Policy Institutes

How Far Can Congress Delegate Its Legislative Authority?

Cato Op-Eds - Mon, 06/23/2014 - 14:10

Roger Pilon

The Supreme Court this morning announced that in its next term it will hear oral argument in a case called Department of Transportation v. Association of American Railroads, which asks whether Congress, when it passed the Passenger Rail Investment and Improvement Act of 2008, unconstitutionally delegated its legislative power to a private entity—in this case, Amtrak. The non-delegation doctrine, grounded in the separation of powers, arises from the very first word of the Constitution, after the Preamble: “All legislative Powers herein granted shall be vested in a Congress of the United States ….” (emphasis added). Taken at face value, that clear a statement would seem to preclude much of the “lawmaking” that goes on every day in the 300 and more executive branch agencies to which Congress over the years has delegated vast regulatory authority. Unfortunately, the Court long ago held otherwise, unleashing the modern executive state, indulged no more assiduously that by President Obama with his resort to “pen and phone” as he wills his agencies to action, the will of Congress often notwithstanding.

This case, however, challenges the next step in undermining the constitutional doctrine: again, whether Congress can delegate its lawmaking authority to a private entity. In time, one hopes, the case may sow the seeds for the Court’s revisiting the main form of legislative delegation, if only by putting the issue in play. That was at least implicit in the opinion below from the D.C. Circuit, written by the irrepressible Judge Janice Rogers Brown and joined by Senior Judges Stephen Williams and David Sentelle, each of whom has been a presence at Cato. In fact, it was only three weeks ago that Judge Williams was here, commenting on Professor Philip Hamburger’s new book entitled, appropriately, Is Administrative Law Unlawful?—the broad question at issue here.

As with so many administrative law cases, DOT v. AAR involves a complex tangle of agencies and authorities that the reader will be taxed to untangle. But Judge Brown put the principle of the matter plainly: “While often phrased in terms of an affirmative prohibition [as with rights], Congress’s inability to delegate government power to private entities is really just a function of its constitutional authority not extending that far in the first place. In other words, rather than proscribing what Congress cannot do, the doctrine defines the limits on what Congress can do.” This is one to watch.

Categories: Policy Institutes

How Political Repression Breeds Islamic Radicalism

Cato Op-Eds - Mon, 06/23/2014 - 13:52

Dalibor Rohac

Following the decision upholding numerous death penalties for Muslim Brotherhood members accused of a 2013 attack on a police station, Egypt has recently seen the conclusion of another sham trial, resulting in harsh sentences for three al-Jazeera journalists, accused of aiding terrorists.

While it is obvious that trials like these move Egypt further away from freedom, could they also be inadvertently helping Islamic radicals? My new development bulletin argues that political repression of the kind we are seeing in Egypt creates incentives for Islamists to use violence in order to attain their goals.

Iraq, where ISIS is making continual progress fighting the government of Nouri al-Maliki, is an extreme example of where things can end when political elites exclude a significant part of the population from democratic politics. Al-Maliki’s premiership has been marked by a strengthening of his own hold to power, progressively alienating the country’s Sunni population.

My paper argues that the electoral successes of Islamists in Arab Spring countries have relatively little to do with religion but rather with the organizational characteristics of Islamic political groups, which were typically active in the provision of local public goods and social services. Instead of seeing the rise of Islamic political organizations as a pathology that needs to be countered – possibly through repressive means – we should note that,

[I]n transitional environments, the electoral success of Islamists is a natural result of the political environment, which can be mitigated only by an increase in the credibility of alternative political groups. The electoral advantage enjoyed by Islamic parties can be expected to dissipate over time as competing political groups establish channels of communication, promise verification for their voters, and build reputation over time.

Furthermore,

There is no denying that religion and politics do not always mix well. However, the appropriate answer to the ugly side of religious politics is not political repression of the kind we are seeing in Egypt but rather open, competitive democratic politics.

Categories: Policy Institutes

SCOTUS: Maybe We Broke Securities Law, But Don't Ask Us To Fix It

Cato Op-Eds - Mon, 06/23/2014 - 13:23

Walter Olson

Today the Supreme Court missed an opportunity to undo one of its worst corporate-law mistakes of modern times, its 1988 decision in Basic, Inc., v. Levinson that lawyers can file class-action suits on behalf of investors without proving class members’ actual reliance on allegedly fraudulent statements, by presuming the price of the stock was affected. (Colleague Andrew Grossman covered the oral argument in Halliburton v. Erica P. John Fund, Inc. in this space in March.)

In the narrower sense, the Court did unanimously grant relief to defendant Halliburton by recognizing its right to offer proof at an earlier stage that its claimed misstatement had not affected the price of its stock. That’s welcome, and shows that the Court recognizes – maybe even unanimously recognizes – that the current class-action mechanism operates unfairly to pressure defendants to settle at the certification stage, and needs procedural overhaul aimed at fixing that. 

