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Steve H. Hanke and Dr. Garbis Iradian

The haggling between Iran and the so-called P5+1—the permanent members of the United Nations Security Council, plus Germany—is scheduled to come to a close on Monday, November 24th. The two parties each want different things. One thing that Iran would like is the removal of the economic sanctions imposed on it by the United States and its allies.

After decades of wrongheaded economic policies, Iran’s economy is in terrible shape. The authoritative Economic Freedom of the World: 2014 Annual Report puts Iran near the bottom of the barrel: 147th out of the 152 countries ranked. And the “World Misery Index Scores” rank Iran as the fourth most miserable economy in the world. In addition to economic mismanagement, economic sanctions and now-plunging oil prices are dragging Iran’s structurally distorted economy down. So, it’s no surprise that Iran would like one of the weights (read: sanctions) on its economy lifted.

Just how important would the removal of sanctions be? To answer that question, we use the Institute of International Finance’s detailed macroeconomic framework. The results of our analysis are shown in the table and charts below the jump.

 

The trade and financial sanctions imposed since early 2012 have inflicted heavy damage on Iran’s economy. Indeed, we estimate that Iran’s real gross domestic product has contracted by a cumulative 8.6 percent during the past two fiscal years (2012/13–2013/14). We estimate the forgone annual economic output to be a whopping $79 billion. That is slightly more than twice the size of the Jordanian annual GDP of $36 billion.

Without an agreement, the Iranian economy will remain weak. On the other hand, a comprehensive agreement—one in which existing sanctions would be lifted gradually—would allow for steady increases in oil exports to their pre-sanction levels by the end of 2017 and a possible restoration of access to the global financial system. The economy would boom: indeed, the real GDP growth rates during the fiscal year 2015/16 and 2016/17 would jump by 4.1 and 4.6 percentage points, respectively. And for those two fiscal years alone, the cumulative GDP would be $125 billion greater than if the painstaking sanctions were left in place.

So, the economic benefits dangling in front of the Iranians are enormous. The unanswered question remains: what are the costs of coming to an agreement, as seen by the Iranians? The answer will be revealed on November 24th.

 

Chelsea German

With the media frenzy over Ebola now thankfully fading, let us view the outbreak within the context of humanity’s continually improving ability to solve new problems.

Today, the world is better prepared than it has ever been to respond to an outbreak of an infectious disease. For example, there are more skilled medical professionals available to tend to the sick and conduct research on effective treatment. The number of physicians per person is rising globally.

While there is not yet a cure for Ebola, many people are hard at work coming up with one. Countless maladies that once were death sentences can now be treated. The development of effective antiretroviral drugs for HIV/AIDS, for example, serves as one of the great medical accomplishments of the past two decades.

Today, the tools to prevent transmission of disease are more accessible than ever. Ebola and many other diseases are partly spread through poor access to sanitation. Thankfully, more people are gaining access to improved sanitation facilities.

The Ebola threat should be viewed in the context of human ingenuity. As Princeton University professor and HumanProgress.org advisory board member Angus Deaton writes in his book The Great Escape, “Need, fear, and, in some circumstances, greed are great drivers of discovery and invention.”

Ilya Shapiro

In an excellent speech combining reasoned policy arguments, appeals to American ideals, touching anecdotes, and well-selected Scripture, President Obama launched significant positive reforms to an immigration (non-)system that I’ve long called the worst part of the U.S. government (at least before Obamacare). Unfortunately, the centerpiece of this action, the legalization of around five million people who are in the country illegally—mostly the parents of U.S. citizens and green-card holders—is beyond the powers of the president acting alone.

To be sure, the relevant statutes give executive branch officials very broad discretion in how they enforce immigration laws. For example, Section 212(d)(5)(A) gives the Secretary of Homeland Security the “case-by-case” discretion to “parole” for “urgent humanitarian reasons or significant public benefit” an alien applying for admission. The authorization for “deferred action”—a decision not to seek deportation and concomittant authorization to reside and work legally, which was the basis for Obama’s 2012 Deferred Action for Childhood Arrivals program—is similarly broad.

And all modern presidents, from both parties, have used such discretionary powers. President Ronald Reagan’s Justice Department issued regulations to comport with the family-unity provisions of the 1986 Immigration Reform and Control Act. President George H.W. Bush temporarily expanded the category of undocumented children and spouses eligible to stay in the country before Congress formalized their status. President Bill Clinton deferred action on illegal immigrants from Haiti during that country’s convulsions in the 1990s—one example of many relating to executive discretion regarding nationals of war-torn nations—while President George W. Bush took various actions regarding illegal aliens in areas affected by Hurricane Katrina. These are just a few examples, but they’re all different from what President Obama is doing, both qualitatively—discrete and temporary versus open-ended and potentially timeless—and quantitatively. (See here and here for contrasts between Reagan/Bush and Obama.)

But don’t take it from me. Here are a few solid arguments that were made by a noted constitutional lawyer over the last several years:

  • “Comprehensive reform, that’s how we’re going to solve this problem…. Anybody who tells you it’s going to be easy or that [the president] can wave a magic wand and make it happen hasn’t been paying attention to how this town works.” (March 10, 2010)
  • “America is a nation of laws, which means [the President is] obligated to enforce the law…. With respect to the notion that [the president] can just suspend deportations through executive order, that’s just not the case, because there are laws on the books that Congress has passed…. [W]e’ve got three branches of government. Congress passes the law. The executive branch’s job is to enforce and implement those laws. And then the judiciary has to interpret the laws. There are enough laws on the books by Congress that are very clear in terms of how we have to enforce our immigration system that for me to simply through executive order ignore those congressional mandates would not conform with [Obama’s] appropriate role as President.” (March 28, 2011)
  • “If this was an issue that [the president] could do unilaterally, [Obama] would have done it a long time ago…. The way our system works is Congress has to pass legislation. [The president] then get[s] an opportunity to sign it and implement it.” (Jan. 30, 2013)

These are but three examples of the 22 times that this particular analyst of executive power has argued that the president can’t do what he just announced. Who is this person with such strong feelings that he’s felt the need to opine so many times on this? Barack Obama.

There comes a time even under statutes that are ambiguous or open-ended that executive discretion ceases to be a lawful execution of the law and becomes a suspension or re-writing of it. It’s very difficult to articulate where that line is, but my view is that President Obama is on the other side of it. He’s set a dangerous precedent for executive action, one in which the president somehow gets more power when Congress isn’t acting (as if gridlock were a bug in our system of checks-and-balances, not a feature).

Accordingly, while the applicable immigration laws give the president discretion that’s quite broad, either (1) this executive action goes beyond even that broad grant of power, or (2) the laws themselves are an unconstitutional delegation of legislative power. After all, Congress could not constitutionally pass a law saying, “The president is now dictator and can make any laws he wishes”—even temporarily or regarding but one area of policy. So if the administration’s defenders are right that President Obama is toeing but not crossing the letter of the law, then that letter is invalid and the president’s actions are still unconstitutional.

Ultimately, more than enough blame goes to Congress for not fixing this mess of an immigration system that serves nobody’s interests—not big business or small, not skilled or unskilled workers, not the economy or national security—but that doesn’t justify what the president is doing. And in acting like he has, President Obama—who as a senator in 2007 voted against the guest-worker program that would have sealed the Bush-era compromise—has eviscerated any chance for real, legislated immigration reform.

I guess we’ll have to wait for President Ted Cruz to accomplish that in a latter-day Nixon-to-China moment.

