Policy Institutes

Good First Steps, But Real Surveillance Reform Will Require More

Cato Op-Eds - Fri, 01/17/2014 - 13:35

Julian Sanchez

The president’s speech on surveillance today proposed some welcome first steps toward appropriately limiting an expanding surveillance state — notably, an end to the NSA’s bulk phone metadata program in its current form, and a recognition that judges, not NSA analysts, must determine whose records will be scrutinized.

The details are important, however. Obama’s speech left open the possibility that bulk collection might continue with some third party — which would in effect be an arm of government — as a custodian. If records are left with phone carriers, on the other hand, it’s important to resist any new legal mandate that would require longer or more extensive retention of private data than ordinary business purposes require.

It was disappointing, however, to see that many of the recommendations offered by Obama’s own Surveillance Review Group were either neglected or specifically rejected. While the unconstitutional permanent gag orders attached to National Security Letters will be time-limited, they will continue to be issued by FBI agents, not judges, for sensitive financial and communications records.

Nor did the president address NSA’s myopic efforts to degrade the security of the Internet by compromising the encryption systems relied on by millions of innocent users. And it is also important to realize that changing one controversial program doesn’t alter the broader section 215 authority, which can still be used to collect other types of records in bulk—and for all we know, may already be used for that purpose.

Most fundamentally, Congress must now act to cement these reforms in legislation — and to extend them —to ensure safeguards implemented by one president cannot be secretly undone by another.

Categories: Policy Institutes

Damning Trade with Faint Praise

Cato Op-Eds - Fri, 01/17/2014 - 12:32

Daniel J. Ikenson

A Washington Post editorial today pushes back against the argument that a Trans-Pacific Partnership agreement would exacerbate income inequality. Amen, I suppose. But in making its case, the editorial burns the village to save it by conceding as fact certain destructive myths that undergird broad skepticism about trade and unify its opponents.

“All else being equal,” the editorial reads, “firms move where labor is cheapest.”  Presumably, by “all else being equal,” the editorial board means: if the quality of the factors of production were the same; if skill sets were identical; if workers were endowed with the same capital; if all production locations had equal access to ports and rail; if the proximity of large markets and other nodes in the supply chain were the same; if institutions supporting the rule of law were comparably rigorous or lax; if the risks of asset expropriation were the same; if regulations and taxes were identical; and so on, the final determinant in the production location decision would be the cost of labor. Fair enough. That untestable premise may be correct.

But back in reality, none of those conditions is equal. And what do we see? We see investment flowing (sometimes in the form of “firms mov[ing],” but more often in the form of firms supplementing domestic activities) to rich countries, not poor. In this recent study, I reported statistics from the Bureau of Economic Analysis revealing that:

Nearly three quarters of the $5.2 trillion stock of U.S.-owned direct investment abroad is concentrated in Europe, Canada, Japan, Australia, and Singapore. Contrary to persistent rumors, only 1.3 percent of the value of U.S.-outward FDI [foreign direct investment] was in China at the end of 2011.

Meanwhile, the United States (not China or Mexico) is the world’s #1 destination for FDI:

With a stock valued at $3.9 trillion, the United States is the top single-country destination for the world’s FDI outflows. There are plenty of reasons for that being the case, including the facts that the United States is the world’s largest market and has a sound legal system and a relatively transparent business environment. More than $4 out of every $5 of that stock (84.2%) is owned by Europeans, Canadians, and Japanese, with the U.S. manufacturing sector accounting for a full third of its value, making it the primary destination for inward FDI.

Are BASF, Michelin, BMW, Siemens, Airbus, InBev, Honda, Kia, Ikea, Shuanghui (recent Chinese purchaser of Smithfield Hams) and thousands of other foreign-headquartered companies invested here because labor is cheapest in the United States? They are here because firms conduct value-added activities wherever it makes the most sense to do so, given all of the considerations and restrictions that affect costs. For so many reasons, the United States is still the top destination for investment in manufacturing and most services industries. 

So stop. Just stop.

The editorial also indulges the most persistent myth of all, that increasing exports while minimizing imports is the purpose of trade agreements. As I’ve written on countless occasions in numerous different ways, increased imports are the real benefits of trade. Our exports are what we use to pay for our imports. If you prefer paying less for your products at the grocery store, you should prefer exporting less for the products you import. And for those concerned about income inequality—the editorial’s presumed audience—it is worth understanding that import competition increases choices and reduces prices, which means imports increase real incomes. 

The editorial concedes that imports from Vietnam may increase under the TPP (“suppose [the bilateral deficit] were to double”), but that the deficit “would still be tiny relative to the overall U.S. trade balance.” Instead of apologizing and rationalizing, as though this development were a cost, why not point out how lower-income Americans, in particular, would experience a lower cost of living because trade would reduce the cost of their clothing and footwear?

We need to do better a job explaining how trade does not lend itself to sports metaphors. Exports are not our “points.” Imports are not “their” points. The trade account is not a scoreboard. It is not Team America against the world. Trade is about mutually beneficial exchange between individuals in different political jurisdictions, and to the extent that those kinds of transactions are subject to the whims of politicians, more and more resources will be diverted from economic to political ends.

Though it may have had good intentions, the Washington Post should know better than to perpetuate simplistic myths spun by well-compensated K Street consultants on behalf of the business, labor, and environmental interests that benefit financially from restrictions on trade and investment.

Categories: Policy Institutes

Cato FOIA Request Reveals E-Verify Delays Hurt Workers

Cato Op-Eds - Fri, 01/17/2014 - 12:16

Alex Nowrasteh

Proponents of E-Verify, the Internet-based system to verify that a person is eligible to work in the United States, often tout its supposed speed and reliability. A recent Freedom of Information Act (FOIA) request from Cato has shed some light on how long it takes for the government to resolve contested tentative non-confirmations (TNC). The data should temper some enthusiasm for the system.

Our FOIA revealed that in 2012, the most recent year for which data are available, there were 68,775 contested TNCs through E-Verify. A TNC is an initial E-Verify determination that a worker is unlawful. Of those, 21,007 were handled by the Social Security Administration, with an average turnaround of 3.42 work day days.  

The Department of Homeland Security handled the other 47,768 contested TNCs, with an average turnaround of 6.01 work days. SSA deals with a lower volume of cases and deals with them in almost half the time that it takes DHS.

The information received as part of the FOIA included further breakdowns of resolution time:

Number of Days to Resolve

FY

Contested SSA TNC Cases

≤ 1 Day 1 to 2 Days 2 to 3 Days 3 to 8 Days ≥ 8 Days

2008

4,708

1,536

952

2,932

918

2009

3,180

987

577

1,800

748

2010

6,094

2,093

1,261

3,906

1,503

2011

6,274

2,221

1,344

4,503

1,695

2012

7,778

2,791

1,853

6,122

2,463

 

37.0%

13.3%

8.8%

29.1%

11.7%

FY

Contested DHS TNC Cases

≤ 1 Day 1 to 2 Days 2 to 3 Days 3 to 8 Days ≥ 8 Days

2008

5,284

855

530

1,118

16,924

2009

5,977

828

538

1,128

16,345

2010

11,880

2,053

1,172

2,587

20,936

2011

15,445

3,010

1,762

3,637

21,380

2012

16,246

3,166

1,928

4,224

22,204

 

34.0%

6.6%

4.0%

8.8%

46.5%

As can be seen, not only was DHS slower in resolving its cases, but nearly half of its cases took longer than 8 work days to resolve. Some 55.3 percent took over 3 work days for DHS resolve.

