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Now, of course, this is a boss complaining that the bureaucracy won't allow him to do what he wants to do: The UK competition regulator is stifling innovation and entrepreneurship by taking too long to make decisions, according to a senior Adobe executive who is overseeing its $20 billion takeover of Figma.In an interview with The Times, David Wadhwani, president of Adobe's Digital Media business, said: "The process should not take 15 months to get to this stage. I think we can all agree that expediting these kinds of decisions is important for innovation and for doing the right thing by consumers and customers to make these decisions faster and move more quickly."In November, the Competition and Markets Authority (CMA) said it was minded to block Adobe's multibillion-dollar takeover of the app interface design business Figma because it could harm competition in product design, image editing and illustration. A final decision will be made by the end of February next year.We're even prepared to accept, for the moment and for this argument only, that the concerns of the CMA are valid. Maybe it will cause problems in some corner of this market. You know, maybe.But now the point we've made before. There are two types of economic growth, there's simply processing more economic resources into more output. Not very green, it's also how all of the Soviet Union's growth turned up. More iron ore and coal to make the steel for the machines to dig up more iron ore and coal. There's also becoming more efficient at our use of economic resources. This is what produced about 80% of the economic growth in the market economies in that long 20th century. Becoming more efficient is also known as increasing productivity. We can talk about total factor productivity (how efficient we become at using everything) or the one that politics currently whines about, labour productivity. How much more value do we gain from an hour of human labour? This productivity increase - it comes from either doing new things, or doing old things in new ways. As above, this has historically been 80% of total growth. The speed of GDP growth is the speed at which we do those new things or things the new way. This is also the same, in concept, as the speed of productivity growth.So, now we've a bureaucracy taking 15 months to even decide whether they might have a concern about someone suggesting a new arrangement for doing something or other. Sure, that new thing might be bad. Might be good too. But at some rate of bureaucratic cogitation the time spent to think through it causes as much damage to economic and productivity growth as simply allowing a bad thing to happen.We're not getting richer precisely and exactly because we've a bureaucracy deciding how we should be getting richer. The answer is obvious - simply abolish the Competition and Markets Authority. Replace it, perhaps, with something efficient, that doesn't, by definition, make us poorer. Or a coin toss, likely to do less harm.Given that example we have of a sensible political reaction to bureaucracy in Argentina, so, where's that chainsaw gone?
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On Tuesday, the United Nations General Assembly overwhelmingly adopted a resolution introduced by Egypt and Mauritania and co-sponsored by more than 100 states demanding an "immediate humanitarian ceasefire" in Gaza. The measure won by 153 votes, with only 10 opposed and 23 abstentions. The resolution was triggered by the UN Secretary-General Guterres' invocation of Article 99 of the UN Charter citing a likely "complete collapse" of humanitarian services in Gaza. Article 99 enables the Secretary-General "to bring to the attention of the Security Council any matter which in his opinion may threaten the maintenance of international peace and security."The UN Security Council's own resolution calling for a ceasefire failed after the U.S. vetoed it in a 13 to 1 vote on Friday.The General Assembly's vote margin on Tuesday was much bigger than the October 27 vote on a resolution calling for a "humanitarian truce leading to a cessation of hostilities" (somewhat weaker language than the latest resolution). That one was adopted with a huge margin of 121 votes in favor and 14 opposed. Most of the Global South states that had not supported the Oct 27 resolution were in favor this time around. These included India, Cambodia, Philippines, Jamaica, Zambia, Ethiopia, Fiji, and Benin. The shift of India, Philippines, Ethiopia, and Fiji is particularly notable from a geopolitical perspective.On the flip side, Argentina was one of the very few Global South states that flipped from being in favor to abstaining. This is likely an effect of the recent election of Javier Milei as president. Milei has taken a strongly pro-Israel stance. (Malawi and Equatorial Guinea were other two states who shifted their votes more toward the Israeli and U.S. positions.)A small set of Global South states maintained their stance against a ceasefire from the last vote, including Burkina Faso, Cameroon, Liberia, South Sudan, Guatemala, Panama, Paraguay, Uruguay, Venezuela, and several Pacific Island countries. Overall, out of 116 Global South states outside the Greater Middle East (defined as spanning a zone from Morocco to Pakistan), an overwhelming 80% voted for the ceasefire. Only about 20% did not. Of course, the percentage of affirmative votes becomes even more dominant (close to 90%) if we add greater Middle East states to this mix. Some divides over Hamas that emerged during this process are worth noting. During the October 27 voting process, the United States had introduced an amendment explicitly condemning Hamas. That amendment failed but garnered a respectable tally of 88 votes in favor. This time around, a similar amendment introduced by the United States "unequivocally" condemned "the heinous terrorist attacks by Hamas" on October 7 and "the taking of hostages." It garnered 84 votes in favor. About 28% of Global South states outside the Greater Middle East voted with the United States on the amendment. Of these, Chile, Ecuador, Ghana, India, Kenya, Peru, Philippines, and Singapore also backed the ceasefire resolution. Several other key Global South states abstained on the U.S. amendment, including Angola, Brazil, Colombia, DRC, Ethiopia, Mexico, Thailand, and Vietnam.This indicates that there remains considerable sentiment in the Global South that would like to go on record condemning Hamas and its actions on October 7 as terrorist in nature. It is however more noteworthy that this preference did not prevent almost all of these states from also calling for an immediate ceasefire. Their ceasefire demand was thus unconditional. Most Global South states have strongly opposed the Israeli war on Gaza and backed a ceasefire for many weeks. But the December 12 vote indicates that sentiment against Israel and the United States is hardening, and now represents a near-consensus among the developing world. There should be no doubt whatsoever that the United States and Israel stand isolated across Africa, Asia, and Latin America when it comes to Israel's ongoing bombardments of Gaza. Washington should take note and use its leverage with Israel to stop the civilian bloodshed — which is what this body clearly wants — fast.
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Peder Beck-Friis and Richard Clarida at Pimco have a nice blog post on the recent inflation, including the above graph. I have wondered, and been asked, if the differences across countries in inflation lines up with the size of the covid fiscal expansion. Apparently yes. It's a simple fact, and it's dangerous to crow too loudly when things go your way. Fiscal theory says that inflation comes when debt or deficits exceed expectations of a country's ability or will to repay. The latter can differ a lot. So, it does not predict a simple relationship between debt or deficits and inflation. Still, it's nice when things come out that way, and more fun to write qualifications than to come up with excuses for a contrary result! I have seen other evidence that doesn't look so nice (will post when it's public). One example is across eurozone countries. But that's a good reminder where to expect success and where not to expect success. Inflation as described by most macro models, including fiscal theory, monetarism, etc., is the component common to all prices and wages. It is in essence the fall in the value of currency. In any historical experience we see lots of relative price changes on top of that, in particular prices over wages. Indeed inflation is only measured with prices, and a central idea is to measure the "cost of living," not the value of the currency. Across the eurozone there is only one currency and thus only one underlying inflation. The large variation in measured inflations are relative prices, real exchange rates between countries, and can't go on forever. That we cannot hope to explain inflation variation across countries in the eurozone with a simple theory that describes the value of currency gives you some sense of the error bars in this exercise as well. Beck-Friis and Clarida also look at money growth, above. There was a big expansion in M2 before the US inflation. Monetarists took a victory lap. M2 has since fallen a lot. There is not much correlation between monetary expansion and inflation across countries however. The slope of the regression also clearly depends on one or two points. Money or debt, which is it? When governments print money to finance deficits (or interest-bearing reserves), fiscal theory and monetary theory agree, there is inflation. Printing money (helicopters) is perhaps particularly powerful, as debt carries a reputation and tradition of repayment, which money may not carry. A core issue separating monetary and fiscal theory is whether a big monetary expansion without deficits or other fiscal news would have any effects. Would a $5 trillion QE (buy bonds, issue money) with no deficit have had the same inflationary impact? Monetarists, yes; fiscalists, no. Beck-Friis and Clarida opine that fiscal stimulus is over and central banks now have all the levers they need to control inflation. I'm not so sure. The US is still running a trillion or so deficit despite a 3.6% unemployment rate, and here come entitlements. And, as blog readers will know, I am less confident of the Fed's lever. We shall see. Update:Mark Dijkstra makes the following graph (see comments for link), based on IMF data for all countries. Hmm, doesn't look so good. However, when you look at lots of small countries, weird things happen. The far right data point is Estonia, with 100% increase in debt and 14% cumulative inflation. Estonia started with 8.2% debt/GDP, however, so its rise to 18.4% is a 100% rise in debt to GDP ratio. So, Estonia spent 10% of GDP on covid and now military, compared to 30% of GDP for the US. Again, fiscal theory is not debt or deficit = inflation, but debt vs. ability and will to repay. One can argue that this increase in debt is more repayable. Argentina has -8% growth in debt/GDP and 100% inflation. Inflation is inflating away debt/GDP faster than the government can print the debt. The high inflation countries in this graph are Uzbekistan, Ghana, Guinea, Sierra Leone, Turkmenistan, Nigeria, Zambia, and Haiti. They are all plausibly fiscal inflation, from preexisting fiscal problems, not stable countries that suddenly borrowed/printed 30% of GDP with no plans to pay it back, the rather special case of the US, EU, UK. OK, I'm making excuses and I'm glad I started with the cautionary paragraph. Fiscal theory is not so easy as debt = inflation! But we do have to confront the numbers, and I hope this spurs some more serious analysis.
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Ukrainian President Volodomyr Zelensky had an unusually packed travel schedule this week, with stops in Argentina, the United States, and Norway. His message was clear: If Ukraine has any chance of pushing Russia out of all of its territory, it will only come from sustained Western support. But Zelensky's requests for aid earned a much different response than they did at Christmas time last year, when confidence in Kyiv's military was at a historic high. This time around, the Ukrainian leader found himself shadow-boxing with right-wing skeptics of Ukraine aid at every turn. In Buenos Aires, where Zelensky attended the Sunday inauguration of President Javier Milei, news cameras caught the frustrated leader in "an intense-looking conversation" with Viktor Orban, Hungary's prime minister and the primary obstacle for Kyiv's bid to join the European Union. Back in Washington on Tuesday, Zelensky faced down Speaker Mike Johnson (R-La.), the primary obstacle for any future U.S. aid to Ukraine. Johnson ripped into President Joe Biden's approach to the war after meeting with Zelensky. "What the Biden administration seems to be asking for is billions of additional dollars with no appropriate oversight, no clear strategy to win and with none of the answers that I think the American people are owed," Johnson argued. Johnson and his GOP allies have now made clear that President Joe Biden will have to make significant compromises in order to secure new funding. Their primary ask is a series of new border control measures that most Democrats view as over the line, leaving little room for compromise. Even Biden — who has long promised to support Ukraine "as long as it takes" — could only muster a pledge to arm Kyiv "as long as we can." In Oslo, Zelensky got a friendlier reception on Wednesday from Nordic leaders, who promised new bilateral aid packages. Later that day, Spanish Prime Minister Pedro Sanchez — who currently chairs the EU Council — said Kyiv could enter into official negotiations to join the EU as soon as this year. But this upbeat moment proved fleeting. In a speech at an EU summit, Orban made clear that, whatever argument he may have gotten from Zelensky in Buenos Aires, there is little chance that he will change his mind on Ukraine's accession bid. The idea that the EU should start membership talks with Kyiv is "absurd, ridiculous, and not serious," he argued. "Our stance is clear. We do not support Ukraine's quick EU entry," Orban later wrote on Facebook. On a more promising note for Ukraine, Orban has been more open to horse trading when it comes to aid. After days of back-and-forth, the EU agreed Wednesday that it would release funding for Hungary that had previously been withheld due to alleged democratic backsliding. An Orban aide said Hungary would be open to relenting on Ukraine aid if that money comes through. If Budapest holds to the deal, the EU could announce a roughly $55 billion aid package for Kyiv as soon as Friday. The timing could scarcely be more important for Ukraine. As its forces struggle against Russian soldiers at home, recent Dutch elections have created the possibility that far-right firebrand Geert Wilders could be the next prime minister of the Netherlands. Wilders, whose party opposes aid to Ukraine and wants to hold a referendum to leave the EU, has so far failed to form a coalition but is considered to be in the strongest position to lead the country's next government. If Wilders wins out in the end, Kyiv would likely be among the biggest losers. Even if Wilders loses, all signs now point to a delay in U.S. funding until at least early January, setting Kyiv up for a difficult winter. Conscious of the diplomatic headwinds, Zelensky struck a defiant tone in a Thursday address to the EU, which he delivered via video link from Kyiv. "This day will go down in our history. Whether it's good or bad for us, history will capture everything," he said. "It's very important that Europe doesn't fall back into indecision today." In other diplomatic news related to the war in Ukraine: — The U.S. declassified an intelligence report claiming that Russia has suffered over 300,000 casualties in Ukraine, though the report does not distinguish between deaths and injuries, according to the New York Times. The report, which argues that Russian President Vladimir Putin's short-term goal is to reduce Western support for Ukraine, highlights the destructive impact that the conflict has had on Russia's army. The decision to release the report suggests a shift in the Biden administration's PR strategy, which has deemphasized the argument that the war is a "low cost" way to deliver Moscow a strategic loss — a line that some see as confirmation that the U.S. is pursuing a proxy war with Russia and has perverse incentives to extend it. — Lawmakers from across Europe called on the U.S. Congress to pass aid for Ukraine, arguing that American support is "critical and urgent," according to Reuters. "A Putin victory would embolden our enemies around the world: they are watching and hoping we grow tired," wrote the group, led by French MP and former foreign policy analyst Benjamin Haddad. "Ukrainians are fighting so we don't have to." — Putin held a major news conference on Thursday where he reiterated his goals for the war — "denazification, demilitarization and [Ukraine's] neutral status" — and revealed that Russia has 617,000 soldiers in Ukraine, according to the BBC. The Russian leader played down his military's middling performance and alleged that Western "freebies" for Ukraine "are gradually running out." Notably, he suggested that there has been some progress in talks for a U.S.-Russia prisoner exchange that could bring home ex-Marine Paul Whelan and Wall Street Journal reporter Evan Gershkovich. "On the whole we're speaking in a language which we both understand," Putin said. "I hope we find a solution." U.S. State Department news:In a Monday press conference, State Department spokesperson Matthew Miller said the U.S. is "deeply concerned" for the well-being of Alexei Navalny, a prominent Russian dissident who recently disappeared from a Russian penal colony, according to his lawyers. "We have communicated to the Russian Government that they are responsible for what happens to Mr. Navalny while he is in their custody, and they will be held accountable by the international community," Miller said.
