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Emma Ashford

Russian aggression in Eastern Europe during the last year has brought to the fore many of the issues surrounding the transatlantic security relationship, in particular, the role of NATO. Since the end of the Cold War, NATO has been floundering, seeking new missions and goals, with recent involvement in military campaigns in Afghanistan and Libya emblematic of this search. In some ways, Russia’s recent actions have brought back a sense of purpose to the alliance.

Unfortunately, NATO still has many problems. Common vision among members is lacking, a problem exacerbated by the expansion of NATO from sixteen members at the end of the Cold War to twenty-eight members today. Many of these new member states in Central and Eastern Europe feel – understandably – more threatened by Russian aggression than West European or North American member states, creating tension within the organization.

NATO itself has increasingly become a political entity. Indeed, the growth of NATO membership among East European states during the last decade has been a key impediment to improved relations with Russia. The suggestion that Georgia and Ukraine might become EU or NATO members has also been widely discussed as one of the roots of the current conflict.

NATO funding is a big problem. Though most member states hail NATO’s importance and demand its services, few are willing to pay the costs, which fall disproportionately on the United States. In 2012-2013, only three other member states met NATO’s stated military spending target of 2% of GDP: the United Kingdom, Estonia and Greece. Many countries which rely heavily on NATO nonetheless contribute little to the alliance or their own defense, relying instead on the United States.

 

These problems are not new, but current events highlight the need for a more coherent and participatory transatlantic security framework. Is NATO the right tool for the task? Should the alliance be reformed? How should NATO interact with the European Union? And what role should the United States play in European security?

These questions will be discussed at an upcoming Cato policy forum, “The Future of NATO and the Transatlantic Security Framework.” The event features James Goldgeier, Dean of American University’s School of International Service, and author of the 2010 Council on Foreign Relations report The Future of NATO; Cato’s Doug Bandow, a noted critic of NATO, whose recent writings on NATO can be found here and here; and François Rivasseau, Deputy Head of Delegation for the European Union, who has spent his diplomatic career working on European security issues.

The event begins at noon on March 4, 2015. You can learn more, and register for the event here

David Boaz

I’ve been busy talking up the libertarian moment, libertarian ideas, and The Libertarian Mind (buy it now, available everywhere) in person and in print lately. Here are a few recent examples.

My article on America’s libertarian roots in Sunday’s Philadelphia Inquirer:

Indeed, the principles of the Declaration are so closely associated with libertarianism that the Chinese edition of my previous book, Libertarianism: A Primer, features a cover photograph of the famous room in Independence Hall, complete with Windsor chairs and green tablecloths.

Libertarianism is the philosophy of freedom. It has, in different form throughout history, inspired people who fought for freedom, dignity, and individual rights - the early advocates of religious tolerance, the opponents of absolute monarchy, the American revolutionaries, the abolitionists, antiwar advocates and anti-imperialists, opponents of National Socialism and communism.

The next day, Nick Gillespie interviewed me at the National Constitution Center in Philadelphia. Video here.

My article “Black History Is American History” at HuffingtonPost:

Black history is American history, a story of oppression and liberation rooted in the libertarian idea of individual rights. Much of the progress we have made in the United States has involved extending the promises of the Declaration of Independence – life, liberty and the pursuit of happiness – to more and more people. The emphasis on the individual mind in the Enlightenment, the individualist nature of market capitalism and the demand for individual rights that inspired the American Revolution naturally led people to think more carefully about the nature of the individual and gradually to recognize that the dignity of individual rights should be extended to all.

And my interview with African American Conservatives.

My print interview yesterday with Salon:

Where am I the most optimistic? I am optimistic that around the world more and more people are moving into a world of property rights, markets, globalization, human rights, women’s rights, access to information and opportunity. Now that’s obviously not true everywhere; there are, at any given moment, unfortunate setbacks in Venezuela and Russia and some of Eastern Europe. But I do think the largest historical trend of our time is the move in a broadly libertarian direction, and therefore toward a higher standard of living for billions of people around the world.

Are you thinking of the growing middle class in China and India when you say this?

Absolutely. The change in economic conditions in China and India — right there you got one-third of the world. But also there have been some advances in the direction of human rights in Africa as well. So in a great deal of the world, you’ve seen a huge reduction in poverty and absolute poverty, and a rising middle class in many of these countries.

Interviews with Jim Bohannon, Garland Robinette, Bill Frezza, and others can be found here.

Buy the book!

 

George Selgin

Yesterday morning I had a query from someone asking me to share my thoughts about the Federal Reserve Transparency Act, better known as the bill to “Audit the Fed.” Having given him a brief answer, I thought I might say a little more here.

Although Rand Paul promises that his measure will shed much-needed light on the Fed’s undertakings (the Senate version of his measure was even called “The Federal Reserve Sunshine Act”), the truth is that it’s unlikely to reveal anything of importance beyond what existing Fed audits–including those provided by Title XI of the Dodd-Frank Act (which provides for a GAO audit of the Fed’s crisis-related emergency lending)–can themselves reveal.

True, unlike existing measures Paul’s bill would also let the GAO “audit” the Fed’s conduct of monetary policy, including its open-market operations and financial dealings with other central banks. But if “sunshine” is the first word that pops into your head when contemplating this possibility, you probably have had a little too much of it already. Certainly you have not read many GAO reports.

Don’t get me wrong: the GAO does its job’s well, and a report by it on the Fed’s conduct of monetary policy would probably be a much better read than most academic papers on the same topic. But if you’re looking forward to seeing the GAO give the FOMC a good thrashing, or to any other sort of scintillating reading, you’re barking up the wrong tree, because what you’re likely to be in for instead is a bunch of charts and tables, accompanied by a competent but very measured and detached review of the Fed’s activities, of the sort that might prove very handy, but that is hardly likely to be the least-bit earth-shattering.