Some 52 million American workers were hired in 2012 and they were subjected to 21.1 million queries. This gives an indication that today’s relatively short delays would increase if tens of millions of additional American workers are forced to use E-Verify annually. 

Worse, Sen. Jeff Sessions (R-Ala.) has offered an amendment for national E-Verify that would require verification of all existing employees who were not previously verified—with a three-month deadline. There is a total civilian labor force of roughly 155 million people. Running more than 100 million workers through E-Verify within three months, as Senator Sessions’ amendment requires, would dramatically increase the wait time for resolving contested TNCs.

The 68,775 contested TNCs in 2012 came from a pool of 21.1 million total E-Verify queries nationwide, about 0.33 percent. Importantly, that is a percentage of contested TNCs to actual queries. It’s likely that individual workers were run through E-Verify by the same employer more than once, increasing the number of queries relative to the number of workers checked through E-Verify. That means that the rate of contested TNCs per worker run through E-Verify is actually higher than indicated here.

Applying that same rate to the 155 million workers Sessions envisions would produce 511,500 contested TNCs. About 36 percent of those, or 184,140, would take eight days or more to resolve—assuming (laughably) that increasing the number of people run through E-Verify by a factor of 7 will have no effect on speed.

The economic costs of nationally mandating E-Verify caused by TNC resolution delays will be higher than many of its proponents care to admit. That and the other economic costs of E-Verify, the worrying privacy issues surrounding it, its lackluster performance, and how it makes everyone ask for permission from the government to work should temper enthusiasm for this scheme.         

This post was written with the help of Scott Platton.  

Categories: Policy Institutes

New Study on Air Traffic Control Reform

Cato Op-Eds - Fri, 01/17/2014 - 10:28

Chris Edwards

Robert Poole is one the nation’s top experts on privatization and transportation policy reform. He has a great new Hudson Institute study on problems with our air traffic control (ATC) system and ideas for restructuring it. The nation’s ATC system is operated by the Federal Aviation Administration (FAA). Here are some of Bob’s findings:

  • The features and procedures of our government-run ATC system “have remained remarkably unchanged through a half century of dramatic advances in technology” elsewhere in the economy.
  • Our ATC system “has fallen well behind the capacity of new technologies to provide  safer, faster, more reliable, and more fuel efficient air travel and to keep up with the increasing volume of air travel.”
  • “Nearly all communications are still by voice radio, despite the ubiquity of text messaging and its greater ease and accuracy for routine communications.”
  • “Radar remains the principal means of aircraft position surveillance, despite the much greater accuracy of GPS and other systems.”
  • The FAA “is slow to embrace promising innovations in outside research organizations or private-sector companies.”
  • The FAA “does a poor job of procuring new technology, with many programs eventually cancelled or emerging years late at inflated cost.”
  • The FAA “is particularly resistant to high-potential innovations that would disrupt its own institutional status quo.”
  • Canada, Australia, New Zealand, Britain, and Germany are doing a better job of embracing new technologies for ATC. These countries have restructured their systems as self-supporting organizations outside of their government bureaucracies.

Ultimately, the culprit for America falling behind on ATC is not the FAA, but Congress. Congress has its head buried in the sand. Aviation demand is rising and our government-run system is not up to the challenge. ATC is an increasingly dynamic, high-tech business, and it is too important to consign to the lethargy, inefficiency, and bungling that dominates so many Washington bureaucracies.    For more, see this study on airport and ATC reform, and this op-ed on privatizing ATC. Bob’s work at the Reason Foundation is here.

Categories: Policy Institutes

In Maryland, A Left-Right Alliance on Surveillance

Cato Op-Eds - Fri, 01/17/2014 - 09:10

Walter Olson

Some issues lend themselves well to cooperation between liberals and conservatives who can both see the need to limit the arbitrary power of government. One prime prospect: the dangers to individual privacy of government surveillance run amok. This week in Annapolis several members of the Maryland legislature held a press conference to announce that they would push for an agenda of reforms setting out rules for law enforcement’s use of techniques including phone location tracking, automatic license plate readers, email surveillance, and drones. The group is led by Sen. Jamie Raskin (D-Silver Spring), one of the strongest liberals in the state legislature, and Sen. Chris Shank (R-Hagerstown), one of the strongest conservatives. Here (quoting verbatim) is the summary provided by the ACLU of Maryland

  • Email surveillance. Legislation to require that law enforcement go before a neutral arbiter and prove that the information they are obtaining is likely to turn up evidence of a crime before intercepting and accessing online data.
  • Location Tracking. Legislation to require that law enforcement get a warrant based on probable cause prior to obtaining mobile phone tracking information.
  • Drones. Legislation to impose limits and regulations on aerial surveillance that would protect against police fishing expeditions, and abusive use of these tools.
  • Automatic License Plate Recorders. Legislation that would keep law enforcement from storing records of license plates and locations that are not ‘hits’ against any database.

Others sponsoring the bills include Democratic delegates from Baltimore City and Montgomery County as well as Del. Mike Smigiel (R-Eastern Shore), a prominent supporter of Second Amendment rights. 

Looks like something worth keeping an eye on.

Categories: Policy Institutes

Obama Allows Congress to Participate in Lawmaking

Cato Op-Eds - Fri, 01/17/2014 - 09:09

David Boaz

This headline appeared in Thursday’s Washington Post:

The story reports that President Obama “will call on Congress to help determine the [NSA surveillance] program’s future. Which is good because Article I, Section 1, of the Constitution of the United States provides that:

All legislative Powers herein granted shall be vested in a Congress of the United States.

Deciding the scope and extent of any federal surveillance powers is clearly a legislative matter. Subject to the constraints imposed by the Constitution’s limits on federal powers, legislative powers are vested in Congress, not the president. How can reporters (and headline writers) write so cavalierly about the president “giving” Congress a chance to “weigh in” on matters of fundamental law? This headline should be as jarring as one reading, “Obama plans to give Supreme Court a say in fate of NSA program.” It isn’t up to the president. The legislative branch is empowered by the Constitution to make law, and the judicial branch is empowered to strike down legislative and executive actions not authorized by the Constitution. The president’s job is to “take Care that the Laws be faithfully executed.”

Arthur Schlesinger Jr. wrote that the rise of presidential power ‘‘was as much a matter of congressional acquiescence as of presidential usurpation.’’ It’s time for Congress to stop acquiescing. And for journalists to remind readers of the powers granted to presidents in the Constitution.

Categories: Policy Institutes

Hot Air About Cold Air

Cato Op-Eds - Thu, 01/16/2014 - 17:36

Patrick J. Michaels and Paul C. "Chip" Knappenberger

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

Last summer, we predicted that come this winter, any type of severe weather event was going to be linked to pernicious industrial activity (via global warming) through a new mechanism that had become a media darling—the loss of late summer/early fall Arctic sea ice leading to more persistent patterns in the jet stream. These are known as “blocking” patterns, which generally means that the same type of weather (usually somewhat extremish) hangs around longer than usual.

