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Private Funding of Science?

Cato Op-Eds - Mon, 03/17/2014 - 09:38

Jeffrey Miron

According to textbook economics, government funding is crucial to scientific progress and technological innovation.  The reasoning is that pure science (e.g., the structure of DNA) underlies most applied science (e.g., genetic testing).  Pure science, however, is easily copied once discovered, so it cannot earn significant profits. Private actors therefore underinvest in pure science, and applied science suffers. In economics lingo, pure science is a public good because knowledge is non-excludable.

This perspective is reasonable but hardly decisive. Government funding suffers bureaucratic inefficiences and risks politicization of the nation’s research agenda (e.g., an excessive focus on defense research). And even if some role for government makes sense, the right amount is hard to gauge; no evidence shows that current amounts are insufficient.

In addition, the textbook argument assumes that private actors will not fund basic research. Yet as this New York Times piece documents, private actors contribute mightily to scientific research:

Paul G. Allen, a co-founder of Microsoft, .. set up a brain science institute in Seattle, to which he donated $500 million, and Fred Kavli, a technology and real estate billionaire, … then established brain institutes at Yale, Columbia and the University of California. …

The new philanthropists represent the breadth of American business, people like Michael R. Bloomberg, the former New York mayor (and founder of the media company that bears his name), James Simons (hedge funds) and David H. Koch (oil and chemicals), among hundreds of wealthy donors. Especially prominent, though, are some of the boldest-face names of the tech world, among them Bill Gates (Microsoft), Eric E. Schmidt (Google) and Lawrence J. Ellison (Oracle). …

So far, Mr. Ellison, listed by Forbes magazine as the world’s fifth-richest man, has donated about half a billion dollars to science. …

The philanthropists’ projects are as diverse as the careers that built their fortunes. George P. Mitchell, considered the father of the drilling process for oil and gas known as fracking, has given about $360 million to fields like particle physics, sustainable development and astronomy — including $35 million for the Giant Magellan Telescope, now being built by a private consortium for installation atop a mountain in Chile. …

Eli Broad, who earned his money in housing and insurance, donated $700 million for a venture between Harvard and the Massachusetts Institute of Technology to explore the genetic basis of disease. Gordon Moore of Intel has spent $850 million on research in physics, biology, the environment and astronomy. The investor Ronald O. Perelman, among other donations, gave more than $30 million to study women’s cancers — money that led to Herceptin, a breakthrough drug for certain kinds of breast cancer. Nathan P. Myhrvold, a former chief technology officer at Microsoft, has spent heavily on uncovering fossil remains of Tyrannosaurus rex, and Ray Dalio, founder of Bridgewater Associates, a hedge fund, has lent his mega-yacht to hunts for the elusive giant squid. 

Whether a role remains for government funding is not clear; perhaps the projects funded by private investors will not address the breadth of important questions in basic science.

And government funding has undoubtedly supported huge amounts of valuable research; that is not in dispute, only whether the research would have occurred even without government.

The wealth of private funding nevertheless suggests that outrage over cuts to science budgets is misguided. The private sector will fill much, perhaps all, of the gap.

Categories: Policy Institutes

Just Call Us the "Not Smart Enough" Bunch

Cato Op-Eds - Mon, 03/17/2014 - 09:35

Walter Olson

From a Baltimore Sun article on the regulatory fate of car-sharing services Uber and Lyft, bitterly attacked by their more highly regulated taxi competitors: 

At a recent work session on the issue, Kelley [Sen. Delores G. Kelley, D-Baltimore County] rejected the contention from Lyft and Uber that it’s a matter of consumer choice about whether to use the application to book a ride and they won’t do it if the price is too high. 

“We regulate all sorts of things because the general public is not smart enough to know when they’re about to be fleeced,” Kelley said.

But what about members of the general public who are smart enough to know they’re about to be fleeced, but are unable to do anything about it because it’s lawmakers and market incumbents combining to make that happen? 

Categories: Policy Institutes

Another Defective IMF study on Inequality and Redistribution

Cato Op-Eds - Sat, 03/15/2014 - 16:02

Alan Reynolds

IMF Warns on the Dangers of Inequality,” screams the headline of a story by Ian Talley in the Wall Street Journal. The IMF – which Talley dubs “the world’s top economic institution”– is said to be “warning that rising income inequality is weighing on global economic growth and fueling political instability.” 

This has been a familiar chorus from the White House/IMF songbook since late 2011, when President Obama’s Special Assistant David Lipton became Deputy Managing Director of the IMF.  It echoes a December 2012 New York Times piece, “Income Inequality May Take Toll on Growth,” and a January 14, Financial Times feature, “IMF warns on threat of income inequality.”  This isn’t news.

Talley writes, “The IMF … says advanced and developing economies need to raise more revenues through taxes, focusing on progressive taxation that moves more of the burden for social security, health care and other state benefits to the high-income earners.” That isn’t news either.  The IMF has an ugly history of advising countries to raise tax rates, with disastrous results.  The inequality crusade is just a new pretext for old mistakes.