Unfortunately, a six-member majority led by Chief Justice Roberts invoked the doctrine of stare decisis to reaffirm its general holding in Basic, reasoning that it will not inquire whether earlier precedents are wrong, just whether they are so extra-super-wrong as to stand out from the usual run of wrong precedent.  Chief Justice Roberts’s majority opinion makes much of the idea that securities law is statutory and that Congress could therefore alter matters if it chose.

But Justice Thomas, writing in concurrence for himself and Justices Scalia and Alito, has the better logic when he points out that Basic v. Levinson never emerged from an engagement with statutory text at all – it was a product of the Court’s now-discredited “implied private rights of action” period, in which Justices for a while took it upon themselves to invent new civil causes of action from whole cloth. And as with the so-called Pottery Barn rule in government (you break it, you own it) the Court might want to consider taking responsibility for undoing messes that are entirely of its own making.  

Categories: Policy Institutes

TaskRabbit to Become "Uber For Everything" Thanks to Makeover

Cato Op-Eds - Mon, 06/23/2014 - 13:00

Matthew Feeney

TaskRabbit, a site that connects people looking to outsource tasks such as household repairs and keg deliveries, recently announced that its business model will be changing from one that resembles an eBay-style auction house to one that more closely resembles companies like Uber. The new TaskRabbit will be launched “before the end of July.”

As Casey Newton noted at The Verge last week in an article titled “TaskRabbit is blowing up its business model and becoming the Uber for everything,” when the new system goes live next month users will find a landing page that steers them to the platform’s four most popular types of service: handyman, house cleaning, moving, and personal assistants. (You can still request other services, though it takes a few more clicks.) After you submit some details about the job, TaskRabbit will present three contractors, along with their hourly rates, who represent a range of prices and experience levels. After you select one, you can schedule a time for the job and communicate with the “Tasker” in real time using a custom messaging platform built by the company.

It seems that news of TaskRabbit’s makeover has increased interest in the company. TaskRabbit PR chief Johnny Brackett tweeted on Wednesday, the day after TaskRabbit announced the planned changes, that TaskRabbit had “15X more user signups yesterday than an average day.”

While Uber’s rideshare service, UberX, makes it simple for users to do one familiar thing (catching a ride), TaskRabbit allows for its users to easily find help carrying out a range of common tasks such as assembling furniture, replacing light switches, and so-called “virtual” tasks such as vacation planning and proofreading.

It remains to be seen if TaskRabbit’s redesign will yield the sort of growth enjoyed by other “sharing economy” companies. If Brackett’s tweet is accurate, there is at the very least some new interest in TaskRabbit, the “Uber for everything.” Investors have shown that they believe in the potential of the “sharing economy” despite numerous domestic and international regulatory battles, having provided Uber and Airbnb with huge valuations earlier this year.

If the new version of TaskRabbit takes off, it will likely have to contend with its own share of regulatory obstacles. In particular, many of the jobs that it helps people to get done could be subject to state and local occupational licensing rules. Established service providers may try to use these laws to squelch unlicensed competition from TaskRabbit, just as taxi services have sought to stop Uber.

It will be interesting to see how TaskRabbit does with its Uber-like system. I was quite eager to use TaskRabbit myself, but after signing up as a TaskRabbit (a term that will be changed to “Tasker” once the new site is launched) in Washington, D.C. I received a message that said in part:

There is high application volume in your city right now so we’ve temporarily put a hold on all new applications. The number of tasks on our site is growing rapidly, so it shouldn’t be long before we start accepting new applications.

So, it doesn’t look like I’ll be helping strangers out with IKEA furniture assembly via TaskRabbit any time soon, but that seems to be because of the popularity of the “Uber for everything,” which shouldn’t come as a surprise.

Categories: Policy Institutes

Ex-Im Bank Weakens American Capitalism

Cato Op-Eds - Mon, 06/23/2014 - 12:46

Chris Edwards

One of the policy fissures in the Republican Party is over business subsides, and the current debate about the Export-Import Bank illustrates the conflict. The Ex-Im Bank is one of many corporate welfare or crony capitalist programs that litter the federal budget. The Bank’s authorization runs out in September, and so Congress must act if it wants to extend the operations of this business subsidy machine.

Veronique de Rugy at Mercatus and Sallie James at Downsizing Government have looked at the Bank’s operations and discussed why the economics of the Bank do not make sense. Veronique says, “the Export-Import Bank is one of the least defensible corporatist boondoggles that taxpayers are forced to subsidize.”

The main problem with corporate welfare programs like Ex-Im is often overlooked. It is that they undermine American capitalism by weakening the recipient businesses. All subsidies can change the behavior of recipients, and nearly always in a negative way. Just like individual welfare programs reduce work incentives, corporate welfare dulls the competitiveness of recipient companies.

Corporate welfare focuses the energy of business executives on Washington and away from the marketplace. It gives companies a crutch, an incentive not to make the innovations needed to remain on the leading edge. It induces recipient businesses to make foolhardy decisions, as we saw with export subsidies for Enron. And corporate welfare often steers business capital into dead-end markets favored by politicians, and away from uses that would more productive and profitable in the long run.

