Policy Institutes

Adam Bates

Today Attorney General Eric Holder issued new guidelines to federal prosecutors tightening the rules for seizing assets for so-called “structuring” offenses.

Under the Bank Secrecy Act, structuring occurs when someone is suspected of arranging their financial transactions as to avoid triggering a report to the federal government by the financial institution.  Some of civil asset forfeiture’s most egregious abuses are the result of federal prosecutors utilizing this nebulous statute to empty the bank accounts of unwitting citizens and small businesses who are never charged with any crime or even aware that their transactions are considered illegal. 

The new rules require:

1. That structuring seizures against people for whom there is no criminal charge be based upon probable cause that the funds were either generated by unlawful activity or intended for use in anticipated unlawful activity.  Alternatively, prosecutors must procure a warrant from a court and with the approval of either the U.S. Attorney (for Assistant U.S. Attorneys) or the Chief of the Asset Forfeiture and Money Laundering Section (AFMLS) (for Criminal Division trial attorneys).

2. That when the prosecutor determines subsequent to a structuring seizure that the government lacks the necessary evidence to succeed at either a civil or criminal trial, the seizing agency must return the full amount.

3. That when a prosecutor seizes property pursuant to suspicion of structuring, the prosecutor must file either a criminal indictment or a civil complaint, or receive an exception from either a U.S. Attorney or Chief of AFMLS within 150 days or else return the seized assets.

4. That all settlements must be complete and in writing.  Informal settlements are expressly prohibited.

Time will tell how impactful these reforms are, and they certainly stop well short of the abolition of civil forfeiture advocated by civil liberties advocates like Cato and the Institute for Justice.  The reforms are also limited to seizures made under suspicion of structuring, which represent only a portion of civil asset forfeiture abuses.

However, much like Eric Holder’s previous reforms to the federal government’s equitable sharing program, this memo can be taken as yet another signal that even the federal government is concerned about the increasingly publicized abusive nature of the government’s asset forfeiture regime. In that sense, these common sense reforms represent another step in the right direction, toward a legal system that respects due process and property rights.

Nicole Kaeding

The Veterans Health Administration (VHA) is plagued with problems. Veterans wait months for medical care and have few options for accessing non-VHA providers. In addition to all of the issues relating to providing health care, construction of VA medical facilities is mismanaged, which costs taxpayers billions of dollars in extra costs.

However, the VHA might be trying to change direction. Glenn Haggstrom, the individual who oversees VHA construction, “stepped down” last week after being put under internal investigation. Hopefully, he will be replaced by a reform-minded leader. In 2013 the Government Accountability Office (GAO) studied the four largest VHA construction projects, which are located in Denver, Orlando, New Orleans, and Las Vegas. GAO found a host of problems. All four projects had major cost overruns and schedule delays.

GAO discovered that the combined costs for the projects have doubled, from $1.5 billion to $3 billion. Construction of the Denver facility was 144 percent over budget and the Orlando facility was 143 percent over budget. The New Orleans facility was only 59 percent over-budget.The construction projects are also taking much long than planned. The Denver and New Orleans projects were 14 months behind schedule. The Las Vegas project was 74 months behind scheduled. GAO put much of the blame for these problems on the VHA: “Our review of VA’s four largest projects indicates that weaknesses in VA’s construction management processes…contributed to cost increases and schedule delays.” These sorts of problems have continued since GAO’s 2013 analysis. Costs at the Denver facility have continued to skyrocket. The most recent estimate in 2015 put total costs at $1.73 billion, five times greater than its original projected cost of $328 million, and $900 million more than GAO’s 2013 estimate.

Members of Congress were furious with the latest cost estimate. Many called for all VHA construction to be shifted to the Army Corps of Engineers, which handles construction for many federal agencies. The Chairman of the House Armed Services Committee said, “One thing is certain: Congress will not authorize another dime until VA gets its construction affairs in order.” These problems increased the pressure on Haggstrom. The VHA launched an investigation into the agency’s handling of construction issues. Haggstrom decided to step down, but not before collecting $64,000 in bonuses over the last several years. Since Haggstrom left voluntarily, he will continue to be eligible for his federal pension.

Haggstrom’s investigation and departure is a good first step to remedying the problems surrounding VHA hospital construction, but much more reform is needed. The failures with VHA construction projects are endemic. The inefficiencies related to the construction of VHA hospitals is another reason why veterans health care should be shifted to a system based on private providers.

K. William Watson

When deciding whether to impose antidumping duties on imports from Vietnam, the United States uses what’s known as nonmarket economy (NME) methodology.  That is, instead of comparing a product’s U.S. price with the price for the same or similar product in Vietnam, U.S. authorities compare it with a fictitious price constructed using surrogate values from third countries.

The use of NME methodology is prohibited under the rules of the World Trade Organization.  But when Vietnam and China joined the WTO, they each agreed that the use of NME methodology would be permitted against them for an additional 15 years.  For China that’s until the end of 2016, and for Vietnam it’s until the end of 2018.

Vietnam, however, is also a negotiating party to the Trans-Pacific Partnership, a 12-member free trade agreement that may be concluded this year.  Last week, Vietnam’s Ambassador to the United States implied that Vietnam was seeking to have its NME status revoked as part of those negotiations.  As reported at Inside U.S. Trade ($):

“I think on the question of the market economy status, we can do it together. Vietnam has been doing it with other countries and I think about three dozen or something countries have recognized that,” said Pham Quang Vinh, Vietnam’s ambassador in Washington. Vinh added that he hopes “when we reach a conclusion of the TPP, then everything [with regard to this issue will] be resolved.”

It certainly makes sense that Vietnam would hope to negotiate the end of NME treatment.  As the Ambassador explained, they’ve already secured market economy status in other countries.  The TPP is a natural vehicle for getting a similar commitment from the United States .  But there’s no guarantee they’re going to get it:

But his counterpart, U.S. Ambassador to Vietnam Ted Osius, seem to tamp down those expectations. Speaking at the same event, Osius indicated that while TPP might put Hanoi on strong footing to make the economic reforms necessary to become a market economy, a change in its status would be likely be further down the road. Both officials spoke at March 24 event at the Center for Strategic and International Studies (CSIS).

Osius said that the U.S. Commerce Department process to determine a country’s market economy status is non-political, and that Vietnam still needs to fulfill certain requirements, such as having a convertible currency.