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A stablecoin (SC) is a financial structure that attempts to peg the value of its liabilities (or a tranched subset of its liabilities) to an object outside its control, like the USD. To do this, the SC must effectively convince its liability holders that SC liabilities can be redeemed on demand (or on short notice) for USD at par (or some fixed exchange rate). The purpose of this structure is to render SC liabilities more attractive as a payment instrument. Pegging to the USD is attractive to people living in the U.S. because the USD is the unit of account. Non-U.S. holders may be attracted to the product because the USD is the world's reserve currency. This structure serves to increase the demand for a SC pegged to the USD. To a macroeconomist, an SC looks like a unilateral fixed exchange rate regime or a currency board. The structure also resembles a money market fund that pegs the price of its liabilities with the USD at par (presently, government money funds in the United States). It also looks like a bank without deposit insurance (bank deposit liabilities are pegged at par value against cash). The history of unilateral fixed exchange rate regimes is mixed. Hong Kong has successfully pegged its currency to the USD for decades. But the experience for many countries seems closer to that of Argentina. Unless a USD-based SC is backed fully by USD reserves (it needs an account at the Fed for this) or by USD bills (maximum denomination is $100, so unlikely), it may be prone to a bank run. Any other security (including USTs, as the events of March 2020 demonstrated) is subject to liquidity risk -- i.e., a risk that the market for the security suddenly freezes, or demand for the security vanishes as investors seek safer havens. If a SC cannot dispose of its assets at "fair" or "normal" prices, it will fail to raise the money it needs to meet its par redemption promise. The SC will turn out to be not so stable. The theory of bank runs suggests that SCs might be rendered run-proof if their liabilities are properly designed. The famous Diamond and Dybvig (JPE 1983) model of bank runs is, in fact, a paper that demonstrates how banks can be rendered run-proof. In the first part of their paper, the explain how a credible promise to suspend redemptions when redemption activity is abnormally high can serve to discourage runs (redemptions based on belief of failure, rather than a need for liquidity) altogether. There is no need for deposit insurance (the second part of their paper is devoted to explaining why deposit insurance may nevertheless be needed, but their argument is not entirely satisfactory). In reality, we do see attempts to render run-prone structures less prone to runs. The Dodd-Frank Act, for example, prevented institutional money funds from pricing their liabilities at par with the USD (only government funds can now do this). In addition, the Act required that fund managers implement liquidity fees and redemption gates in the event of heavy redemption activity. These provisions have not been entirely successful. Even banks that suspended redemptions in the old days did not manage to prevent mass redemption events. The theory suggests that what is needed is a *credible* policy. Evidently, when push comes to shove, people cannot always be expected to follow through on their promises. Back in my teaching days, I used a "crowded movie theatre" as a metaphor to explain the phenomenon. Imagine a movie theatre that seats 500 people. If someone was to yell "fire!" (for legitimate or illegitimate reasons), people can be expected to rush for the exits. Invariably, some people are likely to be trampled and even killed. If people would instead react to the alarm by rising calmly from their seats and proceeding sequentially to the exits, then only the very last few people in the queue are destined not to make it. Losing one or two people relative to (say) is terrible, but it's preferable to losing 50 people in a mad rush for the exits. An economist might detect a missing market here. Why not sell tickets with queue positions (in the event of fire)? The tickets with the last few queue positions are likely to sell at a discount (that would depend on the likelihood of the event). This way, if someone yells "fire!", customers will simply show their assigned queue position to the ushers and proceed calmly out of the exits. If the fire does exist, the few people know they are doomed and accept their fate with stoic resignation, knowing that they are dying so that many others may live. (And if it turns out there is no fire, they are saved from the fire and the prospect of death that would have been present had they joined the rush to the exits). Except we know that's not what is likely to happen. People cannot be expected to commit in this manner. And there's no obvious way to enforce such contractual stipulations. But this is where SCs may have an advantage over conventional institutional structures. In particular, their use of "smart contracts" means that commitment is not an issue. The terms of such contracts are executed under the specified contingencies whether you like it or not. You may not like it ex post, but such commitment can be valuable ex ante. In the context of SCs, the credible threat of suspending redemptions in the event of abnormal redemption activity may actually prevent any runs from occurring in the first place. There are, of course, limits to what smart contracts can achieve. They wouldn't, for example, solve the movie theatre problem I just described. This is because people do not live "on-chain." (See also my blog post Smart Contracts and Asset Tokenization.) To some extent, the same issue exists for USD SCs because USDs and USTs exist "off-chain." Nevertheless, money accounts are different than people, so I think the principle described above can apply to financial products. ****Related work: Preventing Bank Runs (w/ Nosal and Sultanum, TE 2017).
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As Congress starts its last scheduled workweek of 2023, observers are becoming increasingly concerned that U.S. aid for Ukraine will at least temporarily run out.The reality of the situation is starting to set in both in Washington and Kyiv. The Biden administration announced recently that aid will run out before the end of the year, and Joe Biden himself argued last week that a cutoff in funding could lead to a direct Russia-NATO conflict.These stark warnings led Ukrainian President Volodymyr Zelensky to make a surprise visit to the United States this week for emergency meetings with the White House and congressional leadership. It remains unclear whether his pitch will prove convincing to Speaker Mike Johnson (R-La.), who now poses the largest obstacle to continued aid.So what actually happens if U.S. support for Ukraine dries up? While Kyiv could likely weather a short gap in funding, a longer delay or even permanent cutoff would force the Ukrainians to substantially cut back their military operations, raising the possibility that Russia could reverse Ukraine's hard-won gains in the country's east. The sudden move would also make it substantially harder to reach a negotiated solution in the short term, according to George Beebe of the Quincy Institute."[T]hose tempted to believe that the United States could end the war by simply ending its aid to Ukraine should think hard" about how such a move would affect Kyiv's leverage in talks, Beebe argued in RS."The United States should not remove cards from its hand by ending aid to Ukraine unilaterally or playing them prematurely," he wrote. "But unless it moves quickly to complement aid with diplomacy, it may find that the opportunity to play its cards has suddenly disappeared."Playing the numbers gameOne important factor complicating discussions about future aid is the widespread uncertainty about exactly how much cash the U.S. still has left to burn. Sen. Mark Warner (D-Va.) said in October that even Congress has struggled at times to get a straight answer on a deadline for new funding. As of last month, the White House said it had spent roughly 96% of the more than $100 billion Congress has allocated for Ukraine. A Pentagon accounting error left the Department of Defense with several billion dollars of extra "presidential drawdown authority," which allows the Biden administration to send equipment from U.S. stockpiles. But there is only about $1 billion in funding left to replace those weapons, and the White House has so far been reluctant to send arms without promises to replace them, according to Mark Cancian of the Washington-based Center for Strategic and International Studies. The impact of a cutoff in funding would not be immediately apparent, especially given the slow pace of fighting during the winter, but would lead to a progressive reduction in Ukrainian operations, Cancian told RS. In his estimation, the pace of aid is "already declining" when compared with the early days of the war, though a steady stream of weapons deliveries will continue for years given the timeline needed to produce new arms. "As that flow declines, then Ukraine's military capability will decline with it," Cancian said. "At some point, probably in January, they would be unable to launch a full-scale counteroffensive, and then maybe in February they'd be unable to do any attacks at all." "Maybe later in the spring, Ukraine would be hard-pressed to hold the Russians off," he continued. "It's not that they won't have any [weapons], but they won't have the flow that's needed to maintain operations at a high level." Biden's supplemental request would allocate about $59 billion in funds related to Ukraine. One third of that goes to humanitarian aid and direct economic support, while the majority goes to various military funding needs. Of the $38.7 billion in military aid, roughly $30 billion is earmarked for purchasing weapons to send Ukraine or drawing down U.S. stockpiles. The remaining $8 billion would support the expanded U.S. troop presence in Europe in response to the Ukraine war, with a small portion of funds going to aid oversight. Cancian noted that much of this funding should be understood as an investment in the U.S. economy given how much of it will be directed to American contractors. This argument, which the Biden administration has also made, has drawn criticism from opponents of increased military spending, who note that defense dollars produce fewer jobs than many other forms of government spending.On the economic front, a sudden cutoff in U.S. funding would be less drastic than an end to military spending given that much of Ukraine's budgetary aid comes from the European Union. Though even that funding could be blocked by Hungary, which, under right-wing Prime Minister Viktor Orban, has often frustrated its European partners. (Zelensky and Orban appeared to get into a heated argument on the sidelines of the presidential inauguration in Argentina this past weekend.)Political reverberationsAn end to U.S. aid would be a sharp rebuke of the Biden administration, which has long argued that American support for Ukraine will last as long as it takes for Kyiv to achieve its stated aim of retaking all of its territory, including Crimea. Many believe that European states would also pull back their funding if American support ends, according to Cancian. "The logic is the same as in the U.S.," he explained. "They have elements that are opposing, on both the left and the right, the high costs and the lack of success. If the United States stops, then many of their critics will point to this and say, 'The United States is stopping. Why are we sending money for a failing effort?'" As the possibility of an aid cutoff grows, some analysts have argued that it's time for the Biden administration to shift its approach to the war and set more realistic objectives — a move that could tamp down concerns in Europe while also responding to the White House's domestic critics, who argue that the president has no clear strategy for the war. "[T]he White House should seek to build a new narrative: that this is a war of defence for Ukraine, and a strategic defeat for Russia, and that the US can support Ukraine while also acknowledging that there are other national security priorities that might need to take precedence," Emma Ashford of the Stimson Center argued in The Guardian. "This narrative is less aspirational, but more pragmatic.""[M]ost importantly, if the Biden administration is re-elected in November, this approach would place them in a much stronger position to pursue armistice negotiations in late 2024," Ashford wrote.
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One of the remarkable aspects of the "big bang" expansion of BRICS (Brazil, Russia, India, China and South Africa) announced at the summit in Johannesburg, South Africa, this week, is the invitation to join the group issued to, among others, Iran and Saudi Arabia — geopolitical rivals in the Persian Gulf.
After Iran became a full member of the Shanghai Cooperation Organization (SCO) in 2022, and Saudi Arabia a "dialogue partner" to this China-led Eurasian security forum (with the prospect of full membership), BRICS is now the second multilateral platform for cooperation and dialogue between Riyadh and Tehran.
Simultaneous accession to BRICS and, in the future, Saudi accession to SCO, could further enhance the incipient process of bilateral normalization between Tehran and Riyadh. Skeptics point to the alleged dysfunctionality of BRICS that, unlike the European Union or NATO, lacks clear accession criteria and gathers countries that seemingly have little in common except some vaguely defined dissatisfaction with the U.S.-led "rules-based order."
Yet, this flexibility and the absence of rigid "rules" can be more of an asset than a defect. For Iran and Saudi Arabia, what counts is a trajectory, a prospect for a long-term normalization rather than immediate results and unrealistic commitments and expectations.
In other words, a forum like BRICS, where both countries can interact on an equal footing and all decisions are taken by consensus, could prove to be a suitable arena to incrementally build mutual confidence.
Such a prospect, of course, is far from inevitable. The reactions from Tehran and Riyadh to the invitation to join BRICS were markedly different in tone and substance. While Iranian officials were exultant about the prospect, the Saudis were much more cautious and pointed to the need to further study the details of what membership would entail before confirming their intention to join.
This disparity stems from both countries' different needs: for Iran, it is imperative to overcome what Quincy Institute Executive Vice President Trita Parsi called the U.S. "gatekeeping role" in the international community. Seen from this angle, joining BRICS is diplomatically far more impactful for Iran than the SCO. Unlike the latter, BRICS is truly global and cannot be dismissed as a club of Eurasian autocracies. There are democracies among its members — Brazil, India, South Africa, and, if membership is confirmed after the elections later this year, Argentina.
None of these countries can be classified as an anti-American autocracy. Yet their Western ties and democratic governance were not obstacles in their greenlighting of Iran's accession. Tehran is right to see it as a diplomatic success.
Saudi Arabia, on the other hand, does not need to break any diplomatic ceilings — to the contrary, it is being courted by the U.S. for a deal that would reportedly entail, among other things, U.S. security guarantees for the kingdom in exchange for Saudi-Israeli normalization. Yet, joining BRICS fits into a broader Saudi strategy of diversifying foreign ties, and, in particular, building a closer relationship with China. The chances, therefore, are that Saudi Arabia, after taking a requisite diplomatic pause, will accept the BRICS invitation.
Matters may be more complicated with joining the SCO, as reportedly one of the U.S.'s quiet demands on Saudi Arabia in exchange for security benefits on offer is to stay away from China's orbit. In that context, full SCO membership may be a bridge too far for Riyadh. Yet such membership is not imminent anyway. Meanwhile, SCO dialogue partner status that the kingdom obtained earlier in 2023 provides it another link to Iran, a permanent member.
Ultimately, however, platforms like BRICS and SCO can only help, but not substitute for the bilateral Saudi-Iranian normalization track. While the Tehran-Riyadh dialogue proceeds with high-level meetings of foreign ministers and top defense officials, it is still in its early stages. Despite optimistic timetables, the work of the diplomatic legations in both countries has not yet fully resumed.
The controversies over the disputed Arash/Dorra gas field, which pits Saudi Arabia and Kuwait against Iran have not yet been resolved. Saudi Arabia insists that, in the long run, Iran will have to address its regional forward-defense strategy — that is, its reliance on non-state proxies and allies that Saudi Arabia and other GCC countries see as a threat, without specifying what corresponding concessions Riyadh would be willing to countenance. After decades of tensions dating back to 1979, mutual distrust runs deep, and its structural reasons are still far from being removed.
Perhaps, most urgently for Tehran at this stage, Saudi Arabia has made it clear that it won't seek exemptions from U.S. sanctions on Iran unless there is some sort of a nuclear deal between Washington and Tehran — an unlikely event given the U.S. is entering a new election season when neither political party will want to appear solicitous of Iran. The implication is that the anticipated economic benefits from the Saudi-Iranian rapprochement may be slow in materializing.
In view of these deeper entanglements, it is likely that Saudi-Iranian relations will experience further ebbs and flows. If they take a more confrontational turn again, it might negatively affect the cohesion of BRICS, with both sides using whatever leverage they have to the detriment of the other. In that case, the current members of BRICS may come to rue the decision of importing geopolitical rivalries from the Persian Gulf into their group.