Here are some of the points made by Veronique and Sallie about Ex-Im:

  • Veronique: The Bank backs less than 2 percent of the value of total U.S. exports.
  • Veronique: The Bank mainly subsidies very large businesses, not small businesses.      
  • Veronique: Taxpayer exposure to possible Bank losses is rising.
  • Sallie: Export subsidies cannot substantially change the U.S. trade balance, even if that were a good idea.
  • Sallie: The Bank’s activities may slightly shift the U.S. employment mix, but they do not raise overall employment.
  • Sallie: The Bank’s aid to some foreign businesses—such as foreign airlines—comes at the expense of U.S. businesses.

For more on the problems with corporate welfare, see my 2012 congressional testimony on Corporate Welfare Spending vs. the Entrepreneurial Economy.

Categories: Policy Institutes

EPA’s Loss Is the Separation of Powers’ Gain

Cato Op-Eds - Mon, 06/23/2014 - 12:41

Andrew M. Grossman

At the bottom of the Supreme Court’s decision today tossing out, in large part, the Obama Administration’s greenhouse gas emissions scheme is a stiff dose of constitutional common sense: “When an agency claims to discover in a long-extant statute an unheralded power to regulate a significant portion of the American economy, we typically greet its announcement with a measure of skepticism.”

Here, skepticism was certainly warranted. At issue was one of the Obama Administration’s earliest efforts to skirt Congress and achieve its major policy goals unilaterally through aggressive executive action.

A bit of background is necessary. The Clean Air Act’s 1970’s-era “Prevention of Significant Deterioration” and “Title V” programs are aimed at the few hundred largest industrial sources of pollution in the country and impose what the Court correctly identified as “heavy substantive and procedural burdens,” far beyond the red tape that most businesses are able to shoulder. To that end, the statute limits regulation to sources that emit more than 100 or 250 tons per year of certain “air pollutants.”

EPA’s trick was to redefine “air pollutant,” as used in those programs, to include carbon-dioxide emissions. Because carbon-dioxide is emitted in large quantities even by smaller sources, that interpretation expanded the number of sources subject to regulation from a few hundred to millions altogether. Regulations that had previously been confined to major power plants, chemical factories, and the like would now apply to retail stores, offices, apartment buildings, shopping centers, schools, and churches. To avoid what even EPA recognized to be an “absurd result,” the agency went on to claim authority to decide exactly which sources have to comply—in other words, the power to choose winners and losers by exempting the vast majority of sources from compliance, for the time being at least. It called this approach “tailoring.” 

The Court, in a lead opinion by Justice Scalia, called it “patently unreasonable—not to say outrageous.” EPA, it held, must abide by the statute: “An agency has no power to ‘tailor’ legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.” And if such tailoring is required to avoid a plainly “absurd result” at odds with congressional intentions, then obviously there is obviously something wrong with the agency’s interpretation of the statute. To hold otherwise, the Court recognized, “would deal a severe blow to the Constitution’s separation of powers” by allowing the executive to revise Congress’s handiwork.

The loss for the administration was not complete. The Court did allow that EPA can regulate greenhouse emissions by newly-built (or substantially modified) sources that would already be subject to PSD or Title V without taking into account their greenhouse gas emissions—known as “anyway sources.” But even this authority, the Court explained, is not “unbounded” and does not authorize to EPA to mandate any manner of efficiency gain.

The Court’s decision may be a prelude of more to come. Since the Obama Administration issued its first round of greenhouse gas regulations, it has become even more aggressive in wielding executive power so as to circumvent the need to work with Congress on legislation. That includes recent actions on such issues as immigration, welfare reform, and drug enforcement. It also includes new regulations for greenhouse gas emissions by power plants, proposed just this month, that go beyond traditional plant-level controls to include regulation of electricity usage and demand—that is, to convert EPA into a nationwide electricity regulator. Today’s decision—as well as one last month by the D.C. Circuit rejecting a nearly identical regulatory gambit by the Federal Energy Regulatory Commission—suggests that this won’t be the last court decision throwing out Obama Administration actions as incompatible with the law. 

Categories: Policy Institutes

NATO - What Is It Good For?

Cato Op-Eds - Mon, 06/23/2014 - 12:29

Justin Logan

With continuing instability in Ukraine, and Poland’s foreign minister Radek Sikorski allegedly using vulgar and racist language to disparage the US-Poland alliance, now’s as good a time as any to evaluate what NATO does for Americans.

Not much, I argue in Foreign Policy (online). As I conclude:

NATO has produced some benefits, but the costs to the United States – tens of billions per year, validating Russian nationalist narratives about the West, and infantilizing its European partners – are often ignored. Washington should cut the Europeans loose, and encourage them to cooperate with each other on European security matters. With a combined GDP larger than the United States and a benign threat environment, Europeans are capable of defending themselves, but won’t until Washington makes them.

Please give it a read.

Categories: Policy Institutes

Can Private Disaster Relief Work?