For an excellent point-by-point analysis of the Office of Legal Counsel memo justifying the president’s action—OLC is the Justice Department’s elite unit responsible for advising the government on the legality of various actions—see Josh Blackman’s post from last night.

Ilya Shapiro and Gabriel Latner

Virtually every aspect of government’s work depends on contracts, whether they be with manufacturers of naval ships, civilian contractors, the companies that sell office supplies, or the landlords who lease the office space that houses the vast bureaucracy. These contracts, like any contract, only work when both parties have legal certainty; each must be able to depend on the promises made by the other.

That said, federal contractors do have to assume less certainty when dealing with the government because the Supreme Court has held that contracts can’t bind Congress from passing new legislation, or agencies from adopting new regulations. For example, while the government could enter into a contract promising to buy 100 widgets, Congress could pass a law making it illegal to manufacture or sell widgets—effectively voiding the agreement.

In the case of Century Exploration v. United States, an energy company leased the rights to an oil field in the Gulf of Mexico owned by the government for $23 million dollars up front, and $50,000 per year of the lease. Because oil drilling is a heavily regulated industry, Century only felt safe spending that kind of money because the lease contained a promise that Century wouldn’t be subject to any changes to the law that the government might make in the future, except for a specific class of regulations created under the authority of a single statute, the Outer Continental Shelf Lands Act (OSCLA). Without this promise, there would have been nothing to stop the government from taking Century Exploration’s money and then outlawing drilling in the Gulf of Mexico, or passing new regulations that would make it prohibitively expensive for Century to make use of the leased plot.

Unfortunately, the government did the very thing it promised not to. Under the Oil Pollution Act (OPA), drilling companies have to calculate the volume of oil that would be released in a “worst case scenario” and prove that they have the financial resources to fund cleanup efforts. The method for calculating the amount of oil, and the cost of cleanup, are governed by regulations issued under the OPA. Two years into Century’s lease, however, a civil servant in the Interior Department sent the company an email demanding a recalculation of the “worst case scenario” using a more extreme methodology contained in an attached FAQ. Using that new method, the cost of cleaning up a hypothetical spill increased from $4.5 million to $1.8 billion. Because Century couldn’t prove that it would have $1.8 billion on-hand in the event of a disaster, it could no longer operate on the leased plot.

Century appealed to the courts, relying on a 2000 case called Mobil Oil in which the Supreme Court interpreted a nearly identical lease to mean that the government would breach its contract if it tried to apply new laws or regulations to the leaseholders (except, again, for regulations under OSCLA). Under Mobil Oil, unilaterally changing the method of calculating the volume and cost of a spill would be just such a breach; the regulatory changes were made under the OPA, not OSCLA, and the changes were made by email, not by formal regulation. The government insisted it had done no wrong and, remarkably, the U.S. Court for the Federal Circuit agreed.

Cato has filed an amicus brief urging the Supreme Court to review this case and make clear that the government can’t violate contractual obligations with impunity. We make two key points:

First, it is vital to the smooth operation of the government and the health of the economy that private entities are confident that the government will honor its contractual promises. Federal spending on contracts has totaled roughly $500 billion annually since 2008—or 15% of the federal budget. If businesses and individuals have no reason to believe that the government will live up to its business obligations, they’ll have no reason to work with it. The Federal Circuit’s decision, which condoned the government’s flagrant breach of its contract with Century, sets a bad example and must be reversed.

Second, and quite simply, words have meaning—in the Constitution, in statutes, and yes, in contracts. A “regulation” is a formal rule adopted and issued by an authorized agency, in accordance with strict procedural protocols. It’s not a casual email. Giving informal government policy documents created by civil servants the full weight of the law is unconstitutional, undemocratic, and unsustainable.

In the end, this case is about following the law: the Federal Circuit needs to abide by Supreme Court precedent and the government needs to abide by its own word.

Ilya Shapiro and Julio Colomba

Not many people know that there’s a clause in the Constitution that charges Congress with guaranteeing every state a “republican form of government.” Even fewer people are aware of exactly what that means.

Historically, the Guarantee Clause is considered to have been a measure the Framers included to ensure that the governments of the states—which used to have far greater autonomy—didn’t devolve into monarchies or other despotic forms. But the clause’s legal effect has never been fully fleshed out. Not that there haven’t been opportunities; claims based on the Guarantee Clause are peppered throughout U.S. history. Courts have typically disposed of them by invoking the political question doctrine, which they use to avoid deciding an issue they believe is more appropriately left to the elected branches. Since there’s no legally binding definition of “republican,” a court applying the Guarantee Clause has little to work with, also contributing to the tendency to treat such cases as non-justiciable.

Accordingly, when a group of legislators and citizens groups supporting big government banded together to attack Colorado’s Taxpayer Bill of Rights (TABOR) based on a Guarantee Clause claim, it seemed like a longshot. Their theory was that the state no longer had a republican form of government because the TABOR—a voter-approved state constitutional amendment—restricts the legislature’s ability to raise taxes without approval from the people of Colorado.

Colorado Gov. John Hickenlooper (D), defending the state’s constitution, moved to dismiss the case in federal district court but, surprisingly, lost the motion. Even more surprisingly, a panel of the U.S. Court of Appeals for the Tenth Circuit affirmed that denial, which meant that the plaintiffs’ claims could go to trial and jeopardize the continued existence of the state’s popular anti-tax measure. Colorado has one more chance, however, to prevent poorly constructed Guarantee Clause claims from being heard in federal courts and thus jeopardizing the dozens of state constitutional measures that use popular input: the Supreme Court.

Governor Hickenlooper has filed a petition for certiorari requesting that the Supreme Court, among other things, put to bed the erroneous notion that elements of direct popular participation and direct democracy can’t exist in a republican government. Joined by the Independence Institute, Reason Foundation, and Individual Rights Foundation, Cato has filed a brief supporting Colorado’s petition. We argue that the Court should hear the case so it can inform the lower courts that pretextual Guarantee Clause claims don’t belong in federal courts.

We give three reasons for this position. First, the plaintiffs’ complaint fails to provide a court with legal standards coherent enough to decide the case under the Guarantee Clause. Second, under Supreme Court precedent, the idea that initiatives and referenda are incompatible with republican government was resolved (and rejected) when Congress admitted states that used these popular procedures into the union. Third, even a brief look at the history of the Founding Era’s understanding of the words “republic” and “republican” dispels the myth on which the plaintiffs base their claim: that direct popular participation is incompatible with the republican form. Our brief provides that historical context.

In sum, the suggestion that the Guarantee Clause—meant to ensure that state governments would remain governments “of the people” and wouldn’t revert to despotic monarchies—could be used to wrest greater control of the taxing power from the people makes the plaintiffs’ claims risible. The Supreme Court should take this opportunity to hear Hickenlooper v. Kerr and put an end to this case.

