housing benefit or child allowance often mean that additional work is not worthwhile or, in extreme cases, even leads to lower net income. The Ifo Institute has calculated this for various household types for the Handelsblatt newspaper – and shown how anti-performance the system sometimes is.

..A dual-income couple with two children aged five and nine, who work full-time and each earn 2000 euros gross per month, have a net income of 2686 euros with rent and heating costs of 1235 euros.

The couple therefore only has 887 euros more at their disposal per month than the household receiving citizen’s allowance. The absurd thing is that if the model working couple increases their joint income to 5,000 euros, the household’s net income falls by 43 euros to 2,643.

 

The graph shows that from a gross monthly income of 2000 Euro ($2150) (gray bars) to 6000 Euro ($6450) the net income gradient (orange bars) is nearly flat and in some regions it actually falls–meaning the couple would be better off by not working.

It’s hard to solve these problems. A negative income tax in which benefits would fall more slowly with income can restore incentives but at the price of having many more people on some welfare and a a much higher budgetary cost."

Singapore, Inc.

By Scott Sumner.

"In a recent interview with Dwarkesh Patel, Former UK Prime Minister Tony Blair discussed the policies of Lee Kuan Yew—the father of modern Singapore.  He suggested that Lee made three key decisions early in his administration, which led to Singapore achieving a high level of economic development:

1.  Singapore adopted English as its national language.

2. Singapore became highly open to foreign capital and talent.

3.  Singapore adopted a zero tolerance policy for corruption, combined with salaries for top government officials that were an order of magnitude higher than typical in the public sector.

This made me think of the similarities between Singapore and corporations based in Switzerland.  Many corporations in Switzerland use English as their official language, despite the fact that their country’s main ethnic groups (German 62.1%, French 22.8%, and Italian 8.0%) all speak other languages.  Singapore also has a complex ethnic mix including Chinese (75.9%), Malay (15.1%) and Indian (7.4%.)   Blair noted that Lee’s decision to have Singapore adopt English was quite controversial at the time.

Switzerland is a highly open economy, which welcomes foreign investment.  Approximately 30% of Switzerland’s population is foreign born, far higher than the 10% to 20% typical in Western Europe.  Singapore also welcomes foreign talent and investment, with 37% of its population foreign born.  Again, Lee’s policy was controversial at the time, as import substitution was in vogue at the time Singapore was founded (in 1965.)

Like Singapore’s government, Swiss companies do not tolerate corruption, and pay relatively high salaries to top executives.  Lee’s policies regarding corruption and public sector salaries are quite unusual in the developing world.

Ethnic strife is a very common problem in many parts of the world.  Switzerland has used political decentralization to reduce the danger of conflict between regions speaking different languages.  Decentralization would not be as feasible in a small city-state like Singapore, but by adopting English as a language Singapore was able to at least somewhat reduce the salience of ethnicity.

I don’t know if Lee Kuan Yew had Europe’s most successful country in mind when he adopted these policies, but whatever the motive, Lee ended up creating a Singaporean model that looks uncannily like a successful Swiss multinational corporation."

A Supreme Court Triumph for Trial by Jury

A 6-3 majority in SEC v. Jarkesy strikes a blow for liberty against the administrative state by ruling that federal agencies can’t deny defendants their day in federal court

WSJ editorial. 

"The Supreme Court on Thursday ducked a decision on Idaho’s abortion law, which as usual is getting all the press. But the day’s more important story for American liberty is the 6-3 majority’s landmark decision (SEC v. Jarkesy) limiting the power of administrative agencies to charge fraud cases in their own tribunals. 

Hedge-fund founder George Jarkesy argued that a provision in the 2010 Dodd-Frank Act letting the Securities and Exchange Commission seek penalties administratively for securities fraud violated the Seventh Amendment’s right to trial by jury. The six conservative Justices agreed based on the Seventh Amendment’s text and history.

The Seventh Amendment says that in “[s]uits at common law . . . the right of trial by jury shall be preserved.” Chief Justice John Roberts notes in his majority opinion that securities fraud resembles a traditional common law claim by an injured party against a defendant for damages. “Both target the same basic conduct: misrepresenting or concealing material facts,” the Chief explains.

Another similarity: the SEC’s monetary penalties for wrongdoing. “While monetary relief can be legal or equitable, money damages are the prototypical common law remedy,” the Chief notes. “What determines whether a monetary remedy is legal is if it is designed to punish or deter the wrongdoer, or, on the other hand, solely to ‘restore the status quo.’”

The Court’s decision means most complaints by agencies seeking penalties will have to be charged in federal courts, where defendants enjoy more procedural rights including to legal discovery. Agencies also won’t benefit from a home-court advantage. They win nearly every case in their own tribunals, as you might expect.

