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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.

Walter Olson

As I’ve had occasion to note in this space, pundits regularly complain that the current Supreme Court is somehow throttling job-bias lawsuits out of some concern for employers’ rights. However, the Court’s recent rulings on employment discrimination law in fact tend toward the cautious and centrist, and the caseload of discrimination claims filed with the Equal Employment Opportunity Commission (EEOC) remains near its all-time highs. (Thus the New York Times complained in 2013 that a Court decision four years previously had made it hopeless to file age-bias claims, omitting to mention that lawyers filed more such cases after the decision than before.)

Today’s decision in Young v. United Parcel Service, on the scope of pregnancy discrimination and accommodation law, will be hailed reflexively in some quarters on a which-side-are-you-on basis, since the pregnant employee won. Few non-lawyers are likely to stick around for its dry details, in which Justice Stephen Breyer laid out a balancing test mushy enough in its liberalism to win over Chief Justice Roberts and even Justice Alito. (Readers interested in such matters as McDonnell-Douglas burden-shifting and the selection of similarly situated co-worker “comparators” should follow up at the specialty employment-law blogs.) The practical impact of the case is also somewhat limited by Congress’s having further liberalized pregnancy accommodation law in plaintiffs’ favor after the events being sued over. 

Young v. UPS does, however, offer at least two bits of entertainment value. One is a fun Scalia dissent joined by Justices Thomas and Kennedy, charging the majority with adopting a “deliciously incoherent” standard based on a statutory reading “splendidly unconnected with the text.” The dissent, however, sounds a more serious note of alarm when Scalia accuses Breyer’s opinion of blurring together the distinct legal handling given to “disparate-treatment” and “disparate impact” cases, with potentially damaging results.  

My other favorite bit came when the majority opinion smacked down the EEOC and the U.S. Department of Justice over the EEOC’s maximally liberal guidelines on pregnancy discrimination, which the commission hurriedly came out with last summer and which DoJ, through the Solicitor General, insisted were entitled to special weight before the Court. Writing for his liberal colleagues, Breyer rejected the guidelines on grounds of “timing, ‘consistency,’ and ‘thoroughness’ of ‘consideration,’” pointing out that they ran “contrary to the litigation position the Government previously took,” that they offered no coherent reading of the statute, and, pointedly, that the EEOC had put them out “only after the Court had granted certiorari in this case” – almost as if it had been trying to influence the Court.

We’ve documented a pattern in recent years of how the intensely ideologized, left-tilting Obama EEOC gets little respect from either liberal or conservative federal judges. It looks as if that pattern continued today.

K. William Watson

The Obama administration wants us to believe that even while the Trans-Pacific Partnership is shaping the global economy in favor of U.S. interests, it is also furthering U.S. foreign policy by strengthening alliances and containing China’s influence in the Asia-Pacific region. 

Alan Beattie of the Financial Times has written a scathing rebuttal to this line of argument:

This is an appealing fall-back for those who don’t like the deal’s content, but is at best one of the weaker arguments in favour. Whether or not agreements help strategic alliances, the intrusive and one-sided nature of pacts negotiated with the US can arouse resentment as well as cooperation.

The participation of countries in the TPP has less to do with enthusiasm for importing the US economic model than a grudging acceptance that yet more tribute has to be paid in order to retain access to the US market. Negotiating a trade deal with the US is not a particularly pleasant business, and nor is it becoming happier over time. You are essentially presented with a US model agreement that contains a decreasing proportion of actual free trade and an increasing proportion of intellectual property protection, and invited to sign.

It’s not clear that a country’s affection for the US will increase after being required to rewrite its patent and copyright law every few years on a model dictated by, respectively, the Pharmaceutical Research and Manufacturers of America and the Recording Industry Association of America. The US itself does not offer much liberalisation. It is highly unlikely to substantially dismantle its agricultural subsidy and protection regime to allow Australian and New Zealand farmers abundant access to its dairy market or stop its rice subsidies disadvantaging Vietnamese rice exports in world markets. America’s trading partners are thus on a permanent treadmill of enforced policy change in order to keep their trade access to the US.

At the moment, the US is essentially using its huge domestic market as a tool to remake other economies in its image. It is likely to work for some time to come, given the prize on offer. But Washington should not delude itself that trade deals which inflict political pain on the US’s negotiating partners will necessarily function as durable and positive elements of a wider diplomatic relationship.

Of course, trade agreements can and should be a tool to build good foreign relations.  Protectionism breeds conflict while trade enables cooperative wealth creation.  Free trade is an eminently friendly policy, and to the extent trade agreements liberalize trade, they reduce the potential for conflict between governments. 

One of the most pressing problems in U.S. trade policy is that policymakers constantly misstate and misunderstand the purpose of trade agreements.  Trade agreements have the potential to overcome political barriers to trade liberalization in a win-win scenario for all countries involved.  Tariffs, quotas, subsidies, and protectionist regulations harm everyone except the cronies that lobbied for them.  Trade agreements reduce or eliminate these harmful policies.