Cato Op-Eds - Mon, 06/23/2014 - 11:45

Jeffrey Miron

In a new paper, Emily Skarbek (King’s College London) presents some evidence:

Using a novel set of comprehensive donation and expenditure data collected from archival records, this paper examines a bottom-up relief effort following one of the most devastating natural disasters of the nineteenth century: the Chicago Fire of 1871. Findings show that while there was no central government relief agency present, individuals, businesses, corporate entities and municipal governments were able to finance the relief effort though donations. The Chicago Relief and Aid Society, a voluntary association of agents with a stake in relief outcomes, leveraged organizational assets and constitutional rules to administer aid.

This contrasts sharply with conventional wisdom and current public policy, which assumes that private agents and local governments will “free ride” on the charitable actions of others, leading to “insufficient” relief activity unless the central government plays a large role.

In fact, private and local government efforts are often substantial, as demonstrated by this example and many others (e.g., the billions given by individuals, foundations, and corporations to help victims of Katrina, Sandy, and the Asian Tsunami).

Local efforts, moreover, are likely more efficient than those directed by a far away central government, as residents of New Orleans can readily attest.

Categories: Policy Institutes

Wal-Mart Swings Back against NYT Columnist

Cato Op-Eds - Mon, 06/23/2014 - 10:25

Walter Olson

Don’t you wish more companies would do this when attacked? After New York Times columnist Tim Egan took a swipe at Wal-Mart over its wage policies, Wal-Mart swiped right back this weekend in a way that’s effective as well as funny. 

One further point the company could have added: the company’s low prices significantly improve standards of living for low-wage and low-income shoppers across the nation. Here’s one economist’s comment from a few years back: 

Wal-Mart’s low prices help to increase real wages for the 120 million Americans employed in other sectors of the economy. And the company itself does not appear to pay lower wages or benefits than similar companies, or to cause substantially lower wages in the retail sector…

[T]o the degree the anti-Wal-Mart campaign slows or halts the spread of Wal-Mart to new areas, it will lead to higher prices that disproportionately harm lower-income families…

By acting in the interests of its shareholders, Wal-Mart has innovated and expanded competition, resulting in huge benefits for the American middle class and even proportionately larger benefits for moderate-income Americans.

Although the link is via a post by colleague Michael Cannon, it wasn’t any of us at Cato who wrote that: it was Jason Furman, adviser to Democratic candidates and President Obama’s current chairman of the Council of Economic Advisers. More Furman on Wal-Mart here.

Categories: Policy Institutes

U.S. Should End Aid to Egypt’s New But Not Improved Mubarak

Cato Op-Eds - Mon, 06/23/2014 - 10:11

Doug Bandow

Much about the President Barack Obama’s foreign policy has been an embarrassment.  In Egypt the Obama administration incompetently followed in the footsteps of its predecessors.

Three years ago Hosni al-Mubarak’s dictatorship ingloriously collapsed.  The Obama administration constantly followed events, first embracing Mubarak, then calling for a negotiated transition, and finally endorsing his overthrow. 

The Muslim Brotherhood’s electoral success upset the military’s plans to retain power, but the “deep state” persisted.  Mohamed al-Morsi was elected president, but he controlled little of substance—not the military, police, courts, or bureaucracy.

Nearly a year ago Gen. Abdel Fatah al-Sisi ended any possibility of the government slipping outside of military control by staging a coup.  Since then thousands have been killed, hundreds sentenced to death, and tens of thousands detained. 

Through it all the Obama administration took the least principled position possible.  Although U.S. law required a cut-off of financial aid, the president simply refused to characterize the coup as a coup, as if not saying the name made it something else. 

Officials worried about lost leverage, even though Egyptian officials always ignored Washington’s political advice in the past.  Washington eventually held back a portion of planned U.S. assistance, apparently to demonstrate a little, but not too much, disapproval.  Particularly grotesque regime abuses earned complaints from the Obama administration, but then Secretary Kerry would suggest that democracy still was moving forward. 

In April the administration said it would allow distribution of some military aid and deliver ten Apache helicopters to Egypt’s military.  When I visited Egypt a couple months ago I found that virtually everyone believed America was on the wrong side, a notable if not particularly worthy achievement by the administration.

Now Congress can set things right.  Last year Cairo was slated to collect $1.3 billion in military and $250 million in economic assistance.  Although the military money was conceived of as an incentive to convince Cairo to keep the peace with Israel, the Egyptian military, which has not fought a war in more than four decades, has the most to lose from any hostilities. 

The economic payments do little to promote growth.  Instead, government-to-government payments usually underwrite autocracy and statism, and discourage reform by masking the pain of failure. 

House Republicans, apparently enthused with President Sisi’s promise to smite Islamists—along with everyone else who has the temerity to criticize him ever so slightly—proposed a nominal $50 million cut in economic assistance.  That’s barely enough for Cairo to notice, especially since the military would continue collecting its usual payments for use to purchase high-tech weapons which are more for show than use. 

In contrast, the Senate Appropriations Committee proposed to reduce military aid to $1 billion and economic assistance to $150 million.  That’s a $400 million cut.  U.S. aid still violates the law, but at least the reduction is noticeable.