The only news in the Journal article is “a 67-page paper detailing how the IMF’s 188 member countries can use tax policy and targeted public spending to stem a rising disparity between haves and have-nots.”  That paper is just one of many “staff discussion notes” which “should be attributed to the authors and not to the IMF.”  The main “warning” from those authors (Jonathan Ostry, Andrew Berg, and Charalambos Tsangarides) is that “the data are particularly scarce and unreliable for redistribution, even more so than for inequality.”  Despite unreliable data, the IMF economists nevertheless claim that” higher inequality seems to lower growth. Redistribution, in contrast, has a tiny and statistically insignificant (slightly negative) effect.”

This IMF discussion draft relies on “a recently-compiled cross-country dataset (Solt 2009) that carefully distinguishes net from market inequality and allows us to calculate redistributive transfers—defined as the difference between the Gini coefficient for market and for net inequality.” Frederick Solt of Southern Illinois University reconstructed the usual pretax, pre-transfer Gini indexes to estimate a “net” Gini – adjusted for direct taxes and cash transfers, but not sales taxes or in-kind transfers.

The Solt Gini index is scaled from zero to 100, where zero would be total equality (everyone has the same income) and 100 would be total inequality (one person has all the income).  The U.S., for example, had a pretax, pre-transfer Gini of 46.5 in 2011, but a much lower net Gini of 37.2 after adding cash transfers and subtracting taxes.  The net Gini would be much lower if the data accounted for America’s unique reliance on refundable tax credits and in-kind benefits (which makes U.S. inequality appear higher than in countries that pay transfers in cash).

According to The Wall Street Journal, “Inequality in several advanced economies, including the U.S., has returned to levels not seen since before the Great Depression, the fund said.”  Irrelevant nonsense.  The IMF study’s data only go back to 1960.  The authors once rehashed rhetorical comparisons to 1928 in a blog, but that is a stale fallacy repeated uncritically from Thomas Piketty and Emmanuel Saez.  It wrongly compares prewar data based shares of personal income with incompatible postwar data based on shares of a much narrower measure of income reported on individual tax returns after subtracting all transfer payments.    

Getting back to the Solt list of 153 countries, inequality is lowest in countries with a net Gini around 30 and highest with a Gini over 45.  Yet most countries The Wall Street Journal singles out as suffering from high inequality actually have low inequality.

“For the fund,” says the Journal, “protests in Athens, Lisbon, Caracas and Tripoli … are manifestations of the broader underlying reality of income inequality.”  That might work for Lebanon, but not the others.  The latest net Gini is a low 33.1 for Greece, 33.2 for Portugal, and 35.6 in Venezuela.  The Journal also claims income inequality “helped propel widespread unrest” in Egypt and Ukraine, but the latest Gini was a super-low 30.9 in Egypt and an amazing 25.6 in Ukraine (much lower than even the USSR in 1992).  Mr. Tally may mean these egalitarian governments went broke trying to redistribute too much, but that would contradict the IMF paper’s other claim – that redistribution is innocuous.

Contrast the very low inequality numbers from countries like Greece and Ukraine with the much higher Gini estimates for all the rapidly-expanding BRIC countries. The latest net Gini is 46.4 for Brazil, 49.9 for Russia, 49.7 for India and 47.4 for China.  Among these fastest-growing economies the Gini is virtually the same with or without taxes and transfers, suggesting no redistribution.  Minimal redistribution just lowers the Gini from 47.9 to 47.4 in China and from 50.6 to 49.7 in India.

Unfortunately, countries begging for IMF loans may have to swallow IMF advice to push their highest tax rates even higher, and redistribute the added revenue (if any) to appreciative political supporters.  Such loans may shore up unworthy governments, but the attached strings will surely strangle the nascent private economy.

Categories: Policy Institutes

SCOTUS Deferred to Executive Agencies. What Happened Next Will Infuriate You!

Cato Op-Eds - Fri, 03/14/2014 - 15:32

Ilya Shapiro

In the 1996 case Auer v. Robbins, the Supreme Court ruled that where there is any ambiguity or disagreement over what a federal regulation means, courts should defer to the interpretation favored by the agency that issued the regulation. The practical consequence of this decision has been that government agencies have had the power not just to create and enforce their own rules but also to definitively interpret them. Given the mind-boggling number of federal regulations that exist—and the exceptional breadth of behavior that they govern—the importance of this “Auer deference” can’t be overstated.

While handing the powers of all three branches of government to the bureaucracy is problematic in and of itself, a recent decision by the U.S. Court of Appeals for the Ninth Circuit further extended the deference courts show to agency rulemakers by declaring that an agency’s interpretation of its own rule is authoritative even if the agency has altered its interpretation dramatically since the regulation came into effect. Under that logic, an agency could spend decades saying that its regulation governing footwear only applied to shoes—and then, without warning or consultation, unilaterally decide to extend the rule to sandals and slippers (despite explicitly saying for years that they were not covered by the regulation).

Such a power to rewrite regulations through after-the-fact “reinterpretation” is incredibly tempting, freeing agencies to change the rules of the game without further legislation or congressional oversight, or even the formalized rulemaking process required by the Administrative Procedure Act.