That would be particularly harmful for the self-perception of BRICS as a forum for inter-state cooperation, in contrast to the Western-dominated institutions, such as the OECD, Bretton Woods, and NATO, based on U.S. hegemony.
Yet this should not necessarily be the case. Relations between China and India are similarly not devoid of tensions due in part to a a long-standing border dispute: as recently as 2020, scores of Indian and Chinese soldiers were killed in an armed skirmish. Both countries also compete for leadership in the Global South. Yet both Beijing and Delhi also seek to preserve dialogue and close economic relations. So far, they have not let their differences stand in the way of BRICS, and this week's ambitious expansion of the group is proof that pragmatism prevails.
There is no reason why Tehran and Riyadh cannot manage their differences in similar fashion. China, a leading power in both BRICS and SCO, also played a crucial role in kickstarting the Saudi-Iranian rapprochement and can be expected to invest in this process further.
Most importantly, both Tehran and Riyadh see an abiding national interest in proceeding with the de-escalation and normalization of ties. In the near future, at least, it looks likely that this trajectory will be preserved, despite the pitfalls on the way. Shared membership in BRICS — and, in the future, possibly in the SCO, too — provides additional venues for the confidence-building process.
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The United States has cast a values veil over its multifaceted match of punishments and restrictions with China. When he dismisses Chinese leader Xi Jinping as a "dictator," the Cold War veteran is making a pointed value judgement that puts a moral spin on the relationship. According to many in Washington, there is a new "axis of evil" out there, and China is the fallen angel, supported by Russia, North Korea, and Iran.If global diplomacy was a morality play, there would surely be no actor more devoted to principles and the fight for good over evil than the Vatican, arguably the consummate values-driven state, despite its own cardinal sins in the human resources department. Of course, in the past, the Roman Catholic church has strayed from the straight and narrow and made soul-wrenching deals with the devil — consider Nazi Germany, fascist Italy, the juntas in Chile and Argentina, and the communist regimes of Eastern Europe. With China, the Holy See is not trying to drive the Communist "Satan" away or turn it into a paragon of religious freedom. The main mission has been to find ways to build trust and gain confidence. Religious affairs and China specialists have drawn parallels between the Vatican and the Chinese Communist Party in the way they are organized, function and exercise authority, leading some to consider the similarities a source of affinity if not mutual understanding. For example, the city-state's diplomatic efforts have remained consistent and persistent from one papal administration to the next, starting arguably with the progressive world-traveling Paul VI back in the 1970s and through the conservative reigns of John Paul II and Benedict XVI, to the liberal non-judgmental crowd-sourcing faith of Francis. Today, there may be no need to pray to Saint Jude for a papal visit to China. It could happen, although the incumbent shepherd, who requires a wheelchair to meet his flock, would seem physically unable to take on such a pilgrimage — there are some 20 cathedrals and basilicas in the mainland. In September, however, he came close, spending five days in neighboring Mongolia, which has only about 2,000 Catholics, compared to about 12 million in China. If, as many papal succession oddsmakers who try to divine the mysterious ways of the Holy Spirit believe, the next pope is from Asia, then hopes for a China trip will surge. And the momentum of goodwill and history could bring the bishop of the Eternal City to the Forbidden City.The Holy See's diplomatic agenda with China is less complicated than Washington's. The Vatican has simple objectives — to unify the Roman church so there is coherence in its management and in catechism and theology, and to protect Catholics everywhere so that they are free to worship in churches and practice their faith openly. The missionary work here is not as much of a priority, though in other parts of the world, the Church is battling to keep souls on pews and recruit priests.In 2018, the Vatican signed an agreement with Beijing on a process for appointing bishops in the patriotic Chinese church — the open part of the church that pays allegiance to the state. In the order of the mass in the patriotic church, the pope does get mentioned, along with the bishop of the diocese, while the state does not, exactly as is the practice in churches around the world. Catholics in China who are loyal to the pope have worshipped underground in secret, or at least discreet, locations. The Vatican-Beijing agreement on bishops, with the pope having the last word on Chinese-approved candidates, essentially recognizes the spiritual authority of the Holy Father, with the state nominally a regulator or monitor of religious affairs. The hopeful prayer is that if the selection process works smoothly, this would make it possible for underground Chinese Catholics to surface and eventually allow the Vatican to establish formal relations with Beijing. For now, the Holy See has diplomatic relations with and representation in Taiwan as the Republic of China, with a nunciature or embassy in Taipei. There has been no nuncio appointed since 1971; a chargé d'affaires is the highest-ranking resident official. Meanwhile, the Holy See maintains a "study mission" in Hong Kong — a de facto consulate — that is manned by a Vatican diplomat, typically a monsignor, or clergyman of stature.These diplomatic missions are by no means the only means of engagement. Two Chinese bishops, both of whom Pope Francis nominated from a list put forward by Beijing, participated in the October synod convened by the pope to discuss church issues and policy. After the Holy See complained that China had appointed a bishop earlier this year who had not received the papal imprimatur, no Chinese prelates were on the initial list of synod participants. But on the eve of the gathering, the two were included on the final roster. While they turned up, they left midway through the three-week conference. Francis has also reached out to Beijing in other ways. Hong Kong archbishop Stephen Chow, whom the pope recently made a cardinal, visited Beijing in the spring before receiving his red biretta. In November, the head of the Chinese Catholic church, Bishop Joseph Li Shan paid a return visit to Chow's archdiocese. When his plane entered Chinese airspace en route to Mongolia, Francis issued a message of greetings. "I ask Chinese Catholics to be good Christians and good citizens," he said days later to the congregation at a stadium mass in Ulaanbaatar, which Catholics from China and around the region attended. That same month, the Vatican sent its envoy on the Ukraine conflict to China. Cardinal Matteo Zuppi, who had been to Kyiv, Moscow and Washington prior to Beijing, was received by the special envoy for Eurasian affairs, the first-ever meeting in the Chinese capital between the Holy See and a senior Chinese official. This effort was reminiscent of the Holy See's behind-the-scenes efforts to reconcile the U.S. and Cuba. Contrary to its crusading past, the Vatican has been brokering peace among nations since even before the establishment of the city-state in 1929. It was involved in the negotiations to end both world wars and sought to mediate between the U.S. and the Soviet Union during the 1962 Cuban Missile Crisis.China and the Vatican have engaged in high-level talks before. In 2020, at the Munich Security Conference, Archbishop Paul Gallagher, the Vatican secretary for relations with states, considered to be the Holy See's foreign minister, met Chinese foreign minister Wang Yi. The two discussed the agreement on bishops, which has been renewed twice despite disputes over certain appointments, increasing restrictions on religious freedom, and reports of the destruction of churches in parts of China. The pope, who, as his predecessors did, faces criticism, including from his own cardinals for engaging Beijing, acknowledged in a Reuters interview last year that the deal was "slow going," but stressed that the Church had to take a long view and that imperfect dialogue was better than nothing. The diplomacy lesson offered by the world's chief values-card player is that pragmatism, patience and consistency are the best tools for doing the godly work of peace and security building. With China, there will be setbacks to endure and sacrifices to make. A workable deal requires painstaking negotiation and may not be ironclad. But with faith and perseverance, an understanding can be reached — and eventually a miracle might happen.
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Colombian President Gustavo Petro sent shockwaves through the diplomatic world recently when he accused Israel of carrying out a "genocide" in Gaza."The head of the state who carries out this genocide is a criminal against humanity," Petro wrote on X. "Their allies cannot talk about democracy."The comments are remarkable for a leader of Colombia, which has historically stuck with the United States on matters of international affairs. "It was just kind of unimaginable for the Colombian government to take a position like that, that would be so divergent from the U.S.," said Alex Main, the director of international policy at the Center for Economic and Policy Research.Petro, who is the country's first-ever left-wing president, has doubled down on his criticism of Israel in recent weeks. He retweeted a poster depicting a cartoon baby being menaced by Israeli rifles and called Israel's attack on the Al-Shifa hospital a "war crime," promised to petition the United Nations to make Palestine a full member state, and threatened to bring Israel before the International Criminal Court.And Petro is far from alone in Latin America. While most states in the region condemned Hamas's initial attack, their harsh response to the Israeli offensive in Gaza has only been equalled by that of Arab- and Muslim-majority countries. Belize and Bolivia both cut ties with Israel over the war, and Colombia, Chile, and Honduras have all recalled their ambassadors from Tel Aviv. Even states that consider themselves neutral on the conflict — like Brazil and Argentina — have issued withering condemnations of Israel's attacks on civilians in Gaza. "This is not a war," said Brazilian President Luiz Inacio Lula da Silva. "This is a genocide."So why are Latin American leaders so pro-Palestine? Experts who spoke with RS said it mostly comes down to three factors: Latin America's increasing independence from the U.S.; the rise of left-wing and indigenous movements; and the presence of large Arab diasporas in much of the region.U.S. pressure 'doesn't count as much as it used to'Brazil's Lula, as he is popularly known, has spent much of his first year back in office carving out an independent path for the country's foreign policy. The leftist leader led a charge for talks to end the war in Ukraine while helping to bolster the influence of BRICS, a geopolitical grouping meant to offset the G7 that he had helped found in the late 2000s. So when a new round of fighting broke out in Israel-Palestine, there was little doubt that Lula would jump in with a pitch to solve it.In practice, this meant leading an effort to pass a United Nations Security Council resolution calling for humanitarian pauses to allow much-needed aid into Gaza. But his initiative hit a wall when the U.S. vetoed the resolution. That, combined with growing pressure from his domestic allies as well as the evacuation of Brazilians stuck in Gaza, led Lula to turn up his rhetoric on Israel's offensive, according to Guilherme Casaroes, a senior researcher at the Brazilian Center of International Relations."He's defending the right of Israel to exist, but not the right of Israel to massacre Palestinians in Gaza," Casaroes argued, adding that Lula views his approach to the conflict as a balancing act aimed at reaching a two-state solution. (The Brazilian leader is not the first to advocate for such a path forward; in fact, Brazil presided over the 1947 U.N. vote in favor of the partition of Mandatory Palestine.)The episode, experts say, highlights the extent to which American influence has waned in Latin America since the height of the unipolar moment after the first Gulf War.The U.S. has privately "expressed disappointment with governments that have done things like recall their ambassadors, or referred to genocide or used strong language and so on," according to Main of CEPR, who has extensive contacts in Latin American governments. "But that pressure doesn't count as much as it used to," he argued. "It's a region that's changed enormously in terms of its dependence on the U.S. and the level of influence that the U.S. can have on foreign policy."The 'pink tide' rolls onThe pro-Palestine stance of many Latin American leaders also stems from the "pink tide" of left-wing and indigenous activists who have taken power in recent years. Left-of-center politicians now hold power in two-thirds of Latin American states, representing more than 90 percent of the region's population and GDP.As Main noted, these groups have long been involved in Palestine solidarity campaigns and other indigenous rights movements, especially since Israel had helped to arm many of the region's most oppressive 20th century governments.For many activists in the region, the disappointment of the Oslo peace process in the 1990s led them to view the situation in Israel-Palestine as little more than a new form of colonialism, according to Casaroes."The Israeli-Palestinian conflict is very often pictured in the back of the minds of Latin American leaders as the conflict between the oppressor, which is Israel, and the oppressed, which are the Palestinians," he said.This helps to explain why the Latin American left has been so united on this issue, as opposed to the war in Ukraine, which has pitted progressive leaders like Chile's Gabriel Boric against traditional leftist stalwarts like Lula and Venezuelan President Nicolas Maduro.While Boric has largely stood alone in his strong support for Ukraine, he has joined his fellow leftists in excoriating Israel for its conduct in Gaza and even withdrew Chile's ambassador from Tel Aviv. "These Hamas attacks are without justification, they deserve global condemnation, but the response by Benjamin Netanyahu's government also deserves our clearest condemnation," Boric argued following a meeting with Biden in Washington earlier this month.Deep ties to the Arab worldThe Arab diaspora in Latin America is also a major force behind pro-Palestine activism. Brazil alone has some 16 million citizens of Arab descent, and Chile has the largest Palestinian population of any country outside of the Middle East. The phenomenon of Arab migration to the region dates back to the late 1800s, when many Lebanese and Syrian migrants fled to the Americas to escape the death throes of the Ottoman Empire. Palestinians followed in waves after each major war between Israel and Arab states. This large diaspora has significant political influence across the region, with Arab politicians holding top positions in many governments. Fully 10 percent of Brazil's parliament had Arab origins as of 2016, according to the Washington Post. Contrast this with the region's relatively small Jewish community, which numbered only 500,000 in 2017. As Main noted, Latin American Jews who support Israel also have no equivalent to powerful U.S. Zionist groups like the American Israel Public Affairs Committee (AIPAC), which will reportedly spend $100 million next year to try to push lawmakers advocating for a ceasefire in Gaza out of office. Of course, there are notable exceptions in the Arab diaspora. El Salvador's president, Nayib Bukele, is of Palestinian descent but has thrown his full support behind Israel's campaign in Gaza. But, experts say, most Arabs in the region still favor Palestine over Israel. A new shift, however, could upset the region's political balance in the coming years, according to Casaroes. Latin America has an increasingly large evangelical Christian movement whose leaders see the state of Israel as a crucial part of their theology of the "end times." And survey research suggests that, as a country's evangelical population grows, so does its support for Israel.This has already led to political dust-ups in places like Brazil, where former President Jair Bolsonaro has made pro-Israel activism a key part of his efforts to bolster his evangelical support. Bolsonaro sparked a controversy earlier this month when he met with Israel's ambassador to Brazil, a move that a ruling party official condemned as a "spurious alliance" between the former leader and the foreign diplomat.