Brink Lindsey

Cato’s online forum on reviving growth features the following new essays today:

1. Steven Teles takes aim at regressive rent-seeking.

2. Alex Nowrasteh explains the benefits of high-skill immigration.

3. Eric Toder argues for corporate tax reform.

4. Derek Khanna wants to unleash entrepreneurs.

 

Walter Olson

To the extent America has made progress in recent years in rolling back the extreme litigiousness of earlier years, one main reason has been the courts’ increased willingness to respect the libertarian and classical liberal principle of freedom of contract. Most legal disputes arise between parties with prior dealings, and if they have been left free in those dealings to specify who bears the risks when things go wrong, the result will often be to cut off the need for expensive and open-ended litigation afterward. Thus the courts’ willingness to enforce agreements to arbitrate disputes, rather than run to court, has played a major role in curbing what once looked like an ever-rising tide of workplace and consumer class action litigation. “Shrinkwrap” or “clickwrap” disclaimers of liability, despite their occasional absurdities, serve the very practical function of ensuring that when information technology or online services go wrong the result is not to sink providers in limitless liability over the consequences of data loss to buyers. And recognizing libertarian principles of free contract would be among the most promising ways to reduce the glaring costs and injustices of medical liability litigation, as Richard Epstein argued in his very early (1976!) paper, Medical Malpractice: The Case for Contract.  

In May, in a case named ATP Tour v. Deutscher Tennis Bund, the Delaware Supreme Court decided to enforce as written a corporate bylaw adopted by an enterprise incorporated in Delaware providing for a loser-pays rule in cases of claims against it by shareholders. Almost at once, the community of practicing Delaware corporate litigators, as well as plaintiff’s class action lawyers across the country, protested loudly: such a rule, by putting claimants at risk of their own money, would discourage all but the strongest claims (and, not incidentally, cut into counsels’ own livelihood of prosecuting and defending such claims). They demanded that the Delaware legislature step in to ban such bylaws and restore the legal status quo ante, along with its accompanying flow of litigation. Within weeks, the legislature was on the verge of passing such a ban, only to pull back when the national business community raised an uproar of its own to defend letting the bylaw experiment go forward

Prof. Steve Bainbridge, a leading corporate law expert at UCLA, has now published a two-part post on why lawmakers and regulators should leave freedom of contract alone when it comes to such bylaws. In Part One, he recounts the evidence for believing that the business of private class-action shareholder litigation generally serves the interests of the lawyers who run it and not that of investors, transferring money from corporate treasuries (ultimately, from investors themselves) to an essentially identical class of investors following a large haircut of legal fees and costs. Deterrence of fraud, self-dealing, and managerial shirking, while an important objective, is poorly served by the class-action mechanism both because guilty individuals seldom pay and because transactions such as mergers and businesses in volatile markets are routinely sued, and made to pay legal toll, whether their managers have misbehaved or not. The result is a less competitive capital market from which internationally mobile companies and investors are increasingly retreating to more predictable legal regimes in other countries.

In Part Two, Bainbridge brings public choice analysis to bear, noting that Delaware’s sought-after corporate law regime is heavily shaped by the interests of repeat-player lawyers, who want to keep Delaware law efficient enough to keep attracting national businesses to incorporate there, yet not so efficient that it does away with the litigation and advisory opportunities that make for their own livelihood. What constrains them from yielding entirely to self-interest is that there is competition between states. Legislators in Oklahoma have moved to authorize loser-pays bylaws for companies incorporated there, and although it would take a lot to get companies to consider departing Delaware as a preferred state of incorporation, a few episodes like this might do it. Inevitably, hints are now in the air of federal action to put Oklahoma in its place: Sen. Richard Blumenthal (D-CT), a frequent ally of plaintiff’s lawyers, has asked the federal Securities and Exchange Commission to step in to squash the option.

I agree with Bainbridge’s bottom line: approving fee shifting bylaws “is the right answer from a policy perspective.” It’s also the answer that is most respectful of contractual liberty.

Craig D. Idso

Climate model simulations generally predict a future with more frequent and more severe floods in response to carbon dioxide–induced global warming. Confirming such predictions with real world observations, however, has remained an elusive task.

The latest study to illustrate this point comes from the four-member research team of Anna P. Barros, Yajuan Duan, Julien Brun, and Miguel A. Medina Jr. (2014). Writing in the Journal of Hydrologic Engineering, they analyzed streamflow records at various locations throughout the southeast and mid-Atlantic United States over the past century.

In prefacing their work, the researchers note several challenges that must be overcome in order to properly assess and attribute streamflow trends to anthropogenic climate change. One key challenge pertains to “the lack of long enough observational records [that are necessary] to capture the full range of time scales of variability in hydroclimatic regimes as well as extreme events.” This is particularly true in the present case in which only about 3,000 of the 10,012 U.S. Geological Survey streamflow gauges that exist within the authors’ study region have data stretching beyond 25 years of record. In addition, there is often the added challenge of “intermittency in the spatial and temporal configuration of the observing system of stream gauges,” as different stations both enter into, and exit out of, existence over the course of the study period and within the study region.  

Another factor that must be considered are changes in land-use and land cover (LULC) that can significantly influence streamflow. This is especially apparent in regions that have undergone significant urban development, which creates impermeable surfaces and highly interconnected discharge networks that have been shown to contribute to what the authors refer to as “large flood peaks.” Nevertheless, despite the aforementioned challenges, Barros et al. proceeded to conduct various statistical analyses on streamflow data from within their region of study at various time intervals over the past century.

Among their list of findings, the authors report “an overwhelming majority of stations shows no trend” in annual peak streamflow. Quantitatively, for the period 1950–2010, 81.7% of all stations examined in this 61-year period showed no trend at the 98% confidence level, 11.4% experienced a negative trend toward decreasing streamflow, and 6.8% showed a positive trend. (See Table 1, after the jump.)

Similar trends were noticed over the shorter 31-year period of 1980–2010, albeit there is one important change that occurred: there were lower percentages of stations experiencing negative or positive trends. Thus, rather than trending toward more extreme conditions, annual peak streamflow throughout the southeastern and mid-Atlantic United States over the past 30 years has become less extreme and more representative of average conditions. Moreover, those stations exhibiting positive trends tended to be found in urban areas (affected by LULC change), while those exhibiting negative trends tended to reside downstream of reservoirs (also a LULC factor). 

Table 1.  Summary of the trend analyses performed by Barros et al. on annual peak streamflow time series from the southeastern and mid-Atlantic United States over two time intervals (1950–2010 and 1980–2010). Numbers represent the percentage of all stations examined experiencing a positive, negative, or no trend in the data at the 98% confidence level.

In discussing their findings, Barros et al. say they “are consistent with Villarini and Smith (2010) in their analysis restricted to stream gauges with at least 75 years of record, with Hirsch (2011) using 200 stream gauges, and Vogel et al. (2011) and Lins and Cohn (2011) for the [Conterminous United States].”  Given as much, it is extremely difficult to come to any conclusion other than the fact that the unanimous observations depicted in these studies do not support model-based claims that carbon dioxide–induced climate change is leading to more floods. In contrast, if anything, just the opposite appears to be the case, as annual peak streamflow has trended more toward average conditions.

References

Barros, A.P., Duan, Y., Brun, J. and Medina Jr., M.A. 2014. Flood nonstationarity in the southeast and mid-Atlantic regions of the United States. Journal of Hydrologic Engineering 19, 05014014. DOI: 10.1061/(ASCE)HE.1943-5584.0000955.

Hirsch, R. M. 2011. A perspective on nonstationarity and water management.  Journal of the American Water Resources Association 47: 436–446.

Lins, H. F. and Cohn, T. A. 2011. Stationarity: Wanted dead or alive? Journal of the American Water Resources Association 47: 475–480.

Villarini, G. and Smith, J. A. 2010. Flood peak distributions for the eastern United States. Water Resources Research 46: W06504.

Vogel, R. M., Yaindl, C. and Walter, M. 2011. Nonstationarity: Flood magnification and recurrence reduction factors in the United States.  Journal of the American Water Resources Association 47: 464–474.

