McCain vs Obama: NAFTA

It is almost surreal that what should be hailed as an example of bipartisan success in trade policy has instead become a significant campaign issue. Here are two new stories.

First, news from team Obama:

Obama campaign mum on NAFTA contact with Canada

Despite repeated requests, Barack Obama's campaign is still neither verifying nor denying a CTV report that a senior member of the team made contact with the Canadian government -- via the Chicago consulate general -- regarding comments Obama made about NAFTA....

On Wednesday, CTV reported that a senior member of Obama's campaign called the Canadian government within the last month -- saying that when Senator Obama talks about opting out of the free trade deal, the Canadian government shouldn't worry. The operative said it was just campaign rhetoric not to be taken seriously.

The Obama campaign told CTV late Thursday night that no message was passed to the Canadian government that suggests that Obama does not mean what he says about opting out of NAFTA if it is not renegotiated.

However, the Obama camp did not respond to repeated questions from CTV on reports that a conversation on this matter was held between Obama's senior economic adviser -- Austan Goolsbee -- and the Canadian Consulate General in Chicago.

Earlier Thursday, the Obama campaign insisted that no conversations have taken place with any of its senior ranks and representatives of the Canadian government on the NAFTA issue. On Thursday night, CTV spoke with Goolsbee, but he refused to say whether he had such a conversation with the Canadian government office in Chicago. He also said he has been told to direct any questions to the campaign headquarters.

Meanwhile, there is less confusing news from the McCain camp:

McCain affirms support for NAFTA

Penny Anti

The AP reports:

Asked Friday whether he thought the penny should be eliminated, [Treasury Secretary Henry] Paulson agreed that it would make sense.

Yes, it would.

Two strikes and I'm out of here

A new paper by Radha Iyengar on three-strikes-and-you're-out sentencing in California shows that crminals respond to incentives, sometimes in unintended ways:

I estimate that Three Strikes reduced participation in criminal activity by 20 percent for second-strike eligible offenders and a 28 percent decline for third-strike eligible offenders. However, I find two unintended consequences of the law. First, because Three Strikes flattened the penalty gradient with respect to severity, criminals were more likely to commit more violent crimes. Among third-strike eligible offenders, the probability of committing violent crimes increased by 9 percentage points. Second, because California's law was more harsh than the laws of other nearby states, Three Strikes had a "beggar-thy-neighbor" effect increasing the migration of criminals with second and third-strike eligibility to commit crimes in neighboring states.

The Audacity of Fear

The Economist looks at the recent rise of populism.

Quick Quiz: Middle Class Taxes

Question: How does the tax burden the middle class faces today compare with the tax burden the middle class has faced historically?

Answer: Click here and scroll down to see the chart. (N.B.: This includes all federal taxes, not just income taxes.)

Don't believe it? Check out the data source yourself.

Miron on Drug Legalization

Here is an old talk, recently posted on YouTube, by my friend and Harvard colleague Jeff Miron. (Jeff teaches ec 1010a, the intermediate micro course most Harvard econ students take after ec 10.) The topic is still relevant, as evidenced by today's news that the number of Americans in prison has reached a record high.

Our neighbors are not happy

The FT reports:

Candidates rebuked for attacks on Nafta

Mexico and Canada on Wednesday voiced concern about calls by Barack Obama and Hillary Clinton to renegotiate the North American Free Trade Agreement, as the Democratic presidential hopefuls compete to adopt the most sceptical stance towards free trade ahead of next week’s Ohio primary election.

In a televised debate on Tuesday night, Mr Obama and Mrs Clinton both threatened to pull out of Nafta if elected president unless Canada and Mexico agreed to strengthen labour and environmental standards.

Arturo Sarukhan, Mexico’s ambassador to the US, told the Financial Times that the US, Canada and Mexico had all benefited from Nafta and warned against reopening
negotiations.

“Mexico does not support reopening Nafta,” he said. “It would be like throwing a monkey wrench into the engine of North American competitiveness.”

Mexican diplomats believe a renegotiation could resurrect the commercial disputes and barriers to trade that the agreement itself was designed to overcome.

Tufts prof Daniel Drezner comments:

Democrats cannot simultaneously talk about improving America's standing abroad while acting like a belligerent unilateralist when it comes to trade policy.

Update: Related news:

[Canadian] Federal Trade Minister David Emerson hinted that if the North American Trade Agreement were to be revisited, a provision giving United States priority access to Canadian oil would be on the table.

Emerson declined to shrug off the anti-NAFTA talk by two Democratic presidential candidates as political posturing in a U.S. election year.

Outside Parliament on Wednesday, Emerson said: "There's no doubt if NAFTA were to be reopened, we would want to have our list of priorities," and hinted that U.S. access to Canadian oil could be one of them.