This global-warming-leading-to-more-extreme-winter-weather mechanism has been presented in several recent papers, perhaps the most noteworthy of which was a 2012 publication by Jennifer Francis and Stephen Vavrus, which was the subject of one of our blog posts last summer. We noted then how their idea ran counter to much of the extant literature of the topic as well as a host of other newly published papers investigating historical jet stream patterns.

After running through a list of observations compiled from the scientific literature countering the Francis and Vavrus explanation of things, we nevertheless wondered:

It’ll be interesting to see during this upcoming winter season how often the press—which seems intent on seeking to relate all bad weather events to anthropogenic global warming—turns to the Francis and Vavrus explanation of winter weather events, and whether or not the growing body of new and conflicting science is ever brought up.

We didn’t have to wait long. After a couple of early winter southward Arctic air excursions, the familiar and benign-sounding “jet stream” had become the “polar vortex”[1] which “sucked in” the United States. Of course, the U.S. being sucked into a polar vortex was part and parcel of what was to be expected from global warming.

Since we had predicted this action/reaction, we weren’t terribly surprised.

What did surprise us (although perhaps it shouldn’t have) is that the White House joined in the polar vortex horror show and released a video in which John Holdren, the  President’s Science Advisor—arguably the highest ranking “scientist” in the U.S.—linked the frigid air to global warming:

The Polar Vortex Explained in 2 Minutes

In the video, Holdren boldly stated:

 …a growing body of evidence suggests that kind of extreme cold being experienced by much of the United States as we speak is a pattern that we can expect to see with increasing frequency as global warming continues…

It seems that Holdren neither keeps up with our writings at Cato nor the scientific literature on the topic.

While perhaps it could be argued that Holdren’s statement is not an outright lie, it is, at its very best, a half-truth and even a stretch at that. For in fact, there is a larger and faster growing body of evidence that directly disputes Holdren’s contention.

In addition to the evidence that we reported on here and here, a couple of brand new papers just hit the scientific journals this month that emphatically reject the hypothesis that global warming is leading to more blocking patterns in the jet stream (and accompanying severe weather outbreaks across the U.S.).

The first paper is a modeling paper by a team of U.K. scientists led by Giacomo Masato from the University of Reading. Masato and his colleagues looked at how the magnitude and frequency of atmospheric blocking events in the Atlantic-Europe region is projected to change in the future according to four climate models which the authors claim match the observed characteristics of blocking events in this region pretty well. What they found was completely contradictory to Holdren’s claim. While the researchers did note a model-projected small future increase in the frequency of blocking patterns over the Atlantic (the ones which impact the weather in the U.S.), they found that the both the strength of the blocking events as well as the associated surface temperature anomalies over the continental U.S. were considerably moderated. In other words, global warming was expected to make “polar vortex” associated cold outbreaks less cold.

The second paper is by a research team led by Colorado State University’s Elizabeth Barnes. In their paper “Exploring recent trends in Northern Hemisphere blocking,” Barnes and colleagues used various meteorological definitions of “blocking” along with various datasets of atmospheric conditions to assess whether or not there have been any trends in the frequency of blocking events that could be tied to changes in global warming and/or the declines in Arctic sea ice.

They found no such associations.

From their conclusions:

[T]he link between recent Arctic warming and increased Northern Hemisphere blocking is currently not supported by observations. While Arctic sea ice experienced unprecedented losses in recent years, blocking frequencies in these years do not appear exceptional, falling well within their historically observed range. The large variability of blocking occurrence, on both inter-annual and decadal time scales, underscores the difficulty in separating any potentially forced response from natural variability.

In other words natural variability dominates the observed record making it impossible to detect any human-caused global warming signal even if one were to exist (which there is no proof of).

So, the most recent science shows 1) no observed relationship between global warming and winter severe weather outbreaks and 2) future “polar vortex”-associated cold outbreaks are projected to mollify—yet the White House prepares a special video proclaiming the opposite with the intent to spread climate alarm.

Full scientific disclosure in matters pertaining to global warming is not a characteristic that we have come to expect with this Administration.

References:

Barnes, E., et al., 2014. Exploring recent trends in Northern Hemisphere blocking. Geophysical Research Letters, doi:10.1002/2013GL058745.

Francis, J. A. and S. J. Vavrus, 2012: Evidence linking Arctic amplification to extreme weather in mid-latitudes. Geophysical Research Letters, 39, doi:10.1029/2012GL051000.

Masato, G., T. Woollings, and B.J. Hoskins, 2014. Structure and impact of atmospheric blocking over the Euro-Atlantic region in present day and future simulations. Geophysical Research Letters, doi:10.1002/2013GL058570.

[1] For what it’s worth, there’s been two polar vortices (north and south) on planet earth ever since it acquired an atmosphere and maintains rotation. 

Categories: Policy Institutes

How's That Oversight Coming Along?

Cato Op-Eds - Thu, 01/16/2014 - 15:41

Jim Harper

One of the claims made by defenders of NSA spying is that it’s overseen and approved by all three branches of the federal government.

Computer security expert Bruce Schneier provides some insight into how well congressional oversight is working in a short blog post entitled: “Today I Briefed Congress on the NSA.”

This morning I spent an hour in a closed room with six Members of Congress: Rep. Logfren, Rep. Sensenbrenner, Rep. Scott, Rep. Goodlate, Rep Thompson, and Rep. Amash. No staffers, no public: just them. Lofgren asked me to brief her and a few Representatives on the NSA. She said that the NSA wasn’t forthcoming about their activities, and they wanted me – as someone with access to the Snowden documents – to explain to them what the NSA was doing.

Many members of Congress have been derelict for years in not overseeing the National Security Agency. Now some members of Congress are asking questions, and they’re being stonewalled.

It’s the government so…

I suggested that we hold this meeting in a SCIF, because they wanted me to talk about top secret documents that had not been made public. The problem is that I, as someone without a clearance, would not be allowed into the SCIF.

Randy Barnett and I made the case last fall that the panels of judges who approve domestic spying under the Foreign Intelligence Surveillance Act should not be regarded as legitimate courts. Their use to dispose of Americans’ rights violates due process.

And the executive branch? Here’s President Obama: “I mean, part of the problem here is we get these through the press and then I’ve got to go back and find out what’s going on…”

How’s that tri-partite oversight coming along?

Categories: Policy Institutes

Fordham's Confusion Over Means and Ends

Cato Op-Eds - Thu, 01/16/2014 - 12:50

Jason Bedrick

On Tuesday, the Fordham Institute released a “toolkit” proposing that all private schools accepting students participating in school choice programs be required to administer the state test. Low-performing schools would be forbidden to participate in the school choice program. As I explained then, that would de facto entail forcing almost all private schools into the Common Core regime, thereby stifling innovation and diversity. The Friedman Foundation pointed to a recent study showing how parents hold private schools accountable already. Matt Ladner highlighted Fordham’s own previous research that exposed state accountability measures as fradulant “illusions.” Greg Forster cast a gimlet eye on Fordham’s assurance that existing private schools don’t really mind the state tests:

Once again, Fordham is operating out of a top-down, anti-entrepreneurial mindset. Existing private schools are not the voice of entrepreneurial innovation. They are the rump left behind by the crowding out of a real private school marketplace; they are niche providers who have found a way to make a cozy go of it in the nooks and crannies left behind by the state monopoly. They are protecting their turf against innovators just as much as the state monopoly.