However, even the Senate doesn’t go far enough.  Congress should end all aid.  The administration should shut up about democracy.  The Pentagon should be left to cooperate with the Egyptian military on essential tasks, including access to the Suez Canal—after all, Egypt’s generals will want to continue purchasing newer and better toys, as well as acquiring spare parts for existing weapons.

There is no good answer to Egypt.  No one knows how a Morsi presidency would have turned out, but skepticism of the Brotherhood in power is understandable, given the abuses of Islamists elsewhere. 

Alas, as I point out in my new article on American Spectator online, “we do know how a Sisi presidency is likely to turn out:  a rerun of Mubarak’s authoritarian and corrupt reign.”  Repressive rule isn’t even likely to deliver stability, since the Egyptian people will eventually tire of yet another government which delivers arbitrary arrests, brutal torture, and summary punishment rather than economic growth.

The best Washington can do is stay out. Subsidize no one, endorse no one. Work privately to advance important interests.  Leave Egyptians to settle their fate. 

Categories: Policy Institutes

Border Patrol Spending

Cato Op-Eds - Fri, 06/20/2014 - 16:32

Chris Edwards

A tragedy is unfolding in Texas as thousands of illegal immigrants are pouring over the southern border. Alex Nowrasteh has examined the immigration statistics here.

But in this blog, let’s take a look at the budget situation. The chart below shows that total Border Patrol (BP) spending has more than tripled since 2000, from $1.1 billion to $3.5 billion, according to this BP website. That spending is within broader Customs and Border Protection (CBP) spending of about $12 billion a year currently. A breakdown of the CBP budget is on page 49 here.

Categories: Policy Institutes

Climate Change, Heat Waves, and Adaptation

Cato Op-Eds - Fri, 06/20/2014 - 11:56

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

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.”

——————–

The main idea, as it is portrayed, driving the Obama administration’s pursuit of carbon dioxide regulations is that climate change is leading to all manner of bad things. Pointing to concrete example of bad things that have resulted from human greenhouse gas emissions, however, is much more challenging than just saying it is the case. In fact, for most climate/weather events and their resulting effect, the bulk of the science contradicts the administration’s contentions.

Roger Pielke Jr. makes it a habit to point out how White House proclamations concerning extreme weather events go awry. We have similar habits.

An especially egregious example concerns heat-related mortality. It is true that extreme heat can lead to excess mortality. It is also true that global warming should lead to more heat waves. However, it is NOT true that global warming will lead to more heat-related mortality—the logic forwarded by the administration. Frequent readers of this blog are well aware of this.

However, as not everyone (to his or her detriment) is a frequent reader of this blog, we presented our findings on climate change and heat-related mortality to the audience at a science policy conference held by the American Geophysical Union (AGU) this week. Our conclusions were:

The cause of the observed decline in the sensitivity to extreme heat in the face of rising heat is likely found in a collection of adaptations including increased access to air-conditioning, better medical care, improved building design, community response programs, heat watch/warning systems, and biophysical changes. There is no reason to think that such response measures won’t continue to exist and be improved upon into the future.

In our recent study summarizing the findings on declining heat-related mortality trends in both the U.S and Europe, we made this observation (Knappenberger et al., 2014):

“Some portion of this response [the declining sensitivity to excessive heat events] probably reflects the temporal increase in the frequency of extreme-heat events, an increase that elevates public consciousness and spurs adaptive response. In this manner, climate change itself leads to adaptation.”

It is insufficient and inappropriate to ignore this effect when compiling and discussing the impacts of climate change. If an increasing frequency of heat events raises public awareness and gives rise to an adaptive response that lowers the population’s relative risk due to extreme heat, this must be properly weighed against any increases in mortality that result from a greater number of mortality-inducing heat events.

Our analysis highlights one of the many often overlooked intricacies of the human response to climate change.

Our full AGU poster, “Climate Change, Heat Waves, and Adaptation,” is available for viewing online here.

Hopefully, it opened some eyes.

Categories: Policy Institutes

Chinese Investment in Virginia

Cato Op-Eds - Fri, 06/20/2014 - 11:51

Simon Lester

From the Washington Post:

Gov. Terry McAuliffe scored an economic coup and expanded Virginia’s already substantial business ties with China on Wednesday as he unveiled plans for a major manufacturing facility in the Richmond suburbs.

The announcement caps a string of recent economic development deals involving China and Virginia, highlighting the country’s growing importance in the commonwealth’s economy as both a trading partner and an investor.

Under a deal that state officials called the largest ever between a Chinese investor and Virginia, Shandong Tranlin Paper Co. will create 2,000 jobs with a $2 billion plant that makes paper from corn stalks and other agricultural field waste.

My reaction to almost every announcement of new foreign investment goes like this: First, I’m excited to hear about the new investment, and pleased when people do not respond with a fit of economic nationalism. But then, inevitably, I read on and get frustrated:

McAuliffe (D) approved a $5 million grant from the Governor’s Opportunity Fund to help lure the company, reflecting the former entrepreneur’s push to expand and diversify the state’s defense-heavy economy.