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The leaders of the world's largest economies will gather this weekend in New Delhi, India, for the G20 summit. The meeting comes at a complex time for the grouping, which is one of the rare venues where Russian, Chinese, American and European leaders have to rub shoulders each year.India no doubt hopes to boost its profile as a Global South leader by focusing on issues like climate change and global food prices, but this year's summit risks being paralyzed by Russia's war in Ukraine, arguments over which prevented the grouping from agreeing on a joint communique at its 2022 meeting.Further complicating the summit is the fact that Russian President Vladimir Putin and Chinese President Xi Jinping are not planning to attend. Xi's snub has drawn particular attention given increasing tensions between the U.S. and China, which got a rare respite last year when the Chinese leader held a three-hour meeting with U.S. President Joe Biden.Few analysts are better positioned to break down these dynamics than Kishore Mahbubani, Singapore's former ambassador to the United Nations and a distinguished fellow at the Asia Research Institute. After a 30-year career in diplomacy, Mahbubani has emerged as a leading commentator on international affairs with a special focus on Asia and the Global South.RS caught up with Mahbubani over email to get his take on the summit and the shifting geopolitical landscape that will frame it. The following conversation has been lightly edited for length and clarity.RS: What is India hoping to get from the G20 Summit? How does it factor into Prime Minister Narendra Modi's vision for India's role in the world?Mahbubani: The G20 summit is a big deal for PM Modi and his government. He has both domestic and international goals to achieve at this meeting. Domestically, a successful G20 will raise the stature of his government and himself in the build-up to the national elections in 2024. Internationally, PM Modi would like to position India as an emerging world leader. Hence, he will work hard to enhance the voice of the Global South in the G20 summit in India. He will push hard to get the African Union represented as a member.RS: Notably, Chinese President Xi Jinping and Russian President Vladimir Putin have both chosen to forgo this year's event. How will their absence affect the meetings?Mahbubani: Putin's absence is not surprising. He also missed the G20 summit in Bali last year. He is preoccupied with the war in Ukraine. He may also be shunned by other leaders. Hence, it is wise for Putin not to attend. However, if Xi Jinping decides not to participate, it will sadly diminish the significance of the G20 Summit. The most important bilateral relationship in the world is between the U.S. and China. Just before the G20 summit in Bali in November 2022, [Indonesian] President Jokowi invited me to breakfast to discuss the agenda. I told him that the world would thank him if he organized a good meeting between President Joe Biden and President Xi Jinping. He responded to me by saying, "Please don't worry. I've given them the nicest room in Bali for the meeting." This worked. Biden and Xi had a good meeting. The world breathed a sigh of relief. There will not be a similar sigh of relief after the G20 summit in New Delhi.Please let me add here that it is possible that President Xi may have decided not to attend this meeting in New Delhi as he will have another opportunity to meet President Biden in the U.S. for the APEC Summit in November.RS: Biden will be in attendance in New Delhi. Do you have a sense of what the United States is hoping to get from the summit?Mahbubani: The U.S. is courting India ferociously. Paradoxically, the best comparison to make of this courtship is with the ferocious courtship of China by the U.S. to counterbalance the Soviet Union in the 1970s. Today, to counterbalance China, the U.S. is courting India. This is why President Biden is attending the G20 summit in India and skipping the East Asia Summit in Indonesia. Realistically, the U.S. does not expect to get much from the G20 Summit in India. The most successful G20 summit ever was the 2009 meeting in London, when the G20 came together to rescue the U.S. and other Western economies during the global financial crisis. Today, the U.S. economy is doing relatively well. Hence, the U.S. expects little from the G20 summit in New Delhi. Little of substance will emerge from the summit. It may well prove to be, like many G7 meetings, a photo opportunity for the leaders attending it.RS: Do you expect the war in Ukraine to dominate conversation as it has in other international forums? Are you concerned that it will pull attention away from other global issues, like climate change and the ongoing food crisis?Mahbubani: There will be a continuing tension between the leaders of the Global South and the G7 leaders attending the G20 meeting. The Global South would like to focus on their preoccupations, like their ongoing development challenges, including the food crisis. They would also like the G7 leaders to fulfill their commitments to help the Global South fight climate change. By contrast, the G7 leaders would want to focus on the war on Ukraine and try to get a strong statement condemning Russia at the meeting. There will be no meeting of minds between the Global South and G7 leaders. At best, one can expect a compromise which tries to fudge the big differences between the two sides.In many ways, it is fortunate that India is hosting the G20 summit this year. The only major country that enjoys a high level of trust from both the Global South and G7 countries is India. Only India can pull off a compromise solution between the two sides. If India fails, it will show that the gap between the two sides is too big to be bridged. The world will remain divided.RS: The event comes less than a month after BRICS held a much-remarked summit in South Africa, where the group formally invited Saudi Arabia, Iran, the UAE, Ethiopia, Argentina and Egypt to join. BRICS and the G7 each now have seven members of the G20. Do you expect these groups to act as competing blocs in the summit? How does the rise of BRICS change the G20's dynamics? Mahbubani: Over the past 20 years, the global media, especially the Western media, has paid far more attention to G7 events than to BRICS events. This reflects a major error of judgment. The G7 is a sunset organization. BRICS is a sunrise organization. In 1990, in PPP terms, the combined Gross National Product (GNP) of G7 was more than double that of the BRICS countries. Today, it is less. Equally significantly, 40 countries have applied to join BRICS. There is no similar rush of applications to join the G7. In my book, The Asian 21st Century (which is an open access book), I describe how the world is psychologically preparing for the Asian century. The 88 percent of the world's population who live outside the West understand this reality. The 12 percent who live in the West don't understand this.If the West wishes to pursue a wiser course of action, it should use the forthcoming G20 summit in New Delhi to build new bridges with the Global South. It should also learn to share power by allowing, for example, Global South representatives to run organizations like the IMF and World Bank. Sadly, the West is unlikely to do this. Hence, it will waste the valuable opportunity provided by the G20 summit meeting in New Delhi to build new bridges to the Global South.
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(Updated to fix numbers.) Fitch is right to downgrade the US. Read the sober report. But there are a few other reasons, or emphasis they might have added. The inflationary default. Inflation is the economic equivalent of a partial default. The debt was sold under a 2% inflation target, and people expected that or less inflation. The government borrowed and printed $5 Trillion with no plan to pay it back, devaluing the outstanding debt as a result. Cumulative inflation so far means debt is repaid in dollars that are worth 10% less than if inflation had been* 2%. That's economically the same as a 10% haircut. Yes, this is not a formal default. And a formal default would have far reaching financial consequences that inflation does not have. Still, for a bondholder it's the same thing. It's as if they said, "well, we promised to repay you dollars, but we didn't say which ones, so you're getting Canadian dollars." Yes, the promise not to inflate is implicit, not explicit. Still, it is the reputation and commitment not to inflate, not to dilute the debt as they did, which supported the very low interest rates at which the US could borrow. Countries that routinely inflate like Argentina have to pay higher interest rates ahead of time. Yes, that's in the past, and ratings agencies are supposed to evaluate future risks. But if you only repaid 90% of your mortgage, you can be sure the bank would see you as a worse credit risk going forward. The probability that the US inflates again, that in the next crisis they do the same thing, is unquestionably larger. The world's appetite for boundless amounts of US debt is unquestionably smaller .Yes, there is an argument that this was a "state contingent default," appropriate policy for a once in a century shock. (Except we seem to get these once in a century shocks about every 10 years now.) But Fitch isn't judging if inflating away 12.4% of the debt was a good idea, or if inflating it away again will be a good idea in the next crisis. Their job is to simply tell bondholders if they think the event is likely. It is. It is strange that Fitch does not mention inflation. More inflation is surely the prime risk facing a US bondholder. What is the chance that a 10 year or 30 year bondholder gets repaid in full, without another bout of inflation chopping down the value of his or her investment? What is the chance that someone rolling over one year or one month debt does not go through the last 2 years with the Fed holding short term rates substantially below inflation? That chance is surely much higher than it was two years ago! Debt ceiling shenanigansThe report focuses on whether the US will be able to repay its debts. The larger question is whether the US will be willing to repay its debts. Yes, the debt ceiling business was not the debt crisis we have long feared. Even if the debt ceiling had led to a temporary halt on interest and principal payments, that surely would have been temporary, and investors would soon have been repaid in full. It might have been a problem for liquidity, if you wanted to sell debt fast, or for your ability to pledge debt as collateral, but you would have gotten your money back sooner or later. But I was shocked that in the debt ceiling debate, the Administration did not say, loudly, "We will pay interest and principal on treasury debt before we pay anything else." (I was equally shocked that the Federal Reserve did not say, loudly, "we'll lend freely against treasury debt even if it is in technical default.") Bond investors want reassurance that in a crisis, the US government will choose to prioritize debt repayment over everything else. When it's interest payments to fat-cat Wall Street banks (even if those are just intermediaries to ordinary Americans), to foreign central banks, or pension funds and other institutions, vs. checks to American voters, which will Administration and Congress choose? I phrased it in a way to suggest what we have learned in the debt limit posturing. You may even think that this is the right choice, on grounds of distributive justice. The counterargument is that default will ruin the US reputation and make future borrowing much harder and more expnsive. "One time" defaults and wealth grabs are always attractive, but the world does not end, and the US will surely want to borrow in the next crisis, or the subsequent one. But again, that's not Fitch's job. Their job is to warn bond investors that losses are much more likely than they once thought; that the US does not seem so interested in the sacrosanctity of its reputation for bond repayment. Fiscal capacity and risksFor a financial report, Fitch stresses the baseline forecast, but strangely spends less time on risks. (There is a short section on "sensitivities." Bondholders of course mostly get downside risks. Two stand out to me: 1) Interest costs. The report does mention rising interest costs on the debt, now heading to $1 trillion. "Over the next decade, higher interest rates and the rising debt stock will increase the interest service burden... The CBO projects that interest costs will double by 2033 to 3.6% of GDP. "But this issue is really a risk factor, not a projection. If people listen to Fitch, and start demanding higher interest rates, then debt service costs rise, and the fiscal problem gets worse, and people demand even higher interest rates. 2) Direct fiscal capacity. At the cost of some repetition, sooner or later something will go wrong and the US will want to borrow. Recessions occasion larger automatic stabilizers -- unemployment insurance -- stimulus, bailouts, and lower tax revenues. Crisis, pandemic, war demands more. Can the US really borrow a lot more? Or will the next unexpected shock come out of the pockets of today's bondholders? The chances are surely much higher, and Fitch is right to warn investors. Exorbitant privilege and reserve currencyBoth Wall Street Journal and Fitch mention this as a positive. Yes, to some extent the fact that the dollar is the world's currency means the US can print up some dollars and dollar debt, and send these pieces of paper abroad to finance trade deficits. (I love trade deficits, but most politicians who extol reserve currency aren't so hot about them!) As a government can print up some money for its own citizens and thereby run a bit of a deficit.But this is a one time thing. Money demand is a demand, not an infinity. Once people have all the US debt they want, they don't want any more. If all the foreigners were waiting to gobble up more US debt, we wouldn't have had inflation in the last 2 years. The reportThe report is interesting in this vein, for looking beyond dry budget numbers. The reputation and institutions I refer to here is what they call "governance," Erosion of Governance: In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters...The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management. In addition, the government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process. ... Additionally, there has been only limited progress in tackling medium-term challenges related to rising social security and Medicare costs due to an aging population.That's polite. "complex" budgeting process? There is no budgeting process going on right now. "limited progress" on social security and Medicare? What progress? "Governance" is the right word. I agree with the Wall Street Journal. They were too kind. *The Jan 2021 CPI was 262.6, in June 2023 303.84. That's a 15.6% rise. At 2% inflation, that should have been a 1.02^2.5 = 5% rise.