Matthew Feeney

If taxi drivers want to endear themselves to consumers, they had better find another way of protesting ridesharing companies than deliberately congesting traffic. On Monday night, taxi drivers with the San Francisco Taxi Workers Alliance caused traffic jams at San Francisco International Airport in the wake of last month’s news that the airport would allow rideshare vehicles to pick up passengers as part of a pilot program. Unsurprisingly, airport visitors were not pleased. This kind of protest has a track record of failure, and in the coming years these protests may be remembered as being among the most frantic and ultimately unsuccessful attempts taxi drivers made to combat the rise of ridesharing companies such as Uber, Lyft, and Sidecar. 

Taxis have deliberately congested traffic in rideshare protests not only in American cities such as San Francisco and Washington, D.C., but also in London, where the protest earlier this year reportedly resulted in an explosion in British Uber sign-ups. In Washington, D.C., the city council passed a rideshare bill in a 12-1 vote despite the protest.

Taxi drivers are right to be worried about ridesharing. In San Francisco, there has been a dramatic drop in the number of taxi trips since the beginning of 2012, the year Uber’s ridesharing service and Lyft both launched. In September 2014, the general manager of a Washington, D.C., cab company said “what we are seeing is, year over year, an approximately 30 percent decrease in business.” A draft study from the Virginia Department of Motor Vehicles reportedly predicts that once rideshare regulations are permanently in place in the state, rideshare drivers will outnumber taxis.

Many consumers have demonstrated over the last few years that they prefer rideshare services to taxis. Market incumbents such as taxis have a number of options when competitors arrive on the scene, but it is hard to see if any will halt the growth of ridesharing. 

Taxi companies could try to innovate to keep up with the technology used by Uber, Lyft, and Sidecar. What many people like about ridesharing is the ease of use. All users have to do is press a button on their smartphone in order to get a ride that is paid for automatically without cash. Hailo, a company with an app similar to the apps offered by ridesharing companies, provides a way for passengers to hail a taxi via smartphones. However, Hailo recently announced that it would be leaving North America because of the competition from Uber and Lyft. Given that anyone who can download a taxi app also has the ability to download a ridesharing app, it is hard to see what a taxicab app would be able to offer that ridesharing companies don’t already provide. Of course, it is not inconceivable that the taxi industry will develop a competitive app, but it will be difficult for that app to succeed considering that rideshare companies already enjoy name recognition as well as a loyal customer base.

U.S. taxi drivers have been claiming that they provide a service safer than the services offered by rideshare drivers. Rideshare companies have been criticized for their insurance policies despite the fact that both Uber and Lyft provide coverage once a ride is taking place and when drivers are logged into a rideshare app but have yet to accept a ride request. The coverage for when a rideshare driver does not have a passenger is designed to kick in if a driver’s auto insurer declines a claim.

In California, which like Colorado has statewide rideshare insurance legislation on the books, insurance policies specifically designed for ridesharing can now be reviewed by the California Department of Insurance. As rideshare companies expand, we should expect more rideshare legislation to be passed at the state level and for the insurance industry to work toward developing products specifically designed for ridesharing. It won’t be surprising if more statewide legislation includes insurance requirements similar to those outlined in California’s and Colorado’s legislation, which is very similar to the coverage already provided by Uber and Lyft. The major difference between Uber’s and Lyft’s policies and the insurance requirements in the California and Colorado legislation is that the laws in California and Colorado require that the coverage be primary for the time when a driver is logged into a rideshare app but has yet to accept a ride request. These insurance requirements will go into effect on January 15 in Colorado and on July 1 in California.

Political influence is the best tool the taxi industry has at its disposal, but it will become less efficient as ridesharing companies expand and the number of taxi rides declines. Local lawmakers and regulators with connections to the taxi industry can certainly cause headaches for ridesharing companies. However, as the popularity of ridesharing grows, the taxi industry’s influence will decline and lawmakers will come under increased pressure to allow Uber, Lyft, and Sidecar drivers to work in their jurisdictions.  

* I have a forthcoming paper on the safety concerns related to ridesharing in the works and will announce its publication on this blog. 

Simon Lester

A couple years ago, I speculated about eventual free trade in marijuana. That was before legalization in Colorado and Washington state. The case for trade and globalization of this industry looks stronger now. 

The Economist had a good article recently, taking into account this legalization, and thinking about what the future of the industry looks like. Right now, it’s just a bunch of small companies searching for the right market strategy, but they see consolidation eventually:

As happened with alcohol after the end of Prohibition, and has also happened with tobacco, the pot industry would probably come to be dominated by a few giant corporations.

They note that the tobacco industry has looked into the marijuana sector in the past, and might be well-positioned to run things, although it really could be anyone.

Assuming the current trend of increased acceptance continues, it seems inevitable that the marijuana industry will begin to look like other industries. There will be a few major global players, possibly based in the countries where legalization first happened. There will also be trade and investment disputes, just as there are in industries such as steel, cotton, and aircraft. No doubt the industry will be highly regulated, and regulations often given rise to these complaints.

For example, as the article notes, “Both Colorado and Washington have imposed residency requirements on the owners of marijuana businesses—including anyone with an equity stake.” Why restrict investments from foreigners and others who are not residents of the jurisdiction? No doubt the regulators have some rationale for this, but whether it’s a good one or complies with the various international investment obligations that are now in effect is up for debate.

Chris Edwards

International trade boosts our economy, but U.S. seaports need major improvements to maximize the benefits of trade. Bloomberg reported a couple months ago that congestion at West Coast ports is so severe that shippers are diverting a growing share of traffic to Canada. The Wall Street Journal reports today that the problems are continuing.

One issue is the aggressive labor union that controls the West Coast ports:

For more than a month, a rotating cast of about a dozen container vessels, bulk ships and tankers has sat anchored just outside the ports of Los Angeles and Long Beach, some waiting as long as eight days to berth.

… Uncertainty over contract negotiations between terminal operators and the West Coast Longshoremen’s union has further aggravated the congestion, local officials and economists say.

Businesses up and down the West Coast that rely on the ports for importing and exporting goods have expressed concern over the protracted negotiations between the International Longshore and Warehouse Union, representing workers at West Coast ports, and the Pacific Maritime Association, which represents carriers and terminal operators. ILWU members have been working without a contract since a six-year pact expired July 1.

In recent weeks, the PMA has accused the union of slowdowns at the ports of Seattle and Tacoma, Wash., and withholding some critical workers in Los Angeles and Long Beach, contributing to the current congestion. Some longshoremen walked off the job Oakland, Calif., last week, aggravating concerns over a widespread labor disruption during the holiday shipping season.

Port employers as well as retailers and manufacturers say their greatest fear is the possibility of a total shutdown across West Coast ports—similar to a 10-day worker lockout in 2002 after labor talks failed. The shutdown cost the U.S. economy several billions of dollars, industry groups say. Mr. Louttit of the Marine Exchange said the disruption at one point left 65 ships sitting at anchor off the Southern California coast.

The solution to these labor problems is straightforward: Congress should repeal “collective bargaining,” which is a euphemism for monopoly unionism. In other words, it should repeal the National Labor Relations Act (NLRA), which confers unjustified powers on unions and encourages them to disrupt workplaces.

The share of the private-sector workforce that is unionized has plunged for decades because unions make no sense in the modern fast-paced economy. But the unions that hang on in some industries cause a lot of trouble, as we’ve long seen with the high-paid longshoremen on the West Coast. I don’t imagine that NLRA repeal is on President Obama’s agenda, but it is a reform that policymakers should pursue down the road.