Sigh. It’s great that foreign investors are building new factories. We should welcome that. But there is no reason to subsidize it. Let investors of all national origins go where they want, but offering them subsidies is just a big waste. It doesn’t create more investment, it just shifts it around based on non-market factors.

Categories: Policy Institutes

Kim Strassel and the WSJ on the Lost IRS Emails

Cato Op-Eds - Fri, 06/20/2014 - 11:07

Walter Olson

Earlier this week Wall Street Journal columnist Kim Strassel won a much deserved Bradley Award for her work in investigative journalism. It’s at times like this, in which revelations about evidence destruction at the Internal Revenue Service almost defy belief, that everyone interested in American governance should follow her column and the Journal editorial page.

Some highlights since the email story broke last Friday: 

* According to Strassel’s column today, the contents of Lois Lerner’s hard drive were wiped out by forces unknown “about 10 days after the Camp letter arrived,” that is to say, a letter from House Ways and Means Chairman Dave Camp inquiring into targeting of conservative groups. (Lerner then replied to Camp denying targeting and subsequently pleaded the Fifth before Congress.) 

* A WSJ editorial this morning points out the remarkable timing of the IRS’s begrudging disclosure last Friday that evidence central to the case has been destroyed: more than a year after the investigation began and only when a deadline was impending in which the IRS commissioner would have to certify personally that the agency had produced to Congress all relevant communications. Were responsible agency officials determined to treat this as a high-priority investigation, to be carried on in good faith and with all deliberate speed? (There was no doubt about the seriousness of the scandal, as President Obama himself admitted—or seemed to be admitting—at the time.) Or did they instead stall and deflect until the very last moment? So un-forthcoming was the agency that, according to today’s Journal editorial, IRS staffers met with Sen. Orrin Hatch (R-Utah) Monday and did not tell him that the external emails of six other IRS employees had gone missing too—he found that out only later in the week when he read a press release from the House side.  

* While some IRS critics focus almost to the exclusion of all else on the possible role of the Obama White House in directing the IRS, Strassel and the WSJ correctly will not let us forget that much of the pressure on the agency was coming from Congress itself. In particular, Sens. Carl Levin (D-Mich.), Dick Durbin (D-Ill.), and Chuck Schumer (D-N.Y.), along with Reps. Chris Van Hollen and Elijah Cummings (both D-Md.), were among many Democrats seeking to enlist the IRS in a crackdown on politically antagonistic nonprofits.

Thank heavens for Kim Strassel and her colleagues at the WSJ, because otherwise it would seem as if few in the press were willing to focus serious investigative attention on this extraordinary scandal. (Many other press outlets have treated it as a dull page-A-18 story, run wire service coverage only, or–as with the New York Times–waited three days even to notice it.) 

People used to ask how Watergate might have turned out if the press had sided with Nixon instead of against him. Thanks to the work of Strassel and her WSJ colleagues, let’s hope we never find out.

Categories: Policy Institutes

Don't Overestimate ISIS Gains in Iraq

Cato Op-Eds - Fri, 06/20/2014 - 10:42

Jennifer Keister

ISIS’s territorial gains in Syria and Iraq are impressive. However, the group has its work cut out for it.

First, ISIS may face internal tensions. The nature of the relationship between the group and Iraqi Baathists has been variously reported. While the two have an obvious operational incentive to collaborate, if the former Baathist elements retain their original ideological platform, it is likely incompatible with ISIS’s radical preferences. Should ISIS determine it is content with its territorial holdings, any partnership could face tensions in the absence of a common enemy in Maliki’s sectarian rule.

Second, the Kurds. ISIS appears to have largely avoided direct confrontation with Kurdish forces. But the Kurds appear far from assuming ISIS is an ally, or that the group does not have designs on territory the Kurds themselves claim. If and when ISIS and Kurdish ambitions clash, the peshmerga are likely to put up a fight.

Third, ISIS may be able to take territory, but it now faces the challenge of ruling it. The group has a track record over the last year of ruling in Syrian cities like Raqqa. In Syria, ISIS rebels provided public services, and tried to moderate their implementation of sharia law so as to avoid civilian resistance. But gradually the group reverted to its own ideological platform—an Islamic interpretation not in line with that of the Syrian civilians under their rule. In order to tamp down public dissent and quell resistance, the rebels have become notoriously brutal—showcasing their brutality publicly and electronically. In Iraq, at least some civilians have welcomed ISIS’s arrival and the Iraqi military’s departure. But preferring ISIS to Maliki isn’t necessarily saying a lot.

The US also sought to control areas ISIS now claims in Iraq, and America’s limited success was hard-won. ISIS’s acceptability as a ruler remains to be seen (the group has just published its first set of rules for those newly under its control). As time wears on, any distance between ISIS’s political and ideological platform and those of its new residents will become clearer. If, as in Syria, this gap proves to be wide, we may expect similarly brutal rule by ISIS in Iraq.

If so, the international community will need to weigh the suffering of those under ISIS control against the likely costs and success of intervening to improve the situation.