The U.S. official’s characterization is telling.  The U.S. government has consistently argued that NME status is a factual question.  That is, if Vietnam or China meets the criteria under U.S. law for market economy treatment, their NME status will be revoked accordingly. 

This characterization is misleading and troubling for a number of reasons.  First, NME status is very much a political decision.  There are factors for evaluating nonmarket economy status under U.S. law, but those factors are not especially relevant to the problem a genuinely nonmarket economy poses for the use of regular antidumping methodology.  “Currency convertibility” is an excellent example.  Moreover, the factors ask regulators to evaluate “the extent of” certain interventionist policies without giving guidance on how extensive they must be.  And a determination of whether a country “meets” the factors is explicitly not reviewable by any court. 

Second, the important question is not about Vietnam’s economy but about when the U.S. will end this abusive antidumping practice.  As I explained in a policy analysis paper last year, the NME designation is merely an excuse for lawless protectionism.  Whatever factors the U.S. government wants to come up with, the fact remains that Vietnam and China both are sufficiently market-oriented that authorities can use domestic prices to determine whether goods are being sold in the United States at “dumped” prices.

Finally, it’s particularly repugnant for the United States to impose NME treatment on imports from a country it has a free trade agreement with.  The TPP should eliminate barriers to trade between the United States and Vietnam and further integrate their markets, so that increased competition can effectively drive economic growth.  Singling out Vietnam for discriminatory antidumping treatment is entirely incompatible with that goal.

Vietnam is right to demand an end to abusive NME treatment by the United States.  If U.S. negotiators are serious about making the TPP an “ambitious, 21st Century agreement,” they should welcome that demand without objection.

Roger Pilon

Few recent battles have seized the nation’s moral compass quite as emotionally as the one going on in Indiana right now, pitting defenders of religious liberty against opponents of discrimination based on sexual orientation. But Apple’s chief executive Tim Cook brings the moral confusion surrounding the battle to a head this morning with his op-ed in the Washington Post. Lumping together both legitimate and illegitimate “religious freedom restoration acts,” he writes, “they go against the very principles our nation was founded on.”

Really? Let’s see if that claim stands up. We find those principles in the nation’s founding document, the Declaration of Independence. And Cook himself invokes them: freedom and equality. Rightly understood, they hold that we’re all born free, with equal rights to remain free. That means—to cut to the chase—that we may associate with anyone who wishes to associate with us; but we are equally free to decline to associate with others, for any reason, good or bad, or no reason at all. That right to discriminate is the very essence of freedom. That’s why people came to this country, to escape forced associations—religious, economic, political, or otherwise.

Cook turns those principles on their head. He says religious freedom bills “rationalize injustice” by, for example, allowing a baker to decline to bake a cake for a same-sex wedding. He would compel the baker to accept that request, by force of law. That’s the very opposite of the freedom of association—the right to be left alone—that the nation was founded on.

Just to be clear, I’m as offended as Cook is by that kind of discrimination. But I’m even more offended by the belief that we can force people to conform to our values when they’re asking simply to be left alone to enjoy their right to pursue their values. And precisely there is the source of Cook’s confusion, his conflation of rights and values, two very different moral notions. True liberalism recognizes that distinction. It’s the epistemic foundation of a free society, absent which not only intolerance reigns—ironically, what Cook charges even as he practices it—but intolerance coupled with the force of law.

There are many related issues, of course—too many for a mere post. (See here, here, and here.) These religious freedom restoration acts arose, for example, only because of an erroneous 1990 Supreme Court decision. More deeply, our anti-discrimination law, inconsistent as it is with freedom of association, arose understandably from the ashes of slavery and Jim Crow; and its spill-over to private discrimination was probably necessary to break the back of institutional racism in the South. More immediately, the discrimination permitted here, as Cook says, is “bad for business” and therefore will likely arise only in rare cases. But the principle at issue is crucial. If we lose that, as this battle suggests we’re doing, it will fall ever more to government to determine what values will and will not be tolerated, and that will be the end of liberty—including the liberty to offend, which a free society must tolerate.

Adam Bates

In 2012, the people of Colorado voted to legalize marijuana through a state constitutional amendment, which went into effect in January of 2014.  Two of Colorado’s neighbors, Nebraska and Oklahoma, subsequently filed a lawsuit urging the U.S. Supreme Court to prohibit the state of Colorado from constructing a regulatory regime for the marijuana industry.  Last Friday, Colorado filed its response.

The Nebraska/Oklahoma argument: because the federal government, through the Controlled Substances Act, has banned marijuana, states are not allowed to contradict that ban by creating a regulatory framework for legalization.  Further, Colorado’s official regulation of recreational marijuana imposes a nuisance burden on surrounding states due to an alleged increase in drug trafficking.  While Nebraska and Oklahoma disclaim any intent to force Colorado to “re-criminalize” marijuana, the suit argues that Colorado’s official efforts to regulate the legal marijuana industry bring the state into conflict with federal and international drug laws.

Colorado’s response: there is no conflict.  Federal marijuana prohibition is still in effect, and the decision not to prioritize enforcement in states that legalize marijuana came from the federal government, not Colorado.  If Nebraska and Oklahoma object to the manner in which the federal government is discharging its law enforcement duties in Colorado, they should be suing the federal government.  Colorado’s regulation of the marijuana industry is within its prerogatives under the CSA. As to the nuisance claim, Colorado argues that mere policy differences between states that don’t directly injure the sovereignty of other states are not actionable nuisances.

The legal basis for the lawsuit has been questionable from the beginning, with legal commentators both challenging its merits and pointing out the irony in two of America’s “reddest” states taking a legal posture that overruns state sovereignty in favor of federal power.

And, of course, if prohibition states are concerned with the costs, they could always legalize and regulate marijuana themselves and spare their justice systems the immense costs of prohibition.  

While some notable conservatives appear to be coming around in favor of a federalist experiment on drug legalization, it is a testament to the unfortunate power of the drug war that two state governments that routinely invoke the merits of federalism would abandon it in favor of federal prohibition.  As discussed previously, federalism would hardly be the only cherished principle to be left in the drug war’s wake.

Daniel J. Mitchell

There’s a “convergence” theory in economics that suggests, over time, that “poor nations should catch up with rich nations.”

But in the real world, that seems to be the exception rather than the rule.

There’s an interesting and informative article at the St. Louis Federal Reserve Bank which explores this question. It asks why most low-income and middle-income nations are not “converging” with countries from the developed world.