The Chief notes that the Court has provided limited exceptions to the right to a trial by jury in a “class of cases concerning ‘public rights,’” such as public benefits (e.g. disability payments), immigration law, and collection of revenue. But as the Chief acknowledges, “the Court’s opinions governing this exception have not always spoken in precise terms.”

Alas, the Court didn’t clear up all of its precedential fog in Jarkesy. But the Chief stressed that “even with respect to matters that arguably fall within the scope of the ‘public rights’ doctrine, the presumption is in favor of Article III courts.”

The three liberals argue the opposite. They assert that the Constitution imposes no limits on the government’s power to seek civil penalties outside Article III courts. Their dissent accuses the conservatives of mounting “a power grab” by prescribing “artificial constraints on what modern-day adaptable governance must look like.” In other words, the Constitution must adapt to modern progressive political priorities.

As the Chief rejoins, “the dissent would permit Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch. That is the very opposite of the separation of powers that the Constitution demands.” This would also deprive Americans of due process that the separation of powers is designed to safeguard.

Justice Neil Gorsuch is unforgiving about the dissent in his biting concurrence, joined by Justice Clarence Thomas. He calls it “astonishing” and says the dissent’s underlying complaint is with the “Constitution’s revolutionary promise of popular oversight of government officials—and with those judges who would honor that promise.”

He calls the dissent “all the more puzzling considering how regularly they have argued against that sort of sweeping concentration of governmental power.” And he quotes them chapter and persuasive verse. Perhaps the puzzle is solved if you understand that defending the modern administrative state has become a core progressive cause.

“People like Mr. Jarkesy may be unpopular. Perhaps even rightly so: The acts he allegedly committed may warrant serious sanctions,” Justice Gorsuch adds. “But that should not obscure what is at stake in his case or others like it. While incursions on old rights may begin in cases against the unpopular, they rarely end there.” Liberals used to believe that too."

A Supreme Court License for Social-Media Censorship

A 6-3 majority ducks the First Amendment problem when government pressures tech platforms to limit speech it doesn’t like. Justice Alito writes a powerful dissent

WSJ editorial. 

"President Biden won again at the Supreme Court Wednesday when a 6-3 majority tossed a lawsuit (Murthy v. Missouri) accusing his Administration of colluding with social-media platforms to censor controversial Covid views. Don’t be surprised if government officials read the ruling as a license to do more stealth censoring.

States and individuals sued numerous federal officials for violating their First Amendment speech rights by pressuring social-media platforms to suppress their posts. While lower courts ruled for the plaintiffs, six Justices held that they failed to show they had legal standing to sue. Plaintiffs must show that a “particular defendant pressured a particular platform to censor a particular topic before that platform suppressed a particular plaintiff’s speech on that topic,” explains Justice Amy Coney Barrett in the majority opinion.

She writes that “the platforms moderated similar content long before any of the Government defendants engaged in the challenged conduct” and “continued to exercise their independent judgment.” She was joined by Chief Justice John Roberts along with Justice Brett Kavanaugh and the three liberal Justices.

The majority rebukes lower courts for glossing over “complexities” in the evidence. “Different groups of defendants communicated with different platforms, about different topics, at different times,” Justice Barrett writes, adding that “the links must be evaluated in light of the platform’s independent incentives to moderate content.”

Alas, the majority brushes past how officials effectively coerced platforms, as Justice Samuel Alito explains in a potent dissent joined by Justices Clarence Thomas and Neil Gorsuch. Justice Alito recounts sundry examples of Biden officials hectoring Facebook in public and private to aggressively police “misinformation,” sometimes with thinly veiled threats of government retaliation. After Biden officials fumed, Facebook increased its moderation.

Facebook’s reactions “were not what one would expect from an independent news source or a journalistic entity dedicated to holding the Government accountable for its actions,” Justice Alito writes. “Instead, Facebook’s responses resembled that of a subservient entity determined to stay in the good graces of a powerful taskmaster.”

Justice Alito chides the majority for applying a higher standing standard in this case than in Department of Commerce v. New York (2019). The Court then said states could challenge a Census citizenship question on the strained theory they might lose representation in Congress if undocumented immigrants were dissuaded from responding.

“What the Court seems to want are a series of ironclad links—from a particular coercive communication to a particular change in Facebook’s rules or practice and then to a particular adverse action,” Justice Alito explains. “No such chain was required in the Department of Commerce case, and neither should one be demanded here.”

Justice Alito also notes how the Court stretched its standing principles in Massachusetts v. EPA (2007) to let states challenge the government’s failure to regulate greenhouse gas emissions: “Article III standing is an important component of our Constitution’s structural design,” but “that doctrine is cheapened when the rules are not evenhandedly applied.” Touché.