Brink Lindsey

Cato’s special online forum on reviving growth continues today with the following new essays:

1. Morris Kleiner makes the case against occupational licensing.

2. Tim Kane calls for more immigration.

3. Alan Viard advocates moving to a progressive consumption tax.

4. Donald Marron argues for a carbon-corporate tax swap.

 

Alex Nowrasteh

On Thursday, President Obama is expected to announce the specific provisions of his immigration executive order.  This order will have broad policy implications.  Below is a brief explanation of the changes in policy likely to be announced and their economic effects based on the leaked information.

Legalizations

The most contentious portions of the executive order will be the legalizations.  Many of the beneficiaries of all the legalization programs would be eligible for legal status through more than one program, creating significant overlap and making it difficult to predict exactly how many people would be eligible.  Below I will analyze each one and then sum up what the economic consequences are likely to be.

Expanded Deferred Action for Young Unlawful Immigrants

This would expand the deferred action for childhood arrivals (DACA) program that allowed unlawful immigrants who were brought into the United States when they were under the age of 16, resided here since June 2007, were under 31 years of age as of June 2012, who were not convicted criminals, and who were either high-school graduates or were still attending school.  Those deferred were eligible for a two-year work permit under the Code of Federal Regulations.  An estimated 1.7 million unlawful immigrants were eligible for this program but only 675,000 have been granted DACA status – about 40 percent of the total. 

Obama’s change would move the cut-off date from June 2007 to January 2010 and still apply to anyone who was brought here under the age of 16.  President Obama’s administration estimates that this could apply to nearly 300,000 unlawful immigrants.  As we saw with DACA, however, not all of those available will come forward because this legalization is merely temporary and they fear giving the government their identity information, among other reasons.  If DACA is any guide, about 120,000 additional unlawful immigrants will directly benefit from this provision.

A note about the 300,000 figure used by the Obama administration: Pew reports that there are 650,000 unauthorized minors without DACA or temporary protected status, but it is not clear how long these children have been in the United States, meaning many may have entered after January 2010 and therefore wouldn’t be eligible.  President Obama’s estimate could be too high or too low based on the paucity of data.

Expand Deferred Action for Parents of U.S. Citizens and Green Card Holders

This would be the biggest legalization in Obama’s executive order.  This would defer the deportations of unlawful immigrants who have been here for more than five years and who have children who are either U.S. citizens or green card holders.  The president estimates that this would apply to about 4.5 million unauthorized immigrants, and the Pew data supports this.

Expand Provisional Waivers to Spouses and Children of Green Card Holders

This would expand a provisional waiver program for the unlawful spouses and children of permanent residents and U.S. citizens.  As I wrote here, under current law, unlawful immigrant spouses or children of U.S. citizens can gain a green card if they return to their home country to apply at a U.S. consulate or embassy.  However, unlawful immigrants who have lived here are barred from returning for up to ten years once they leave the U.S. due to the three and ten year bars.  If this executive order goes into effect, unlawful immigrants can apply for a waiver of those bars.  Obtaining a waiver was made easier in March 2013.

It’s unclear how Obama would change this requirement.  Most likely, his order would significantly shorten the wait times abroad.  Ideally, the waiver would be approved more quickly for a larger group of people.  Those unlawful immigrants granted the waiver would then be able to travel to their home countries for interviews at U.S. consulates within weeks, rather than waiting years, in some circumstances.  They would then be able to enter the United States legally.

This would not remove the requirement to leave the United States for the interview at a consulate.  Expanded parole addresses that concern. 

Expanded “Parole”

Currently, the government allows “parole in place” for unlawful immigrant parents and spouses of U.S. military members.  Normally, unlawful immigrants cannot adjust their immigration status even if they are otherwise entitled to a green card through the immediate-relatives category because they were not inspected prior to their admission into the United States.  However, an infrequently used portion of the statute allows a parole of such unlawful immigrant as immediate relatives of U.S. citizens, allowing them to gain legal immigration status without leaving the United States.

Paroled immigrants would then be checked for criminal and national security violations, the same as other immediate relatives, and be able to adjust their status to a green card.  This would not apply to unlawful immigrants who were previously deported and illegally re-entered and to other categories of unlawful immigrants who would otherwise be unable to adjust their status.  When the U.S. citizen children of unlawful immigrants turn 21, they will then be able to sponsor their unlawful immigrant parents under this provision.

There are roughly 10.5 million unlawful immigrant adults in the United States.  Of those, 3.7 million have at least one U.S.-born child but other offenses will bar many of them from adjusting their status.

The Economic and Other Effects

The economic impact of this legalization will be positive.  In the wake of the 1986 Reagan amnesty, wages for legalized immigrants increased – sometimes by as much as 15 percent – because legal workers are more productive and can command higher wages than illegal workers.[i]  Being legal also allows these immigrants to invest in U.S.-specific human capital, like learning English, which will increase their productivity and wages.  Unlawful immigrants are less likely to make these investments in human capital because they could be deported, thus wiping out such investment.  We will likely see a similar increase in the wages of many of the unlawful immigrants legalized today.  This benefit would likely accrue to all of the working unlawful immigrants who would be legalized under this executive order.

Professor Raul Hinojosa-Ojeda of UCLA wrote a paper for Cato in 2012 in which he employed a dynamic model called the GMig2 to study comprehensive immigration reform’s impact on the U.S. economy.  He found that a full legalization of unlawful immigrants will increase U.S. GDP by about $700 billion dollars over the next ten years, primarily by allowing the legalized workers to be more productive.  Any impact of legalizations on GDP would be smaller under an executive order because many of them would be temporary and it would not cover the entire unlawful immigrant population, but it would still produce hundreds of billions of dollars of more GDP within ten years.

The 1986 amnesty can provide some clues as to what will happen to the unlawful immigrants who become legalized through the parole and waiver process, thus earning them green cards.  First, many of them will not naturalize.  By 2009, only 45 percent of those legalized under the 1986 Reagan amnesty eventually gained citizenship.  Most seemed perfectly willing to work and live here on a green card. 

A big reason why the number of unlawful immigrants increased so much in recent decades is that the three and ten year bars and greater border security raised the costs of returning to their home countries.  Prior to the bars being enacted in 1996, unlawful immigration was a largely circular phenomenon.  Unlawful immigrants would come for a few years, work here, return home, and often return to the United States again before eventually settling back in their home countries.  The three and ten year bars and boosted border security raised the cost of leaving the United States, prompting more unlawful immigrants to stay longer.  Legalizing these workers could prompt more circular migration and return to home countries, although the number will not be large because many of these immigrants have now lived here for so long.

Other Portions of the Executive Order

Other portions of the executive order are less controversial but will have important effects.

Expand High-Tech Immigration

This is the only proposal in the executive order that could immediately expand legal immigration.  The details are vague, but there are several ways the president could increase the number of highly skilled immigrants and migrants without running afoul of statutory quotas.

One way would be to not count the family members of employment-based green cards against the cap.  Under current immigration law, about 140,000 green cards are set aside for highly skilled workers with job offers from American companies.  But only about 45 percent of those green cards went to workers in 2013, with the rest going to their families.  The government currently counts family members against the numerical green-card quota for workers without legal basis.

By not counting family members against the cap, the number of employment-based green cards issued every year would more than double.  Such a change in counting green cards would not prevent the families of green card workers from coming; it would merely stop counting them against the cap.  This reform would have the added benefit of virtually eliminating the backlog of green cards for immigrants from India and China.