…only a few countries have been able to catch up with the high per capita income levels of the developed world and stay there. By American living standards (as representative of the developed world), most developing countries since 1960 have remained or been “trapped” at a constant low-income level relative to the U.S. This “low- or middle-income trap” phenomenon raises concern about the validity of the neoclassical growth theory, which predicts global economic convergence. Specifically, the Solow growth model suggests that income levels in poor economies will grow relatively faster than developed nations and eventually converge or catch up to these economies through capital accumulation… But, with just a few exceptions, that is not happening.

Here’s a chart showing examples of nations that are – and aren’t – converging with the United States.

The authors analyze this data.

The figure above shows the rapid and persistent relative income growth (convergence) seen in Hong Kong, Singapore, Taiwan and Ireland beginning in the late 1960s all through the early 2000s to catch up or converge to the higher level of per capita income in the U.S. …In sharp contrast, per capita income relative to the U.S. remained constant and stagnant at 10 percent to 30 percent of U.S. income in the group of Latin American countries, which remained stuck in the middle-income trap and showed no sign of convergence to higher income levels… The lack of convergence is even more striking among low-income countries. Countries such as Bangladesh, El Salvador, Mozambique and Niger are stuck in a poverty trap, where their relative per capita income is constant and stagnant at or below 5 percent of the U.S. level.

The article concludes by asking why some nations converge and others don’t.

Why do some countries remain stagnant in relative income levels while some others are able to continue growing faster than the frontier nations to achieve convergence? Is it caused by institutions, geographic locations or smart industrial policies?

I’ll offer my answer to this question, though it doesn’t require any special insight.

Simply stated, Solow’s Growth Theory is correct, but needs to be augmented. Yes, nations should converge, but that won’t happen unless they have similar economic policies.

And if relatively poor nations want to converge in the right direction, that means they should liberalize their economies by shrinking government and reducing intervention.

Take a second look at the above chart above and ask whether there’s a commonality for the jurisdictions that are converging with the United States?

Why have Hong Kong, Singapore, Taiwan, and Ireland converged, while nations such as Mexico and Brazil remained flat?

The obvious answer is that the former group of jurisdictions have pursued, at least to some extent, pro-market policies.

Heck, they all rank among the world’s top-18 nations for economic freedom.

Hong Kong and Singapore have been role models for economic liberty for several decades, so it’s no surprise that their living standards have enjoyed the most impressive increase.

But if you dig into the data, you’ll also see that Taiwan’s jump began when it boosted economic freedom beginning in the late 1970s. And Ireland’s golden years began when it increased economic freedom beginning in the late 1980s.

The moral of the story is – or at least should be – very clear. Free markets and small government are the route to convergence.

Here’s a video tutorial.

Free Markets and Small Government Produce Prosperity

And if you want some real-world examples of how nations with good policy “de-converge” from nations with bad policy, here’s a partial list.

Gee, it’s almost enough to make you think there’s a relationship between good long-run growth and economic freedom!

Andrew J. Coulson

A week ago, the Atlanta Journal Constitution published an on-line op-ed critiquing Chile’s nationwide public-and-private school choice program. In a letter to the editor, I objected to several of the op-ed’s central claims. The authors responded, and the AJC has now published the entire exchange. A follow-up is warranted, which I offer here:

Comment on the Gaete, Jones response to my critique:

Their response consists chiefly of “moving the goalposts”—changing the issue under debate rather than responding to the critique of the original point. The first claim in their original op-ed to which I objected was that “there is no clear evidence that [Chilean] students have significantly improved their performance on standardized tests.” In contradiction of this claim I cited the study “Achievement Growth” by top education economists and political scientists from Harvard and Stanford Universities. That study discovered that Chile is one of the fastest-improving nations in the world on international tests such as PISA and TIMSS—which were specifically designed to allow the observation of national trends over time. It is hard to conceive of clearer evidence that Chilean students “have significantly improved their performance”, contrary to the claim of Gaete and Jones.

To the extent that Gaete and Jones address this evidence at all it is by saying: “it is true that Chile has shown a certain improvement in [its] relative position in PISA scores. But (1) this may say less about Chilean improvements and more about other countries’ relapse.” That is an empirically testable claim. It has been tested, and it is false. As I pointed out in my original letter, prof. Gregory Elacqua has shown that the same pattern of improvement in academic performance is visible on Chile’s own national SIMCE test, which is entirely unaffected by the performance of foreign nations (see chart 1). Moreover, the improvement in Chilean academic achievement noted in the “Achievement Growth” study is not purely relative to other countries but is an objective gain compared to Chile’s own earlier performance.

Chart 1:  Same trend in national tests (SIMCE language and math, 4th grade)

Source: Gregory Elacqua, “Factors contributing to achievement growth in Chile.”

Even if that were not the case and Chile were only improving relative to the entire rest of the world because the whole rest of the world was suffering a decline, it would beg the question: what is Chile’s secret that is allowing it to buck this worldwide slump? Certainly it would be wrong to dismiss Chile’s education system out of hand as part of the explanation.

But rather than spending much time trying to dispute this evidence that contradicts their original claim, the authors try to change the subject, proposing that “testing is neither the only nor the best way or criterion to determine the quality of an educational system, it is simply the way favoured by market-oriented systems.” It was also, recall, the very first way in which Gaete and Jones themselves proposed to evaluate Chilean education in their op-ed, with their mistaken claim about a lack of test score improvement. But rather than seriously confronting the evidence that refutes them, the authors choose to change the subject, asserting that: “there are no big differences between the private and public system in the [domestic Chilean] SIMCE [test].” This new claim is entirely beside their original point, which was the trend in academic performance for the nation’s students as a whole.

But, having addressed the authors’ original claim, I have no objection to addressing this new one. The effects of a competitive education system are not limited to—or even chiefly comprised by—differences in performance between the sectors. One the contrary, it is the overall performance of all schools and children that is of interest. Alas, Gaete and Jones seem unaware that increased competition from private voucher schools improves the performance of nearby government schools. This has been shown empirically by Francisco Gallego in his study “When does Inter-School Competition Matter? Evidence from the Chilean `Voucher’ System.”