Milton once used the analogy of hot dog vendors. If you put a “free” government hot dog vendor on every street corner, the real hot dog vendors will all vanish. The same has happened to private schools. If we extend the analogy, we could say that a few hot dog vendors might survive by catering to niche markets – maybe the government hot dog stands can’t sell kosher hot dogs because that would be entanglement with religion. But the niche vendors would not be representative of all that is possible in the field of hot dog vending.

And the private schools that don’t participate in choice programs are probably the least entrepreneurial. Notice, for example, that their top complaint is that choice isn’t universal. Why would that prevent them from participating in choice programs? Wouldn’t they want to reach out and serve the kids they can serve, even as they advocate for expansion of the programs to serve others? The private schools participating in choice programs are doing so; they may not be paragons of entrepreneurship, but they are at least entrepreneurial enough to want to help as many kids as they can. The demand for bigger choice payments is also not a sign of hungry innovation on their part (even if the choice payments are paltry in may places).

In response, Fordham’s new president, Michael Petrilli, acknowledges (some of) these concerns, but oddly claims that since we don’t share his proposed government solution, we also must not share his concern about poorly performing private schools. It’s as though Petrilli proposes dousing a burning building with gasoline but when others object that this is a bad idea, he accuses them of thinking that the burning building is a not really a problem.

Sure, as Petrilli notes, there are poorly performing private schools just as there are poorly performing government schools. The question is which system is more likely to reduce the number of bad schools and increase the number of good ones: a system of uniform accountability to the government or a diverse and innovative system where accountability is directly to parents? We believe that the evidence supports the latter and demonstrated why the evidence Fordham relies on lies somewhere between flimsy and non-existent.

Petrilli has at least shown a potential willingness to back down from the worst elements of his proposal:

Maybe the tests that voucher students take need not be the state tests so long as they’re solid measures of achievement. Perhaps we need to let schools point to alternative measures of student outcomes before they are kicked out of choice programs. Possibly we need an accountability regime that’s completely separate from that which governs the public schools. Such compromises might help to ensure that the educational diversity of the private school marketplace isn’t inadvertently diminished.

Unfortunately, he still clings to the notion that what we have now is somehow a “market” in education, concluding: “But the answer cannot be ‘let the market figure it out.’ Because it hasn’t, and it won’t—and somebody must.” But as Forster noted, a system where 90 percent of the “market” is consumed by the “free” government schools is not really a market. If we really want more accountability, then we need more choices. Even Petrilli admits that sometimes families choose a poorly performing private school because it’s the only alternative to a worse performing (or unsafe) government school. Eliminating that alternative by forbidding the private school from participating in a school choice program won’t do any good for those low-income families who will then be shuffled back to the government school.

Instead of government-induced conformity, let’s push for broader education choice programs that give the private schools the space to innovate.

Categories: Policy Institutes

What the DEA and Drug Traffickers Have in Common

Cato Op-Eds - Thu, 01/16/2014 - 11:48

Jeffrey A. Miron

In today’s WaPo, the DEA’s Chief of Operations James L. Capra claims that: 

the movement to decriminalize the sale of pot in the United States will have severe consequences. … Every part of the world where this has been tried, it has failed time and time again.

Capra’s assertion is so ignorant of the facts that it merits little comment; instead, read Glenn Greenwald’s Cato study on decriminalization in Portugal, which shows just the opposite of Capra’s claim.

Capra’s statement about “severe consequences” is not entirely wrong, however; legalization will put thousands of DEA and other law enforcement officials out of work! Perhaps, therefore, the government should outlaw food, clothing, and shelter; then we could emply billions in the attempt to enforce those laws.

An interesting side note is that, like law enforcement officials, drug traffickers also fear legalization. See minute 4:00 of this video.

 

Categories: Policy Institutes

Egypt’s Shambolic Constitutional Process

Cato Op-Eds - Thu, 01/16/2014 - 11:45

Dalibor Rohac

Don’t let yourself be fooled by the overwhelming approval of the new Egyptian constitution in the referendum held earlier this week. While, according to preliminary results, the vast majority of roughly 37 percent of Egyptians who showed up at the polls backed the proposal, very little about the document itself or about the process through which it has come about is consistent with the idea of liberal democracy and limited government. Yesterday’s Bloomberg View editorial summarizes all one needs to know about the new constitution:

The armed forces would for at least the next eight years be independent of civilian control, including over their budget, as they were under former President Hosni Mubarak, himself an air force commander. Military courts would remain autonomous and would have jurisdiction over civilians in many instances. The hated police would also get greater independence, while the Supreme Court would be able to decide its size and membership for itself.

Neither should there be any illusions about the events leading to the adoption of the document. The referendum followed months of a deliberate crackdown on the opposition and disbanding of the largest political force in the country – not to speak of the arrests of activists of the ‘no’ campaign.

In short, Egypt seems to be coming full circle to where it was before the events of the Arab Spring, particularly if General Abdel Fattah el-Sisi announces his candidature for the country’s highest office. The question is how long the Egyptians are willing to put up with it.

As a side note, the constitutional process in Tunisia looks much more encouraging, although as Emmanuel Martin and I argue here, the new constitution is unlikely to be a an impetus for the badly needed economic reforms.

Categories: Policy Institutes

What to Look for in the Upcoming Trade Policy Debate

Cato Op-Eds - Wed, 01/15/2014 - 12:50

K. William Watson

The most important piece of trade legislation Congress has dealt with in years was introduced in the House and Senate last week. The “Bipartisan Congressional Trade Priorities Act of 2014” sets out the parameters for renewing trade promotion authority (TPA), originally known as “fast track,” in order to ease eventual passage of the Trans-Pacific Partnership and other agreements through Congress. There will be a lot of debate in the coming months about what U.S. trade policy should look like, and this TPA bill will do a lot to establish the agenda.

The new bill largely mirrors the last TPA grant in 2002.  The basic idea of fast track is that Congress agrees to hold an up-or-down vote on any trade agreement submitted by the president, while the president agrees to adopt a series of negotiating objectives laid out by Congress. 

I’ve explained before why I think TPA is not necessary right now to get agreements through Congress and why it could even make the TPP negotiations more difficult. However, that argument is temporarily moot since this TPA bill is on the table and will apply not only to the TPP but to the U.S.-EU trade agreement and any World Trade Organzation negotiations for the next four years. 

Defeat of this bill could quite possibly kill any chance the president has to conclude trade agreements before the end of his term. Also, the negotiating objectives included in the new bill are not as bad as I had feared.

At this point, we should be talking about what’s in the new TPA bill and how it might change as the debate heats up.