But if some dry-as-dust report is all we’re talking about, why are Fed officials so up in arms about the proposal? That’s a good question. Fed officials themselves claim that Paul’s measure would give Congress the power to “harass” the Fed, thereby allowing it (in Dallas Fed President Richard Fisher’s words) “to bend monetary policy to the will of politicians.” But as my colleague Mark Calabria explains, the measure wouldn’t allow anything of the sort. Evidently these Fed officials were too busy arranging the Fed’s wagons in a big circle to take time to actually read the measure they were so anxious to defend their institution against. Had they bothered they might have noticed that it calls for the GAO, and not “Congress” (or any body of “politicians”) to report on the Fed’s policies. They might even have taken a moment to recall that the GAO is an independent agency–just like the Fed’s own Board of Governors–whose head, the Comptroller General of the U.S., is a non-partisan professional appointed by the President with a 15-year term–rather like their own Chairman. Finally, they might have chewed a little on the GAO’s own description of its mission, which is “to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people.”

In short, what we have here is one independent agency of the U.S. government insisting on its right to be uniquely exempt from review by another independent agency charged with making sure that Congress and its departments and agencies perform their Constitutional duties successfully and efficiently. That’s not fighting to preserve independence. It’s fighting to avoid accountability.

Come to think of it, perhaps Paul’s measure will reveal some deep, dark Fed secret after all. Perhaps it already has.

Alan Reynolds

When Thomas Piketty and Emmanuel Saez release their annual estimates of top 1 percent incomes, you can count on The New York Times to put it in a front page headline with additional hype on the editorial page.  This time, however, the news was that the top 1 percent had suffered a 14.9 percent decline in real income in 2013 if capital gains are included, as they always had been until now.  

The New York Times heroic spin was “The Gains From the Economic Recovery Are Still Limited to the Top One Percent.”  The author, Justin Wolfers of the Peterson Institute wrote, “Emmanuel Saez … has just released preliminary estimates for 2013. The share of total income (excluding capital gains) going to the top 1 percent remains above one ­sixth, at 17.5 percent. By this measure, the concentration of income among the richest Americans remains at levels last seen nearly a century ago.”

I will have more to say about this in another blog post.  For now, I just want to call attention to the artistic way in which the subject was changed.  Since 2008, Saez has been comparing changes in top incomes (for which he has preliminary IRS data) to incomes of the bottom 90 percent (for which IRS data are singularly inappropriate).   He always included realized capital gains because that makes the top 1 percent share both larger and more cyclical.

Those share-of-gains calculations were the source of the politically popular canard that the top 1 percent had “captured” 91 percent of the gains in total income since 2009 which, as Scott Winship noted, drops to 30 percent if we include 2013.  Saez now prefers to say the top 1 percent captured 106 percent of the 2013 decline, leaving the previous 91 percent absurdity intact.

President Obama raised tax rates on top income and capital gains in 2013, and the immediate result was big drop in the amount of such income reported by the top 1 percent – just as I and others had predicted.  Saez asks us to take mercy by averaging 2012 and 2013, which comes out to $1,217,002.  That is down quite a lot from $1,533,064 in 2007, but we aren’t supposed to mention cyclical downturns, only the upturns.

Wolfers asks us to be even more merciful and leave out capital gains this time.  That doesn’t help much, but it allows him to fog recent events by talking about “nearly a century ago.”  This echoes the familiar comparison that Senator Ted Cruz and Pew Research made between 1928-29 the now disavowed top 1 percent share in 2012.

But the Piketty and Saez estimates for 1928 or 1929, and all other years up to 1944, calculate shares by comparing top incomes with personal income from the GDP data.  They define total income as personal income less 20 percent until 1944, and then switch to a modified version of Adjusted Gross Income after that (missing 40 percent of personal income in the process).  They also subtract Social Security and unemployment benefits from the denominator of the top 1 percent ratio, which has zero effect in 1929 but greatly exaggerated top income shares in recent years.

The blue line in the graph shows the same data in Wolfers’ graph.  The red line shows what the data would look like if top income shares today were defined the same way they were in 1929. Note the huge increase at the time of the 1986 Tax Reform, when the top 1 percent share of income reported on individual tax returns (rather than being unreported or reported on corporate tax returns) shot up from 7.6 percent to 11.4 percent.  These pre-tax pre-transfer data tell us much more about changing tax rates, than they do about income distribution. 

When measured a comparable basis, the top 1 percent earned 18.4 percent of income in 1929 and 13.3 percent in 2013. Using the same measure of total income shows the comparison between top income shares in 2013 and 1929 is false. 

 

Doug Bandow

The Islamic State is evil. But that’s no reason for America to go to war again in the Middle East or for Congress to approve more years of conflict.

The president requested formal legal authority to war against ISIL—more than six months after dropping the first bomb on the self-proclaimed caliphate. The United States is defending a gaggle of frenemies from a far weaker foe unable to seriously threaten America.

The Obama administration long ignored the group’s gains, recognizing that ISIL was more about insurgency than terrorism, and was targeting Middle Eastern countries, not the United States.

The administration reversed course when the group’s advances threatened Kurdistan’s capital of Erbil and Iraq’s Yazidi community. Then the beheading of two American hostages transformed administration policy.

Now President Obama claims the Islamic State threatens “U.S. national security.” But how? How can a few thousand insurgents, locked in bitter combat with several Middle Eastern nations endanger the globe’s superpower?

The administration created yet another pseudo-coalition, with U.S. forces responsible for over 90 percent of the airstrikes, as of last week. “ISIL is going to lose,” declared the president. But Washington gave the group a recruiting bonanza. The Associated Press reported that foreign fighters continue to join “in unprecedented numbers.”

In seeking congressional authority, the administration is playing on emotions. Hostage Kayla Mueller’s killing “fueled congressional outrage and renewed calls to defeat” the organization, reported USA Today.