As immigration attorney Charles Kuck explains, Obama could also allow the spouses of H-1B visas to work, expand the definition of “extraordinary ability” for O-1 visas, and allow more companies affiliated with universities to obtain cap-exempt H-1B visas.  

End ‘Secure Communities’ and Start a New Program

Secure Communities (SCOMM) was a program begun in March 2008 and was initially piloted in 14 police jurisdictions by October of that year. At its peak, SCOMM was operational in over 3,000 jurisdictions in the United States, a 21,429 percent increase in jurisdictional reach during the first term of the Obama administration.  SCOMM links fingerprint from arrestees with government immigration and criminal databases.  If the Department of Homeland Security suspects an arrestee is an unlawful immigrant, it issues a detainer to hold the arrestee until the federal government can investigate.  SCOMM was effective at identifying and removing many unlawful immigrants but it was also supposed to decrease crime rates.  On the second point, it failed.

SCOMM did not decrease crime.  According to this paper that is forthcoming in the Journal of Law and Economics, “Secure Communities led to no meaningful reductions in the FBI index crime rate.  Nor has it reduced rates of violent crime – homicide, rape, robbery, or aggravated assault.  This evidence shows that the program has not served its central objective of making communities safer.”  Furthermore, immigrants in the United States are less crime-prone than the native born.

SCOMM also targeted many non-criminals who were arrested since the finger print check is at the point of arrest, not conviction.  Unlawful immigrants who commit violent and property crimes should be identified and deported, but a targeted enforcement system will likely be more effective than SCOMM without the collateral damage.

Prioritized Deportations for Serious Criminals

This would be a new Department of Homeland Security enforcement policy to prioritize the deportations of serious criminals, gang members, and others deemed a threat.  This is already done to a large extent but it could be improved.  Deemphasizing workplace raids and arrests of unlawful immigrants who do not have a driver’s license and focusing those resources on actual threats would be an improvement. 

Boost Pay for ICE Officers

Obama is proposing a pay increase for officers at Immigration and Customs Enforcement.  Since Congress appropriates funds, Obama cannot do this on his own.

Strengthen Border Security

This part of his plan would put additional enforcement resources along the border with Mexico.  This will continue a pattern since 2012 when Obama began to deemphasize interior enforcement and instead focused on border enforcement.

Regardless, more border security would not decrease unlawful immigration very much.  A lower-skilled guest worker visa program would be far more effective and cheaper than spending more tax dollars on trying to shut down a vibrant black market.  However, the president cannot create such a program on his own.

Promote Naturalizations

Obama may lower the naturalization fee by 50 percent for the first 10,000 applicants.  The current fee is $680.  This is a token measure.  The fee is likely too high but this is small potatoes compared to the other immigration problems dealt with here.

Conclusion

Whether this executive order is constitutional is the major question that is still unanswered.  Portions of this executive order will be unambiguously constitutional while others will skirt the line or could even cross it.  Ignoring that vital question for now and viewing the executive order in purely policy terms, it will produce positive economic effects and legalize a significant number of unlawful immigrants.

[i] Amuedo-Dorantes, Bansak, and Raphael, “Gender Differences in the Labor Market: Impact of IRCA,” American Economic Review, 2007.

 

Rivera-Batiz, “Undocumented Workers in the Labor Market: An Analysis of Earnings of Legal and Illegal Mexican Immigrants in the United States,” Journal of Population Economics, 1999.

 

Kossoudji and Cobb-Clark, “IRCA’s Impact on the Occupational Concentration and Mobility of Newly-Legalized Mexican Men,” Journal of Population Economics, 2000.

 

Kossoudji and Cobb-Clark, “Coming Out of the Shadows: Learning about Legal Status and Wages from the Legalized Population,” Journal of Labor Economics, 2002.

 

Baker, “Effects of the 1986 Immigration Reform and Control Act on Crime,” SSRN Working Paper, 2011.

Walter Olson

When the small town of Westminster in central Massachusetts announced plans to ban the same of tobacco entirely – not just in certain types of stores, or to younger buyers – townspeople came out loudly and in force to oppose the plan. That has thrown advocates back a bit [New York TimesMassLiveearlier]:

“They’re just taking away everyday freedoms, little by little,” said Nate Johnson, 32, an egg farmer who also works in an auto body shop, as he stood outside the store last week. “This isn’t about tobacco, it’s about control,” he said.

Right he is. And despite the Times reporter’s lifted eyebrow at the notion that “outside groups” are encouraging town officials to go forward with the ban, it’s worth asking how Westminster, Mass., population 7,400, came to have its very own “tobacco control officer.” Do you imagine the townspeople decided to create such a position with local tax funds? If so, read on.

For well over a decade the Massachusetts Municipal Association has run something called the Tobacco Control Technical Assistance Program, assisted by grant money from the state Department of Public Health. It does things like campaign for town-by-town hikes in the tobacco purchase age to 21, and town-by-town bans on tobacco sales in drug stores. It will surprise few that it has been in the thick of the Westminster situation.

This article, written for a friendly audience of public health advocates, frankly describes how the MMA project, with assistance from nonprofit and university groups as well as the Commonwealth of Massachusetts, worked to break down the reluctance of town health boards to venture into restrictions on tobacco sales (scroll to “Roles of the Massachusetts Tobacco Control Program, Local Boards of Health, and Tobacco Control Advocates”):

Local boards were enticed into hiring tobacco control staff by the DPH’s tobacco control grants. As a participant in the process explained, “[L]ocal boards of health looked at it as ‘oh, it’s a grant. Let’s apply for this grant. So now, what do we have to do, now that we’ve got it?’” … The grants dictated that local boards use those community members they had hired as their staff to assist them in enacting and enforcing tobacco control regulations…

The staff paid with money from outside the town seem to have seen their job as, in part, lobbying the local officials: “We’ve had to work on each individual board [of health] member to get them to come around,” said one.

The account continues with many revealing details of how the outside advisers managed to orchestrate public hearings to minimize critics’ voice, deflect challenges with “we’ll take that under advisement” rather than actual answers, and in the case of particularly intense opposition, “back off for a couple of months” before returning. “Grant-funded regulatory advocates were able to counter all of [opponents’] arguments and tactics.”

In other words, an extra reason for the townspeople of Westminster to be angry is that they have been paying to lobby themselves. And it’s worth knowing exactly how the game plan works, because similar ones have been rolled out to localities in various states not only on “tobacco control” but on “food policy,” environmental bans and other topics. Grass roots? If so, most carefully cultivated in high places.

[cross-posted and slightly adapted from Overlawyered]

Brink Lindsey

Here are the newest essays in the Cato Institute’s online forum on reviving growth:

1. Ramesh Ponnuru offers three ideas – on taxes, patents, and money.

2. William Gale argues for getting our fiscal house in order.

3. Jeff Miron proposes cuts in health insurance subsidies.

4. Adam Thierer calls for a culture of permissionless innovation.

Paul C. "Chip" Knappenberger

Enough already!

Why is Congress, the President, or anyone else, still talking about the Keystone XL pipeline?

This project is so small in the grand scheme of anything it boggles the mind anyone outside of those directly involved in building and operating it gives it a second thought.

That a discussion of the pipeline is still consuming government resources some six years after it was originally proposed epitomizes the grand waste of time and money that characterizes the current Administration when it comes to anything it thinks causes dreaded global warming.

In this case, the fault lies squarely with President Obama.