For starters, the bill’s weak language on currency manipulation is particularly encouraging. American automakers and their allies among House Democrats have made “misaligned” foreign currency their number one trade issue and have insisted on very strong language in TPA. The administration, however, has stated that it does not want the issue addressed in the TPP agreement, as other countries in the negotiations are strongly opposed to the inclusion of currency rules. 

The current text of the TPA bill calls out currency manipulation as a problem but leaves the president a lot of discretion. The political cost of that discretion has been a complete lack of support from House Democrats. Dan Ikenson has explained the troubling politics of this situation and calls for the president to take a tougher stance against Detroit if he wants to make progress with his own trade agenda.

On labor and the environment, the new TPA bill maintains the status quo in U.S. trade policy. The language requiring our trade partners to abide by specific international labor and environmental agreements was not included in the 2002 TPA but reflects a compromise reached in 2007, when Democrats took control of the House. Despite the fact that Republicans have regained their majority, many were worried that the new TPA would impose even stronger objectives on labor and environmental requirements. 

If support from House Democrats is already lost because of the currency issue, Republicans may want to consider whether there’s any room to roll back the objectives on labor and environment. Free trade should not be contingent on the adoption of foreign labor and environmental standards. As Dan Griswold succinctly explained when Congress was debating another fast track bill fifteen years ago:

This debate is not about worker rights or a cleaner environment. It’s about the freedom of people in America and abroad to engage in mutually beneficial trade. In the real world, the international standards and trade sanctions that opponents of fast-track insist upon could in fact slow progress toward better living standards in poor countries.

Now fast track imposes those very same standards and sanctions, but opponents are still not satisfied. Perhaps this Congress in 2014 is incapable of imbuing the trade agenda with much-needed faith in the free market, but there’s little to lose from trying.

The new TPA bill also continues the past policy of promoting strong intellectual property rules through trade agreements. This is an area where the United States has to expend a considerable amount of negotiating capital to get marginal changes in foreign IP laws that benefit a handful of U.S. industries. 

IP has also become a focus of domestic opposition to the U.S. trade agenda, as copyright and patent reform advocates recognize the dangers of locking-in bad policy through international agreements. Like labor and environmental targets, the IP component of the trade agenda is an issue where congressional consensus exists despite a pressing need for serious debate.

Finally, some separate trade initiatives may get tied-in to the passage of TPA.

Democrats are certain to insist on an extension of the Trade Adjustment Assistance program before supporting TPA. Trade Adjustment Assistance provides greater welfare benefits to people who can tie their job loss to import competition. It is an entitlement program whose primary purpose is to demonize trade while assuaging anti-trade constituencies. In truth, these jobs are lost due to economic growth and trade is only one of many ways to ensure a dynamic and competitive economy.

Also, the Generalized System of Preferences program that grants tariff-free treatment to imports from poor countries could be extended in conjunction with passage of TPA. The program, though it has its faults, helps many consumers and producers in the United States and creates economic opportunity for people who desperately need it. Despite being generally popular in Congress, the program expired last year.

TPA offers Congress an opportunity both to support and to shape the U.S. trade agenda. Perhaps the current set of negotiating objectives is the best that can be done with this particular Congress this year.  But, this is a good time to have a debate about the goals of U.S. trade policy: to consider ways to make it better and, especially, to keep it from getting worse.

Categories: Policy Institutes

Does Banning Walmart Help Mom-and-Pop Retailers?

Cato Op-Eds - Wed, 01/15/2014 - 12:33

Jeffrey A. Miron

As “Big-Box” retailers like Walmart have proflierated in recent years, “Mom-and-Pop” retailers have asked local governments to ban or limit Big Boxes, arguing that Walmart and their ilk drive small, independent retailers out of business.

One response to this complaint is, “Too bad.”  Walmart’s large size allows it to operate efficiently and offer low prices; independents are less efficient and so should get driven out of business.  Independents may be better than Big Boxes at service, convenience, specialty items, and “personality,” so many will survive despite nearby Big Boxes.  But if some fail and exit, that is what economic efficiency demands.

A different response is that, even if Big Box entry hurts independents, laws that limit Big Boxes do not necessarily help independents.  That is precisely the conclusion of new research by Raffaella Sadun (Harvard Business School).  Analyzing entry regulation in the United Kingdom, she finds that

independent retailers were actually harmed by the creation of entry barriers against large stores. Instead of simply reducing the number of new large stores entering a market, the entry barriers created the incentive for large retail chains to invest in smaller and more centrally located formats, which competed more directly with independents and accelerated their decline.

Thus even if policymakers want to protect small retailers, the “treatment” (government intervention) can be worse than the “disease” (competition)!

Categories: Policy Institutes

Minimum Wage and Unemployment

Cato Op-Eds - Wed, 01/15/2014 - 10:11

William Poole

Seventy-five economists, including seven Nobel winners, have signed a letter advocating an increase in the minimum wage. The letter was preceded by a New York Times editorial on January 2 making the same argument. I assume that there will be an opposing letter shortly, probably also including some Nobel signers. These minimum wage campaigns arise from time to time; this exchange is old hat, but worth reviewing briefly.

The Economics

The new letter claims that “… the weight of evidence now show[s] that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers … .” Relatively few op-ed readers are economists, but anyone interested in the evidence should consider a 2007 National Bureau of Economic Research (NBER) paper by David Neumark and William Wascher, “Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research.” Here is the abstract:

We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the new minimum wage research beginning in the early 1990s. Our review indicates that there is a wide range of existing estimates and, accordingly, a lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage. However, the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect. A sizable majority of the studies surveyed in this monograph give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects, both for the United States as well as for many other countries. Two other important conclusions emerge from our review. First, we see very few - if any - studies that provide convincing evidence of positive employment effects of minimum wages, especially from those studies that focus on the broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.

It is not hard to explain to the noneconomist why some studies suggest no effect of the minimum wage on employment. In the past, changes in the minimum wage have been relatively small. Trying to sort out the effects of the increase from everything else going on requires high-powered statistics, and even then the effects can be buried by a host of other simultaneous disturbances and influences.

So, consider the following common-sense thought experiment: Suppose Congress were to enact a minimum wage $50 higher than the current one of $7.25 per hour. Would a minimum of $57.25 reduce employment? I know of no economist who would assert a zero effect in this case, and recommend that readers ask their economist friends about this thought experiment. Assume that the estimate is that a minimum of $57.25 would reduce employment by 100,000. The actual number would be far higher but 100,000 will do for this thought experiment. Now, consider several other possible increases of less than $50. The larger of these increases would have substantial effects, the smaller ones smaller effects.

But is there reason to believe that a minimum of $10 would have no effect? I have never seen a convincing argument to justify that belief. If you accept as a fact that a minimum wage of $57.25 would reduce employment, and you accept as a fact that some workers are currently paid $7.25 per hour, then logic compels you to believe that a small increase in the minimum wage above $7.25 will have at least a small negative effect on employment.

The only escape from this logic is to believe that there is a discontinuity in the relationship between the minimum wage and employment. No one has offered evidence that there is a discontinuity at a certain minimum wage such that a minimum above that has an effect and one below does not.

A wage above $7.25 is readily available to anyone willing to move to low-unemployment area such as North Dakota. Instead of calling for a higher federal minimum wage, why not call for federal assistance helping workers to move to labor-short states?