Unfortunately, the Trans-Pacific Partnership has largely been conceived and shaped by a different set of motivations.  According to its architects, the TPP is supposed to be a “21st century” agreement that will set the rules of trade in ways favorable to the United States.  In other words, favorable to politically powerful U.S. constituencies.  What U.S. policymakers are touting as the great achievements and aims of the TPP are better understood as distortions—issues added to agreements to make them more politically appealing at the expense of the agreement’s core economic function of opening markets to competition.

If the United States truly wants to use the TPP to strengthen relations in the region, the agreement should look a lot different.  For starters, stop pushing for unpopular rules on intellectual property, investment arbitration, and labor and environmental protections.  The United States could also offer more meaningful liberalization of the U.S. market in textiles, sugar, and shipping.  A truly “ambitious” agreement would do a lot to improve U.S. international relations, but it would look very different from the TPP as it has been presented.

Jim Harper

There have been more than 2,700 bills introduced so far in the current Congress. That’s more than 30 bills per day, every day this year, weekends included. Ordinary Americans have a hard time keeping up, of course. Congress does, too.

The controversy around the anti-sex-trafficking bill in the Senate last week illustrates this well. Debate around the formerly non-controversial bill fell into disarray when Democrats discovered language in the bill that would apply the Hyde Amendment to fines collected and disbursed by the government. (The Hyde Amendment bars government spending on abortion. Democrats argue that it has only applied in the past to appropriated funds, not disbursement of fines.)

How is it that it took until late March for Democrats to discover controversial language in a bill that was introduced in January?

Well, Congress is awash in archaic practices. For one, bills are written in “cut and bite” style—change this line, change that word, change another—rather than in a form that lays out what the law would look like if the bill were passed. That makes bills unreadable—a situation Rep. Justin Amash (R-MI) has sought to remedy.

In this case, the bill just made an obscure reference to the Hyde Amendment in prior law. One staffer knew about it, but the information didn’t make its way up the food chain. Throughout the rest of the Democratic caucus, apparently, no one else checked it out because it’s hard to do. If the office that’s leading on the issue is OK with the bill, why look up the meaning of obscure bill language?

Derek Willis of the New York Times explains how Congress can do better:

There’s already an effort to modernize most congressional legislation drafting, but it isn’t coming from inside government. The Cato Institute, the libertarian-leaning research and policy organization, created the Deepbills Project, which takes legislation published by Congress and adds references, including to existing laws and government organizations like federal agencies and congressional committees.

Our work allows references to prior law in bills to be made into web links, which anyone could click to see what those references mean. If Congress did this, it would be a lot easier to read the bills.

Willis is is right that Congress, not Cato, should be in charge of this modernization.

It can take a lot of time to work through the thousands of bills that are written in every session. Making it a part of the official legislative drafting process, when the legal staff would already have the semantic information needed, could help staffers, lobbyists, citizens and, yes, members of Congress figure out what specific language means and what it refers to.

Paul C. "Chip" Knappenberger

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

On Sunday, in anticipation of Sen. Ted Cruz’s (R-TX) announcement that he intends to run for president, California governor Jerry Brown (D), declared to NBC’s Meet the Press Cruz was “absolutely unfit to be running for office.” Why? Because of Cruz’s stance on climate change—some of which Cruz laid out on late night TV last week.

But comparing Cruz’s comments on Late Night with Seth Meyers and Brown’s remarks on Meet the Press, it is pretty clear that it is Gov. Brown who needs to spend more time familiarizing himself with the scientific literature on climate change and especially its associations with extreme weather events.

Apparently Gov. Brown is convinced that climate change, or rather the apparently scarier-sounding “climate disruption” Brown prefers, is behind the ongoing drought in California, not to mention the East Coast’s cold and snowy winter.

Cruz, on the other hand, told a more restrained story—that data doesn’t support many alarmist claims and that satellites show no warming during the past 17 years while climate models expected warming—one which comports better with the science that he portrayed.

While there is certainly more to the story than Cruz went into in his brief appearance with Seth Meyers, he is right, that according to satellite observations of the earth’s lower atmosphere as compiled by researchers at Remote Sensing Systems, there has been no overall temperature increase during the past 17 years.

Gov. Brown, meanwhile, decided to elaborate on the climate change issue. Under general questioning from Meet the Press host Chuck Todd, Brown admitted that is was difficult to link specific events, like the California drought, to human-caused climate change. But then Todd played a snippet of Cruz’s Late Night interview where Cruz said:

And my view actually is simple. Debates on this should follow science and should follow data and many of the alarmists on global warming, they have a problem because the science doesn’t back them up.

Brown’s assertions then got much bolder:

What [Cruz] said is absolutely false. Over 90% of the scientists who deal with climate are absolutely convinced that the human activity, the industrial activity, the generation of CO2, methane, oxides of nitrogen and all the rest of those greenhouse gases are building up in the atmosphere, they are heat-trapping, and they are causing warming, not just drought in California, but severe storms and cold in the East Coast. So it’s climate disruption of many different kinds. And that man betokens such a level of ignorance and a direct falsification of existing scientific data. It is shocking, and I think that man has rendered himself absolutely unfit to be running for office.