Yet her tragic fate demonstrates ISIL’s limited reach. The only U.S. citizens harmed by the Islamic State are those who voluntarily traveled to a war zone.

Of course, the president paints ISIL’s threats much more broadly. However, the longer the “caliphate” has existed in cities like Mosul, Iraq, and Raqqa, Syria, the less popular ISIL has become.

The group has succeeded so far only because of others’ failings. In Syria, a civil war destroyed the political order. In Iraq, the sectarian Shia central government spawned a Sunni counter-reaction.

The Islamic State found the going much tougher once it expanded. Indeed, the movement has targeted nations with a million or more men under arms. Paradoxically, Washington is protecting ISIL from this formidable collection of enemies by taking over other nations’ defense duties.

Unfortunately, the proposed Authorization for the Use of Military Force would further entangle America in sectarian war without addressing the reasons for ISIL’s success. The measure would leave in place the 2001 AUMF, directed against al-Qaeda, under which the administration improbably claimed authority to attack the Islamic State.

Moreover, the new measure would be a dangerous expansion of executive power. First, the administration requested authority to wage at least three more years of war. Secretary of State John Kerry also urged “provisions for extension” of such a limit.

Second, there is no geographic limit. Today the United States is operating in Iraq and Syria. The new AUMF would authorize combat anywhere.

Third, the measure does not limit war to the Islamic State. Also included are “any closely related successor entity” and “associated persons or forces,” meaning ISIL’s allies, defined as “fighting for, on behalf of, or alongside ISIL or any closely-related successor entity in hostilities against the United States or its coalition partners.” That would cover almost any Iraqi or Syrian opposition group.

Fourth, the resolution bars only “enduring offensive ground operations.” However, the current operation is described as a matter of America’s “inherent right of individual and collective self-defense” even though ISIL did not attack America. Moreover, the president’s transmittal letter exempted a variety of military actions from any limit, including “missions to enable kinetic strikes.”

Fifth, as I point out on Forbes online, “instead of turning the war over to threatened Arab states, the new AUMF would assure Washington’s “allies” that they need not worry about their own defense. The administration plans to create a herd of long-term military dependents.”

If Congress truly is concerned about legality, it should enforce the 2001 AUMF. Any new measure should sharply limit military operations. Legislators should end old wars rather than rationalize new ones.

Nicole Kaeding

The Department of Veterans Affairs (VA) has a long history of mismanagement. Last year, the public became aware of a wait-time scandal at the VA hospital in Phoenix. Veterans were forced to wait months for appointments, even as the hospital was reporting no delays in service and allowing its management to receive performance bonuses. Over 1,700 veterans were not placed on the official wait lists to hide the length of actual waits. The VA Inspector General suggested that the Phoenix VA was not the only center to modify its wait lists in this fashion.

In response to the crisis, Congress passed a  law that allowed veterans who were waiting for treatment to access non-VA providers. At the time, I cautioned about the risk of a possible large, unfunded entitlement program being created. Now it seems that there are other issues with the way that the VA is implementing the expanded program. Veterans continue to be shut out of service and providers are uncertain how to utilize the benefits.

The Washington Post reports:

The card gives veterans who have been waiting more than 30 days for appointments or who live more than 40 miles from a VA facility the chance to see a private doctor.

But instead, some veterans say that when they attempted to use their card, the VA told them they had to live more than 40 “miles in a straight line, or as the crow flies,” from their VA rather than Google maps miles, which makes the card harder to use. Several VA doctors e-mailed The Washington Post saying they themselves don’t understand how to use the program

Another reader wrote in saying that her stepfather, Charles Schuster, who died in 2009, recently received a card in the mail, a symbol of an agency still seemingly in disarray. “Gave me a good laugh,” she wrote.

So far, 27,000 veterans have made appointments for private care with their cards, the VA said last week. It’s a fraction of the 9 million veterans who depend on the delay-plagued VA health-care system, the largest network of health centers and hospitals in the country.

“As far as I can tell, the choice card has created more confusion and aggravation than improving access to clinical care, though it did gain political points,” said one VA primary care doctor, who says he’s on the front lines of doing intakes. He spoke on the condition of anonymity because VA employees are not allowed to speak to the media without permission. But he said he and other doctors “are confused by the choice card system and don’t understand how to implement it.”

The article  documents other instances of veterans being unable to utilize their choice cards.

The VA hospital system is a mess, showing the downsides of socialized health care. During last year’s scandal, Congress simply put a bandage on the problem by allowing some veterans to use outside providers. Congress should revisit the issue and institute more fundamental reforms to the Veterans Health Administration.

Jim Harper

Luke Rosiak at the Washington Examiner filed a report late last week on a little recognized, but important congressional practice: proposing open-ended spending. In the last Congress, fully 700 bills proposed spending without limits. That’s a lot.

A quick primer: congressional spending is a two-step process. First, there must be an authorization of appropriations. Then Congress appropriates funds, providing actual authority for executive branch agencies to spend.

The committees in Congress are divided by type between authorizing committees and appropriations committees. Authorizers are supposed to do the bulk of the oversight and authorize spending at amounts they determine. Appropriators would then dole out funds specifically. But over the years, the division of labor has shifted and power has collected in the appropriations committees, whose members are often referred to as “cardinals” … like “College of Cardinals.”

Backward incentives explain this. Members of Congress who authorize spending naturally appear to be pro-spending, which has political costs. The costs are at their worst when a specific amount is involved. “Senator So-and-So wants to spend $50 million on what?!” So many authorizing committees shirk their duties by eschewing reauthorization of the agencies in their jurisdiction. And sometimes the trick is authorizing spending of “such sums as may be necessary,” which doesn’t provide as good an angle for political attack.