Unless they moderate their platform, there are few ways to encourage ISIS to adopt less coercive rule. Interdicting support from abroad can strain the group in a variety of ways, but access to oil wealth (and now, cash) will dampen the effects of any interdiction, and even a weakened ISIS is likely to abuse civilians.

But beyond the first blush of victory, governance is a difficult and costly undertaking. Reports note ISIS’s extensive and coercive reach into civilians’ lives in Syrian cities it has controlled since last year. But this apparatus eats up resources. Even if ISIS uses public brutality to quash resistance and retain control, it will have to task personnel to do this—personnel that cannot then be used to pursue additional territory, or protect themselves against government troops or other rival factions.

Unfortunately for those who live under it, brutality can be a sustainable means of retaining control—for rebels like ISIS, as well as for states. ISIS may manage to keep the territory it has captured, but it will have to work for it—as Ghengis Khan noted “Conquering the world on horseback is easy; it is dismounting and governing that is hard.”

Categories: Policy Institutes

Are Economists Captured Too?

Cato Op-Eds - Fri, 06/20/2014 - 10:06

Jeffrey Miron

Economists have long worried about regulatory “capture,” the process whereby regulators become cozy with the businesses they regulate. This is one reason for caution about the value of regulation.

According to economist Luigi Zingales (Chicago), 

The very same forces that induce economists to conclude that regulators are captured should lead us to conclude that the economic profession is captured as well. As evidence of this capture, I show that papers whose conclusions are pro-management are more likely to be published in economic journals and more likely to be cited. I also show that business schools’ faculty write papers that are more pro management. I highlight possible remedies to reduce the extent of this capture: from a reform of the publication process, to an enhanced data disclosure, from a stronger theoretical foundation to a mechanism of peer pressure. Ultimately, the most important remedy, however, is awareness, an awareness most economists still do not have.

In other words, “Economist: heal thyself!”

Categories: Policy Institutes

Congress May Hike VA Spending $400 Billion

Cato Op-Eds - Thu, 06/19/2014 - 17:32

Chris Edwards

Last week the Senate voted to greatly increase health care spending for veterans. If the new spending were made permanent, it would cost at least $385 billion over 10 years, as Nicole Kaeding noted. The House version of the bill would cost at least $477 billion if made permanent. The chambers will now work out a compromise bill, and—going out on a limb here—I’m guessing that the compromise is also a budget buster.

The bills would allow veterans to access health services from facilities outside of the Veterans Affairs (VA) system. The VA system needs a fundamental overhaul, but these bills would appear to just throw money at the problem without creating structural reforms.

The CBO score for the Senate bill is here and for the House bill here. For the House bill, CBO says spending would be $16 billion in 2015 and $28 billion 2016. The House bill would authorize the new spending until 2016, but if Congress extends it permanently the total costs would be $54 billion a year and about $477 billion over 10 years.

I can’t remember an instance when Congress has voted so quickly to spend so much money with so little debate and analysis. The CBO cautioned that their numbers are essentially only rough guesses. So the ultimate spending could be even higher than shown in the chart.

Categories: Policy Institutes

Marriage Equality in Michigan, Kentucky, and Tennessee

Cato Op-Eds - Thu, 06/19/2014 - 14:23

Ilya Shapiro

Having filed amicus briefs in Hollingsworth v. Perry (California’s Prop 8), United States v. Windsor (Defense of Marriage Act), and the cases involving the marriage laws of Oklahoma, Utah, and Virginia in the U.S. Courts of Appeals for the Tenth and Fourth Circuits, respectively, Cato and the Constitutional Accountability Center have filed briefs in three marriage-related cases now before the Sixth Circuit. DeBoer v. Snyder questions Michigan’s constitutional ban on same-sex marriage. Tanco v. Haslem challenges Tennessee’s non-recognition of same-sex marriages, while Bourke v. Beshear does the same in Kentucky. 

DeBoer was originally filed to similarly challenge Michigan’s non-recognition of same-sex marriages, but was later amended to attack the underlying issue of the state’s ban on same-sex marriage all-told. In the wake of the Supreme Court’s ruling in Windsor (striking down part of DOMA), the DeBoar district court ruled in the plaintiffs’ favor. The district court in Bourke then ruled in favor of two couples and their respective children; Kentucky’s attorney general had refused to defend the non-recognition law, so the governor hired outside counsel. Finally, in Tanco, decided this past March, three Tennessee couples were also successful in court. The Sixth Circuit stayed all three rulings pending its own examination of the issues presented.

The Cato-CAC position continues to be what we’ve argued all along: The Fourteenth Amendment promises the equal protection of the laws to all persons. It’s a sweeping guarantee that eliminates class-based discrimination that lacks a strong policy justification (for example, denying driver’s licenses to blind people). Though enacted in response to failures to protect the rights of the newly freed slaves, this guarantee was intended to protect the rights of all persons — as demonstrated textually by its neutral phrasing, extending its protections to “any person.” The amendment’s proponents consciously rejected race-specific language. Indeed, in introducing the amendment, Senator Jacob Howard explained that it “abolish[ed] all class legislation.” The common, public understanding was that the Fourteenth Amendment “[took] from the States the power to make class legislation and to create inequality among their people.”