Unfortunately for Brown, it is he that is speaking against “existing scientific data.”

Consider this new study by a team led by Geophysical Fluid Dynamic Laboratory’s (GFDL) Thomas Delworth that examined the association between the global warming hiatus and drought in western North America (including California). Turns out, according to these scientists, both stemmed from a similar cause—a change in the patterns of winds across the tropical Pacific Ocean. Further, they suggest this pattern was not overly consistent with expectations from human-caused climate change. Here is an excerpt from that paper:

The strong connection between the intensification of Pacific trades and the drying in western North America observed over the past decade suggests that this drying cannot be connected in a straightforward fashion to greenhouse gas increases. In most coupled [climate model] simulations anthropogenic forcing produces a long-term weakening of the Walker circulation and tropical Pacific trade winds, but with substantial intrinsically-generated variability on decadal scales (Vecchi et al. 2006). Therefore, unless it can be shown that the strengthened trade winds are a result of either natural or human-induced radiative forcing changes, the model results suggest that the observed drying over the western U.S. over the last decade may be primarily due to natural variability, and therefore not necessarily a harbinger of a secular drying trend (Hoerling et al. 2010; Seager and Naik 2012). These results highlight how vulnerable western North America is to severe decadal swings in hydroclimate arising from internal variations of the climate system.

Clearly, Gov. Brown is out of touch with these findings, just as he is with many findings on East Coast cold and snow (for example, here, here, and here). But this is typical of those who are intent on attacking those folks (politicians, scientists, writers, etc.) who take a dimmer view than themselves on the necessity for policy action aimed to combat climate change—policies which too often seek to limit energy choice.

If anyone is keeping score, this round of political squabbling over climate change should go to Sen. Cruz.

Reference:

Delworth, T.L., et al., 2015. A link between the hiatus in global warming and North American drought. Journal of Climate, doi:10.1175/JCLI-D-14-00616.1, in press.

Doug Bandow

Iran has been one of Washington’s chief antagonists for nearly four decades. But a deal to keep Tehran from building nuclear weapons is in sight.

Tehran, though an ugly regime, does not threaten America. The United States is the globe’s greatest military power with the most sophisticated nuclear arsenal and finest conventional force.

Tehran’s leaders are malign actors, but nevertheless have reason to feel insecure. In 1953 Washington helped overthrow the democratically elected prime minister. Presidents George W. Bush and Barack Obama regularly declared military action to be “on the table.”

Israel is concerned over a possible Iranian nuclear weapon, but when asked in 2011 whether Iran would drop a nuke on Israel, former Defense Minister Ehud Barak responded “Not on us and not on any other neighbor.” Israeli Defense Force’s Lt.-Gen. Benny Gantz observed: “I think the Iranian leadership is comprised of very rational people.” Who recognize Israel’s overwhelming retaliatory capacity.

Washington’s ally the Shah started the Iranian program. Tehran’s motive, noted former Mossad head and national security adviser Efraim Halevy, “is not the confrontation with Israel, but the desire to restore to Iran the greatness of which it was long deprived.”

Tehran does not appear to have an active weapons program. Instead, it is hedging, putting off any decision.

Negotiations began to move seriously after the 2013 election of Hassan Rouhani as Iran’s president. The interim Joint Plan of Action limited Iran’s nuclear program and increased international surveillance.

More needs to be done. But only negotiation is likely to yield additional restrictions and oversight.

For years hawks erroneously predicted that Iran was about to build nuclear weapons. Instead, negotiations have reduced Tehran’s “breakout” capacity, the time necessary to enrich enough uranium to make one bomb. Before the JPOA Iran’s breakout time was a month or so. The U.S. hopes to push that up to a year.

The basic dispute is whether the West demands complete termination of Iran’s nuclear activities or agrees to program limits backed by intrusive oversight.

Iran is unlikely to surrender:  there is broad domestic support for Iran’s nuclear program. In contrast, a more limited pact would discourage development of a nuclear bomb.

Uranium enrichment may be the most important area of dispute since it is as much political as technical. A compromise deal likely is the best the West can expect. Having endured years of escalating penalties, Tehran isn’t likely to accept less. U.S. military action would set the stage for another extended Middle Eastern disaster.

Compromise also is the best that Tehran can expect. Iran needs an agreement to meet its economic and security needs. The alternative is persistent economic crisis, geopolitical isolation, and military threat.

There are other issues between the West and Iran, including the latter’s regional role. But resolving the nuclear controversy would improve the chances of addressing other disputes.

Nevertheless, negotiation critics promise a better deal if the administration stands firm. Hard-line Republican senators believe Iran should essentially surrender.