That would make appropriators the only drag on spending, but it doesn’t because of a second perversion in politics. Appropriators get good enough at gathering the political emoluments of spending that they overcome the negatives and become an institutional pro-spending bloc. As Mike Franc of the Heritage Foundation put it in 2011, “appropriators, their professional staff, and legions of lobbyists serve as a mutually reinforcing triad bent on increasing spending today, tomorrow, and forevermore.”

Rosiak notes that the House Republican leadership cautioned against open-ended spending proposals at the beginning of the 113th Congress. Consequently, Republican blank-check bills are more rare. The top open-ended spenders are all Democrats, and they’re all on the party’s left wing.

So what’s to be done?

In 2010, the Senate joined the House in banning earmarks. This came after a few short years of applied transparency in the earmark area, including a contest to gather earmark data conducted by yours truly on WashingtonWatch.com. A group called Taxpayers Against Earmarks (now Ending Spending) applied some direct pressure. And a host of other groups were involved, of course.

The practice of proposing open-ended spending could similarly be curtailed with public oversight and pressure.

So who should do that work?

We’ve already started. Rosiak’s story was produced using the Cato Institute’s Deepbills data.

Mark A. Calabria

I’ve repeatedly said since 2009 that the further in time we get from the crisis, the greater the probability that Fannie Mae and Freddie Mac would survive in some form.  Such looks like an ever-increasing likelihood.  I’m occasionally asked if there are any reforms that would make Fannie & Freddie acceptable.  I’m tempted to say “no.” 

In the spirit of lively debate, I submit the following changes to address most of the flaws in the government sponsored enterprise (GSE) model that would also allow the companies to survive in some form.  I do emphasize that this is not an argument for keeping the GSEs.  That’s a different question altogether.

1)   Open up the charters to competition.  If we learned anything from the rampant corruption that characterized early 1800s U.S. state banking, it is that legislators shouldn’t give out exclusive charters.  Accordingly, the government should delegate chartering authority to the regulator and allow anyone who can meet the requirements to get a charter.

2)   Increase Capital.  Fannie and Freddie were (and still are) massively leveraged.  Laurie Goodman suggests 4 to 5 percent would be a reasonable minimum capital.  I believe something closer to what insurance companies have–around 8 percent (real, not risk-weighted) would be appropriate.  While I’m not completely in the Admati camp on capital, I do agree with her general point that capital isn’t “dead” –it would be used for lending.  And since GSEs aren’t providing some form of payment medium like banks, I see little cost to requiring higher capital levels. So I’d say 8 percent, if not more.

3)   Ditch loan limits, go with income.  In order to make sure these entities actually serve middle-class America, rather than be a subsidy to the well-off, we should eliminate the loan limits and make mortgage eligibility based on income.  This is similar to the USDA’s Rural Housing Service loans.

4)   Break ‘em up.  This might be the most controversial, but simply allowing other institutions to enter the market is unlikely to guarantee sufficient competition.  We broke up Ma Bell.  Under any antitrust standard, Fannie and Freddie are a duopoly.  Unless we are repealing the Sherman Act, the two companies should be broken into at least 6 pieces each and barred from merging.  Existing shareholders would get shares in the off-spring companies.

5)   Require More Mortgage Insurance.  In order to protect the taxpayer, mortgage insurance companies should take the first 35 percent of loss, instead of the customary 20 percent.

6)   Improve Underwriting Standards.  End the housing goals and require minimum down payments of 5 percent and minimum FICO scores of 700.

7)   End all securities law exemptions.  Subject companies to 1933 & 1934 Act requirements. 

8)   End banking law preferences.  Banks aren’t allowed to hold corporate equity, except for that of GSEs.  We know how that turned out.  For the purposes of all banking regulation, especially capital and asset concentration limits, treat GSE securities as you would any other corporate security.

9)   Limit portfolios.  Allow portfolios to be used for an inventory function only. A minimum of 90 percent of debt issued should be required to be mortgage-backed securities (MBS).

These are just some initial thoughts.  Implementing all of these would go a long way towards bringing competition to our mortgage markets and protecting the taxpayer.  If some remain concerned that this lacks a “catastrophic” backstop, then we can allow the Federal Home Loan Banks to discount advances on the MBS issued by these new and improved GSEs.

Ilya Shapiro

Between 1861 and 1865, Texas was in a state of rebellion, waging war against the United States under the flag of the Confederacy. Texas has never offered any indication that it’s ashamed of this history. Indeed, the state recognizes April as Confederate History Month and spends January 19 celebrating Confederate Heroes Day. Yet now Texas is before the Supreme Court, arguing that its citizens’ sensibilities must be spared the sight of the Stars and Bars in one particular context.

The case involves a state agency that knows well what it is to cause universal offense: the Department of Motor Vehicles. Texas’s DMV, like that of many states, runs a program that allows private organizations such as charities, universities, and businesses to design their own “specialty” license plates—not to be confused with “vanity” plates, where the vehicle owner chooses the letters/numbers on her plate—which can then be purchased through the DMV. The current range of customized plates on offer in the Lone Star State include messages that are patriotic (“God Bless America”), fannish (“Dallas Cowboys”), socially conscious (“Be a Blood Donor”), commercial (“Dr. Pepper”), and completely immoral (“Young Lawyers”).

These custom plates include a near-limitless variety of slogans, symbols, logos, and color patterns—something for everyone’s taste. Except the Sons of Confederate Veterans. Their design, which included a miniature depiction of the Confederate battle flag, was rejected by the DMV on the grounds that some members of the public would find it offensive.

It’s certainly right about that—and the relevant statute authorizes the DMV to reject any design that “might be offensive to any member of the public”—but do we really want the government determining what’s “too offensive”?