Turning to the merits, Justice Alito points to Bantam Books(1963) and the Court’s recent Vullo ruling as frameworks “to distinguish between permissible persuasion and unconstitutional coercion.” They require courts to consider the authority of government officials over third parties, the nature of their statements, and reactions by third parties.

Based on this test and the case record, Justice Alito says Biden officials clearly crossed the constitutional line: “What the officials did in this case was more subtle than the ham-handed censorship found to be unconstitutional in Vullo, but it was no less coercive. And because of the perpetrators’ high positions, it was even more dangerous.”

Justice Alito warns that “officials who read today’s decision together with Vullo will get the message. If a coercive campaign is carried out with enough sophistication, it may get by.” The Court “thus permits the successful campaign of coercion in this case to stand as an attractive model for future officials who want to control what the people say, hear, and think.”

It’s a shame the majority ducked the free-speech merits in this case because Justice Alito’s warning about stealth censorship seems right given the Covid experience and the Administration’s desire to police “disinformation.” Liberals may rue this in the future as much as conservatives do in this case."

Mob Targets Synagogue As LAPD Stands By

Anti-Israel protesters obstructed, beat and bear-sprayed Jews who were simply trying to enter

By Alexandra Orbuch. 

"A friend texted on Sunday afternoon: “Just checking in to make sure your family is okay after everything in LA today.” I hadn’t been online and had no clue what he was talking about. It could have been anything—an earthquake or a wildfire—but something told me it was antisemitism. Unfortunately, I was right.

Protesters waving Palestinian flags and shouting anti-Israel slogans gathered outside Adas Torah synagogue in Los Angeles’s Pico-Robertson neighborhood on Sunday. They tried to block the entrance and were soon met by counterprotesters waving Israeli flags. The groups clashed. Adas Torah officials said the anti-Israel demonstrators maced and bear-sprayed Jews trying to enter the synagogue, which was holding an Israeli real-estate fair. Talia Regev, 43, said she was sprayed and saw violent altercations between the two groups.

“There was nowhere to turn where you could be safe,” said Naftoli Sherman, 25, who had planned to attend the synagogue’s fair. He was attacked and ended up in the hospital. “There was a whole gang of protesters on top of me. They broke my nose and kicked me in the head a couple of times.”

Israeli-born journalist Daniel Greenfield reported that an anti-Israel protester had threatened, “Billions of us will come and kill you.”

President Biden and California Gov. Gavin Newsom took to social media to condemn Sunday’s act of hate. Los Angeles Mayor Karen Bass promised that the police would “provide additional patrols in the Pico-Robertson community as well as outside of houses of worship throughout the city.” It’s good they spoke up, but tweeting isn’t enough.

Nor is standing by and watching. Members of the Los Angeles Police Department observed the melee unfold rather than protecting those targeted by the mob. It took volunteers from nonprofit Jewish security organizations, including LA Shmira Public Safety and Magen Am, to break up the scuffles. “Without them, it would have been a lot worse,” Mr. Sherman said.

“If not for Magen Am, I don’t know what would have happened,” said David Kramer, 37. “People were running, screaming, a little bit delirious,” and begging uniformed officers to intercede. Despite many pleas, he said, “they were slow to move, and it appeared to me like they had orders to stand down.”

As the fighting moved east of Adas Torah toward other synagogues in the Jewish neighborhood, the police remained about a quarter-block away from the action, Ms. Regev said. She urged officers to get involved. “I said, ‘You need to stop this,’ and they essentially said, ‘We can’t do anything without a higher authority.’ ” Mr. Greenfield said the police “did little to interfere with the terrorist supporters.” By failing to disperse the protesters, they made it difficult for Jews to enter their own synagogue. The LAPD declined to comment.

Ms. Bass and the LAPD should be better prepared to handle violent incidents, especially given the surge in antisemitic activity in the Los Angeles area since the start of the Israel-Hamas war. A month after Oct. 7, Paul Kessler, 69, died of a head injury in Thousand Oaks following an altercation with an anti-Israel protester. Weeks later, Raphael Nissel, 75, needed staples to close a wound in his forehead after being assaulted by a man wielding a belt buckle in Beverly Hills. Mr. Nissel was on his way to synagogue. Los Angeles County District Attorney George Gascón said the attack took place amid a “disturbing trend of antisemitic hate crimes” in the area.

Would the police have been as passive as they were on Sunday if those being targeted had been any minority other than Jews? Would they have stood by and let protesters block the entrance to a church or mosque? This blatant double standard is precisely why the first place my mind went when my friend reached out was antisemitism. I long for the day when an earthquake is more plausible.

Ms. Orbuch is a Robert L. Bartley Fellow at the Journal."