The Ethics of a Minimum Wage Increase

If you accept that a small increase in the minimum wage will have some small negative effect on employment, then you need to consider the nature of the trade-off involved. Those who remain employed—and most workers will remain employed if the minimum wage increase is small—will enjoy the benefits of the higher wage and will thank the politicians who gave it to them. Those who lose employment will, most likely, not even realize that the minimum wage is the cause. Why? Because most firms will adjust by letting attrition run down staff size. Most minimum wage jobs are in industries with high turnover. Thus, few workers are fired; instead, some are not hired to replace workers turning over. Workers not hired are unlikely to have any idea as to the reason.

Who are the workers not hired? They are the least skilled, most disadvantaged members of society. The bottom line is that those who advocate an increase in the minimum wage are willing to trade the higher wages of those who remain employed for reduced employment opportunities for the least skilled.

I finish with a personal story. I remember my father telling me of an effect from the minimum wage increase from $1.00 to $1.15 effective September 1961. The same legislation scheduled a further increase to $1.25 in September 1963. Dad described how the DuPont Company at that point decided to automate elevators in its office building in Wilmington, Delaware. The old elevators worked fine, but required an operator. Within a short time, all the elevators were automated and the operators of the old ones had no jobs.

Today, even modest increases in the minimum wage will have similar effects. For example, fast-food restaurants will replace order takers with electronic order stations that accept cash and credit cards for payment and relay the orders directly to the kitchen.

I wish it were possible for today’s long-term unemployed to plead with the economists and editorial writers not to advocate a higher minimum wage. Will those advocating a higher minimum wage be willing meet face to face with disadvantaged members of society, who are willing and able to work, and explain why their employment needs to be sacrificed for higher wages for those who remain employed?

 

Categories: Policy Institutes

North Korean Politics as Blood Sport: China May be a Target Too

Cato Op-Eds - Tue, 01/14/2014 - 16:54

Doug Bandow

North Korea has never been an easy ally for the People’s Republic of China. With the execution of Jang Song-taek, Kim Jong-un’s uncle and supposed mentor, Beijing’s uncertain clout in Pyongyang is at risk. 

“Dear Leader” Kim Jong-il has been dead barely two years, but his son appears to have turned politics there into blood sport. While family members, including Jang under both Kim Il-sung and Kim Jong-il, were commonly sidelined, they never were publicly executed. 

Now the game has changed. Although Kim appears to be in firm control, the circumstances are extraordinary. A quick execution is as much a sign of weakness as strength, suggesting the need to dispatch a dangerous rival who might gather support. Undertaking a broad and deadly purge creates not only uncertainty but desperation, which might spark unexpected resistance.

As I recently wrote in US-China Focus:

The most obvious concern over the DPRK concerns a foreign policy which has gotten more erratic and confrontational since Kim Jong-il’s death. Kim regularly employed brinkmanship as policy, but always seemed to know just when to stop. Kim fils has demonstrated no such limits. His latest threat of war against South Korea went by fax to Seoul. The possibility of mistake or miscalculation seems much higher.

There also is rising doubt as to the PRC’s ability to offer a moderating influence on Pyongyang. China’s relationship with the DPRK never has been easy. Still, Chinese energy and food aid has been essential, and most recently Chinese investment has provided the DPRK an economic lifeline. 

There has been a recent hardening of attitudes in the PRC. Nevertheless, until now the North continued to seek support from China. But now Jang is gone.

Jang was widely thought to play an important role in economic affairs and place greater emphasis on economic development, which probably meant support for economic liberalization.

Moreover, Jang had established a strong relationship with Chinese officials. Bilateral deal-making seemed to accelerate in Kim Jong-il’s final years, when Jang played an important leadership role. In 2012, the latter headed a large delegation which discussed expanding special investment zones with Beijing’s support. Many North Koreans linked to Jang were in business in the PRC. 

It is widely presumed that Jang was removed for political reasons. Yet the bill of particulars included several economic charges.

For instance, Jang was accused of having “seriously obstructed the nation’s economic affairs and the improvement of the standard of people’s living.”  Even more telling, Jang’s indictment includes the charge of “selling of precious resources of the country at cheap prices” and having “made no scruple of committing such act of treachery in May last as selling off the land of the Rason economic and trade zone to a foreign country for a period of five decades under the pretext of paying those debts.” Moreover, corruption was charged involving a 2011 project at Rason. 

Of course, China is the “foreign country” cited.

The charges could merely reflect a “kitchen sink” quality, but they seem too specific for Beijing’s comfort. So far nothing has obviously changed. New contracts have been signed and one North Korean economic official announced “It’s just the same as before.” Still, inertia might continue to govern, with change to come. Zhu Feng of Peking University observed: “the negative impact must be tremendous.”

Chinese with whom I spoke in early December admitted that they could only speculate. But if the North really is targeting Beijing along with Jang, relations could deteriorate quickly.

North Korea’s urge to purge should prompt rethinking in Beijing about the North Korea “problem.” The PRC should explore options with South Korea and America, including taking a much tougher policy toward the DPRK in return for allied attention to Chinese concerns over economic costs, refugee flows, and security issues. The North’s neighbors should work together to ensure a stable and peaceful future no matter what.

Categories: Policy Institutes

Orange Revolution Redux in the Ukraine: America Should Stay Out

Cato Op-Eds - Tue, 01/14/2014 - 14:23

Doug Bandow

Nine years after the so-called Orange Revolution against electoral fraud, opponents of Ukrainian President Viktor Yanukovich hope to stage a repeat.  But the issue today, whether Kiev aligns economically with Europe or Russia, doesn’t much concern the U.S. 

In 2004 the Orange Revolution helped deliver the presidency to Western-favorite Viktor Yushchenko, a disastrous incompetent.  Yanukovich narrowly won the 2009 race. 

He has been negotiating over an Association Agreement with the European Union.  However, Brussels demanded political concessions, most importantly the freeing of opposition leader Yulia Tymoshenko, who had been prosecuted by Yanukovich’s government, and refused to offer cash assistance. 

At the same time Vladimir Putin pushed Kiev to forswear the EU and join the Moscow-led Customs Union.  And Moscow brought cash to the table.  To the consternation of Brussels, last month the Yanukovich government signed an accord with Russia—though without joining the CU.

Brussels and Washington were shocked, shocked.  New German Foreign Minister Frank-Walter Steinmeier said “It is utterly scandalous how Russia used Ukraine’s economic plight for its own ends.”

Sen. John McCain visited Kiev, where he complained that “President Putin has pulled out all the stops to coerce, intimidate and threaten Ukraine away from Europe.”  Former Undersecretary of State Paula Dobriansky demanded “a broad range of measures, including WTO sanctions, Russian expulsion from the Group of Eight and even a boycott of the 2014 Winter Olympics by political leaders, unless Moscow abandons its strong-arm tactics toward Kiev.” 

The hypocrisy is breathtaking. 

After all, the EU was pushing Kiev into making political concessions and choosing Europe over Russia.  In return, the Europeans offered the prospect of economic gain through increased trade.  After Kiev said no European officials said billions in grants and loans would have been forthcoming had Ukraine signed with the EU. 