Texas argues that it can be as censorial as it wishes because it can’t be forced to promote speech that it disagrees with or finds offensive. Regardless of whether that’s true—Cato takes no position on the question of whether a specialty plate is a “quasi-public forum” or any other legalistic concept—it represents a remarkable and disturbing willingness to ban expression that’s fully protected by the First Amendment merely because it may offend. (This is not a case about obscenity, incitement, “true threat,” or one of the few other categories of unprotected speech.) Texas’s stance is particularly worrying given that it comes at a time when free speech is being threatened to an extent not seen in some time.

Throughout Europe and the Anglosphere, liberal democracies are increasingly intolerant of offensive speech, enacting open-ended hate-speech laws, prohibitions on blasphemy, and “human rights” protections against insulting not just individuals but communities and abstract concepts. Domestically, Texas’s position mirrors that of many colleges and universities, whose coddling speech codes have rendered the idea of the campus as a place for vigorous and open academic discourse a laughable theory. So effective has this program of re-education been that. in a recent poll, nearly 40 percent of respondents believed that the First Amendment goes “too far” in protecting free speech—up from less than 20 percent just two years ago.

Cato disagrees. Together with a team of expert offenders of good taste who are equally expert defenders of free speech—P.J. O’Rourke, Nat Hentoff, Martin Garbus (Lenny Bruce’s lawyer), Nadine Strossen, and the Comic Book Legal Defense Fund—we have filed an amicus brief urging the Supreme Court to reaffirm that the First Amendment protects the speech of unpopular minorities, even when the proffered justification for censorship is its putative “offensiveness.”

We argue that offensiveness is intrinsically valuable in the marketplace of ideas because it enables self-actualization and the freedom of association, among other important interests. Not only does the right to be offensive secure the livelihood of our favorite comedians, it protects scientific and medical researchers in their quest to push the limits of human knowledge into fields once considered taboo and enables one religion’s heretic to become another’s prophet. And should a member of a third faith, or no faith at all, wish to define himself as an iconoclast by mocking, degrading, or insulting that heretic cum prophet—be it Muhammed, L. Ron Hubbard, or Mark Steyn—that too, is protected by the First Amendment.

There’s no “offensiveness” exception to the First Amendment and it would be insulting for the Supreme Court to allow Texas to tell us what’s offensive. Those who are offended shouldn’t have a veto over free expression and putative offenders should be judged in the court of public opinion.

The Supreme Court will hear argument in Walker v. Texas Division, Sons of Confederate Veterans on March 23.

Chris Edwards

In “The Use of Knowledge in Society,” economist F.A. Hayek described how markets take into account an array of local knowledge that governments do not possess. It is “knowledge of the particular circumstances of time and place,” which enters into everyday exchanges, but central authorities cannot access it. That’s because it “never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.” This sort of knowledge is tacit and subjective, so “by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form.”

Cato adjunct scholar Jeff Singer is a surgeon practicing in Phoenix, and his op-ed today in the Wall Street Journal illustrates Hayek’s point. The federal government has mandated that health providers adopt electronic records to the specifications of the central planners in Washington. A theme in Jeff’s piece is that there is tacit and localized aspects of his practice that the government did not know about, and did not bother to find out about, before it imposed its top-down rules.

The debate over ObamaCare has obscured another important example of government meddling in medicine. Starting this year, physicians like myself who treat Medicare patients must adopt electronic health records, known as EHRs, which are digital versions of a patient’s paper charts … I am an unwilling participant in this program. In my experience, EHRs harm patients more than they help.

… for all the talk of “evidence-based medicine,” the federal government barely bothered to study electronic health records before nationalizing the program.

Electronic health records are contributing to two major problems: lower quality of care and higher costs. The former is evident in the attention-dividing nature of electronic health records. They force me to physically turn my attention away from patients and toward a computer screen—a shift from individual care to IT compliance. This is more than a mere nuisance; it is an impediment to providing personal medical attention.

A 2014 survey by the industry group Medical Economics discovered that 67% of doctors are “dissatisfied with [EHR] functionality.” Three of four physicians said electronic health records “do not save them time,” according to Deloitte. Doctors reported spending—or more accurately, wasting—an average of 48 minutes each day dealing with this system.

Proponents of electronic health records nonetheless claim that EHRs decrease record-keeping errors and increase efficiency. My own experience again indicates otherwise and is corroborated by research.

The EHR system assumes that the patient in front of me is the “average patient.” When I’m in the treatment room, I must fill out a template to demonstrate to the federal government that I made “meaningful use” of the system. This rigidity inhibits my ability to tailor my questions and treatment to my patient’s actual medical needs. It promotes tunnel vision in which physicians become so focused on complying with the EHR work sheet that they surrender a degree of critical thinking and medical investigation.

Not surprisingly, a recent study in Perspectives in Health Information Management found that electronic health records encourage errors that can “endanger patient safety or decrease the quality of care.” America saw a real-life example during the recent Ebola crisis, when “patient zero” in Dallas, Thomas Eric Duncan, received a delayed diagnosis due in part to problems with EHRs.

Mark A. Calabria

With the introduction of bills in both the House (H.R. 24) and Senate (S.264) allowing for a GAO audit of the Federal Reserve’s monetary policy, officials at both the Board and regional Fed banks have launched an attack on these efforts.  While we should all welcome this debate, it should be one based on facts.  Unfortunately some Fed officials have made a number of statements that could at best be called misleading. 

For instance Fed Governor Jerome Powell recently claimed “Audit the Fed also risks inserting the Congress directly into monetary policy decisionmaking”.  I’ve read and re-read every word of these bills and have yet to find such.  H.R. 24/S.264 provide for no role at all for Congress to insert itself into monetary policy, other than Congress’ existing powers.  I would urge Governor Powell to point us to which particular part of the bill he is referring to, as I cannot find it.