He could have killed the pipeline years ago if he wanted. Or better yet, he could have approved the pipeline years ago and we would now be reaping the benefits of it in whatever form those benefits may have taken (choose your favorites from among the lists that likely includes jobs, tax revenues, lower gas prices, energy security, ally cooperation, etc.).

But he did neither.

His highest priority seems to be leaving a lasting legacy of “doing something” about climate change. Again, his own EPA should tell him that even if we cut our emissions to zero, today, the amount of warming that would be “prevented” by 2100 is a mere 0.14°C.

And the Keystone XL pipeline is one of his biggest tools to keep planetary warming alive, at least in the media. As long as it is in limbo, people keep talking about it, protestors keep protesting about it, supporters keep lobbying for it, newspapers keep writing about it, and the rest of us are caught up in the spectacle.

The State Department has already found that the environmental impacts and risks from the project are acceptably low. I have already pointed out (to Congress even) the climate impacts of the project are nil. And all the while the Keystone XL pipeline has been delayed, the Alberta tar sands oil production has increased and is in the process of finding other ways onto the global market. Even the Nebraska court case that is often cited by the President as a reason for delaying a decision on the pipeline is more of a procedural issue than a real threat to the pipeline.

At this point, the Keystone XL is just another construction project. In fact, that is all it ever was. If it didn’t require crossing the border with Canada (which required a “presidential permit”), we never would have heard a peep about it.

The USAToday appropriately and succinctly summed up the situation in a recent editorial:

 Keystone is not an existential issue. It’s a 1,179-mile oil pipeline in a nation already crisscrossed by more than 150,000 miles of such pipelines. It’s long past time to say yes.

Agree completely. It high is time for the federal government to put this issue to rest and get down to issues actually deserving of this much attention (but don’t bet on it!).

 

 

Julian Sanchez

The push to rein in the authorities of the National Security Agency—covertly expanded by a secret court to permit indiscriminate bulk collection of Americans’ communications  and financial records—has become a truly bipartisan affair. In a way, this is nothing new: Liberals who recall the abuses of the Hoover era have long teamed with conservatives skeptical of government power in efforts to check excessive surveillance.  With a Senate vote looming to move forward with the USA FREEDOM Act, however, a still stranger mix of opponents is seeking to block what has emerged as the primary vehicle for intelligence reform in the post-Snowden era.

First, and least surprising, there’s the “More Catholic than the Pope” contingent—boosters of the intelligence community who seem convinced that the bill will somehow put Americans at risk, despite the insistence of Director of National Intelligence James Clapper that the proposed safeguards would not hinder intelligence operations. This stance is exemplified by a stunningly misleading Wall Street Journal op-ed penned by former Attorney General Michael Mukasey and forrmer NSA head Michael Hayden. Since the terrorist Islamic State group, or ISIS, is currently in the headlines, naturally it is invoked to tar the bill as “a reform that only ISIS could love.”  Never explained: Why, precisely, we should expect an authority to indiscriminately sweep up domestic telephone records to be a critical tool for monitoring a group that seems primarily concerned with consolidating its power overseas, not fielding operatives in the United States.  After all, even when it comes to domestic investigations—where one might have expected the NSA’s mass database to show its value—two independent review groups with full access to classified records have concluded that the program had little or none.  Incoming Senate majority leader Mitch McConnell has described the reforms as “tying our hands behind our back”—but a hand is a useful appendage.  On the public record, “tying our hair back” might a be more apt description—the bulk database has obscured the FBI’s by flooding the Bureau with dead-end “tips,” while any truly pertinent information it provided was invariably duplicative of records that agents had already obtained using traditional, targeted authorities.

Yet the USA FREEDOM framework actually preserves the core capabilities of this ineffective program: It creates a new mechanism for the government to do “connection chaining” by quickly and continuously obtaining, from multiple phone carriers, the records of suspected terror affiliates and their contacts. Mukasey and Hayden falsely decribe the new process as requiring a “warrant”—which it does not, on the consensus legal understanding that a “warrant” is a particularized authority based on the Fourth Amendment’s relatively high evidentiary standard of “probable cause.”  They also, somewhat comically, describe it as requiring the government go “scurrying” to telecomunications providers to “comb through” records, presumably by consulting a card catalogue.  Yet the point of the new framework, with a mandate that carriers provide “technical assistance” to NSA, is precisely to ensure that carriers can rapidly search their files to provide information about numbers once the secret FISA court has signed off (or, indeed, in advance of the court’s approval in an emergency).  Nor, indeed, do Mukasey and Haden so much as mention “National Security Letters,” a separate tool that can be used to obtain certain types of communications records without any judicial involvement. Unfortunately, the USA FREEDOM Act does not implement the recommendation of the President’s Surveillance Review group that these, too, require court authorization. Nor, conspicuously, does their tendentious discussion of the various safeguards currently in place mention the numerous massive and systemic violations of the rules imposed by the FISA court—violations that easily passed undetected for years precisely because NSA itself maintained the database rather than making particularized requests to carriers through the FISA court.

In short, the bill doesn’t really affect the government’s capabilities, only the way they’re implemented.  First, phone numbers to be searched will have to be specifically approved by the FISA Court—as Congress expected would be the case when it approved these authorities, and as has already been required since Februrary under a presidential directive.  Second, NSA will quickly obtain particular records, corresponding to “specific selectors” like phone numbers or other account identifiers, by passing its search queries to the carriers who already maintain those rather than compiling its own massive database, overwhelmingly consisting of irrelevant data about innocent people. This ought to be a pure win: A privacy protective re-architecting that reduces the potential for abuse without meaningfully interfering with the government’s ability to obtain the information in which it has a legitimate interest.   Which, of course, is why current intelligence officials have characterized the reforms as reasonable. Retired officials—the ones who implemented the bulk program and insisted its vast invasiveness was absolutely necessary—may be reluctant to admit they’ve been proven wrong, but their stubbornness does not amount to much of an argument.

More surprising, perhaps, is the opposition from NSA critic and civil libertarian Sen. Rand Paul (R-KY), who feels the bill doesn’t go far enough in reining in government surveillance.  I’m inclined to agree with that view—as are numerous other senators who plan to support the bill while offering amendments to strenghten it—but it’s hard to see how blocking this particular set of reforms makes it any more likely that other important changes to the law will be passed. Ending the bulk collection of communication records under one group of authorities may only be the first step on a long road to more comprehensive surveillance reform, but taking that step enables privacy groups and civil libertarian legislators to devote their full focus to building consensus around subsequent steps, like amending (if not eliminating) the general warrant authority created by §702 of the FISA Amendments Act of 2008.

Sen. Paul’s primary objection thus far has been that the USA FREEDOM Act “reauthorizes the PATRIOT Act,” which is rather misleading. The vast majority of the PATRIOT Act is, alas, permanent and in no need of reauthorization. Three provisions will, in fact, expire in 2015: The §215 business records authority under which the NSA’s bulk telephony program is operating, the never-used “lone wolf” provision blessing the use of intelligence tools against foreigners suspected of terrorism but unaffiliated with any larger group, and the “roving wiretap” authority giving analysts discretion to intercept a target’s communication across multiple communications channels without specifying them in advance to a court. The USA FREEDOM Act would, of course, overhaul the first authority while extending all three until 2017, aligning their sunset dates with the expiration of the §702 general warrant authority, and allowing these interdependent surveillance powers to be discussed and debated together.  By far the most significant of the expiring authorities is §215—yet history suggests that even if it were to expire, intelligence agencies could shift their current programs to one of the permanent authorities, such as the §214 “pen register/trap-and-trace” provision or the aforementioned National Security Letters, with largely cosmetic changes. The one other authority that has actually been used—roving wiretaps—ought indeed to be amended, but should probably not be entirely eliminated. So it would be more accurate to say that the USA FREEDOM Act involves a short extension of three Patriot Act provisions, but substantially reforms the one that’s actually important, while fixing several overlapping authorities that don’t expire in the bargain.