Next, Gaete and Jones attack Chile’s education system on the grounds that it suffers from an educational gap between its wealthier and poorer students. That it does, but so do other nations. It is more meaningful to ask how Chile compares in this respect to its peer Latin American nations. Inequality can be measured using several different metrics, one of which is to look at differences in test scores between wealthier and poorer students. These results vary somewhat by subject, grade, and test, but as an example we can look at the PISA test of reading among 15-year-olds. Here, Chile’s achievement gap is statistically indistinguishable from the overall average of all participating countries and significantly smaller than the gaps in most other Latin American countries. Chile’s achievement gap is also significantly smaller than the gaps in the United States, France, Belgium, and several other rich nations (“PISA 2009 Results: Learning to Learn,” Vol. III, Table III A, 2010).

Another way of measuring educational inequality is the average number of years of schooling completed by the wealthiest versus the poorest students. On this point, professor Claudio Sapelli summarizes the evidence for El Mercurio: “Chile has the lowest average educational inequality in Latin America. To measure inequality using the education gap between quintile 5 (richest) and 1 (poorest). In terms of change in this gap in the last 20 years, Chile is among the few countries in Latin America to decrease it.” So, here again, the data on Chile’s education system seem encouraging.

Looking beyond the education system to the broader economy, income inequality has also been falling in recent decades, as has poverty. “The fraction of the population living under the poverty line in Chile fell from 45.1% to 13.7% between 1987 and 2006” (Eberhard & Engel, 2008). Meanwhile, “from 1990 onwards the wage of the 10th percentile [poorest] and the median wage [middle class] grew faster than [that of the] the 90th percentile [the wealthy]” (Eberhard & Engel, 2008).

As for public sentiment toward the program, to which Gaete and Jones make reference, I leave explaining that to the political scientists and sociologists.

Steve H. Hanke

Charles W. Calomiris and Peter Ireland, two distinguished economists and friends, wrote an edifying piece in The Wall Street Journal on 19 February 2015. That said, their article contains a great inflation canard.

They write that “Fed officials should remind markets that monetary policy takes time to work its way through the economy—what Milton Friedman famously referred to as “long and variable lags”—and on inflation.” That’s now a canard.

For recent evidence, we have to look no further than the price changes that followed the bursting of multiple asset bubbles in 2008. The price changes that occurred in the second half of 2008 were truly breathtaking. The most important price in the world — the U.S. dollar-euro exchange rate — moved from 1.60 to 1.25. Yes, the greenback soared by 28% against the euro in three short months. During that period, gold plunged from $975/oz to $735/oz and crude oil fell from $139/bbl to $67/bbl.

What was most remarkable was the fantastic change in the inflation picture. In the U.S., for example, the year-over-year consumer price index (CPI) was increasing at an alarming 5.6% rate in July 2008. By February 2009, that rate had dropped into negative territory, and by July 2009, the CPI was contracting at a -2.1% rate. This blew a hole in a well-learned dogma: that changes in inflation follow changes in policy, with long and variable lags.

Milton Friedman was certainly correct about the period covered in the classic, which he co-authored with Anna J. Schwartz: A Monetary History of the United States, 1867-1960. Recall that the world of that era was one in which the fixed exchange rates ruled the roost. That’s not today’s world. Indeed, many important currencies now float. Since the world adopted a flexible exchange-rate “non-system”, changes in inflation can strike like a lightning bolt.

Roger Pilon

Continuing the media firestorm of the last few days, George Stephanopoulos spent over 11 minutes today on ABC’s “This Week” browbeating Indiana Gov. Mike Pence over the meaning of the Religious Freedom Restoration Act the governor had just signed, and the governor spent the entire 11 minutes refusing to say what the Act plainly says, that individuals and businesses, in the name of religious liberty, may discriminate against members of the LGBT community by, for example, declining to provide bakery or florist services for gay weddings.

Such today is the dishonesty of our politics, on both sides, that those who defend religious liberty cannot or will not speak plainly, while those who defend anti-discrimination measures—like Bill Clinton, who signed the federal Religious Freedom Restoration Act, and Barack Obama, who was an Illinois state senator when that state’s religious freedom act was passed unanimously—cannot bring themselves to say that they are limiting religious liberty—assuming the media would ever ask them to say that.

Doubtless spurred by the upcoming NCAA “Final Four” games in Indianapolis, we have here, of course, the continuation of the hysteria that followed the Supreme Court’s Hobby Lobby decision last year, which upheld the right of the deeply religious owners of that chain of stores to refrain from paying for abortifacients for their employees, as was required under the administration’s interpretation of Obamacare. (See Cato’s brief in that case, and some of my thoughts on the issue here and here.) “Hysterical” is no overstatement: ABC News reports today that Seattle’s mayor wants to prohibit city employees from traveling to Indiana. Why stop there? Prohibit travel across the U.S., where the federal law is in force.

In truth, we have in this Act the analogue of what we see every day in the area of free speech, which the left assiduously and rightly defends—but this is religion, and for the left, that’s another matter. Just as we defend a person’s right to say what he pleases, which is not the same as defending what he says, so too here we can defend a person’s right to discriminate on the basis of his religious beliefs without defending those beliefs or the actions they may require of a believer. As one more sign of how modern liberals have turned the Constitution on its head, they would have the statutory rights created by our anti-discrimination law trump the constitutional rights the First Amendment was ratified to protect. I discuss those issues in much greater depth here.

Ilya Shapiro

Mdicaid, the entitlement program for low-income Americans jointly funded by the state and federal government, represents about 25 percent of state budgets. Federal funding represents more than half (57 percent) of that amount, and that funding is now being threatened by Obamacare.

In what seems like déjà-vu all over again, Maine’s Department of Health and Human Services (DHHS) is pursuing a lawsuit to prevent this sort of federal coercion.

Here’s the scoop: In 2009, the American Recovery & Reinvestment Act (ARRA) offered states stimulus funds if they agreed to a maintenance-of-effort (“MOE”) provision that required them to maintain Medicaid-eligibility standards at July 2008 levels through December 2010. MaineCare, Maine’s Medicaid program, accepted those funds and the accompanying MOE provision. In relevant part, MaineCare covered low-income individuals ages 18 to 20 in 2008 — even though Medicaid doesn’t require states to include non-pregnant, non-disabled 18- to 20-year olds — so that MOE provision required Maine to continue to do so through 2010. Then the Affordable Care Act came along and added its own MOE provision, which required states to “freeze” eligibility levels until 2019 or risk losing all federal Medicaid funding.

When the ACA took effect on March 23, 2010, Maine was still bound by the ARRA’s MOE requirements, and thus had to continue to cover 18- to 20-year olds for an additional nine years. In August 2012, however, the Maine DHHS sought to drop this coverage. The federal Center for Medicare and Medicaid Services (CMS) rejected Maine’s position regarding alleged inconsistencies between the MOE provisions.