Alas, Tehran did not respond to prior pressure by crawling to Washington. Instead, Tehran added centrifuges and increased reprocessing capabilities. As I warn on Forbes online, “Demanding capitulation would risk restarting Iranian efforts, ending enhanced inspections, and encouraging Tehran to follow North Korea in leaving the NPT entirely.”

Having blown up the negotiations, the U.S. then might find war the only alternative to a nuclear Iran. A military strike likely would only delay rather than stop the program. The prospects for democracy in Iran would die, while the impact in the Middle East could be catastrophic.

Thus, negotiations remain the only realistic option to prevent an Iranian bomb. They also could dramatically reduce tensions in the Middle East.

Tehran is an ugly regime, but that only makes a reasonable and enforceable nuclear agreement more critical. For the people of America and Iran, failure is not an option.

Jim Harper

When New York’s Superintendent of Financial Services first encountered Bitcoin, he evidently thought it was a way to build his reputation as a hangin’ superintendent of financial services. (Doesn’t quite roll off the tongue like “hangin’ judge,” does it…) He sent subpoenas to everyone in the Bitcoin world and went on TV talking about “narcoterrorists.” That was foolishness.

Unfortunately, he also hatched the idea of creating a thing called a “BitLicense” for firms wanting to provide Bitcoin-based financial services in New York. That program is now hanging like an albatross around his neck.

I know nothing of the details, but a couple of decades in public policy make the probable outlines of what happened pretty clear. The press seized on the “BitLicense” idea. Lobbyists and business people came around to fawn over the “BitLicense” idea with Superintendent Lawsky, each hoping not to get cut too deeply by its inartful sharp edges. And Lawsky, having come around to favoring Bitcoin (it’s fairly evident from his speeches) found himself committed to coming up with this “BitLicense” thing.

When the first draft came out in July of last year, it was pretty universally panned. The Bitcoin community savaged it. Bitcoin businesses said they would not do business in New York. The idea of a second round of proposal and comment was quickly on offer.

But the second draft isn’t that much better. When comments close at the end of this week (how to comment), the “BitLicense” will again have received strong criticism. There’s always that contingent whose stock in trade is always—always—to play ball. And to others the “BitLicense” saga has gotten boring…

But the outcome is very probably set. In order to avoid backtracking, which would look foolish, the Department of Financial Services will probably continue forward on the errant path of creating a peculiar special license for Bitcoin-based financial services providers in New York.

Today I filed comments with the New York Deparment of Financial Services (NYDFS) focusing mostly on the procedural failures of the rule-writing process. The department claimed that the “BitLicense” is backed by “[e]xtensive research and analysis,” but has for six months declined to release that research.

New York’s regulatory process requires an assessment of impacts on employment in the state. The NYDFS found there would be none. Since then more than $200 million has been invested in Bitcoin companies outside of New York.

On the merits, the “BitLicense” fails because it is a technology-specific regulation rather than function-based. Two firms supplying identical services from the consumer’s perspective will be regulated differently. If finalized, the “BitLicense” would Balkanize New York’s financial services marketplace, suppressing head-to-head competition between new entrants and existing financial services providers. That’s the typical role of regulation—raising barriers to entry and protecting incumbent firms—and it’s almost certainly not what Superintendent Lawsky wants.

The “BitLicense” requires intolerable financial surveillance, forcing firms to collect detailed information on every last transaction in which their customers engage. This is at odds with the responsibility of consumer protection agencies to protect privacy, and it’s out of step with the direction of Fourth Amendment jurisprudence, which will soon revitalize the idea that people maintain a Fourth Amendment interest in data they share with service providers such as ISPs, phone companies, and Bitcoin companies.

I would delight to be proven wrong in my assumption that New York’s financial regulator will push through a bad regulation in order to avoid the negative impression that woud be created by backtracking. Suspending this proceeding would be the better course, though, than carrying on with this “BitLicense” foolishness.

Adam Bates

It’s been a rough month for the Chicago Police Department (CPD). 

First came the revelations from Spencer Ackerman and The Guardian about a CPD warehouse at Homan Square that was, according to detainees, defense attorneys, and civil rights advocates, operating as a “black site” where detainees were held for hours and aggressively interrogated without ever being officially entered into the system or given access to their attorneys. While the police and others dispute this characterization, one complaint seems to be that the abuses at Homan Square could be found at any police facility in Chicago.  Not exactly a resounding defense of CPD practices.  Last week the commander of the Homan Square facility, Nicholas Roti, resigned.

This week, the ACLU of Illinois released a troubling report about the use of Stop-and-Frisk in Chicago.  Stop-and-Frisk is the controversial practice, made infamous by the NYPD which has been ordered to halt it, of stopping large numbers of (especially African American and Hispanic) men on the street without probable cause and frisking them for contraband.  The ACLU report concludes that the CPD’s use of this practice is even broader and more Constitutionally-suspect than the NYPD program.