While Paul is motivated by an admirable regard for liberty and privacy, his arguments against this particular package of reforms stand up to scrutiny only slightly better than those of the cheerleaders for bulk surveillance.

Jeffrey Miron

Christopher Ingraham at The Washington Post’s Wonkblog has a terrific piece up today on Eric Holder’s refusal to use executive branch authority under the Controlled Substances Act to reclassify marijuana as a less harmful substance. The crucial portion is here:  

The crowning inconsistency of the federal drug control system has always been the classification of marijuana as a Schedule 1 substance under federal law, which makes it among the Worst of the Worst drugs as far as the DEA is concerned – literally as bad as heroin, and worse than cocaine! Drug reform advocates have pushed the DEA to change its position for years, citing decades of research on the relative harmlessness of weed compared to other drugs – including alcohol – but the agency hasn’t budged, even as public opinion has rapidly evolved.

The Controlled Substances Act, which set up the drug schedules in the early 1970s, explicitly places drug scheduling authority in the hands of the attorney general, and even instructs him or her to “remove any drug or other substance from the schedules if he finds that the drug or other substance does not meet the requirements for inclusion in any schedule.”

Much to the chagrin and outright befuddlement of drug law reformers, however, outgoing attorney general Eric Holder has repeatedly stated that any changes to the scheduling status of marijuana should be made by Congress.

Ingraham then explains that

a bipartisan group of congressmen asked the administration to [re-schedule marijuana] … In essence, the Justice Department and Congress are both begging each other to fix federal marijuana laws, but nobody’s doing anything.

As Ingraham writes, “Welcome to Washington in 2014.” 

Doug Bandow

Americans are angry with their politicians but nuanced in their political opinions.  Voters in Alaska simultaneously ousted their Democratic Senator and legalized the use of marijuana.  Floridians voted to allow the use of medicinal marijuana and reelected Republican Gov. Rick Scott.

In fact, Milton Friedman and William F. Buckley long argued against drug prohibition.  The electorate appears to be moving their way.

Which makes sense.  If you want to limit government and protect individual liberty, it’s impossible to ignore the ill consequences of arresting and imprisoning millions of people for using illicit substances. 

Drug use is bad.  Arresting people for using drugs is worse. 

But conservatives have another reason to abandon the drug war: federalism.

The Drug War has poisoned almost everything it touches.  The rule of law suffers.  Lawyers speak of the drug exception to the Fourth Amendment, since judges often sacrifice Fourth Amendment protections when drugs are involved. 

Constitutional interpretation is malformed.  In Gonzales v. Raich the Supreme Court held that Uncle Sam could regulate someone who grew marijuana for personal consumption under the interstate Commerce Clause.  The reasoning of conservative jurist Antonin Scalia was used by the legal Left to argue that ObamaCare was constitutional.

Federalism is another victim of the Drug War.  Many conservatives complain about the over-criminalization of life, with Washington encroaching on an area that’s traditionally a matter of state authority.

As some states decriminalized drug use and others allowed pot consumption for medical purposes, the federal government continued to prosecute all users and dealers.  The Tuesday election has provided another potential conflict. 

Citizens in Alaska and Oregon joined those in Colorado and Washington in legalizing marijuana.  While the national government can continue separately prosecuting users, it can’t force states to toss people in jail for using drugs.

Washington, D.C. is different.  District voters approved legalization by a more than two-to-one margin. 

However, since D.C. is under federal control, Congress can overturn District measures by passing a disapproval resolution within 60 days.  Or legislators can apply annual riders blocking measures from taking effect, a Republican tactic used for 11 years straight against a medical marijuana initiative passed by D.C. in 1998.

Maryland Rep. Andy Harris is leading the latest charge.  Earlier this year he won House approval for a legislative rider to block the D.C. city council’s vote to decriminalize marijuana, though the Senate refused to go along.

The GOP Senate takeover could give Harris a new opportunity.  But Sen. Rand Paul (R-KY.) is set to take over the District oversight committee in that body and is skeptical of federal preemption.

Whatever one thinks of the substantive issue—no surprise, I favor legalization—Washington should not dictate policy to other levels of government.  The fact that the District is a federal enclave doesn’t change the issue.

Congress can legitimately oversee a true federal zone.  But most of the District is irrelevant to the national government’s operations.  Residents should be allowed to manage their own affairs.  It is highly intrusive, even dictatorial, for Uncle Sam to insist that a subordinate government criminalize a particular activity against the wishes of the majority of the latter’s people.  

Moreover, while Congress can prevent the District from officially legalizing pot use, in practice Congress cannot force the District to enforce prohibition.   So what’s the point?

Federalism long has been a position of convenience for most politicians.  They tend to recognize state authority only when doing so advances their substantive ends. 

The District’s vote on drugs gives the GOP an opportunity to put principle before politics.  Voters in the District of Columbia, no less than those in Alaska, Colorado, Oregon, and Washington, should be able to decide on their criminal laws. 

As I argue on American Spectator online:  “More than anyone else, conservatives should affirm this right (and responsibility).  Let D.C. join the great laboratory of democracy known as the American states.”

Nicole Kaeding

The wars in Iraq and Afghanistan cost more than $1 trillion with billions going to Department of Defense (DoD) contractors. All of that spending has led to a large uptick in waste and fraud.

As much as $60 billion has been wasted on U.S. operations in those two countries, according to analysis from the Commission on Wartime Contracting in Iraq and Afghanistan. The Justice Department has brought more than 235 criminal cases since 2005.

The Associated Press highlights some examples:

In the past few months alone, four retired and one active-duty Army National Guard officials were charged in a complex bribery and kickback scheme involving the awarding of contracts for marketing and promotional material, and a trucking company driver pleaded guilty to bribing military base employees in Georgia to obtain freight shipments — often weapons which required satellite tracking — to transport to the West Coast.

More recently, a former contractor for the Navy’s Military Sealift Command, which provides transportation for the service, was sentenced to prison along with a businessman in a bribery case in which cash, a wine refrigerator and other gifts traded hands in exchange for favorable treatment on telecommunications work. Also, three men, including two retired Marine Corps officers, were charged with cheating on a bid proposal for maintenance work involving a helicopter squadron that serves the White House.

The story continues on with the long list of abuses:

Defense contractor Leonard Francis was arrested in San Diego last year on charges that he offered luxury travel, prostitutes and other bribes to Navy officers in exchange for confidential information, including ship routes. Prosecutors say he used that information to overbill the Navy for port services in Asia in one of the biggest Navy bribery schemes in years. Ethan Posner, a lawyer for Francis, declined comment.

Yet many others involve more mundane cases of contracting or procurement fraud. Consider the trucking company contractor in Afghanistan who bribed an Army serviceman to falsify records to show fuel shipments that were never delivered, or the former Army contractor who demanded bribes before issuing orders for bottled water at a military camp in Kuwait.

According to the story, the Defense Department acknowledges the issue and is working to improve the situation. But if this report is any indication, DoD has a long way to go.

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