On appeal, Maine argued that the ACA’s MOE provision is unconstitutionally coercive under the Spending Clause, that it unconstitutionally applies retroactively to ARRA MOE provisions, and that it violates Maine’s right to equal sovereignty. Nevertheless, the U.S. Court of Appeals for the First Circuit affirmed the CMS decision, so Maine now seeks Supreme Court review.

Cato has filed a brief supporting that petition. We outline the significance of the case and reiterate concerns over the executive branch’s interpretations of NFIB v. Sebelius (the previous Obamacare case at the Supreme Court). The issues presented here need to be resolved so states can decide whether to establish exchanges — regardless of how King v. Burwell is decided — or expand their Medicaid programs. In enforcing the eligibility freeze, the ACA creates inequality among states in administering their Medicaid programs and threatens state sovereignty.

After NFIB struck down mandatory Medicaid expansion, U.S. HHS Secretary Sebelius suggested that the Court’s ruling didn’t apply to populations covered under MOE requirements. Yet the Supreme Court majority clearly stated that expanding mandatory Medicaid eligibility beyond “discrete categories of needy individuals” represented a dramatic increase of state obligations. All 34 states that have chosen not to establish exchanges are still responsible for the populations under the MOE provision, however, and most states that haven’t expanded Medicaid are facing budget shortfalls.

Aside from clear federalism issues, this case therefore has a huge impact on state budgets. The Court must grant cert. in order to address federalism issues and provide clarity so that the states can make informed decisions about ACA implementation.

The Supreme Court will decide whether to take up Mayhew v. Burwell later this spring.

Ilya Shapiro

The Supreme Court heard arguments on Wednesday in Michigan v. EPA, asking whether it was unreasonable for the Environmental Protection Agency to ignore costs in determining the appropriateness of regulating mercury emissions from power plants. The EPA’s proposed regulations are expected to cost the coal industry a whopping $9.6 billion, but only offer a meager $500,000 to $6 million in public health benefits. 

Cato filed an amicus brief in the case that focuses on why the EPA chose to ignore costs in developing these regulations. It turns out that EPA could achieve its goal of comprehensively regulating utility emissions only if it ignores the costs. That in turn allowed the EPA to single out power plants – which it couldn’t do under other programs, and to avoid working through the states – as the other programs require. This strategy amounts to little more than a clever trick to circumvent statutory limits on the EPA’s own authority.

In effect, the EPA is exploiting nearly harmless levels of mercury emissions as a Trojan horse – an excuse to regulate all power plant emissions, even ones that are covered by other programs that deny EPA the ability to regulate in this fashion.

Chief Justice Roberts picked up on this point from our brief when he questioned the Solicitor General extensively as to the radical disparity between costs and benefits (see discussion starting p.59 here). He also asked pointed questions regarding the EPA’s attempt at making an “end run” around restrictions on the Clean Air Act.

As Roberts explained, this “end run” works by the EPA first finding a hazardous air pollutant (HAP) that is suitable for regulation—in this case mercury. In the government’s view, this then opens the door for the EPA to “regulate all hazardous pollutants that the source emits,” even if those pollutants – this time particulate matter – are not covered by the applicable sections of the Clean Air Act. The Chief Justice scoffed at the government’s argument, remarking that “I understand how the end run works … I’m just questioning the legitimacy of it.”

The EPA is attempting to offset the admitted disparity between the costs and benefits of regulating mercury emissions by claiming that regulating “co-pollutants” like particulate matter would deliver “$30 to $90 billion” in benefits, far outweighing the $6 million in benefits from mercury regulation and allegedly justifying the tremendous costs to the coal industry. 

But what we’re really witnessing here is a heavy-handed power grab. The federal government is grasping at straws to target coal-fired power plants in ways that Congress denied to it. As explained in Cato’s brief, “by refusing to consider costs when deeming it ‘appropriate and necessary’ to regulate power plant’s HAP emissions, the EPA was able to circumvent the Clean Air Act’s statutory bar on regulating criteria pollutants as hazardous air pollutants and aggrandize its authority at the expense of that of the states and their citizens.”

The Economist also recently highlighted many of the concerns we raised. In the end, it seems clear that the EPA’s reading of the law is, as Justice Scalia put it, “silly.” This is just another unacceptable power grab by the executive branch.

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

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

More evidence this week that high-end forecasts of coming climate change are unsupportable and Americans’ worry about environmental threats, including global warming, is declining. Maybe the general public isn’t as out of touch with the science as has been advertised?

First up is a new paper by Bjorn Stevens from Germany’s Max Plank Institute for Meteorology that finds the magnitude of the cooling effect from anthropogenic aerosol emissions during the late 19th and 20th century was less than currently believed, which eliminates the support for the high-end negative estimates (such as those included in the latest assessment of the U.N.’s Intergovernmental Panel on Climate Change, IPCC). Or, as Stevens puts it “that aerosol radiative forcing is less negative and more certain than is commonly believed.”

This is important, because climate models rely on the cooling effects from aerosol emissions to offset a large part of the warming effect from greenhouse gas emissions. If you think climate models produce too much warming now, you ought to see how hot they become when they don’t include aerosol emissions. The IPCC sums up the role of aerosols this way:

Despite the large uncertainty range, there is a high confidence that aerosols have offset a substantial portion of [greenhouse gas] global mean forcing.

The new Stevens’ result—that the magnitude of the aerosol forcing is less—means the amount of greenhouse gas-induced warming must also be less; which means that going forward we should expect less warming from future greenhouse gas emissions than climate models are projecting.

Researcher Nic Lewis, who has done a lot of good recent work on climate sensitivity, was quick to realize the implications of the Stevens’ results. In a blog post over at Climate Audit, Lewis takes us through his calculations as to what the new aerosols cooling estimates mean for observational determinations of the earth’s climate sensitivity.

What he finds is simply astounding.

Instead of the IPCC’s estimate that the equilibrium climate sensitivity likely lies between  1.5°C and 4.5°C, Lewis finds the likely range to be 1.2°C to 1.8°C (with a best estimate of 1.45°C). Recall that the average equilibrium climate sensitivity from the climate models used by the IPCC to make future projections of climate change and its impacts is 3.2°C—some 120% greater than Lewis’ best estimate. But perhaps even more important than the best estimate is the estimate of the upper end of the range, which drops from the IPCC’s 4.5°C down to 1.8°C.