This week has also brought questions of the Chicago Police Department’s use of cell site simulator technology to track and potentially rip data from cell phones.  As previously noted, such devices are in use across the country, but government officials have gone to great lengths – including dropping serious charges against suspects - to prevent the public from finding out where these devices are being deployed and what, if any, guidelines exist to oversee their employment.  These devices are capable of interfering with and infiltrating the cell phones of everyone within a given area, inevitably including many innocent people in their sweep.  The use of sealed and potentially vague court orders rather than warrants to deploy them is also cause for concern. The taxpayers of Chicago have already been billed more than $120,000 by an outside law firm retained to prevent the disclosure of the CPD’s use of these devices.

In short, Chicago has emerged over the last month as ground zero for institutional civil liberty and transparency deprivations, and demonstrates clearly the need for more intense public scrutiny of police practices around the country.

David Boaz

In an interesting discussion of social change and especially the best ways to spread classical liberal ideas at Liberty Fund’s Online Library of Liberty, historian David M. Hart has high praise for the Encyclopedia of Libertarianism (published by Sage in conjunction with the Cato Institute):

The Encyclopedia of Libertarianism provides an excellent survey of the key movements, individuals, and events in the evolution of the classical liberal movement….

One should begin with Steve Davies’ “General Introduction,” pp. xxv-xxxvii, which is an excellent survey of the ideas, movements, and key events in the development of liberty, then read some of the articles on specific historical periods, movements, schools of thought, and individuals. 

He goes on to suggest specific articles in the Encyclopedia that are “essential reading” for understanding “successful radical change in ideas and political and economic structures, in both a pro-liberty and anti-liberty direction.” Here’s his guide to learning about the history of liberty in the Encyclopedia of Libertarianism:

  1. The Ancient World
    1. “Liberty in the Ancient World”
    2. “Epicurianism”
    3. “Stoicism”
  2. Medieval Period
    1. “Scholastics - School of Salamanca”
  3. Reformation & Renaissance
    1. “Classical Republicanism”
    2. “Dutch Republic”
  4. The 17th Century
    1. “English Civil Wars”
      1. “The Levellers”
      2. “John Milton” & “Puritanism”
    2. “Glorious Revolution”
      1. “John Locke” & “Algernon Sidney”
      2. “Whiggism”
  5. The 18th Century
    1. 18thC Commonwealthmen - “Cato’s Letters”
    2. The Scottish Enlightenment
      1. “Enlightenment”
      2. “Adam Smith”, “Adam Ferguson” & “David Hume”
    3. The French Enlightenment
      1. “Physiocracy” - “Turgot”
      2. “Montesquieu” & “Voltaire”
    4. “American Revolution”
      1. “Declaration of Independence” - “Thomas Jefferson” & “Thomas Paine”
      2. “Constitution, U.S.” - “James Madison”
      3. “Bill of Rights, U.S.”
    5. “French Revolution”
      1. “Declaration of the Rights of Man and of the Citizen”
  6. The 19th Century
    1. “Classical Liberalism” - the English School
      1. “Philosophic Radicals”
      2. “Utilitarianism” - “Jeremy Bentham”
      3. “Classical Economics” - “John Stuart Mill”
    2. “Classical Liberalism” - the French School
      1. “Jean-Baptiste Say” & “Benjamin Constant”
      2. “Charles Comte” & “Charles Dunoyer”
      3. “Frédéric Bastiat” & “Gustave de Molinari”
    3. Free Trade Movement
      1. “Anti-Corn Law League” - “John Bright” & “Richard Cobden”
    4. “Feminism and Women’s Rights”
      1. “Mary Wollstonecraft”
      2. “Condorcet”
    5. Abolition of Slavery - “Abolitionism”
      1. “William Wilberforce”
      2. “William Lloyd Garrison” & “John Brown”
      3. “Frederick Douglass” & “Lysander Spooner”
    6. [The Radical Individualists]
      1. “Thomas Hodgskin”, “Herbert Spencer”, & “Auberon Herbert”
    7. The “Austrian School of Economics” I
      1. 1st generation - “Carl Menger”, “Eugen von Böhm-Bawerk”
      2. interwar years - “Ludwig von Mises”, “Friedrich Hayek”
  7. Post-World War 2 Renaissance
    1. “Mont Pelerin Society” - “Friedrich Hayek”, “Milton Friedman”, “Karl Popper”, “James Buchanan”
    2. Institute for Economic Affairs (IEA) & “Antony Fisher”
    3. Foundation for Economc Education (FEE) & “Leonard Read”
    4. Institute for Humane Studies & “F.A. Harper”
    5. The Austrian School of Economics II
      1. post-WW2 2nd generation - “Ludwig von Mises”, “Friedrich Hayek”, “Murray N. Rothbard”, “Israel Kirzner”
    6. “Chicago School of Economics” & “Milton Friedman”
    7. “Objectivism” & “Ayn Rand”
    8. “Public Choice Economics” & “James Buchanan”

There’s your college course in the history of liberty right there, all for $125 (or a trip to a good library). You might also start with Chapter 2 of The Libertarian Mind, which is sort of a brief outline of what you could learn from all these articles.