Biden Loses Again on Student Loan Forgiveness

Two Obama-appointed judges say the SAVE plan is likely illegal

WSJ editorial. 

"‘That didn’t stop me,” President Biden crowed after the Supreme Court blocked his sweeping student loan cancellation last summer. Well, on Monday federal judges appointed by Barack Obama stopped his latest debt forgiveness scheme too.

The Education Department finalized its SAVE plan mere days after the High Court(Biden v. Nebraska) blocked its $400 billion write-off. The SAVE plan caps monthly payments at 5% of discretionary income—defined as exceeding 225% of the poverty level—and forgives remaining balances after 10 to 20 years. It also waives accrued unpaid interest.

Eighteen states sued on grounds that SAVE wasn’t authorized by Congress and turned loans into grants. Federal judges Daniel Crabtree and John Ross more or less agreed and blocked most of the SAVE plan, though they let some provisions take effect as litigation continues.

Judge Crabtree held that the SAVE plan likely violates the High Court’s major questions doctrine because it is “‘an enormous and transformative expansion in statutory authority without clear congressional authorization.’” The $475 billion estimated price tag over 10 years, he writes, “forgives nearly one-third of all student loan debt.”

He added that SAVE substantially revises the income-based repayment plans that Congress enacted in 2010. The Administration leaned on a provision in the Higher Education Act that lets the Education Secretary craft “an alternate repayment plan” on a case-by-case basis to “accommodate the borrower’s exceptional circumstances.”

But Judge Crabtree said the department’s interpretations of the law “fall short of clear congressional authorization.” He let discrete SAVE provisions that already took effect—namely, the redefinition of discretionary income—continue because he said states didn’t demonstrate that they’d be irreparably harmed.

Judge Ross was more deferential to the Administration. He opined that the law lets the department alter repayment schedules and interest accrual as it wishes. He also excused its administrative lapses, including an inaccurate cost estimate, which didn’t take into account the effects of Biden v. Nebraska. The judge nonetheless blocked the plan’s debt forgiveness provisions for exceeding its legal authority.

The two nationwide injunctions stop the Administration from writing off tens of billions of dollars in debt, though more than four million borrowers will still pay nothing under SAVE while litigation proceeds. Education Secretary Miguel Cardona is terribly vexed, accusing Republicans and “special interests” of harming their constituents by suing to block the plan. Apparently he doesn’t believe elected officials should stand up for taxpayers.

The SAVE plan was another cynical exercise to buy votes, and Biden officials had to know they were stretching the law. As a result, millions of borrowers who were counting on lower payments and forgiveness are in limbo. Don’t young people get tired of being played as pawns by this President?"

Chicago’s Slavery Reparations

Johnson follows the latest fad rather than fix the public schools

WSJ editorial. 

"Chicago is trotting out its progressive bona fides before the Democratic National Convention in August, and the latest fashion statement is slavery reparations.

Last week Mayor Brandon Johnson announced a new task force to examine “all policies that have harmed Black Chicagoans from the slavery era to present day.” He has earmarked $500,000 in the 2024 budget to study “restoration and reparations.”

Mr. Johnson’s task force will seek to address the way Chicago “perpetuated, condoned, profited and benefitted from the system of chattel slavery,” as well as the Jim Crow laws that followed. The mayor says his administration would look at investments aimed at “rectifying decades of deliberate disinvestment in Black neighborhoods and communities.”

The mayor’s office blames systemic racism for issues including vacant lots, policing failures, industrial pollution, and a homeownership gap. Chicago also has the highest black unemployment rate (12.7%) among the country’s 15 largest cities in 2022 and the widest black-white employment gap. The rate for black workers is more than four times as high as for white workers.

That’s a tragedy, and it’s one that Mr. Johnson’s equity-addled Democratic Party owns. Chicago has been a deep blue city for decades, and the real roots of the problem lie in the city’s rotten education system. Mr. Johnson is beholden to his benefactors at the Chicago Teachers Union who have sinecures at failure factories known as public schools even as they demand more money.

CTU President Stacy Davis Gates said recently that conservatives who criticize the union “don’t even want Black children to be able to read,” and “that is literally a part of the oath that they take to be right wing.”

Sorry, conservatives want black children to escape schools where they don’t learn to read. Ms. Gates, by the way, sends her son to private school.

Since 2018 Chicago schools funding has grown 70% per student, according to Wirepoints. Chicago Schools CEO Pedro Martinez said on local station WTTW that the average teacher is making more than $100,000 per year. That’s with summers off and rich pensions. Meanwhile, reading scores have fallen, with 11% of black juniors in CPS proficient in reading on the SAT, down from 14% in 2018. Eleven measly per cent.

If Mr. Johnson wants to pay reparations to black Chicagoans, can the families at least use the money for tuition at private schools?"