This basically eliminates the possibly of catastrophic climate change—that is, climate change that proceeds at a rate that exceeds our ability to keep up. Such a result will also necessarily drive down estimates of social cost of carbon thereby undermining a key argument use by federal agencies to support increasingly burdensome regulations which seek to reduce greenhouse gas emissions.

If this Stevens/Lewis result holds up, it is the death blow to global warming hysteria.

 

Which brings us to the last results of Gallup’s annual poll gauging the level of environmental concern among Americans—something the polling agency has been keeping track of since the late 1980s. 

Here’s Gallup’s summary of this year’s results:

Americans’ concern about several major environmental threats has eased after increasing last year. As in the past, Americans express the greatest worry about pollution of drinking water, and the least about global warming or climate change.

And Gallup’s full write-up includes this gem:

Importantly, even as global warming has received greater attention as an environmental problem from politicians and the media in recent years, Americans’ worry about it is no higher now than when Gallup first asked about it in 1989.

Says something about the effectiveness of the climate alarm campaign.

The full set of questions and results are available here. You ought to have a look!

Adam Bates

Over at the Washington Post, Radley Balko details a recent Fourth Circuit ruling overturning an award for a father whose son was shot and killed in a military-style SWAT raid after marijuana residue was found in an outside garbage bag. A jury awarded the father $250,000 after it was shown that the police failed to comply with their obligation to knock and announce their presence before barging in and that they lied about several aspects of the raid.

Without repeating the entirety of Balko’s excellent analysis, a particularly troubling aspect of the ruling is the nonchalant way in which the Fourth Circuit judges, even in dissent, treat the militarized raid over marijuana residue and dispense with any suggestion that such escalated violence is constitutionally questionable:

Let’s first start by noting one very important issue that is not in dispute—whether the massive amount of force the police brought to bear in this case was reasonable under the Fourth Amendment. As far as the federal courts are concerned, it was. As Judge Pamela Harris points out in her dissent, “The point here, to be clear, is not to take issue with the Officers’ decision to execute a search warrant based on marijuana traces by way of a military-style nighttime raid.”

Harris is correct. The courts long ago decided that dangerous, punishing SWAT-style raids to search for pot—even when there is no evidence of distribution—are reasonable under the Fourth Amendment. A lawsuit arguing otherwise will be promptly tossed.

Balko then points out that such behavior is precisely what the Fourth Amendment was designed to prevent:

But it’s worth considering the absurdity of that position. In the 20 or so years leading up to the American Revolution, the British crown began stationing troops in the streets of Boston to enforce England’s tax and import laws. The British troops and enforcement officers were armed with writs of assistance, or general warrants that gave them broad powers to search colonists’ homes. They didn’t need to establish probable cause, or even specificity as to a person or residence. The abuse that came with those warrants made Boston a hub of revolutionary fervor, and memories of that abuse are why the Founders created a Fourth Amendment after the war.

But while today’s search warrants require both specificity and some evidence of wrongdoing, in many ways the colonists had more protections than we do today. For example, the British soldiers could serve warrants only during the day. And they were always required to knock, announce themselves, announce their purpose and give the resident time and opportunity to come to the door to let them in peacefully. This was all in observance of the Castle Doctrine, or the idea that the home should be a place of peace and sanctuary and that it should be violated only in the most extreme circumstances. Even then, the Castle Doctrine had a rich history in English common law, a tradition that carried over in the United States until the Supreme Court began chipping away at it in drug cases, beginning in about the 1960s.

Today, of course, authorities can break into homes without knocking. They can conduct raids at night. In theory, we’re today protected by the requirement that authorities show probable cause before serving a warrant, but given the deference judges give to police and prosecutors in much of the country and the boilerplate language you’ll often find on warrant affidavits, you could make a good argument that in many jurisdictions the probable cause protection is little more than a formality. In any case, if the Fourth Amendment is due to the Founders’ offense at British soldiers forcibly entering homes in daylight hours after knocking and announcing to search for contraband, it seems safe to say that the Founders would be appalled by the fact that today, dozens of times each day, heavily armed government officials break into homes, often at night, without first knocking and announcing, in order to conduct searches for contraband.

It’s a persuasive point. Whether the issue is civil asset forfeiture, warrantless surveillance, or armed government agents barreling through your front door at 4:30 in the morning, there is a strong case to be made that the drug war has mangled the Fourth Amendment beyond recognition. That federal courts can observe as much with so little concern is a testament to the institutional nature of this problem.

The entire ruling can be found here.

Adam Bates

A new report from the Drug Policy Alliance details a steep decline in the number of marijuana arrests in Colorado and remarks on the beneficial effects.

The key points:

  • Since 2010, marijuana possession charges are down by more than 90%, marijuana cultivation charges are down by 96%, and marijuana distribution charges are down by 99%.
  • The number of marijuana possession charges in Colorado courts has decreased by more than 25,000 since 2010—from 30,428 in 2010 to just 1,922 in 2014.
  • According to raw data from the National Incident-Based Reporting System, drug-related incidents are down 23% since 2010, based on a 53% drop in marijuana-related incidents.
  • In 2010 the top five Colorado counties for marijuana possession cases were El Paso, Jefferson, Adams, Larimer, and Boulder.  Marijuana possession cases in those counties all dropped by at least 83% from 2010 to 2014.
  • Marijuana distribution charges for young men of color did not increase, to the relief of racial justice advocates wary of a “net-widening” effect following legalization. The black rate for distribution incidents dropped from 87 per 100,000 in 2012 to 25 per 100,000 in 2014.
  • Racial disparities for still-illegal and mostly petty charges persist for black people when compared to white people, primarily because of the specific increase of charges for public use combined with the disproportionate rates of police contact in communities of color. The marijuana arrest rate for black people in 2014 was 2.4 times higher than the arrest rates for white people, just as it was in 2010.
  • The report also reveals a decline in synthetic marijuana arrests, presumably because people are less likely to use synthetic marijuana when marijuana itself is no longer criminalized.

According to Art Way, Colorado state director of the Drug Policy Alliance:

It’s heartening to see that tens of thousands of otherwise law-abiding Coloradans have been spared the travesty of getting handcuffed or being charged for small amounts of marijuana. By focusing on public health rather than criminalization, Colorado is better positioned to address the potential harms of marijuana use, while diminishing many of the worst aspects of the war on drugs.