Adam Bates

Good news from out west.  A New Mexico bill, HB 560, to restrict civil asset forfeiture has cleared the legislature - receiving unanimous support in the State House and State Senate - and awaits the signature of Governor Susana Martinez to become law.

Among other things, the New Mexico bill requires a criminal conviction for forfeiture actions, bolsters the “innocent owner” defense by requiring that the owner know that his/her property was being used illegally, requires that all forfeiture proceeds be deposited into the general fund rather than into the seizing agencies, and limits the ability of state and local law enforcement agencies to circumvent state law by utilizing the federal equitable sharing program.

As noted numerous times by Cato and other civil liberties advocates like the Institute for Justice and the ACLU, civil asset forfeiture is a conceptually unjust practice that has no place in a society that cherishes due process and private property.  

That many state legislatures across the country are now undertaking efforts to rein in this government abuse is something worth cheering about.

Ilya Shapiro

As Ted Cruz announces his White House candidacy, let me forestall a new round of birtherism prompted by the discovery that the Texas senator was actually born in a different oil patch: Calgary, Alberta, Canada. I looked at the whole “natural-born citizen” requirement a couple of years ago and concluded that Cruz’s eligibility for the presidency is an easy legal call. Here’s the heart of the matter:

So the one remaining question is whether Ted Cruz was a citizen at birth. That’s an easy one. The Nationality Act of 1940 outlines which children become “nationals and citizens of the United States at birth.” In addition to those who are born in the United States or born outside the country to parents who were both citizens … citizenship goes to babies born to one American parent who has spent a certain number of years here.

That single-parent requirement has been amended several times, but under the law in effect between 1952 and 1986 — Cruz was born in 1970 — someone must have a citizen parent who resided in the United States for at least 10 years, including five after the age of 14, in order to be considered a natural-born citizen. Cruz’s mother, Eleanor Darragh, was born in Delaware, lived most of her life in the United States, and gave birth to little Rafael Edward Cruz in her 30s.

In an amusing footnote, when this mild controversy first arose, Cruz quickly renounced any claim to Canadian citizenship. This prompted my good friend and sometime co-author Josh Blackman to present me with a filled-out renunciation application after I naturalized as a U.S. citizen last June. I have not signed or submitted this document, however, because there’s really no need – and who knows when a second passport might come in handy? (The State Department allows dual citizenship even though the naturalization oath requires a new citizen to “renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state, or sovereignty, of whom or which I have heretofore been a subject or citizen.”) Rest assured that if I’m ever required to give up my Canadian citizenship to get a security clearance or for some other official reason, I will do so, much as I owe to the country where I grew up after my family left the Soviet Union.

Benjamin H. Friedman

I have an op-ed in The National Interest dealing with the GOP’s intramural squabble over defense spending levels in the House and Senate’s budget resolutions for fiscal year 2016, which have now passed their committees.

I explain there how the Republican chairmen of both committees tried to restrain military spending, but lost out to military hawks in their caucus in a newly pernicious way. The resolutions limit appropriations to the legally mandated cap for non-war “defense” spending. But they stuff $38 billion above the cap that the White House wanted for the Pentagon into the uncapped war (“Overseas Contingency Operations” or OCO) account, taking an established scam to evade caps and making it far larger and more blatant. If these spending levels hold, in 2016 the Pentagon would get a total budget roughly equal to its current one, but a much bigger chunk of it would come via OCO.

Thus far, then, the fight between GOP budget and fiscal hawks has produced a compromise that offers a new sort of militarism amid a pretension of fiscal responsibility. That outcome, I argue, may be worse than giving the administration a deal to raise the cap:

The problem … isn’t just that military spending is too high. It is also that this method of paying creates perverse incentives. If OCO becomes an auxiliary Pentagon fund that exists to escape caps, war becomes the Pentagon’s budgetary salvation. Historically, the elements of defense establishment benefit from a public sense of insecurity, but not necessarily war. This new set-up could change that.

I say “may” be worse because of a couple uncertainties. One is that hawks upset about this arrangement may have a point. They worry that locating this money in a shrinking war account makes it unlikely to last. I hope not.

Second, the reaction of Democrats is uncertain. Some may work with Republican budget hawks to strip the extra OCO money out on the floor, which has happened before, albeit on a smaller scale. Under current Senate rules, that apparently takes only 50 votes. But those Democrats–like President Obama, Armed Services Committee Ranking Member Jack Reed (D-RI), and various other heavies–who want to boost military spending may agree to do so through OCO. Where the leadership comes down, I can’t say.

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.

Talk of interference, intimidation, and abridgement of scientific freedom continues to make the news this week—and increasingly is taking the form of pushback against recently announced congressional investigations into sources of scientific research funding.

On Tuesday, the Wall Street Journal ran an editorial offering a “round of applause for those pushing back, providing the bullies a public lesson in the First Amendment.” Highlighted in their coverage were efforts by the Cato Institute, Heartland Institute and Koch Industries condemning attempts to “silence public debate” on climate change. From the WSJ:

Democrats and their allies have failed to persuade Americans that climate change is so serious that it warrants sweeping new political controls on American energy and industry. So liberals are trying to silence those who are winning the argument. We’re glad to see the dissenters aren’t intimidated.