Both early Supreme Court cases and modern precedent demonstrate that it was understood that the Equal Protection Clause spoke in general terms that were considered comprehensive. The equal right to marry the person of one’s choice is guaranteed by that provision. Even opponents of the Fourteenth Amendment acknowledged the fundamental nature of the right to marry. The modern Supreme Court has recognized this as well, most famously in Loving v. Virginia, as well as in Zablocki v. Redhail and elsewhere. 

Laws that prohibit or refuse to recognize same-sex couples’ marriages therefore violate the constitutional guarantee of equal protection of the laws. They impose badges of inferiority on persons based solely on their class and the harm extends to the children being raised by such couples. No compelling state interest is served by and no constitutionally legitimate rationale can be found in such disparate treatment. Merely invoking “tradition” can’t save a practice from constitutional prohibition — as has been shown in cases involving segregation, sodomy, and speech restrictions. The very purpose of the Fourteenth Amendment was to break the tradition of denying the equal protection of the laws to newly freed slaves and other disfavored groups.

The Sixth Circuit will hear argument in all these cases, along with one out of Ohio (to round out the four states that make up the Sixth Circuit) on August 6.

Categories: Policy Institutes

Mission Accomplished, He Said

Cato Op-Eds - Thu, 06/19/2014 - 08:59

David Boaz

Everything that American troops have done in Iraq, all the fighting and all the dying, the bleeding and the building, and the training and the partnering — all of it has led to this moment of success. Now, Iraq is not a perfect place.  It has many challenges ahead.  But we’re leaving behind a sovereign, stable and self-reliant Iraq.

Yes, that was President Obama at Fort Bragg, North Carolina, on December 14, 2011.

For another perspective, former vice president Dick Cheney in the Wall Street Journal Wednesday:

Rarely has a U.S. president been so wrong about so much at the expense of so many. 

In case there’s any doubt – he means President Obama, not the president who launched the war that cost 4,487 American soldiers’ lives, 32,000 Americans wounded, some 100,000 to 500,000 Iraqi deaths, and as much as $6 trillion.

Maybe they should have listened to the Cato Institute back in 2001 and 2002.

Categories: Policy Institutes

Lessons from Stamp Collecting

Cato Op-Eds - Wed, 06/18/2014 - 16:35

Chris Edwards

My mom recently handed me a large bag of stamps she had collected as a child. There are thousands of stamps from about 100 countries, most from the 1910s to the 1950s. It’s a treasure trove.

My daughters and I started digging through them, and we checked out Internet resources on philately, a hobby I know little about.

Here are a few observations:

  • Most old postmarked stamps are worth relatively little. I guess the reason is high supply and low demand.
  • The world’s first postage stamp was the British Penny Black in 1840, which portrayed Queen Victoria. Stamps were introduced as part of U.K. postal reforms to cut government waste and mismanagement. The first U.S. stamps in 1847 showed Franklin and Washington. Canada’s first stamp in 1851 did not show a government leader, but instead the clever and industrious beaver.
  • Great Britain used to rule a vast area of the globe, and dozens of nations had the British monarch on their stamps. And many countries used to honor American liberty on their stamps, such as these fascinating issues from the 1930s. I doubt whether that happens much anymore.
  • Small countries often have attractive stamps. Some of the prettiest I have are from the Caribbean and Africa. The least attractive are from Germany and the United States. In a competitive world, small countries know that they must put in an extra effort. (See photo). It’s a similar situation with corporate tax rates today: small countries tend to have low and competitive rates, but the United States has an ugly 40 percent rate.
  • U.S. postage stamps and currency have long been printed by the government, although postage stamp printing was privatized in 2005. By contrast, Canadian stamps and currency have long been printed by private firms, such as the Canadian Bank Note Company.
  • Hyperflation plays out on stamps. I have a Deutsches Reich 5 mark stamp that is stamped with heavy black ink “2 Millionen.” Another says “4 Millionen.” (See photo). Here is the interesting story of these relics of government folly.
  • I have a German Democratic Republic stamp with a cute portrait of Marx, Engels, and Lenin. (See photo). The communist government is showing off that it has computers and oil refineries.

 

In the stamp bag, my mom saved an October 1948 Woman’s Day article “Inside Stories about Stamps.” Under the heading “Private Enterprise,” it says “until the 1880s, private firms in several American cities operated postal systems of their own in open—often violent—defiance of federal postal laws. Probably the last of these carriers was the St. Louis City Delivery Company which the Post Office finally suppressed in 1883.”

Ironically, the federal government imposed the Sherman Antitrust Act only seven years later to stomp out monopolies, but not government monopolies of course.

I’ll have more on private postal competition in the 19th century in a future blogpost. Meanwhile, here’s Tad DeHaven on postal reform and me on privatizing the Royal Mail.

Categories: Policy Institutes

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