Daniel J. Mitchell

This is a column I never expected to write. That’s because I’m going to applaud Presidents Franklin Roosevelt and Harry Truman.

This won’t be unconstrained applause, to be sure. Roosevelt, after all, pursued awful policies that lengthened and deepened the economic misery of the 1930s. And, as you can see from this video, the “economic bill of rights” that he wanted after WWII was downright malicious.

Truman, meanwhile, was a less consequential figure, but it’s worth noting that he wanted a restoration of the New Deal after WWII, which almost certainly would have hindered and perhaps even sabotaged the recovery.

But just as very few policymakers are completely good, it’s also true that very few policymakers are totally bad. And a review of fiscal history reveals that FDR and Truman both deserve credit for restraining domestic spending during wartime.

In a new column I wrote for The Hill, I specifically responded to the cranky notion, pursued by Bernie Sanders, the openly socialist U.S. senator from Vermont, that there should be tax hikes on the rich to finance military operations overseas.

The idea has a certain perverse appeal to libertarians. We don’t like nation-building and we don’t like punitive tax policy, so perhaps mixing them together would encourage Republicans to think twice (or thrice) before trying to remake the world.

But “perverse appeal” isn’t the same as “good policy.”

That’s why I suggest another approach, one that used to exist in our nation.

Lawmakers would be well served to instead look on the spending side of the budget. …This may seem like a foreign concept in today’s Washington, but it actually was standard procedure at times in our history.

Consider, for instance, what happened to domestic spending when the nation entered World War II.

As you see from this chart, these outlays fell significantly as a share of GDP. And this was while Roosevelt was in the White House!

I note in the article that much of this improvement was the result of rising GDP, but the raw numbers from the Office of Management & Budget Historical Tables also show that nominal spending was constrained.

The same thing happened during the Korean War. Once the conflict began and policymakers began funding the troops, they also put the brakes on domestic spending.

Unfortunately, restraining domestic spending when military spending is rising is no longer the standard practice in Washington. I point out in the article that we got across-the-board profligacy under President Johnson. Reagan, by contrast, did reduce the burden of domestic spending when he boosted defense outlays to win the Cold War. But then we had a return to guns-and-butter spending last decade during the Bush years.

That led me to write this surreal passage:

We have two odd collections of bedfellows, with Presidents Franklin Roosevelt, Truman, and Reagan in one camp vs. LBJ and Bush in the other camp.

Though I would argue there’s only one good president mentioned in that excerpt if we’re grading overall records.

K. William Watson

Senate Democratic Leader Harry Reid (NV) has announced that he will not seek reelection in 2016, and his most likely successor is Chuck Schumer (D-NY). No doubt a lot will be said by journalists and commentators about what this transition means for policy and politics.

If you want to get an idea of what that change might mean for U.S. trade policy in the long run, you should take a look at Cato’s congressional trade votes database—Free Trade, Free Markets: Rating the Congress.

Throughout his career, Reid has been a staunch opponent of trade liberalization. He has voted in favor of market-distorting subsidies and tariffs at almost every opportunity:

 

For instance, Reid thwarted President Obama’s attempt to secure trade promotion authority last year when Reid was still majority leader.

Schumer has a less drastic voting record:

Though hardly inspiring, Schumer’s record is better than Reid’s.

It can be useful to see more specifically where the senators differ. Unlike Reid, Schumer has voted in favor of free trade agreements from time to time; he has supported lifting and loosening the Cuba embargo, and–at least in his earlier years in the Senate–voted to reform the sugar program.

Should he take the helm next term, Schumer’s less rigid resistance to trade liberalization may help Senate Democrats better represent their base, which is less opposed to trade and globalization than most people realize.

Jason Bedrick

Mississippi is poised to become the third state, behind Arizona and Florida, to enact an education savings account (ESA) law. Yesterday, the Mississippi Senate voted to concur with the state House’s version of the bill, which would provide ESAs for students with special needs to cover numerous education expenses, including private school tuition and fees, tutoring, textbooks, educational therapy, assistive technology, and higher education expenses. Gov. Phil Bryant has indicated that he will sign the legislation.

The Friedman Foundation for Educational Choice provides a useful breakdown of the ESA legislation. While about 63,000 Magnolia State students would be eligible for an ESA next year, “this opportunity is limited to 500 students in year one, with an additional 500 students added to the program each year during a ‘pilot’ period of five years.”

The state will fund the ESAs at $6,500 annually in the form of reimbursements for eligible expenses. The reimbursement model may make it difficult for lower-income families to participate—something policymakers should monitor and address if necessary. Arizona provides ESA parents with restricted-use debit cards that allow parents to conveniently access ESA funds while minimizing the potential for fraud.

In a 2013 survey, parents of students with special needs in Arizona overwhelmingly reported being satisfied with the education they purchased for their children with ESAs. ESAs empower parents to completely customize their child’s education based on his or her unique learning needs. As Lindsey Burke of the Heritage Foundation and I explained in a recent article:

Parents can also save unused funds from year to year and roll the funds into a college savings account. These two features of ESAs—the ability of parents to completely customize their child’s education and save for future educational expenses—make them distinct from and improvements upon traditional school vouchers. ESAs empower parents with the ability to maximize the value their children get from their education services. And because they control how and when the money is spent, parents also have a greater incentive to control costs.

Whether or not 2015 ends up being the Year of Educational Choice, Mississippi has taken an important step toward educational freedom.

Emma Ashford

Since the Arab Spring, many Middle Eastern countries have fallen into political chaos like dominoes. This week’s explosion of conflict in Yemen is just the most recent example. Though many of these conflicts are based on local grievances, they are being exacerbated by the involvement of the region’s larger states, and by the United States.

America’s leaders denounce intervention by unfriendly states like Iran. Yet the United States ignores or even enables such actions by U.S. allies like Saudi Arabia. In doing so, America is simply contributing to the mess in the Middle East. Washington should back off and refuse to get more deeply involved in further Middle Eastern conflicts.

Yemen’s conflict is nothing new; the Houthi rebels have been active in Yemen for more than a decade, and captured the capital in January, forcing President Hadi to flee south. This week, as the rebels finally reached the southern city of Aden, Hadi fled, and apparently appealed to Saudi Arabia for help in combatting the Iranian-backed insurgency.

Yesterday evening, that help arrived in the form of a massive Saudi air campaign and a reported 150,000 troops. The Saudi efforts are supported by a number of other GCC and Arab states, as well as U.S. logistical and intelligence support.