Also unintimidated by attempts abridge academic freedom is Alice Dreger, professor of Medical Education-Medical Humanities and Bioethics at Northwestern University and a historian of science and medicine. Dreger has a new book out titled Galileo’s Middle Finger: Heretics, Activists and the Search for Justice in Science that describes how activists try to intimidate researchers when the activists disagree with the researchers’ work.

Roger Pielke Jr. reviews the book for Nature. From his blog, leading into his review, Roger describes why he empathizes with Dreger:

Most academic work is like the proverbial tree falling in the forest, but every so often (and probably more often than many of us would like to think), scholarship becomes the focus of a political battle.

I should know. My review was completed and filed the week before I was targeted with an “investigation” by a member of Congress for the audacity of testifying before that august body with the results of peer reviewed, government-funded research, widely accepted as scientific consensus. But even before that, my own career has led me to be sympathetic to Dreger’s arguments.

I have lots of experience with personal and professional attacks based on my research and advocacy. For instance, it was one year ago today that I published a piece at FiveThirtyEight on that same research, which prompted a social and mainstream media campaign to have me fired for voicing such heresies. The Guardian, New York Times, Slate, Salon and even the American Geophysical Union all joined the campaign. Unsurprisingly, FiveThirtyEight succumbed to the pressure, explaining “Reception to the article ran about 80 percent negative in the comments section and on social media. A reaction like that compels us to think carefully about the piece and our editorial process.”

So, scientific consensus vs. Facebook likes - Guess who won?

Dreger herself describes some of the attacks on academic freedom in her post at Retraction Watch titled “Yes, we are seeing more attacks on academic freedom.” She leads with:

The good news: Policy makers and the public seem to be increasingly taking scientific research seriously. The bad news? People who don’t like researchers’ findings seem to be increasingly coming after researchers and their universities. And some of those people are powerful.

Technically, your university is supposed to protect your academic freedom. In my own university’s faculty handbook, academic freedom is the first topic discussed. But as I’ve learned from my own personal experiences, as well as from eight years studying the experiences of other researchers who have gotten into political hot water, your administration may not always have your back.

Economist Paul Frijters of the University of Queensland in Australia seems to have found this out the hard way.

You ought to have a look at her full post for some rather lurid details.

And from what we can gather, you ought to have a look at her book, too.

Stay tuned. The issue of scientific intimidation is trending—big time. 

Andrew J. Coulson

According to the American Federation for Children, Sen. Marco Rubio (R-FL) and Rep. Todd Rokita (R-IN) have reintroduced “the Educational Opportunities Act, which would create an individual and corporate tax credit for donations that pay for scholarships for students to attend a private school of their parents’ choice.”

It is encouraging to see growing support for scholarship tax credit school choice programs, which have been found to simultaneously boost achievement for students who switch to private schools, do the same for students who remain in public schools, and save taxpayers millions of dollars every year–a win-win-win scenario. Nevertheless, it is ill advised to pursue such a program (or other school choice programs) at the federal level.

Years ago I summarized those problems when President George W. Bush advocated creating a federal school voucher program. Such programs are not only beyond the mandate accorded to Congress by the Constitution, they bear the risk of suffocating private schools nationwide with a raft of new regulation, defeating their very purpose of increasing the range of educational options available to families with limited means.

In the past few years I have visited Sweden and Chile and studied their federal school chioce programs. Both confirm my earlier worries about national programs. Chile’s entrepreneurial voucher schools grew rapidly at first, but with a recent change of government hostile to the program they have sensed the new climate and stopped expanding.The new government is trying to enact regulations to diminish the scope and freedom of private schooling in Chile.

Meanwhile, something similar is happening in Sweden. Among other things, the government has mandated that all schools hire graduates of government-certified teacher training programs, despite the well known fact that those programs are currently attracting the lowest-achieving college students.

National school choice programs have proven to be a prime case of “staff car legislating.” The legislators who enact them are not always the ones in the official staff cars, making the rules. New lawmakers with different preferences ultimately come to power and can wreak havok on a nation’s entire K-12 education sector.

This problem can be minimized by leaving school choice legislation to the state level, where the Constitution rightfully leaves it. We thus have a “laboratory of federalism”–a variety of different policies across states that make it easier to determine how best to design such programs.

Michael F. Cannon

I have a post over at National Review Online’s Bench Memos blog that explains why, contrary to Supreme Court Justice Anthony Kennedy’s concerns, the King v. Burwell challengers’ interpretation of the Patient Protection and Affordable Care Act (a.k.a., PPACA, ACA, and ObamaCare) doesn’t coerce states. At least, not under the Court’s current tests for determining whether Congress is coercing states.

If you happen to be a busy Supreme Court justice, here’s a spoiler:

1. The ACA’s exchange provisions don’t penalize states. They let states make tradeoffs between taxes, jobs, and insurance coverage.