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Today marks a solemn anniversary in Brazil: 60 years ago, the Brazilian military seized power from the government of João Goulart, marking the start of over two decades of military rule. Brazil's 2014 Truth Commission report is the country's only formal investigation into this period of dictatorial rule. The commission's 2,000-page report revealed some grisly details of the dictatorship's human rights abuses, identified over 400 individuals killed by the military, and shed light on Brazil's role in destabilizing other Latin American countries.To assist with the Truth Commission, then-Vice President Joe Biden hand-delivered declassified State Department records to former Brazilian President Dilma Rousseff — who herself had been imprisoned and tortured by the military regime. The records offered details about the dictatorship and Washington's enabling of abuses, including a cable from former Ambassador to Brazil William Rountree arguing that condemning the regime's human rights "excesses" would be "counterproductive." Biden's delivery of the declassified records was symbolic, since the U.S. had supported the coup. The U.S. solidified its support for the putschists the year prior, drew up plans for a U.S. invasion if deemed necessary, and sent a naval task force to Brazil to support the military plotters. In the end, direct U.S. involvement wasn't needed — Goulart fled to Uruguay by April 4. The coup was carried out by Brazil's generals, but Washington celebrated it as a victory for its interests nonetheless. On the one hand, U.S. support for the coup laid bare the hypocrisy of America's supposed commitment to sovereignty and democracy. Gone was the Kennedy administration's promise to reject a "Pax Americana enforced on the world by American weapons of war." The Cold War logic of siding with anti-communist dictators for the purpose of defeating the Soviet Union prevailed. Washington may have lost China, but it won Brazil — or so the thinking went. However, even the most cynical arguments for aligning with undemocratic regimes for a strategic purpose often failed to bear fruit, given that many of these regimes departed from U.S. policy on key issues. Many historians of the U.S.-Brazil relationship contend that during this period their ties at times more closely resembled rivals rather than close partners. Rubens Ricupero, a former diplomat and minister of finance of Brazil, writes that, "Little by little, doubts turn[ed] into disappointment, and this le[d] to gradual disengagement in relation to the regime they had helped to create."When it first took power, Brazil's military dictatorship closely followed Washington's lead. Goulart was out, as was his "Independent Foreign Policy," a non-alignment stance that emphasized self-determination, decolonization, and non-intervention, devised by the ousted president's predecessor, Janio Quadros. In line with Washington's desires, the dictatorship, which rotated through five different military general-presidents between 1964 and 1985, broke off relations with Cuba and even assisted the U.S. in its occupation of the Dominican Republic in 1965.Washington also saw Brazil as a key ideological partner in destabilizing leftist regimes across Latin America. As one Brazilian general put it, the United States wanted Brazil "to do the dirty work." And it did. Most prominently, the Brazilian regime played a critical role in the overthrow of the democratically-elected government of Salvador Allende in Chile,. even secretly bringing members of the Chilean military to Brazil to discuss the potential coup. Brazil under the generals also participated in Operation Condor, the secret cooperation of right-wing military dictatorships in much of Latin America to assassinate, or "disappear" perceived leftists and other dissidents during the 1970s.Over time, the Brazilian regime's alignment with the U.S. waned and tensions bubbled up. Dr. Luiz Alberto Moniz Bandeira writes in his book "Brazil-United States: An Emerging Rivalry," that "automatic alignment with State Department guidelines could no longer continue for long, as it no longer effectively corresponded to the national interests of a developing country that aspired to become a power." Despite the fact that the U.S. wanted the benefits of outsourcing its dirty work, it was not willing to accept the consequences that came with greater military autonomy for Brazil. Dr. Eduardo Svartman, a political science professor at the Federal University of Rio Grande do Sul, told Responsible Statecraft that one early issue that emerged was over Brazil's request for F-5 fighter jets."In the eyes of American politicians, if the great threat in Latin America was communist insurgents, there was no point to sell or transfer modern supersonic fighter jets to Latin American countries when helicopters would do the job much better," Svartman said. The Brazilian government disagreed, believing it was important to have a modern military in order to project power in South America. The generals accordingly grew more reliant on Europe, buying several Mirage fighter aircrafts from France. They eventually pushed the F-5 sale through several years later, but it was an early lesson that the U.S. may not be their most reliable partner. Though the U.S. remained an important supplier of critical components for Brazil's burgeoning national arms industry, Brazil's supply of U.S.-made arms imports decreased from 92% to 14% of its total arsenal over the course of the dictatorship. The U.S. also grew frustrated with Brazil's move towards positions associated with the non-aligned movement. Though Brazil was never a full member of the movement, in the early 1970s, it supported the decolonization of the Lusophone countries in Africa, emphasized non-intervention, and recognized the MPLA in Angola. Elements of the Independent Brazilian Foreign Policy had returned. Perhaps the biggest source of tension between the U.S. and Brazil was over the development of a nuclear program. Brazil refused to join the Nuclear Non-Proliferation Treaty, arguing that nuclear technology was vital for its development. After the U.S. suspended the supply of enriched uranium for Brazil's research reactors, the regime turned to West Germany and negotiated a major nuclear agreement in 1975.In an internal report, the CIA claimed that Brazil's nuclear ambitions posed a "fundamental challenge" to U.S.-Brazil relations. Without informing the Brazilians, newly-elected Vice President Walter Mondale tried to lobby the German government to cancel the agreement. Washington also grew frustrated with the generals' authoritarianism and human rights abuses. The regime passed a series of "institutional acts" — the first of which came just days after the coup — that gave them sweeping powers, including suspending the rights of opposition leaders and power to declare a recess in Congress. Ricupero writes that "with each new attack on the legal order or violation of rights, the embassy in Rio de Janeiro was forced into dialectical contortions to calm the State Department's unrest." Pressure on rising authoritarianism and the nuclear issue came to a head during the Carter administration, which applied human rights as a criteria for military assistance more directly. After the Carter State Department criticized Brazil for its human rights abuses in 1977, the Brazilian government retaliated by suspending the Joint Military Commission between the U.S. and Brazil, its Naval Mission, and a long-standing bilateral military accord. According to Washington's then-ambassador to Brasilia, Robert Sayre, "U.S.-Brazil relations just went to pieces."Despite a brief rapprochement with the election of Ronald Reagan as president in 1980, Brazil became critical of Washington's revival of more interventionist policies under his administration. Washington's decision to side with Britain against neighboring Argentina during the Falklands/Malvinas War in 1982 confirmed Brazilian suspicions that the U.S. was not a reliable partner. For the first time ever, "the hypothesis of war with the United States became an object of study in the Armed Forces," writes Bandeira.Brazil also opposed the so-called Reagan Doctrine, which sought to overthrow leftist governments in Central America and southern Africa. The U.S. had become not just a distant partner but something altogether new: an emerging rival. Many of these disputes between the two countries remained well into the period of democratization that began in 1985. There is a lot that is still unknown about this chapter in Brazil's history, and the U.S.' relationship to the military regime. Peter Kornbluh, a senior analyst at the National Security Archive who also served as the liaison between the U.S. and Brazilian governments for the Truth Commission, estimates there are still thousands of records that remain classified, including many sensitive records from the CIA and the Department of Defense. "[T]he degree to which the United States is sitting on documentation about repression in Brazil is the degree to which the United States is not assisting Brazilian society in reminding itself about the horrors of what happened behind closed doors in secret detention centers," Kornbluh told Responsible Statecraft.To start, President Biden could honor a request from 16 Brazilian civil society organizations to declassify these records. The groups' appeal states that declassification would "provide valuable information about human rights violations committed during the Brazilian dictatorship and clarify the degree of the United States' involvement in or knowledge of these events. This act of transparency would also strengthen the foundations of the U.S.-America relationship, fostering trust and collaboration on important issues such as human rights, democracy, and regional stability." The Luiz Inácio "Lula" da SiIva government is unlikely to formally request these documents from Biden himself. In an effort to appease leaders of the Brazilian Armed Forces who still hold the 21-year dictatorship in high regard, Lula controversially canceled all formal demonstrations of the 60th anniversary. But even without an official commemoration, millions of Brazilians from Manaus in the Amazon to Florianopolis in the far south are organizing demonstrations to send a message of "dictatorship never again."
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This post is from a set of comments I gave at the NBER Asset Pricing conference in early November at Stanford. Conference agenda here. My full slides here. There was video, but sadly I took too long to write this post and the NBER took down the conference video. I was asked to comment on "Downward Nominal Rigidities and Bond Premia" by François Gourio and Phuong Ngo. It's a very nice clean paper, so all I could think to do as discussant is praise it, then move on to bigger issues. These are really comments about whole literatures, not about one paper. One can admire the play but complain about the game. The paper implements a version of Bob Lucas' 1973 "International evidence" observation. Prices are less sticky in high inflation countries. The Phillips curve more vertical. Output is less affected by inflation. The Calvo fairy visits every night in Argentina. To Lucas, high inflation comes with variable inflation, so people understand that price changes are mostly aggregate not relative prices, and ignore them. Gourio and Ngo use a new-Keynesian model with downwardly sticky prices and wages to express the idea. When inflation is low, we're more often in the more-sticky regime. They use this idea in a model of bond risk premia. Times of low inflation lead to more correlation of inflation and output, and so a different correlation of nominal bond returns with the discount factor, and a different term premium. I made two points, first about bond premiums and second about new-Keynesian models. Only the latter for this post. This paper, like hundreds before it, adds a few ingredients on top of a standard textbook new-Keynesian model. But that textbook model has deep structural problems. There are known ways to fix the problems. Yet we continually build on the standard model, rather than incorporate known ways or find new ways to fix its underlying problems. Problem 1: The sign is "wrong" or at least unconventional.The basic sign is wrong -- or at least counter to the standard belief of all policy makers. In the model, higher interest rates cause inflation to jump down immediately, and then rise over time. Everyone at the Fed uniformly believes that higher interest rates cause inflation to go nowhere immediately, and then gently decline over time, with "long and variable lags." Larry Ball pointed this out 30 years ago. The behavior comes straight from the forward-looking Phillips curve. Lower output goes with lower inflation, relative to future inflation. I.e. inflation rising over time. To be clear, maybe the model is right and the beliefs are wrong. It's amazing that so much modeling and empirical work has gone in to massaging theory and data to conform to Milton Friedman's 1968 proclamation of how monetary policy works. The "long and variable lags" in particular are a trouble to modern economics. If you know prices are going up tomorrow, you raise prices today. But that's for another day. This model does not behave the way most people think the economy behaves, so if you're going to use it, at least that needs a major asterisk. Well, we know how to fix this. You can see that sneaking lagged inflation into the Phillips curve is going to be a big part of that. Christiano Eichenbaum and Evans, 20 years ago, produced a widely cited model that "fixes" this problem. It has a lot of ingredients. Most of all, it assumes that wages and prices are indexed. Firms and workers that don't get tapped by the Calvo fairy to change their price or wage nonetheless raise by observed inflation. This gives a Phillips curve with lagged inflation. Moreover, in preferences, investment, and this Phillips curve, CEE modify the model to put growth rates in place of levels. (More review in a three part series on new-Keynesian models here.) The result: If the funds rate goes down (right panel) unexpectedly, inflation goes down just a bit but then turns around and goes up a year later. (Several other authors get to the same place by abandoning rational expectations. But that has its own problems, and it's going to be hard to incorporate asset pricing that way. Much more in Expectations and the Neutrality of Interest Rates) Great. But notice that neither Gourio and Pho nor pretty much anyone else builds on this model. We cite it, but don't use it. Instead, 20 more years of NK theorizing studies different extensions of the basic model, that don't solve the central conundrum. Problem 2: Fed induced explosionsThe standard new-Keynesian model says that if the Fed holds interest rates constant, inflation is stable -- will go away on its own -- but indeterminate. There are multiple equilibria. The standard new-Keynesian model thus assumes that the Fed deliberately destabilizes the economy. If inflation comes out more than the Fed wishes, the Fed will lead the economy to hyperinflation or hyper deflation. Under that threat, people jump to the inflation that the Fed wishes to see. But the Fed does no such thing. Central bankers resolutely state that their job is to stabilize the economy, to bring inflation back from wherever it might go. Despite thousands of papers with new-Keynesian equations written at central banks, if anyone were ever to honestly describe those equations in the introduction, "we assume that the central bank is committed to respond to inflation by hyperinflation or deflation in order to select from multiple equilibria" they would be laughed out of a job. This has been clear, I think, since 2000 or so. I figured it out by reading Bob King's "Language and Limits." My "Determinacy and Identification" in the JPE 2011 was all about this. We've also known at least one way to fix it, as shown: fiscal theory. OK, I'm a broken record on this topic. Instead, we go on with the same model and its underlying widely counterfactual assumption about policy. Problem 3: The fit is terribleA model consists of a set of equations, with the thing you want to determine (say, inflation) on the left, the economic causes described by the model on the right, plus "shocks," which are things your model can't capture. In the explanation part, there are parameters (\(\sigma, \ \beta, \ \kappa, \ \phi\)), that control how much the things on the right affect the things on the left. The fit of new-Keynesian models is usually terrible. In accounting for economic variables (\(x_t,\) \(\pi_t, \) \(i_t \) here), the error terms (\(\varepsilon\)) are much larger than the model's economic mechanisms (the \(x,\) \(\pi\) on the right hand side). Forecasts -- predicting \(\pi\), \(x\) ahead of time -- is worse. For example, where did inflation come from and why did it go away? Expected inflation hasn't moved much, and the economy just plugged along. Most of the rise and fall of inflation came from inflation shocks. Related, the fit of the models is about the same amount of terrible for different values of the parameters. That means the parameters are "poorly identified" if identified at all. That means that the mechanisms of the model -- say, how much higher interest rates lower output, and then how much lower output affects inflation -- are weak, and poorly understood. In part this isn't often noticed because we got out of the habit of evaluating models by fit in the 1980s. Most models are evaluated, as I showed above for CEE by matching select "identified" impulse response functions. But as those response functions also explain small variances of output and inflation, it's possible to match response functions well, yet still fit the data badly, i.e. fit the data only by adding big shocks to every equation. I don't know of good fixes here. Old fashioned ISLM models had similar problems (See Sims 1980). But it is a fact that we just ignore and go on. The Phillips curve is a central problem, which has only gotten worse lately. Unemployment was high and declining throughout the 2010s, with stable inflation. Inflation came with high unemployment in 2021. And inflation fell with no high real interest rates, no unemployment, and strong growth in 2022-2023. But what will replace it? So where are we?Macro is surprisingly un-cumulative. We start with a textbook model. People find some shortcomings and suggest a fix. But rather than incorporate that fix, the next paper adds a different fix to the same textbook model. One would think we would follow the path on the right. We don't. We follow the path on the left. This is common in economics. The real business cycle literature followed much the same path. After the King Plosser Rebelo stochastic growth model became the standard, people spent a decade with one extension after another, each well motivated to fix a stylized fact. But by and large the next paper didn't build on the last one, but instead offered a new variation on the KPR model. Posteriors follow priors according to Bayes' rule, of course. So another way of putting the observation, people seem to put a pretty high prior on the original model, but don't trust the variations at all. I sin too. In Fiscal Theory of the Price Level I married fiscal theory with the new-Keynsian IS and Phillips curve, exactly as above, despite problems #1 and #3. Well, it makes a lot of sense to change one ingredient at a time to see how a new theory works. I'm unhappy with the result, but I haven't been able to move on to a new and better textbook model, which is what has occasioned several of these related posts. Wę need a digestion. Which of the new ingredients are reliable, robust, and belong as part of the new "textbook" model? That's not easy. Reliable and robust is very hard to find, and to persuade people. There are so many to choose from -- CEE's smorgasbord, capital, financial frictions, heterogeneous agents, different expectation formation stories, different pricing frictions, and so on. What's the minimal easy set of these to use? Part of the trouble lies in how publishing works. It's nearly impossible to publish a paper that removes old ingredients, that digests the model down to a new textbook version. The rewards are to publishing papers that add new ingredients. Even if, like CEE, everyone cites them but doesn't use them. I've asked many economists why they build on a model with so many known problems, and why they don't include known fixes. (Not just fiscal theory!) The answer is usually, yes, I know about all these problems, but nobody will bother me about them since every other paper makes the same assumptions, and I need to get papers published. I went on a bit of a tear here as I referee lots of great papers like this one. Every part of the paper is great, except it builds on a model with big flaws we've known about for 30 years. It feels unfair to complain about the underlying model, since the journal has published and will publish a hundred other papers. But at what point can we, collectively, scream "Stop!" The new-Keynesian model has been the standard model for an astonishing 30 years. None of ISLM, monetarism, rational expectations, or real business cycles lasted that long. It's even more amazing that it is so unchanged in all this time. It is definitely time for a better textbook version of the model! Maybe this is a plea for Woodford, Gali or one of the other NK textbook authors, which much better command of all the variations than I have, to bless us a new textbook model. Or, perhaps it's time for something totally new. That's not fiscal theory per se. Fiscal theory is an ingredient, not a model. You can marry it to new-Keynesian models, as I, Leeper, Sims, and others have done. But you can also marry it to old ISLM or anything else you want. Given the above, maybe there isn't an existing modification but a new start. I don't know what that is. (My comments also have some similar comments about term premiums and how to think about them, but this post is long enough.) Update:Twitter correspondents Stéphane Surprenant and Tom Holden point me to The Transmission of Monetary Policy Shocks by Silvia Miranda-Agrippino Giovanni Ricco in the AEJ Macro, and Inflation, output and markup dynamics with purely forward-looking wage and price setters by Louis Phaneuf, Eric Sims, and Jean Gardy Victor in the European Economic Review. The former is a VAR with high frequency measurement of the monetary policy shock. And.. Source: Miranda-Agrippino and RiccoThe price level as well as the inflation rate can jump down immediately when the interest rate rises! (I think the graph plots the level of CPI, not growth rate.) That's even stronger than the baseline model in which the price level, being sticky, does not move, but the inflation rate jumps on the interest rate rise. The latter is a nice theoretical paper. It adds a lot of the CEE assumptions. I overstated a great deal that others have not used these ingredients. They are used in these "medium scale" models, just not in "textbook" models. However, it gets rid of indexed prices and wages with purely forward looking Phillips curves. It adds intermediate goods however. This makes prices changes work through the network of suppliers adding interesting dynamics, which has always struck me as a very important ingredient. And...Source: Phaneuf, Sims ,and VictorThe main estimate is the dark line. Here you see a model with the conventional response: inflation does not move on impact, and increases some time after the interest rate rise. So, we can switch places! Estimates can replicate the conventional model, with an instant inflation response. Models can replicate the conventional estimates, with a slow inflation response. This one is much prettier than CEEs.