Perhaps Governor Powell is worried that an audit would allow Congress to regularly “harass” the Fed.  David Wessel states this fear as “Fed officials worry…that aggressive members of Congress unhappy with a Fed interest-rate decision could dispatch the GAO repeatedly to investigate, essentially using the GAO as a way to pressure the Fed to change its policies.”  Richmond Fed President Jeff Lacker has described this as “high frequency harassment”.  Such comments, however, display a fair amount of ignorance as to how GAO operates.  As someone who has handled GAO requests for the Senate Banking Committee, I can say there’s nothing “high frequency” about it.  Even H.R. 24/S.264 contemplates a 90 day turnaround after an audit is completed.  Neither Congress nor GAO is currently constituted in such a manner for any of this to happen at “high frequency”.

Several Fed policy-makers point out that the Fed is already “audited”.  Of course that’s besides the point since the bills are not about financial audits, but rather policy audits. 

Perhaps most bizarre is that Powell and Dallas Fed President Richard Fisher have ventured into the world of second-guessing the motives of the authors’ of H.R.24 and S.264.  Generally I believe it bad form to attribute motives to people who haven’t actually expressed those motives.  And of course public policy should be judged on its impact, not speculative motives.  For instance I’m not sure what to say to Fisher’s implication that Audit the Fed is being driven by antisemitism.  Or his implication that its authors want to distract from Congress’ failings on the budgetary front, especially since those behind H.R.24/S.264 have generally been at the forefront of trying to address our budgetary imbalances.  It isn’t an “either or”.  In fact given the Fed’s dominance of the treasury market, the Fed has been an enabler of the reckless fiscal policy which Fisher laments. 

Of course there are other more subjective claims presented as facts.  Powell first presents the Fed’s crisis actions as “very much in keeping with the traditional role of the Fed” but then later admits “the Fed’s actions after the onset of the financial crisis were unprecedented in scale and scope”.  So which is it? Keeping within tradition or unprecedented in scale and scope?  Unsurprisingly the Fed presents all its actions as correct and beyond question.  The fact that these actions are far from obvious “successes” further illustrates the need for an audit.

I welcome officials from the Fed to a broader discussion on the potential merits and costs of Audit the Fed.  That said, try first reading the bills in question and keeping to the facts.

Steve H. Hanke

Dr. Paul Krugman, the hyper-productive New York Times columnist and Nobel laureate, has produced a flood of fiscal factoids. He argues that the only way to put the major economies around the world back on track is to “stimulate” them via deficit-financed government spending.

Most recently, Dr. Krugman has weighed in repeatedly on Greece’s travails with his fiscalist snake oil. His column of January 26th, “Ending Greece’s Nightmare,” makes it clear that he thinks he can deliver an elixir.

Not so fast Doctor, a mountain of evidence shows that the elixir is a fiscal factoid. Never mind.

Statements made by the likes of Nobel laureates carry weight — even if those statements amount to nothing more than factoids. Recall that, according to the Oxford English Dictionary, a factoid is “an item of unreliable information that is reported and repeated so often that it becomes accepted as fact.” The famous “Dr. Fox Lecture,” which was presented at the University of Southern California’s Medical School, illustrates just how so-called “experts” can effectively work and influence a crowd. The lecture was presented by Dr. Myron Fox —an advertised heavyweight — to an academic audience in 1970. The response to Dr. Fox’s lecture was unanimously favorable.

Little did the audience know that “Dr. Fox” was an actor who had been cloaked with an impressive fake curriculum vitae and trained to deliver a nonsensical lecture filled with contradictory statements, double-talk and non-sequiturs. Like it or not, when the big guns sound off, they are heard. Beware.

Alex Nowrasteh

U.S. District Court Judge Andrew Hanen granted a preliminary injunction to block the implementation of President Obama’s executive actions on immigration – specifically the DAPA program and his expansion of DACA - until he decides on their legality.  Constitutional scholars are going to be writing about this for the near future (I recommend reading Josh Blackman’s comments here and our Cato brief here) and the appeals will come quickly.  In the midst of this lively debate, the political and policy consequences of Judge Hanen’s ruling should not be ignored. 

The political consequences could be immediate.  Speaker Boehner could use this moment of GOP “victory” to pass a clean DHS funding bill as he hides behind the preliminary injunction.  It could tone down the intensity of the political debate on Capitol Hill now that the courts will decide DACA/DAPA’s future.  The GOP does not have the votes to force the Democrats to accept defunding either of those programs.  This preliminary injunction allows Speaker Boehner to stop the DACA/DAPA defund fight while claiming some victory and avoiding the defeat he seems to be preparing for.  Now he can leave it to the courts with some confidence, more than he is likely to be feeling right in the DHS defunding fight, that they will rule in the GOP’s favor in a few weeks.  Regardless, this provides an opportunity for Boehner to skip the bruising DHS funding fight without suffering a political rout.

The policy consequences are more uncertain.  Obviously the future of DACA/DAPA depend on how the courts will rule on appeals.  If the courts side with the administration in the future, then we’ll be right back where we are now – except maybe without a fight over DHS funding. However, the defunding cheerleaders know that this would happen so they might not be eager to give up the fight so easily (see previous paragraph). 

The best possible scenario would be if the GOP leadership on Capitol Hill use this opportunity to pass a clean DHS funding bill, leave the fate of the President’s actions up to the courts, and begin to seriously debate and introduce the liberalizing portions of immigration reform.  Senators Hatch, Flake, and others already gave them a head start with the I-Squared bill that would liberalize the immigration of highly skilled workers.  Combined with a lower-skilled guest worker visa program, the DREAM Act, and a repeal of the 3/10 year bars, immigration reform’s most important pieces would become law. 

Vitally, many conservatives on the Hill have endorsed all of these portions of reform.  More importantly, these reforms would improve the immigration system, shrink illegal immigration currently and in the future, and provide human capital that will help grow the economy.  It’s a long shot, but a continuing court-dominated procedural and constitutional debate over DACA/DAPA could result in the passage of some of these portions of immigration reform.