As I point out in my latest Forbes online column:

Of course, Washington goes not one hour, let alone one day, without attempting to bribe or coerce another government to do something.  The American secretary of state circles the globe constantly lecturing other nations how to behave.  Since the end of the Cold War the U.S. has been the warrior state, routinely using military means to achieve its ends.  Indeed, Sen. McCain has variously supported war against Iran, Iraq, Libya, North Korea, Serbia, and Syria.

Russia is guilty of heavy-handedness?

Yes, the West offers a better, freer path.  Which is why protests have broken out over Ukraine’s abandonment of the EU.  It’s fair for Washington to wish the critics well and warn Kiev against a violent response. 

But why should Brussels or Washington meddle in the decision itself?  The Wall Street Journal insisted that the Obama administration “stand up for America’s interests and values.”  But what are they in Ukraine? 

Assistant Secretary of State for European Affairs Victoria Nuland declared at the opposition rally in Kiev:  “the U.S. stands with you in your search for justice, for human dignity and security, for economic health, and the European future that you have chosen and deserve.” 

Washington should endorse justice and human dignity, which justifies support for honest elections and warnings against police brutality.  But Ukraine’s “economic health” and “European future” aren’t American values and are barely American interests.  How would Americans feel if Ukrainian politicians showed up at a Republican rally in Washington vowing to stand with protestors in the name of Ukrainian “interests and values”?

A stable, democratic Ukraine would be benefit all.  However, Russia’s activities in Ukraine do not threaten the U.S.  In contrast, bringing NATO up to Russia’s southern border could not help but be seen as threatening by Moscow—imagine the Warsaw Pact expanding to Mexico. 

The West should acknowledge legitimate Russian interests in Ukraine, while offering new incentives for Kiev to look westward.  Moreover, Europe should seek compromise with Moscow.  Ukraine has proposed creation of “a tripartite commission to handle complex issues,” including greater links between the EU and the Russian-lead CU, which might reduce Moscow’s pressure on Kiev.

If Ukraine wants to look east, so be it.  Even with Russia’s money Yanukovich’s reelection prospects are weak and Ukraine is likely to eventually join the West.  If not, the country never was the EU’s or Washington’s to lose.

Categories: Policy Institutes

The Minimum Wage: Immoral and Inefficient

Cato Op-Eds - Tue, 01/14/2014 - 12:47

Doug Bandow

Democratic politicians are desperate to make up for ObamaCare’s disastrous roll-out.  Thirteen states are increasing their minimums this year, and some Democrats believe raising the national minimum wage is a winning campaign issue for November.

There’s no doubt that raising the minimum wage would reduce employment and slow economic growth.  Worse, government wage-setting is immoral.  It is unfair and wrong for politicians to posture as philanthropists while forcing other people to pay higher salaries.

The first question is the minimum’s impact on employment and price levels.  The answer is clear:  the cost of higher wages will be borne in varying degrees by customers, workers, and investors.  As I wrote in the American Spectator:

as Nobel Laureate Milton Friedman observed, there ain’t no such thing as a free lunch.  Arbitrarily raising the cost of labor—there is no principled basis for choosing any particular government minimum—will increase prices, reduce investor returns, and cut employment levels.

Most vulnerable are workers with the least education, experience, and skills, who tend to be young and minorities.  Forcing up wages will not only reduce overall employment, but shift jobs toward higher-skilled workers who are more productive and thus warrant higher pay.  The minimum wage also encourages mechanization, since it makes economic sense for companies to invest more in machines to spend less on labor. 

In effect, the minimum wage is a tax on labor-intensive companies.  No surprise, then, as explained by Mark Wilson of Applied Economic Strategies in a Cato Institute Policy Analysis:  “The main finding of economic theory and empirical research over the past 70 years is that minimum wage increases tend to reduce employment.” 

The strangest claim may come from the Financial Times, which editorialized:  “a higher wage would stimulate the economy without adding a dime to federal spending.”  However, to the extent raising the minimum increases the total amount of wages, it does so by redistributing the money from other people, who end up with less to spend on consumption. 

No doubt, the employment impact of a small increase, especially if salary levels have been rising, would be modest, which explains recent economic studies demonstrating lesser job loss.  But the less significant the increase, the less meaningful any potential benefit.

In contrast, those who claim that raising today’s minimum would have no impact on employer behavior fail to demonstrate the courage of their convictions.  If government can hike wages without harm, why stop at $10 or $15 an hour?  Why not go to $1000 or $1500?  Then everyone in America could be rich at no cost to anyone!

Yet there is an even more fundamental issue.  The minimum wage is the modern perversion of compassion into coercion:  I believe there is a moral imperative for you to earn more, so I force someone else to pay more.  I feel moral while sticking someone else with the bill. 

However, if “we,” the citizens of America, believe people should earn more, then “we,” the citizens of America, not a few labor intensive businesses, should pay for those above-market wages.  Opposing the minimum wage is simple fairness.

While many advocates no doubt are true believers, for some fairness talk is pure twaddle.   John Cassidy wrote in the New Yorker:  “In the current political environment, there is little chance of pushing through another hike in income-support programs.  Raising the minimum wage pushes the burden onto corporations and consumers.” 

Washington should be systematically reducing, not increasing, the cost of doing business.  Yet the regulatory-happy Obama Administration has been imposing multiple burdens on commerce, starting with ObamaCare. 

The next time someone rises to support arbitrary government wage-setting, they should be asked what they are doing personally to help the economically disadvantaged.  Raiding the wallets of others does not count as compassion

Categories: Policy Institutes

Unanimous SCOTUS Decides Two Civil Procedure Cases

Cato Op-Eds - Tue, 01/14/2014 - 12:43

Walter Olson

This morning the U.S. Supreme Court handed down two unanimous cases correcting appeals courts on issues of civil procedure. In Mississippi ex rel. Hood v. AU Optronics, it reversed a Fifth Circuit ruling that a consumer lawsuit by the state of Mississippi was enough like a class action that it should be heard in federal rather than state court under the procedures specified by the Class Action Fairness Act. In Daimler AG v. Bauman et al, it reversed a Ninth Circuit ruling that because worldwide auto giant Daimler has operations in California, it can properly be sued in that state over alleged misconduct in Argentina that has nothing in particular to do with its California operations. 

Neither result is even remotely surprising (and Cato did not file amicus briefs in either case). In the AU Optronics case, CAFA’s plain language supported the state of Mississippi’s position, and arguments that removal was more consistent with the law’s spirit added up to a plea for the business community (which identifies with the defendant side here) to get a better deal than it managed to get during the negotiations that led to the law’s passage. In the Daimler case, the Court again confirmed, as in the Kiobel v. Royal Dutch Petroleum case discussed at length by Kenneth Anderson in the latest Cato Supreme Court Review, that it is deeply out of sympathy with “universal jurisdiction” notions beloved in some parts of legal academia and the world of activist NGOs (non-governmental organizations), under which labeling something a “human rights” matter should open the way for suit to be brought over it in more or less any court anyplace.