2. Roughly half of states appear to consider those costs tolerable. Prior to 2014, eight states voluntarily imposed this supposedly coercive penalty on themselves.

3. This “deal” is comparable to what the Court allowed in NFIB v. Sebelius. In NFIB, the Court allowed states collectively to turn down Medicaid subsidies for as many as 16 million poor people. The exchange provisions permit states to do the same for 16 million higher-income residents.

I have no objection to the Court lowering the bar for demonstrating that cooperative federalism programs coerce states. But the Court will have to lower the bar quite a bit to find the ACA’s exchange provisions coercive.

If you aren’t a busy Supreme Court justice, or even if you are, read the whole thing.

Walter Olson

Gov. Gary Herbert (R) has signed into law an expansion of Utah’s anti-discrimination law following what’s being billed as a historic compromise between gay rights advocates and the Church of Jesus Christ of Latter-Day Saints. Unfortunately, as I argue at the Daily Beast, both halves of the compromise are bad news for individual liberty and freedom of association in the workplace. Excerpt:

As I noted at the Cato Institute’s website a while back, these laws “sacrifice the freedom of private actors—as libertarians recognize, every expansion of laws against private discrimination shrinks the freedom of association of the governed.”

That’s the familiar half of the story. What’s new about the Utah Compromise is that it adds completely new restrictions on employers’ rights to keep the workplace focused on work as opposed to religious or moral debate. In particular, it allows employees to sue on a claim that they were fired or otherwise treated poorly for talking about religion or morality in the workplace, at least if they were doing so in a way that was “reasonable” and didn’t interfere with the employer’s “essential” business interests.

When an employee then begins treating customers or co-workers to unasked-for disquisitions about religious or moral matters, it will apparently be the state of Utah—rather than, as now, the folks in human resources—who will have the final say as to whether the topic is “similar” to others on which discussion had previously been allowed, and whether the proselytizing or reproachful comments taken as a whole were “reasonable” or by contrast “harassing or disruptive.”

And I conclude:

It’s not clear whether anyone was at the table speaking up for employers’ rights and interests during the Utah negotiations. It’s a lot easier to reach what’s hailed as a historic compromise if you can do so at the expense of absent third parties, isn’t it?

Whole thing here.

Adam Bates

Over at Forbes, the Institute for Justice’s Nick Sibilla details a new report from the Department of Justice concerning the Drug Enforcement Administration’s practice of cold-stopping travelers at airports, bus stations, and train stations and asking to search their property looking for forfeitable assets.

Federal drug agents may be racially profiling and unjustly seizing cash from travelers in the nation’s airports, bus stations and train stations. A new report released by the Office of the Inspector General for the U.S. Department of Justice examined the Drug Enforcement Administration (DEA)’s controversial use of “cold consent.

In a cold consent encounter, a person is stopped if an agent thinks that person’s behavior fits a drug courier profile. Or an agent can stop a person cold “based on no particular behavior,” according to the Inspector General report. The agent then asks the people they have stopped for consent to question them and sometimes to search their possessions as well. By gaining consent, law enforcement officers can bypass the need for a warrant.

While many people who believe they have nothing to hide may–inadvisably–consent to a police search, they may not be familiar with federal civil asset forfeiture laws, which give federal agents wide latitude to seize property, especially cash, without charging anyone with any crime. Sibilla notes that the DEA agents even go so far as to carry affidavits for search targets to sign disclaiming any rights to the property being seized. 

Disturbingly, the Inspector General found that DEA interdiction task force groups have been seizing cash from travelers and then urging them to sign forms disclaiming their own cash and “waiving their rights.” In one cold consent encounter, DEA agents stopped another African-American woman in part because she was “pacing nervously” before boarding her flight. After gaining her consent, the agents searched her luggage and found $8,000.

The extortive waiver maneuver is not an isolated practice in civil forfeiture jurisdictions. In exchange for signing away your money, the agents agree not to seize other property (for instance, your car or home) or arrest you on criminal charges. Many interstate travelers (the primary targets of drug interdiction forfeiture efforts) rationally decide it’s better to get on with their journey than fight the government for their property. It’s not hard to imagine the practical and financial vulnerability of people getting ready to step on an airplane being threatened with arrest if they refuse to hand over their cash. 

The Department of Justice report also raises troubling questions concerning the criteria used to make the stops. There is an obvious risk that allowing DEA agents to stop travelers cold and question them invites the possibility of racial profiling. This federal policy bears a striking resemblance to the NYPD’s controversial Stop-and-Frisk program, which received withering criticism for the constitutional and racial dynamics involved in allowing officers to stop people cold.

In short, this is another on a long list of areas where the pernicious incentives of the drug war and civil asset forfeiture combine to create an institution of abuse and disregard for individual liberty. 

At a time when predatory, revenue-centered law enforcement is being rightly condemned-–with the ostensible imprimatur of the federal government-– it would be nice for the federal government to set an example by ending its own abusive law enforcement practices.

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