Ilya Shapiro

Late last night, as the DC area braced for a snowstorm, a federal judge in Brownsville, Texas granted a temporary injunction to the executive action that President Obama announced in November. The Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA) was set to go into effect this week, so a quick ruling was expected after Judge Andrew Hanen held a hearing a month ago. And based on how that hearing went, it’s no surprise that Texas and the 25 other states suing the federal government succeeded in stopping DAPA at least temporarily.

Now, a few things to note about the ruling:

  1. It was exceedingly thorough, with a 123-page memorandum opinion that makes clear that, even though this is the very earliest stage of the case, the judge recognizes that his words will quickly be scrutinized by national decison-makers and legal analysts.
  2. The opinion spends about 60 pages on standing, concluding that the issuance of drivers licenses to DAPA beneficiaries imposes a real cost on the states. The court rejected the claim that the states also have standing because DAPA will cause an influx of illegal immigrants that will cause economic harm. My colleague Alex Nowrasteh last summer described how DACA (the “executive DREAM Act” that was the precrusor to DAPA) didn’t cause the surge in unaccompanied minors. The purported injury is similarly speculative here. (I’ll also note that Cato’s opposition to REAL ID is mentioned in this discussion because the federal REAL ID requirements put an even greater burden on states with respect to issuing drivers licenses.)
  3. The rest of the opinion focuses on the Administrative Procedure Act, ultimately ruling that the Department of Homeland Security didn’t go through the proper notice-and-comment rule-making procedures before it promulgated what are in effect new immigration regulations.
  4. To reach that conclusion, the court found that Congress did not delegate sufficient discretionary authority to DHS to implement such broad-based deferred action (which even in individual cases isn’t explictly authorized by statute, just implicitly allowed with Congress’s presumptive acquiescence). It also rejected the “presumption of unreviewability” of non-rule-making agency actions because DAPA represents a “complete abdication” of the government’s duty to enforce the laws as written. “DAPA does not simply constitute inadequate enforcement; it is an unannounced program of non-enforcement of the law that contradicts Congress’s goals.”
  5. Judge Hanen stresses how important it is to preserve the status quo because, once granted, the DAPA program will be very hard to reverse and its benefits exceedingly difficult to clawback. It would be a public-policy nightmare.
  6. There is no constitutional discussion at all. Because the court enjoined DAPA based on statutory/administrative grounds, it did not need to reach the question of whether the president had failed to “take care that the laws be faithfully executed.”

For whatever it’s worth, I agree with each of these points.

This decision can be expected to force the government into a very quick appeal to the U.S. Court of Appeals for the Fifth Circuit. Most likely, the government will call for an immediate en banc hearing of all 15 active judges. Indeed, it’s quite possible that the government will simultaneously seek Supreme Court review – though the Court has been unwilling to jump in and preempt lower-court consideration despite such pleas in other high-profile litigation such as the various Obamacare and same-sex marriage cases. If the Fifth Circuit acts quickly, we could still see the case reach the Supreme Court before it takes its annual summer recess, although that would mean an extremely demanding briefing, argument, and opinion-writing schedule.

Given that there’s no real urgency here – DAPA doesn’t respond to any particular emergency and the case doesn’t involve the striking down of a piece of legislation or other government action on which other federal programs depend – the more realistic scenario would be to expect a Fifth Circuit ruling before the summer, then briefing over the summer, and argument the first week of the new term in October (or perhaps a special session in September). Of course, the Fifth Circuit could reverse the district court and allow DAPA to proceed, in which case Supreme Court review isn’t guaranteed. But this is less likely than the scenario I previously described because the Fifth Circuit has the highest ratio of Republican-to-Democrat nominees of any federal appellate court, 10:5, so chances are that, whether as a panel or en banc, the court will affirm the injunction.

What will be the ultimate result here? It’s anybody’s guess, but given that Cato filed a brief – on behalf of supporters of comprehensive immigration reform – supporting the lawsuit, I certainly hope that the final ruling, at whichever level it comes, mirrors Judge Hanen’s. Our immigration system is broken, but it’s up to Congress to fix it. The president simply doesn’t get more power when Congress is gridlocked. 

For more, see Josh Blackman’s “instant analysis” – and read the scholarly opinion!

Jeffrey Miron

NPR has an interesting story about the interaction between Colorado’s tax revenue from legalized marijuana and its Taxpayer Bill of Rights (TABOR):

Colorado voters overwhelmingly supported state taxes on marijuana, and the state collected tens of millions of dollars in the first year of legalization. But in a strange twist, all those taxes raised from pot may have to be refunded because of a quirk in the state’s constitution. That means money earmarked for schools and drug prevention programs could be lost unless lawmakers agree on a solution.

Liberal supporters of legalization will worry that this conflict threatens to invalidate a key argument for legalization; conservative opponents will use the conflict to claim legalization was oversold.

But libertarian legalizers should not care much either way.  The crucial arguments for legalization are increased freedom for marijuana users and decreased prohibition costs for everyone, not increased tax revenue.

So if Coloradans end up with legal marijuana and an income tax refund, that’s just fine.

Steve H. Hanke

People keep asking me what I think about Europe’s most recent crisis (read: Greece). Well, my sentiments are exactly the same as they were in April 2012, when my Globe Asia column was titled: “China and Greece – Here We Go Again.”

Here’s what I wrote on Greece: “And if you think the political chattering classes in the U.S. are dangerous, take a look at Europe, where the elites are fighting economic reality with all their might — a fight they will lose. Indeed, they have built an economic doomsday machine. And when it comes to Greece, don’t fool yourselves into believing that the recent huge debt restructuring exercise will allow Europe’s politicos to pull their chestnuts out of the fire. Greece’s annual broad money (M3) growth rate has been in negative territory for every month since February 2010, and it is currently contracting at a fantastic 17.5%. In the words of former President George W. Bush (not Yogi Berra): ‘This sucker is going down.’ You can forget all the calculations and soothing noises coming from Europe.”