The cases remind us that despite the various attacks on the Court as result-oriented and ideology-driven, much of its work consists simply of trying to keep the law on a logically coherent and predictable course. Anti-business activists couldn’t win a single vote for their supposed human rights claims in Daimler, just as their more radical claims had unanimously flopped in Kiobel.  By the same token the organized business community couldn’t win a single Justice in AU Optronics, though it put a real effort into defending its Fifth Circuit victory. It’s long past time for Sen. Elizabeth Warren (D-Mass.) to apologize for her demagogic portrayal of the Court as headed toward a condition as “wholly owned subsidiary of Big Business”.

 

 

Categories: Policy Institutes

FCC to Make Internet Service a Public Utility

Cato Op-Eds - Tue, 01/14/2014 - 11:55

Jim Harper

Do you want your Internet service provider to operate like the water company or the electric company? Internet access services will be more like these leaden public utilities if the Federal Communications Commission tries one of the more likely workarounds to a D.C. Circuit Court decision today that restricts its authority to regulate.

The story is long and involved—read it in the court’s opinion if you like—but the FCC has sought for years now to regulate broadband Internet service providers something like it used to regulate AT&T, with government mandated terms of service if not tarriffs and price controls. This doesn’t fit the technical environment of the Internet, which allows for diverse business models. Companies that experiment with network management, pricing, internal subsidy, and so on can find the configurations that serve widely varying consumers and their differing Internet needs the best. If government believes in fast lanes and slow lanes, surely Internet service providers could optimize service for movie delivery, video calling, and such, while email arrives a little less speedily.

The court found that the FCC’s plans don’t fit with its classification some years ago of broadband as an “information service,” subject to the light-touch regulation under Title I of the Communications Act. Title II, which applies to “telecommunications carriers,” allows common carrier regulation of the type the FCC is trying to impose. So watch for the FCC to conveniently change its mind and begin pushing for treatment of broadband once again as a “telecommunications service.” This is so it can have more control over the business decisions made by Internet service providers.

We made the case more than five years ago that “ ‘Net neutrality” is a good engineering principle, but it shouldn’t be a legal mandate. Technology and markets surpassed any need for command-and-control regulation in this area long ago. But regulators don’t give up power without a fight. To maintain power, the FCC may try to make Internet service a public utility.

Categories: Policy Institutes

Would Anti-Marijuana Activists Also Try to Keep Alcohol Illegal?

Cato Op-Eds - Tue, 01/14/2014 - 11:30

David Boaz

After I read the latest of Mitchell S. Rosenthal’s tirades against drug legalization in the Wall Street Journal, I must have fallen asleep and dreamed of a world in which marijuana is legal and alcohol is illegal. Not one of Coleridge’s opium-induced dreams, alas, so I didn’t wake up to write a classic poem. But I did wonder what op-ed the Journal might publish in such a world if people began to agitate for the freedom to drink alcohol. With the help of Matthew LaCorte, I discovered you wouldn’t have to change many words. I imagine it might go something like this: 

Let’s Not Kid Ourselves About Alcohol

By Rose Ethel Mitchell

Booze is always good for a giggle, and that makes it hard to take alcohol seriously. The news and entertainment media couldn’t resist puns on “LAX new rules” when California started the year with legal sales of alcohol for recreational purposes. TV stations across the country featured chuckling coverage of long lines outside the state’s new state-licensed liquor shops.

Legalizing alcohol isn’t just amusing. It’s increasingly popular with legislators and the public. And why not? No matter how drunk drinkers get, they’re nowhere near as useless in society as lazy pot-heads, right?  Drinkers don’t clear all the munchies off the grocery shelves or grow their hair out like hippies. But studies show that, unlike pot, alcohol leads to violence and aggression, especially with friends or partners.

A recent study found that alcohol is more dangerous than such legal drugs as cannabis and Ecstasy. We should not be raising a glass to the coming acceptance of alcohol use and dependency. Alcohol is far from safe, despite the widespread effort to make it seem benign. Drinking damages the heart, increases the incidence of anxiety, depression and schizophrenia, and can trigger acute psychotic episodes. Many adults appear to be able to use alcohol with relatively little harm, but the same cannot be said of adolescents, who are about twice as likely as adults to become addicted to drinking. The new California law limits alcohol sales to people 21 or older, but making it available for recreational use normalizes it in society. The drug will be made more easily available to those under 21, and how long until the age limit is dropped to 18? Having some bubbly may enhance social interactions, but at what cost?

Adolescents are vulnerable—and not just to booze. That’s how they are programmed. They make rash and risky choices because their brains aren’t fully developed. The part of the brain that censors dumb or dangerous behavior is last to come on line (generally not before the mid-20s). Meanwhile, the brain’s pleasure-seeking structures are up and running strong by puberty. When you link adolescent pleasure-seeking and risk-taking to liquor’s impairment of perception and judgment, it isn’t surprising that a 2004 study of seriously injured drivers in Maryland found half the teens tested positive for booze.

Drinking impairs judgment—no small matter during the adolescent years—and it can do lasting harm to the brain. The National Institute on Alcohol Abuse and Alcoholism has found that alcohol disrupts the brain’s communication pathways and can change mood and behavior, making it harder to think clearly and move with coordination. Long-term drinking can damage the heart, inflame the liver, increase risk of cancer, and weaken the immune system.

Most disturbing is a recent discovery about alcohol from the Center for Addiction and Mental Health which found alcohol is the third leading cause of disease around the world. The lead author wrote, “Alcohol consumption has been found to cause more than 200 different diseases and injuries.” While New Yorkers are sipping their “Long Island iced tea” or vacationers are singing about tequila, the facts show that their bodies don’t think these drinks are going down smooth.

Many experts are troubled by changing teen attitudes about drinking.   Half of adolescents have already tried illegal alcohol. Teen marijuana use and cigarette smoking have declined, and their abuse of prescription painkillers has fallen off sharply, but teen imbibing  continues to increase.  And a shocking 15% exhibit signs of alcoholism even in their teen years. This binge of facts will only worsen with legal alcohol.

No one can say how liquor legalization will play out. A perception of legal alcohol as safe, combined with sophisticated marketing, may well double or triple drinking. Warning of aggressive promotion, alcohol-policy expert Luke Farmer, who studied potential issues of a legal alcohol market for the New York City Council, pointed out last year: “The only way to sell a lot of alcohol is to create a lot of alcoholics.”

As we learn more about the realities of legalizing recreational booze, I suspect it won’t seem so funny anymore. Remember, potheads used to be good for a laugh too. A spaced-out pothead was a staple of Hollywood comedies in the 1960s and ’70s. Smoking cigarettes was considered cool. The reality of wrecked lives and ruined health eventually changed public perceptions of these addictions. Now liquor is becoming more widely regarded as a harmless amusement. That’s not funny, it’s tragic. Drinkers may enjoy a Scotch on the rocks, but the social effects will be rocky for us all.

It’s always hard to imagine a counterfactual. I wrote once about a world in which education was provided on the free market but shoes were produced and distributed by the government, and how people would have trouble imagining how a free market in shoes would work. In this case, however, we did go through an episode of substance prohibition, followed by legalization. And despite all the real problems created by alcohol use, we decided that a liberal system created fewer social problems than Prohibition. Surely we can imagine the same with regard to marijuana.

 

 

Categories: Policy Institutes

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