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President Biden has used the immigration authority known as "parole" to permit many immigrants to enter the country or remain in the country legally. But his actions have deep historical precedent. Under section 212(d)(5) of the Immigration and Nationality Act (8 U.S.C. 1182(d)(5)), the Attorney General and later the Secretary of Homeland Security has had the authority to waive the normal restrictions on entry and allow certain noncitizens to enter the United States since 1952. Table 1 provides a list of 126 programmatic or categorical parole orders, meaning orders that were nationalized policies intended to permit the entry of certain defined types of noncitizens. This list is certainly not exhaustive. Until recently, programmatic or categorical uses of parole were often not publicized in any formal, consistent, or even public way. The Immigration and Naturalization Service (INS) would simply create internal guidance that would only become public if stakeholders or the media publicized it.
For example, one instance in Table 1 is an INS official in 1990 listing six separate categories for parole in operation at the time that no other document refers to before or since. That is an exceptional case. In many cases, however, Congress acknowledged these uses of parole through subsequent or previous congressional actions, allowing for parolees to adjust to legal permanent residence or receive refugee benefits. In some cases, it just acknowledged that these procedures were in effect or expressed support for them. This list helps dispel some myths. Since the creation of the parole power in the Immigration and Nationality Act of 1952—which codified executive powers already in use—Congress has substantively amended the parole authority twice: in the Refugee Act of 1980 (P.L. 96–212, March 17, 1980), barring refugees from being paroled into the United States, and in the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (Public Law 104–208), which made two statutory changes. First, the standard for paroling someone changed from "emergent" or "public interest" reasons to "urgent humanitarian" or "significant public benefit" reasons. Second, each determination had to be made on a case‐by‐case basis. Few at the time thought these changes were substantive, and the categorical parole regulations then in effect were reenacted verbatim. Moreover, the case‐by‐case basis requirement was in effect for decades, including for large‐scale programmatic uses of parole, such as for Cubans and Vietnamese. Case‐by‐case determinations always meant an individual determination, even if someone's categorization created a presumption that they met the "emergent/humanitarian" or "public interest/significant public benefit" requirement. In many cases, these parole programs have received almost no attention in many years but contain precedents that the current administration should consider reimplementing. For example, parole used to be available in 1990 for children aging out of eligibility for green cards. In the 1950s, it was used for the employment‐based first preference category (skilled immigrants) when immigrant visas were unavailable under the cap. These two issues are particularly relevant now, with the employment‐based cap being exhausted even for Nobel laureates and their children. Unfortunately, there is no comprehensive set of statistics for the number of people paroled since 1952. Figure 1 shows the data that the INS published from 1982 to 2003. Table 2 shows the programmatic grants under various programs from the 1950s through the year 2000.
Humanitarian and public interest parole categories (1952—present): This type of parole has evolved over time in the types of categories that fall under it. In 1964, the INS associate commissioner listed several categories of immigrants who would be granted parole: to "either attend to sickness or burial or some close family affair," "accompany servicemen, members of the Armed Forces where the wife or some child would have been technically inadmissible," reunite a mentally handicapped child who would otherwise be excludable with their family, or deal with medical emergencies. Since 1982, at least some of these reasons have been included in regulations. In 1980, the INS provided examples of parole, including children coming for medical treatment, people coming to donate a kidney, and a Chinese woman who was allowed to visit her 81‐year‐old adoptive mother, who had been expelled by the communists from China. In 1990, the INS described a "small sampling" of the kinds of humanitarian and public interest categories of parole available at the time: 1) Someone's immediate family member just died or is dying, and consular officers lack time to process a visa or deny the visa; 2) People coming for organ, blood, or tissue donation; 3) Extradited criminals, informants, witnesses; and 4) National security assets (e.g., Soviet dissidents and foreign U.S. spies). In September 2008, ICE, USCIS, and CBP signed a memorandum of agreement on the use of parole by the agencies. This document listed, among other programs described below, parole categories for 1) registered sources of the U.S. intelligence community, 2) transiters through the United States to legal proceedings in a third country, 3) trainees, 4) individuals necessary for prosecutions or investigations, 5) confidential informants, 6) extraditions, 7) civil court participants, and 8) international organization event participants. Parole from detention (1954—1980): On November 12, 1954, Ellis Island and several other INS detention centers were closed, and detainees were paroled into the United States. The number of detained immigrants fell from a monthly average of 225 to less than 40. Paroles were carried out under section 212(d)(5) of the INA. The INS promulgated a regulation on January 8, 1958, authorizing this practice of parole from ports of entry rather than detention. From 1954 until 1981, "most undocumented aliens detained at the border were paroled into the United States." Even after 1982, when the use of parole was narrowed, its use continued "when detention is impossible or impractical." The INS associate commissioner testified in 1964 that the closing of the detention facilities met the requirement of the parole statute because "it created a better image of the American Government and American public." Orphan parole (1956): The Refugee Relief Act of 1953 created 4,000 slots for orphans adopted by U.S. citizens, but when the slots were filled, the attorney general authorized the entry of additional orphans under his parole authority on October 30, 1956. A total of 925 orphans were paroled. Adjustment of status: On September 11, 1957, Congress enacted Public Law 85–316, which authorized the adjustment of status to legal permanent residence of any eligible orphaned paroled into the United States. Hungarian parole (1956): On November 13, 1956, President Eisenhower ordered that 5,000 Hungarians be paroled into the United States. On December 1, 1956, he revised the limit to 15,000 Hungarians before eliminating the limit on January 2, 1957. By June 30, 1957, 27,435 parolees had entered, and the total reached 31,915 by 1958. For context, only 109 immigrants were admitted from Hungary in 1956, and only 321,625 immigrants were admitted worldwide. The Justice Department said in 1957 that this was "the first time that the parole provision has been applied to relatively large numbers of people." Several U.S. charitable organizations helped prepare their parole applications and to find housing and jobs for them. Adjustment of status: On July 25, 1958, Congress enacted legislation (P.L. 85–559) that allowed Hungarians to adjust their status to legal permanent residence if they were "paroled into the United States" at any point after October 23, 1956 (including after the enactment of the act) if they had been in the United States for at least two years. Ultimately, 30,491 received legal permanent residence in this way. This set a precedent for handling adjustments of later parolees. Pre‐Examination Parole (1957—1959): Regulations of December 6, 1957 provided that someone who was subjected to pre‐examination in the United States prior to requesting an immigrant visa in Canada who was found inadmissible in Canada "shall be paroled" into the United States. This regulation was revoked in 1959. Crew Members Parole (1957—present): Regulations of December 6, 1957 provided for the parole of noncitizen crewmembers under certain circumstances and stated that shipwrecked or castaway crew members "shall be paroled." On December 8, 1961 and March 22, 1967, expanded the grounds for parole to asylum seekers from communist countries. On July 27, 1990, this parole was expanded to crewmen facing persecution in any country. On March 6, 1997, this provision was updated and reenacted, and it was revised and reenacted again on February 19, 1999. On April 4, 2004, the parole of lightering crews that were not eligible for D‑1 visas for technical reasons was authorized. The parole of crew members was recognized in Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (Public Law 104–208, 8 U.S.C. 1101(a)(13)(A)). Cuban parole (1959—1965): Starting about January 1, 1959, following the communist revolution, the Eisenhower administration used parole to allow a "small percentage" of Cubans who had left the island and entered illegally into the United States (INS 1960). By June 1961, there were 4,000 paroled Cubans in the United States (INS 1961). By December 31, 1961, there were 12,200 in parole status. In 1962, Cuban illegal entrants ceased to be referred for deportation hearings and were instead paroled into the United States (INS 1962). By June 1962, the number of Cubans on parole rose to 62,500 (INS 1962). Commercial travel between the U.S. and Cuba was suspended in 1962, and only a few thousand more Cubans made it off the island through the Red Cross (INS 1963). Altogether, about 107,116 Cubans were paroled into the United States from 1959 to 1965. Adjustment of status: The Cuban Adjustment Act of 1966 (P.L. 89–732, November 2, 1966) made it possible for Cuban parolees, including future parolees, to adjust their status to legal permanent residence after two years in the United States if they entered after 1959. Guam parole (1959—1974): Starting in April 1959, the INS began to parole into the United States some Filipinos to work with the Defense Department and the Government of Guam on the island under the Parolee Defense program. At least 16 orders establishing and renewing Guam parole programs went out between 1960 and 1969, and an INS internal memo of January 27, 1960 established the initial rules for the program. Workers received INS Form I‑94 stamped, "Paroled into Guam under section 212(d)(5) I&N Act until the purpose of parole has been served not exceeding—–." Parolees could enter for up to a year and could be extended at least twice. On November 15, 1962, the INS created the Reconstruction and Rehabilitation Parole Program to parole workers from the Philippines and the Trust Islands into Guam to help with emergency repairs to homes and defense installations following a storm (INS 1963). From FY 1963 to FY 1974, 26,501 workers received parole to enter Guam temporarily. The Reconstruction and Rehabilitation Parole Program ended in 1970, and the Parolee Defense program was eliminated in 1975 in favor of admitting workers under the H‑2 nonimmigrant work visa program. Refugee‐escapee parole (1960—1965): On July 14, 1960, Congress passed the Fair Share Law (Public Law 86–648), a joint resolution to "enable the United States to participate in the resettlement of certain refugees." The law directed the INS to parole into the United States any refugee who fled from a communist or Middle Eastern country in an amount not to exceed 25 percent of the total number of such refugees accepted by other countries in the world, and it allowed any of those paroled to receive legal permanent residence after two years. During fiscal year 1961, 2,942 refugees entered as parolees (INS 1961), the largest portion of which were from Yugoslavia. In 1962, the total reached 8,260 (INS 1962). By 1966, the total had reached 19,705 (INS 1966). Public Law 86–648 included a sunset date for this use of parole of July 1, 1962, but authorization to continue to parole was extended indefinitely by section 6 of the Migration and Refugee Assistance Act Public Law 87–510 (July 1, 1962). Section 16 of the Immigration and Nationality Act of 1965 ended this parole program, and the law introduced a new capped category of immigrant visas for refugees. Adjustment of status: Public Law 86–648 of 1960 (the original statute establishing the refugee‐escapee parolees) allowed parolees to adjust their status to legal permanent residence after two years in the United States. Section 16 of the Immigration and Nationality Act of 1965 terminated this provision. First Preference parole (1961): In January 1962, the INS reported that "recent changes in regulations" allowed for the parole of two groups of first preference skilled workers who could not receive green cards or immigrant visas as a result of the annual caps: 1) those who were abroad if they will be coming to work in defense industries; and 2) anyone in the United States. It's not clear exactly what change in regulation made this possible, but in 1964, the INS associate commissioner testified that this was the policy for "many years." He testified, "The basis for this policy was this incompatible situation that seemed to exist in that, with one hand, the Service was in effect making a finding that the alien's services were urgently needed and, at the same time, in contradiction, we were seeking to expel him." Congress revised the caps in 1965, which may have ended this practice. Hong Kong Chinese parole (1962—1965): On May 23, 1962, Attorney General Robert Kennedy ordered the INS to parole into the United States Chinese who had fled to Hong Kong so long as they were "relatives of United States citizens and resident aliens" or "Chinese persons possessing special skills needed in the United States" (INS 1962). By the end of FY 1963, the total number reached 7,047 (INS 1963). Processing continued into 1964, during which the total reached 10,617 (INS 1964). The number reached 13,619 in 1965 (INS 1965). By 1966, the total reached 14,757 (INS 1965, Table 14B). A few stragglers were approved in 1966 but did not arrive until later, bringing the total to 15,111 (INS 1966). The program ended in June 1965. Adjustment of status: The INA was amended in 1960 to allow parolees to adjust their status to legal permanent residence for the first time—which many were eligible to do since parolees generally had to meet the standards for an immigrant visa except for a cap spot being available—but no law provided any special category for Hong Kong parolees. Nonetheless, when Congress created a new general refugee category in December 1965, the administration used it to enable most other Hong Kong Chinese refugees to adjust their status. On October 5, 1978, P.L. 95–412 authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Russian Orthodox Old Believer parole (1963): The Russian Orthodox Old Believer church was being forced out of Turkey to the Soviet Union, where they would be persecuted. In response, the INS authorized the parole of 210 church members on May 10, 1963. Adjustment of Status: On October 5, 1978, P.L. 95–412 authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Cuban airlift parole (1965—1973): Starting on December 1, 1965, based on a November 6, 1965 memorandum of understanding with the Cuban government, the Johnson administration operated daily "Freedom Flights" from Cuba to Miami. During its operation, 281,317 Cubans were paroled into the United States. At its peak year, 46,670 Cubans arrived via parole in 1971. This compares to 361,972 total immigrants that year. The airlifts were funded by congressional appropriations. In May 1972, the flights were suspended by the Cuban government before being terminated permanently on April 6, 1973. Adjustment of status: The Cuban Adjustment Act of 1966 made it possible for Cuban parolees entering after 1959, including future parolees, to adjust their status to legal permanent residence after two years in the United States. Czechoslovak parole (1970): Following the failed uprising against the Soviets in Czechoslovakia on September 4, 1968, Secretary of State David Rusk asked the president to authorize the attorney general to parole for Czechoslovaks fleeing the fallout of the failed anti‐communist uprising. When the refugee numbers permitted under the Immigration and Nationality Act of 1965 ran out, every member of the House Judiciary Committee wrote in November 1969 to the administration to request that it parole Czechoslovakian refugees. On January 2, 1970, the attorney general authorized the use of parole. Nearly 5,000 were processed from February to November 1970, with 6,500 total. These parolees were given I‑94 documents that stated that the period of admission was "indefinite" and the purpose of the parole was "refugee." This type of indefinite parole document was still available throughout the 1980s for other parole types. Adjustment of Status: On October 5, 1978, Public Law 95–412 authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Soviet Union minority religious groups (1971): Following a letter from Rep. Peter Rodino of the House Judiciary Committee, on October 1, 1971, Attorney General John Mitchell announced that the United States would parole Soviet religious minorities who secured exit permits from the Soviet Union. The first four arrived on January 7, 1972, and in FY 1973, 200 were processed this way (INS 1973). Adjustment of Status: On October 5, 1978, Public Law 95–412 authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Advance Parole (1971): Advance parole appears to date to 1971 when the INS implemented a regulation in 1971 deeming an adjustment of status application abandoned if a person left the country while it was still pending unless "he had previously been granted permission by the Service for such absence." If someone had entered with a nonimmigrant visa and tried to adjust status, they would have had to prove "nonimmigrant intent" (i.e., intention to leave) upon reentry, which would be impossible with a pending adjustment of status application, and the only alternative to a visa is parole. Advance parole would not have helped prior to the effective date of the 1960 act, which authorized parolees to adjust their status (under a normal immigrant visa category) for the first time. The first advance parole regulation from 1982 stated that "parole [may be] authorized for an alien who will travel to the United States without a visa." Since then, advance parole has often been the top reason for granting parole. In several acts since then (1986, 1990, and 1996), Congress specifically mentioned how "advance parole" can be granted to people already paroled into the United States (8 U.S.C. 1151(c)(4)(A)). Ugandan Asian parole (1972): The Ugandan government ordered Ugandan Asians to leave the country in 1972, and Attorney General Mitchell responded by initially ordering the INS to parole 1,000 Ugandan Asians. It ended up paroling almost 1,200 into the United States in FY 1973 (INS 1973). Another roughly 1,300 came thereafter. Adjustment of Status: On October 5, 1978, P.L. 95–412 authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Asylum parole (1972—1980): Following the United States acceding to the Protocol to the U.N. Convention on the Status of Refugees in 1968, the INS had no uniform process or status providing to asylum recipients because Congress had not created a specific status for them, but some were granted "individual parole." The April 10, 1979 regulations specifically provided for immigration judges to "grant asylum by parole under section 212(d)(5) of the Immigration and Nationality Act." Adjustment of Status: The Refugee Act of 1980 (P.L. 96–212, March 17, 1980) provided the opportunity for those granted asylum to adjust their status to receive legal permanent residence.