Yes. Plus ça change, plus c’est la même chose.

Walter Olson

What does federal labor law have in common with civil forfeiture law? As I write at Reason:

Under a provision of the 1938 Fair Labor Standards Act, the U.S. Department of Labor can seek what is known as a “hot goods” order, freezing the physical output of an employer that it suspects of having violated wage and hour law, all without having to prove its case at a trial.

Until lately the procedure was little known to the general public, but the Obama administration, amid its general all-fronts offensive to expand wage and hour law and intensify its enforcement, has begun using it against farmers in a series of actions. Applied to agriculture, a “hot goods” order is even more than usually coercive, because both sides know the crop will rot if not brought to market soon. Moreover, as in many forfeiture cases, the freezing of a target’s most valuable asset may mean that it cannot afford legal help to appeal or otherwise challenge what has happened — all of which gives the federal government the leverage to get what it wants in resulting negotiations without having to test the strength of its case at trial.

Now, however, a federal judge has slapped down the administration hard in a Pacific Northwest case that farm groups had described as “extortion.” In a humiliating defeat, the Department of Labor has agreed to drop charges against two Oregon blueberry growers and refund the moneys extracted from them. It’s a case that should rally attention to the need to roll back the Department’s powers in this area.

My whole Reason piece is here.

Andrew J. Coulson

The Broad Foundation has decided to halt its 13-yr-old prize for academic improvement.The idea of the prize was that recognizing and celebrating top performance within our traditional district-based school system would lead to widespread emulation of the most successful practices. The proximate cause of the decision is reportedly the Foundation’s disappointment at the paucity of high performing districts. It may also have to do with the the fact that earlier prize-winners did not spark the mass replication of successful methods, as hoped.

While no doubt frustrating for the Foundation, it was neither unforeseeable nor unforseen. Two years before the Prize for Urban Districts was launched, I reviewed the Foundation’s programs and plans. Concerned, I addressed a letter to Mr. Broad, which I reproduce in its entirety below.

March 14, 2000

Dear Mr. Broad:

It was with great pleasure that I read your letter describing the creation of the Broad Foundation. Your organization’s dedication to encouraging exemplary educational leadership has the potential to do great things for our nation’s children.

Having also read the brief prospectus enclosed with your letter, I wonder if I might raise a question which I consider crucial to the Foundation’s success? It seems as though the Foundation will be promoting pockets of excellent leadership in urban districts around the country. My question is this: Does the Foundation have a plan for ensuring that these pockets of excellence will 1) consistently endure beyond the lifetime of the individuals involved, and 2) systematically expand to reach all students rather than remaining isolated?

Much of my research on educational governance has been historical, chronicling the relative merits of education systems from 500 BC to the present. One of my findings is that, while there have been few periods that lacked isolated pockets of excellence, these pockets very rarely lasted for more than a generation or two, and very rarely spread beyond a tiny fraction of the population.

There have been only a handful of exceptions to this sad historical record, such as classical Athens, the early medieval Islamic world, and early 19th century England and America. The difference between these remarkably successful periods and their less successful counterparts was that they enjoyed a mechanism that reliably perpetuated excellence over time, and relentlessly drove its spread to an ever wider group of children.

The specific nature of that mechanism is not the point of my letter. My point is to highlight the compelling need for some such mechanism given the patently transitory nature of nearly every education reform effort in the history of civilization. The goals of the Broad Foundation, which I share, are too important to be left to erode in the sands of time like the mighty works of Ozymandius, or to burn like a few solitary candles amidst a vast and lingering educational darkness.

There have been many foundations created for the improvement of education over the years. The ones that will be remembered will be those that understand excellence is not intrinsically self-perpetuating—that it only endures and thrives within systems whose incentive structures inexorably drive people to perpetuate it. I hope that your organization will be among this rare group of insightful foundations.

Please feel free to call or e-mail me if you would like to discuss this issue in detail.

Yours very truly,

Andrew J. Coulson

Patrick J. Michaels

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


On Page 3 of Friday’s Washington Post is (yet another) lurid climate story, this time about mega-droughts of several decades that are going to pop up in the Pacific Southwest around 35 years from now. The findings are based upon the UN’s climate model suite that, according to our presentation to the American Geophysical Union, is in the process of failing, because it just isn’t warming at the rate they project. Here, for example, is a graphic from John Christy and Dick McNider of the University of Alabama-Huntsville, showing the growing disparity.

The work cited in the Post ignores this teensy-weensy little problem and, instead drives the models with the UN’s biggest scenario for future carbon dioxide emissions, something that natural gas, which emits much less carbon dioxide than coal when used for electrical generation, is in the process of burying.

But it gets worse.

Droughts in the Pacific Southwest are usually broken by the big pacific climate oscillation known as  El Niño.  They occur every four to eight years or so. So, in order to have decades of drought, there has to be decades without El Niños.

The overdriven, overheated climate models used in this study cannot simulate them with any degree of realism.

That’s why, in the Post article, study co-author Toby Ault

had a word of caution.  Weather conditions can vary, climate impacts can be mitigated, and the warnings of the study might not come to pass. A single El Niño weather pattern in the West could interrupt periods of prolonged drought.

At least younger climate scientists like assistant professor Ault are getting wiser. The fates willing, he’s going to live another 35 years, and we hope much longer. And when those pesky El Niños (along with many other potential co-conspirators) destroy the forecast of gloom and doom, he’ll be able to say that he warned that could happen, because the models his team used didn’t have a good handle on them.

Kat Murti

Having trouble finding the perfect V-Day greeting for your freedom-fighting honey? Cato’s got you covered.

This collection of liberty-friendly valentines puts a fun twist on some recent Cato research. Perfect for your like-minded love … and all your friends. 

If your crush cares more about free markets than flowers, these valentines are sure to sweep them off their feet!

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