But like everything in the Middle East today, this conflict isn’t as clear cut as it seems. The Houthis are indeed aligned with Iran, and probably receive monetary support. But they also represent a sizeable fraction of the Yemeni population, and many of their policies – such as opposition to U.S. drone strikes in Yemen – are widely popular. Even more confusing, the Houthis are also adamantly opposed to Al Qaeda, and have spent substantial time and resources fighting AQAP fighters inside Yemen.

This conflict fits with a broader pattern of post-Arab Spring clashes in the Middle East, conflicts which are complex and local in nature, but which are treated as simply proxy wars or sectarian conflicts. The fear that Iran might make gains in Syria, in Iraq, in Libya and elsewhere drives Saudi Arabia and other Gulf states to respond militarily, increasing tensions and conflict.

The U.S. response to this complex reality has been to reflexively back traditional U.S. allies. But in doing so, American policy has become confused, contradictory and overleveraged. We’re working towards similar goals as Iran inside Iraq, opposing them in Syria and Yemen, all while trying to reach a nuclear deal before the March 31st deadline. How this mess of policy contradictions is supposed to produce viable results is anybody’s guess.

Yemen has a long history of instability, and any military solution to the crisis will likely fail to produce a long-term solution; it will just paper over the problem. It’s not even clear whether the reinstallation of the Hadi government would be best for U.S. interests: though a Houthi government is unlikely to allow U.S. drone strikes against al Qaeda, they might prove more effective at fighting the group than the government has.

America should stop reflexively backing traditional U.S. allies in the region, and refrain from deeper involvement in these conflicts. Instead, we should think more clearly about when (and whether) the United States should be involved in Middle Eastern conflicts, and about how such actions fit our overall strategic goals. Because one thing is certain: further U.S. intervention in the Middle East would be an exceedingly bad choice.   

Thaya Knight

Tuesday, the SEC approved final rules for so-called Reg A+, a new and revitalized version of the Regulation A exemption, created by the JOBS Act of 2012.  While the new rules remove barriers for issuers seeking a raise near the top of the $50 million cap, they fail to remove the greatest barrier – state registration – for the smaller issuers, effectively leaving them out in the cold. 

Reg A has been essentially unusable for years.  The exemption allows a company to sell securities to the public without full registration, provided the issuer raises no more than $5 million and provided the offering complies with all applicable state securities (“blue sky”) laws.  Because of the low $5 million cap and, more importantly, the heavy burden of complying with at least two regulatory regimes – federal and one or more states – this exemption has become almost entirely obsolete.  Hoping to make a new, workable version, Title IV of the JOBS Act directs the SEC to create an additional class of securities under the exemption.  In addition to raising the cap to at least $50 million, Title IV left the door open for state preemption.

Surprising no one, the state regulators objected.  Although Reg A had languished for years even as small business clamored for better capital access, the North American Securities Administrators Association (NASAA), a group representing state regulators, only very recently announced it had “solved” the Reg A problem.  NASAA’s solution is a program of coordinated review whereby participating states agree to use uniform review standards and a streamlined filing process.  While this process may be a little less cumbersome, it still requires that the issuer complete two separate filings, under two separate regulatory regimes.  For the small companies likely to use Reg A, that is an expensive undertaking.  Moreover, NASAA has insisted that state-level review is important for investor protection, but it’s unclear what additional protection the state regulators provide.  NASAA President William Beatty has argued that small, local offerings require local regulators.  But, as Mr. Beatty himself has said, Reg A offerings that involve local issuers typically involve local investors who are familiar with the issuer.  Also, to the extent there is a benefit from review by a local regulator, that benefit would seem to be lost under coordinated review.  It’s also unclear how any one state regulator is “local” to a company doing a multi-state offering.

In the end, the SEC split the baby.  Reg A+, the Commission announced, will have a two-tier structure.  Offerings under Tier 1 may raise up to $20 million and will be subject to blue sky laws.  Offerings under Tier 2 may raise up to $50 million and will not be subject to blue sky laws.  Tier 2 offerings will have additional requirements not applicable to Tier 1 offerings, however, such as a cap on the amount a non-accredited investor may invest (10% of income or assets), periodic filing requirements (annual, semi-annual, and current event), and the obligation to file audited financials.  Given the expense and demands of blue sky compliance, it’s unlikely many issuers will use Tier 1.  That means that companies seeking less than $20 million will either choose a Tier 2 raise or, more likely, find that the new Reg A+ is as unusuable as the old one.  

Peter Van Doren

This week, Cato released the Spring issue of Regulation.

The cover article, by economist Pierre Lemieux, argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil.  The increased supply allows the economy to produce more goods. This benefits some people, if not all of them.  Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole.

A related article examines the dramatic increase in crude oil transported by trains and whether additional safety regulation of tank car design should be enacted.  Economist Feler Bose argues that companies have an incentive to reduce accidents to reduce insurance rates.  Thus less-obvious ways to prevent accidents, like better track maintenance, may be more cost-effective and undertaken voluntarily to reduce insurance costs.

The issue has three articles on health policy.  Cal State Northridge professor Shirley Svorny describes how state medical licensure boards do very little to discipline doctors who cause medical errors.  Instead, medical quality is created by the private decisions of individual hospitals to grant privileges to doctors to treat patients and the decisions of specialty boards, such as those that govern cardiology, to certify members as qualified.  A second article concludes that the regulation of electronic cigarettes is likely, even though the evidence for adverse health effects is thin, because a powerful coalition of existing cigarette companies and anti-smoking activists would benefit. A third article examines questionable legal maneuvering by states to implement aspects of the Affordable Care Act (Obamacare).

Finally, two articles describe the regulation of emerging technologies. The first, by Oxford’s Pythagoras Petratos, examines nanotechnology and argues that both the Food and Drug Administration and the Environmental Protection Agency are ill-suited to regulate this complex technology. This bureaucratic burden could slow nanotech innovation in the United States. The second article, by Henry Miller of the Hoover Institution, describes the regulation of so-called “biosimilar” drugs.  Biosimilars are “generic” versions of patented biologic drugs, which are produced by living cells through genetic engineering rather than the chemical reactions used to produce traditional patented and generic prescription drugs.  He concludes that clinical trials will be necessary to prove biosimilarity and thus “biosimilar” drugs will not be cheap like traditional generic drugs.

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