Cuban third country parole (1973—1978): On October 26, 1973, the INS created a parole program for Cubans outside of Cuba who had family in the United States (INS 1975). A total of 11,577 were paroled in FY 1974, 6,940 in FY 1975, 2,341 in FY 1976, 413 in FY 1977, and 580 in FY 1978. Adjustment of status: The Cuban Adjustment Act of 1966 made it possible for Cuban parolees entering after 1959, including future parolees, to adjust their status to legal permanent residence after two years in the United States.
South American/Chilean parole (1975—1979): On June 12, 1975, the INS permitted 400 detained Chilean dissidents (and their families) to be paroled into the United States. A total of 1,600 people were ultimately paroled from 1975 to 1977. On October 27, 1976, the INS again authorized parole of 200 households, representing 800 people in FY 1977, and included some Uruguayans and Bolivians. On June 14, 1978, the parole of 500 households was authorized, and 2,000 people were admitted, including some Brazilians and Argentinians. More would have come if the government of Argentina had allowed more of them to leave. Adjustment of Status: On October 5, 1978, Public Law 95–412 authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Vietnamese, Cambodian, and Laotian parole (1975—1980): In late March 1975, a parole program was authorized for Vietnamese orphans, and the first 2,279 Vietnamese orphans were flown out on April 2, 1975 (INS 1975), and on April 18, 1975, the president authorized a large‐scale evacuation to Guam using parole. In FY 1975 alone, about 135,000 received parole. Congress funded (partially retroactively) the processing under the Indochina Migration and Refugee Assistance Act (Public Law 94–23, May 23, 1975). In August 1975, the program was expanded to Cambodians and Vietnamese with special connections to the United States, and on May 6, 1977, 11,000 more were authorized from Vietnam, Cambodia, or Laos. The three countries were grouped together in expansive programs starting August 11, 1977, January 25, 1978, June 14, 1978, December 5, 1978, April 13, 1979, October 16, 1979, and December 15, 1979. From 1975 to the middle of 1980—when the Refugee Act was enacted and replaced the parole programs—more than 330,000 Vietnamese, Cambodians, and Laotians were paroled into the United States. These refugees were all assessed on a case‐by‐case basis. Adjustment of status: In 1977, Congress passed Public Law 95–145 (October 1977) that authorized adjustment of status to anyone from Vietnam, Laos, or Cambodia who was paroled as a refugee before March 31, 1979—that is, about two years in the future. On October 5, 1978, Public Law 95–412 extended the date to September 30, 1980 and allowed any refugee to adjust from any country. Soviet and Eastern European parole (1977—1980): On January 13, 1977, the attorney general created a Special Parole Program for 4,000 Soviet Jewish refugees (INS 1977). In December 1978, another program was initiated for 5,000 Soviet Jews and Romanians (INS 1978). On June 14, 1978, the INS launched another parole program for Eastern European refugees, with 3,260 processed in FY 1978 and 8,740 processed in FY 1979 (INS 1978). On April 12, 1979, 25,000 additional entries were authorized and occurred under parole in 1979. On October 16 and December 15, 1979, 3,000 additional entries were authorized per month until the enactment of the Refugee Act in March 1980. Adjustment of Status: On October 5, 1978, Public Law 95–412 authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Lebanese parole (1978): On December 6, 1978, the attorney general announced the creation of a new parole program for 1,000 victims of civil strife in Lebanon, and by 1980, 349 had been used, and 107 were pending. Adjustment of Status: On October 5, 1978, Public Law 95–412 authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Cuban prisoner parole (1978, 1985): On December 6, 1978, following an invitation by the Castro regime to take them, the attorney general announced the creation of a new parole program for 3,500 political prisoners who were then imprisoned or released since August 1978 plus their family. Ultimately, 12,000 Cubans were paroled in FY 1979. On December 14, 1984, Cuba and the United States signed an agreement under which the United States would take 3,000 Cuban political prisoners through parole and the refugee program. In fiscal year 1988, the State Department and INS approved 2,040 prisoners for entry to the United States, and 928 entered the United States. Adjustment of status: The Cuban Adjustment Act of 1966 made it possible for Cuban parolees entering after 1959, including future parolees, to adjust their status to legal permanent residence after two years in the United States.
Iranian parole (1979—1982): On April 16, 1979, following the Islamic revolution in Iran, the INS granted "extended voluntary departure" to Iranians in the United States and began paroling others into the country. Precise parole figures were not kept, but "a large number" ("thousands") were paroled. Part of this parole effort was a program under which—as the State Department put it—"not too many questions were asked" about B‑2 visa applicants from Iran, and those clearly not qualified were often paroled anyway. In 1983, Iranians were included under the Refugee Act cap for the first time, which—the administration said—replaced "the practice of the past several years of admitting them through the Attorney General's parole authority." Adjustment of Status: On October 5, 1978, authorized adjustment of status for "any refugee, not otherwise eligible for retroactive adjustment of status, who was or is paroled into the United States by the Attorney General pursuant to section 212(d)(5) of the Immigration and Nationality Act before September 30, 1980."
Cuban/Haitian entrant parole (1980): In April 1980, thousands of Cubans began arriving in Florida from Mariel, Cuba, by boat. Initially, these Cubans were granted parole for 60 days and allowed to seek asylum under the procedures of the newly‐passed Refugee Act of 1980 (P.L. 96–212, March 1980). As the crisis escalated, INS declared on June 20, 1980 that it would extend 6‑month parole documents to Cubans and Haitians who had already arrived. On October 21, 1980, these 6‑month paroles were then authorized to be extended again to those who arrived before October 10, 1980. More than 125,000 Cubans and 25,000 Haitians were paroled. Congress passed a statute that recognized the existence of the Cuban and Haitian "entrant status" parole in 1981. Congress specifically authorized benefits for both past and future Cuban and Haitian parolees in The Refugee Education Assistance Act of 1980 (P.L. 96–422, October 10, 1980). On December 28, 1987, INS finalized a special regulation on the parole of Mariel boatlift Cubans detained since the boatlift ended, which resulted in about 7,000 additional paroles (or re‐paroles). Adjustment of Status: The Immigration Reform and Control Act of 1980 (P.L. 99–603, November 6, 1986) allowed any Cuban or Haitian who entered before 1982 and either received Cuban/Haitian entrant status or had a "record created" with the INS.
Parole from detention (1982—present): In 1981, the INS reversed its prior practice of not detaining people unless they were deemed a flight risk or a danger to the community. A court enjoined the policy, and the INS issued an interim regulation on July 9, 1982 that detailed the grounds under which it would issue parole from detention. On October 19, 1982, it finalized the regulation. This included the following categories of people eligible for parole from detention: people needing medical care, pregnant women, young children and teenagers whose processing will take longer than 30 days and who cannot be held with an accompanying adult; people with U.S. family eligible to petition for an immigrant visa for them; witnesses going to testify; people subject to prosecution; any other person whose "continued detention is not in the public interest." On March 6, 1997, INS reiterated its categories for those eligible for parole under the language of the new parole statute. On December 21, 2000, the INS revised its procedures for the parole of people ordered removed who could not be removed. Khmer border parole (1986): In May 1986, the attorney general created a parole program for Cambodians who fled the Khmer government to Thailand, had approved immigrant petitions filed by U.S. citizen family in the United States, and had no visa available to them because of the caps. A total of 53 approvals were made in 1986, and only 418 were made as of March 1988. In 1991, 1,123 received parole. This program ended in FY 1992. About 3,500 total paroles were issued. Adjustment of Status: The Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1989 (P.L. 101–167, November 21, 1989) allowed any Cambodian paroled into the United States between 1988 and September 30, 1990 (about ten months in the future) to adjust to legal permanent residence after one year if they had been denied refugee status.
Parole for U.S. expats (1987): On December 12, 1987, the United States announced that it would parole former‑U.S. citizens who renounced their U.S. citizenship and then were ordered deported by their new state of nationality. Soviet/Moscow Refugee Parole (1988—present): In August 1988, the attorney general overturned the presumption that Soviet Jews qualified as refugees. On December 8, 1988, he created a "public interest" parole program for 2,000 Soviets per month who were denied refugee status. Parolees needed to have sponsors in the United States and were not eligible for refugee benefits. A total of 7,652 were paroled in FY 1989. Congress reinstated the presumption of refugee status for Jews and Evangelical Christians from the Soviet Union in 1989 (P.L. 101–167, November 21, 1989). Parole continued after this change in part because Jews had a plausible offer of alternative resettlement in Israel and continued after the Soviet Union dissolved under the label of the Moscow Refugee Parole Program. About 17,000 Soviets were paroled from 1992 to 1998 (INS 1996, 1998). On August 6, 2007, responsibility for the Moscow Refugee Parole Program was transferred to USCIS. In July 2011, it was canceled. Adjustment of Status: The Foreign Operations Appropriations Act of 1989 (P.L. 101–167, November 21, 1989) allowed any Soviet paroled into the United States between 1988 and September 30, 1990 (about ten months in the future) to adjust to legal permanent residence after one year if they had been denied refugee status. In 1992, Estonia, Latvia, and Lithuania were added explicitly. This provision was then repeatedly reauthorized.
Orderly Departure Vietnam parole (1989—1999): In February 1989, the attorney general created a parole program to supplement the Orderly Departure refugee program from Vietnam, which was offered only to those denied refugee status. About 770 entered in 1989. Parole was also used for Vietnamese with immigrant visa petitions approved but who could not immigrate due to the caps. Some Laotians and Cambodians also were paroled. This program was created after the attorney general overturned the presumption that Vietnamese (and others) in refugee camps qualified as refugees under the Refugee Act of 1980. Parolees had to prepay their travel expenses. The program was closed at the end of fiscal year 1999 after about 32,000 paroles. Adjustment of Status: The Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1990 (P.L. 101–167, November 21, 1989) allowed any Vietnamese paroled into the United States between 1988 and September 30, 1990 (about ten months in the future) to adjust to legal permanent residence after one year if they had been denied refugee status. On November 6, 2000, Congress enacted the Foreign Operations Appropriations Act of 2001 (Public Law 106–429), which authorized adjustment of status for citizens or natives of Vietnam, Cambodia, or Laos paroled before October 1, 1997, even if they had not been denied refugee status.
Hungarian and Polish parole (1989): In the middle of 1989, Hungary and Poland's communist governments fell, meaning that refugees from those countries no longer feared persecution on political grounds. On November 21, 1989, the INS began denying them refugee status and paroled some 832 people who were already in the process, had been interviewed, and had family in the United States. Adjustment of Status: Section 646 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (Public Law 104–208, September 30, 1996) granted legal permanent residence to these parolees.
Undated 1990s parole categories: In 1990, the INS described the following grounds for parole at the time without giving a date for when they started being used: Spouses of U.S. military members who cannot qualify for visas because of the caps; Aged‐out children of immigrant visa applicants who had waited for years for a visa; Children of immigrant visa recipients who failed to immigrate soon after visa receipt and for whom a visa number is not immediately available; Someone who was trying to legalize their status by getting an immigrant visa, but the State Department erred in scheduling an appointment because there were no visa numbers available for them and is attempting to return to their U.S. residence. Adopted children of U.S. citizens who do not qualify as orphans; and Unaccompanied children in refugee camps with family in the United States.
Chinese parole (1990): On April 11, 1990, the president ordered the attorney general to defer the removal of unauthorized Chinese until January 1, 1994. The INS determined that parole for detained Chinese should be considered in the public interest. Adjustment of Status: Congress enacted the Chinese Student Protection Act of 1992 (Public Law 102–404, October 9, 1992) that provided permanent residence to Chinese who were covered by the president's order and in the United States on April 11, 1990, if they were inspected and admitted or paroled.
Parole of asylum seekers (1990—present): Paroling asylum seekers is a subset of parole under the 1982 regulations, the final category of which (public interest) was amenable to several interpretations. On May 1, 1990, INS launched a "pilot parole program" for detained asylum seekers with a limit of 200. The pilot was expanded and made permanent everywhere on April 20, 1992. From 1993 to 1996, there were about 3,800 to 4,500 asylum paroles. On October 7, 1998, the INS made having established a "credible fear" of persecution a presumptive category of eligibility for parole. On November 6, 2007, DHS eliminated this presumption. On December 8, 2009, DHS reinstated the presumption to parole those establishing a credible fear of persecution. Despite a memorandum from the DHS secretary in 2017 that stated parole should be used "sparingly," the 2009 directive remained in force, though widely flouted during the Trump administration years. On March 29, 2022, DHS lowered the standard to parole someone who had not yet established credible fear. Haitian Guantanamo parole (1991): A 1991 coup led to refugee flows by sea from Haiti to the United States. The U.S. government intercepted the boats and relocated Haitians to Guantanamo Bay, Cuba, for processing. In September 1991, the INS announced a new parole program for Haitians at Guantanamo Bay who demonstrated a "credible fear" of persecution. The program continued until May 1992 when it was suspended. A small number of Haitians continued to be paroled thereafter, but they faced a strong presumption that they should be returned to Haiti. They received one‐year parole authorizations. About 13,000 Haitians received parole from 1992 to 1996 (INS 1996, 1998; INS Parole Report 1999). Adjustment of Status: The Haitian Refugee Immigration Fairness Act (P.L. 105–277, October 21, 1998) provided for the adjustment of status to legal permanent residence for any Haitian in the United States as of December 31, 1995 who applied for asylum or was paroled into the United States after a finding of credible fear.
ABC Settlement Parole (1991): On January 31, 1991, the INS settled a lawsuit that challenged its asylum adjudication policies for certain Salvadorans and Guatemalans. As part of the agreement, certain Salvadorans and Guatemalans were permitted to reapply for asylum. Among these were 20,000 who were paroled into the United States to reapply in fiscal years 1993 and 1994. Adjustment of Status: Section 203 of the Nicaraguan Adjustment and Central American Relief Act (P.L. 105–100, November 2019) permitted these Guatemalans and Hondurans subject to the settlement agreement to apply for suspension of deportation (which provides legal permanent residence) under the lower pre‐1996 standards.
Adoptee parole (1994): On November 25, 1994, the INS created a new parole program for children adopted by U.S. citizens who did not fall into the "orphan" category required to receive an immigrant visa. Adjustment of Status: Congress passed Public Law 104–51 (November 15, 1995) to amend the definition of "child" to create green card eligibility for these children and other adoptees moving forward.
Cuban Migration Accord paroles (1994—present): On September 9, 1994, the United States and Cuba signed an agreement to pursue policies designed to reduce illegal immigration, including the United States maintaining a minimum level of 20,000 legal admissions of Cubans per year. The U.S. Coast Guard interdicted Cubans and moved them to Guantanamo Bay, Cuba. On October 14, 1994, the White House announced that the INS would parole unaccompanied children, people over age 70, and chronically ill people at Guantanamo Bay. On December 2, 1994, it announced it would consider paroling family units if children would be adversely affected by staying in Guantanamo Bay on a case‐by‐case basis. On May 2, 1995, the United States agreed to accept all 18,500 Cubans currently detained at Guantanamo Bay detention facility through parole, but end the practice of taking Cubans there and simply return them to Cuba. In order to meet the 20,000 immigration quota, the United States created the Special Cuban Migration Program to grant parole to about 5,000 Cubans per year through a lottery (which was restricted to those who met at least two of the following criteria: 1) having any relatives living in the United States, 2) 3 years of work experience, and 3) a high school or college degree). In 1995, 1,898 were granted parole through the lottery out of 189,000 applicants. On March 15, 1996, the second parole lottery registration was opened. There were 433,000 applicants. On June 15, 1998, the final registration period was opened for the lottery, and 541,00 applied by July 15, 1998. Those qualifying under the 1998 registration continued to be paroled thereafter. Since 1998, the Cuban government has refused to allow another registration to occur in the country. Around 75,000 Cubans were paroled under these programs from 1994 to 2003 (the last year that statistics were available). Adjustment of Status: All Cubans paroled after 1959 are eligible to adjust to legal permanent residence after one year in the United States under the Cuban Adjustment Act of 1966.
Cuban Wet Foot, Dry Foot parole (1995—2017): On May 2, 1995, the U.S. government announced that it would not parole any Cubans intercepted at sea, even if in U.S. waters, but it would parole anyone on U.S. soil or arriving at a port of entry. The Customs and Border Protection field manual provided that Cuban asylum seekers "may be paroled directly from the port of entry" except for those who "pose a criminal or terrorist threat." Subsequently, the number of Cubans paroled at ports of entry (mainly along the southwest border) increased significantly. From 2004 to 2016, 226,000 Cubans were paroled at U.S. land borders. On January 12, 2017, DHS canceled the wet foot, dry foot parole process. Adjustment of Status: All Cubans paroled after 1959 are eligible to adjust to legal permanent residence after one year in the United States under the Cuban Adjustment Act of 1966.
Iraqi parole (1996): On September 17, 1996, the United States began airlifting some Iraqi Kurds to Guam, where they were granted parole. A total of 6,550 Iraqi Kurds who worked with the United States and 650 opposition activists were granted parole starting in September 1996. Adjustment of Status: The FY 1999 Omnibus Appropriations Act (Public Law 105–277, October 21, 1998) waived the cap on green cards for those adjusting after receiving asylum for Iraqis evacuated via parole but did not create a special green card category.
Cuban Medical Professional Parole (CMPP) Program (2006—2017): On August 11, 2006, the Department of Homeland Security (DHS) created a new parole program for Cuban doctors in third countries conscripted by the government of Cuba. In fiscal year 2007, 480 of 28,000 Cuban physicians applied for parole. As of December 2010, 1,574 physicians were paroled. On January 12, 2017, DHS canceled the program except for dependents of the physicians already in the program. Adjustment of Status: All Cubans paroled after 1959 are eligible to adjust to legal permanent residence after one year in the United States under the Cuban Adjustment Act of 1966.
Parole in Place for family of U.S. veterans (2007—present): On June 21, 2007, DHS announced that it would grant parole to a spouse of a U.S. active duty soldier, enabling the spouse to adjust to a green card. This policy continued for the next six years. On November 15, 2013, DHS issued a memorandum that provided clearer guidance on this program and expanded it to include veterans of the armed forces. On November 23, 2016, DHS expanded the program to cover family of deceased veterans and adult or married children of veterans. The National Defense Authorization Act of 2020 (P.L. 116–92) expressed congressional support for an ongoing parole program for relatives of U.S. military members. Adjustment of Status: Spouses of U.S. citizens have an uncapped opportunity to apply for a green card, but parole enables them to apply for a green card by allowing them to meet the requirement that they were "admitted or paroled" prior to applying.
Cuban Family Reunification Parole (2007—2017, 2021—present): On November 21, 2007, the DHS created a new parole program for any Cuban with an approved family‐based petition for legal permanent residence. In December 2017, USCIS shut down its field office in Cuba and suspended the program. In 2014, DHS started requiring a fee for the parole program. On May 16, 2022, DHS announced that it would resume processing Cuban Family Reunification Parole cases. Adjustment of Status: All Cubans paroled after 1959 are eligible to adjust to legal permanent residence after one year in the United States under the Cuban Adjustment Act of 1966.
Haitian Orphan Parole Program (2010): Following a 2010 Earthquake, on January 18, 2010, DHS announced that it would parole Haitian orphans in the process of being adopted by U.S. citizens. It accepted applications through April 2010. Adjustment of Status: Help Haitian Adoptees Immediately to Integrate Act of 2010 (Help HAITI Act, Public Law 111–293, December 2010) authorized DHS to adjust the status of adoptees to legal permanent residence even if the formal adoption process was not complete in Haiti as a result of the Earthquake.
Haitian Earthquake paroles (2010—2016): Following a 2010 Earthquake, on January 13, 2010, ICE suspended deportations to Haiti, and ICE began to generally parole detained Haitians. CBP at ports of entry along the U.S.-Mexico border likewise began to parole Haitians rather than detain them for transfer to ICE. On January 25, 2010, DHS authorized an automatic extension of advance parole documents through March 12, 2010 for Haitians who had traveled outside the United States prior to the Earthquake after receiving advance parole. From 2010 to 2016, about 16,000 Haitians were paroled after being deemed inadmissible at ports of entry. Central American Minors (CAM) parole (2014—2017, 2021—present): On November 14, 2014, DHS and the State Department announced a combination refugee and parole program for Salvadoran, Guatemalan, and Honduran children with U.S. family sponsors in legal status in the United States (and the minor children of the child and in‐country parent of the child if married to the sponsoring U.S. parent). On July 26, 2016, DHS expanded the program to include other relatives, including siblings and any in‐country biological parent of the child. On August 16, 2017, DHS announced it would be canceling the parole program. On March 10, 2021, DHS and the State Department announced it would be restarting the program for those who previously applied before the termination in 2017. On June 15, 2021, they announced the program would reopen to new applicants, including children whose parents were in the United States with pending asylum applications. The parole is indefinite. On April 11, 2023, it expanded the program to allow sponsorship by parents of children who have pending T visa applications. As of December 2016, there were 10,758 applicants for the CAM program. Of these applicants, 873 had received refugee status, and 2,086 had received parole. In 2017, another 2,700 were permitted to enter. Haitian Family Reunification Parole (2014—present): On December 18, 2014, DHS created a new parole program for any Haitian with an approved family‐based immigrant visa petition if they have a priority date within two years of being current. On August 2, 2019, DHS announced it would terminate the program but would extend the parole of current participants. On October 12, 2021, it reversed its decision and continued the program. Filipino World War II Veterans Parole (FWVP) program (2016—present): On May 9, 2016, DHS created a new parole program for Filipino World War II veterans who have approved family‐based immigrant visa petitions. On August 2, 2019, DHS announced its plans to terminate the program but would extend the parole of current participants. On December 28, 2020, it proposed a regulation to finalize this change. On October 12, 2021, it reversed its earlier decision and continued the program. International Entrepreneur Parole (2017): On January 17, 2017, DHS created a parole program for certain entrepreneurs. On July 11, 2017, DHS published a rule delaying the effective date of the program. In December 2017, the rule delaying the rule was vacated by a court and was forced to implement the rule. From 2017 to 2019, 30 people applied, and only one approval was granted. Parole + Alternatives to Detention program (2021): On July 31, 2021, Border Patrol created a policy of paroling detained immigrants at the border when ICE cannot accept custody of the person, there isn't a risk to national security or public safety, processing capacity exceeds 75%, and arrivals exceed discharges, the average processing time exceeds two days, and arrivals will likely exceed discharges the following day. On November 2, 2021, the Border Patrol chief formalized this policy with respect to family units. On July 18, 2022, Customs and Border Protection expanded this policy to cover both families and single adults. On March 8, 2023, the policy was blocked by a federal district court judge after about 700,000 paroles. Afghan evacuation parole (2021): After the Taliban seized control of Afghanistan on August 15, 2021, the U.S. military began to fly thousands of Afghans to U.S. military bases in the region. On August 23, 2021, DHS launched a new parole operation under Operation Allies Welcome (OAW). In the next few weeks, it paroled more than 75,898 Afghans into the United States. After the initial evacuation, DHS received 50,000 parole requests from Afghans, adjudicated about 9,500, and denied all but about 500. In September 2022, DHS stated that Afghans abroad would generally no longer be considered for parole at all. On June 8, 2023, DHS announced it would extend the parole of Afghan parolees in the United States. The Extending Government Funding and Delivering Emergency Assistance Act of 2021 (P.L. 117–43, May 2022) provided refugee benefits to Afghan parolees, explicitly appropriating money for those benefits, and directing the creation of a plan to process pending Afghan parole applications between July 31, 2021, and September 30, 2022 or paroled into the United States after September 30, 2022 if a spouse or child of an Afghan parolee or parent or legal guardian of an unaccompanied Afghan child. Uniting for Ukraine (2022): After the Russian invasion of Ukraine, DHS decided to parole Ukrainians arriving at the U.S.-Mexico border ports of entry, formally announcing the policy on March 11, 2022, and about 23,000 were paroled with 1‑year admissions. On April 27, 2022, DHS created a new parole program for Ukrainians with U.S. sponsors. As of May 2022, DHS had paroled about 125,000 Ukrainians under the Uniting for Ukraine sponsorship program with 2‑year admissions. The Additional Ukraine Supplemental Appropriations Act of 2022 (P.L. 117–128, May 2022) provided refugee benefits to Ukrainians paroled between February 24, 2022 and September 30, 2023 or paroled into the United States after September 30, 2022 if a spouse or child of a Ukrainian parolee or parent or legal guardian of an unaccompanied Ukrainian child. On March 13, 2022, DHS extended the parole of the 23,000 paroled at ports of entry. Adjustment of Status: A Ukrainian Adjustment Act (H.R.3911) was introduced in 2023.
Cuban, Haitian, Nicaraguan, and Venezuelan parole sponsorship processes (2022—2023): On October 19, 2022, DHS created a parole program for Venezuelans with U.S. sponsors modeled on Uniting for Ukraine with a cap of 24,000. On January 9, 2023, DHS replaced this cap with a combined 30,000 per month cap for Venezuela, Haiti, Cuba, and Nicaragua (each of which received its own parole sponsorship programs the same day). 1.5 million applicants had applied by May 2023, and about 131,000 had been admitted. Adjustment of Status: All Cubans paroled after 1959 are eligible to adjust to legal permanent residence after one year in the United States under the Cuban Adjustment Act of 1966. A Venezuelan Adjustment Act (H.R. 7854) was introduced in 2022.
Family Reunification Parole Processes (2023): On July 10, 2023, DHS created family reunification parole programs for Colombians, Salvadorans, Guatemalans, and Hondurans who have approved immigrant visa petitions. Parole applicants had to be invited by the U.S. government. This announcement followed up on the May 2023 announcement that the United States wanted to accept as many as 100,000 individuals from El Salvador, Guatemala, and Honduras through the family reunification pathway. As of May 2023, there were 73,500 eligible for the program, but many more were waiting for their immigrant visas to be approved.