Peri & Sons, a family-run farm in Nevada (one of America’s largest onion producers), is caught in just such an Kafkaesque morass. In its case, the Ninth Circuit ruled that even though the Department of Labor for over five years interpreted regulations issued under the Fair Labor Standards Act to mean that employers aren’t required to pay employees for the costs of moving for a job (including passport and visa applications), DOL is free to change its interpretation to now require employers to cover those costs.

Cato, along with the Center for Constitutional Jurisprudence and the National Federation of Independent Business, filed a brief urging the Supreme Court to hear this case. We argue not just against the Ninth Circuit’s extension of Auer to cases where the agency has reversed its position, but also that Auer itself was incorrectly decided. Granting agencies post-hoc control over their regulations’ textual meaning is an abdication by the courts of their constitutional duty to zealously guard against executive encroachment on the judiciary’s role as interpreters of the law. And we’re not alone in questioning the wisdom of Auer; as recently as 2011, Justice Scalia criticized the ruling as being “contrary to [the] fundamental principles of separation of powers.”

The Supreme Court will be deciding this spring whether to hear Peri & Sons Farms v. Rivera.We urge the Court to take the case and restore a modicum of the Constitution’s separation and balance of powers.

Categories: Policy Institutes

This Month's Cato Unbound: The State, the Clan, and Individual Liberty

Cato Op-Eds - Fri, 03/14/2014 - 14:32

Jason Kuznicki

The great classical liberal sociologist Henry Sumner Maine theorized that societies progressed from status to contract: In a status-based society, one is born into a place in a hierarchy. That place may change, but typically it doesn’t change very much, and your place governs your rights and obligations. Societies of status are stable, rigid, and often deeply illiberal. They tend to be dominated by kinship groups, or clans, and those can be quite collectivist and hostile to individual liberty.

Contract-based societies are very different: In a contract-based society, individuals tend to be legally equal at birth. Family ties are affective and not quite so legally binding. Obligations tend to be voluntarily undertaken rather than assumed at birth. Societies of contract are flexible, may change rapidly, and will often act to protect individual liberty.

At Cato Unbound, this month’s lead essayist, legal historian Mark S. Weiner, argues that the state performs a sometimes unappreciated role in keeping away the status-based society: without a state that’s strong enough to break the power of the clans, then the clans will return, and individual liberty will suffer.

But how real is the danger? Do we really have the strong state to thank for our liberty? Economist Arnold Kling argues that other institutions, including the nuclear family and consensual transfers of property, make clannishness unappealing. The American Conservative’s editor, Daniel McCarthy, suggests that even liberal government is at times a very collectivist, and thus clannish, activity. Legal historian John Fabian Witt will weigh in on Monday, and we welcome your comments as well.

Categories: Policy Institutes

New York Times Op-ed on Infrastructure

Cato Op-Eds - Fri, 03/14/2014 - 14:28

Chris Edwards

My op-ed in today’s New York Times has prompted numerous critical comments on the NYT website. Let me address some of them.

Some readers questioned the linked source for my statement that infrastructure spending in the United States is about the same level as in other high-income countries. This fact does need some explanation, but I didn’t have room to include it in the op-ed. The data I cited were emailed to me by the author of the linked OECD report. It is national accounts data on gross fixed investment. I charted the data here in Figure 2.

Some readers wondered about my definition of “infrastructure.” That word is often used loosely. The definition that makes sense to me is the broad one of gross fixed investment, which includes such items as government highways and private pipelines and factories. The data are available from BEA Table 1.5.5, where you can see that private investment—even aside from residential—dwarfs government investment.

One reader expressed a common view that in traveling abroad you often find nicer airports than in this country. I think that’s correct, and often those foreign airports are private or partly private, while ours are government-owned.

Numerous readers pointed to shortcomings of particular private companies, and some of those complaints are surely correct. Private companies often screw up, but my experience is that governments screw up more because of deep, structural incentive problems. Furthermore, private markets have the powerful built-in mechanism of competition to fix problems over time, whereas government shortcomings often go unaddressed. Where there is a lack of competition in private markets, policymakers should focus on opening entry to increase it.

A number of readers thought my mention of the Iron Bridge spurious. I thought of that very old cast iron structure after reading this WNYC story about Wednesday’s gas explosion in Harlem. A Con Ed senior VP says that the company checked the Harlem pipes less than two weeks ago and found no leaks. The story notes,

The bulk of the main on that block, however—about 150-feet—is cast iron from 1887. Con Edison has been working to replace such aging pipe citywide. [Con Ed VP] Foppiano said cast iron mains can be in the ground for a couple hundred years and age is not necessarily a factor.

Finally, one reader pointed to rising congestion as a reason to invest more in highways, even aside from the highway quality issue that I touched on. I agree that congestion is a big problem, and in this essay I discuss how we can improve the efficiency of our investment to better solve it.

Categories: Policy Institutes

North Korea: Dealing with a Human Rights Scourge and Security Threat

Cato Op-Eds - Fri, 03/14/2014 - 08:40

Doug Bandow

The Democratic People’s Republic of Korea long has been recognized as one of the globe’s most difficult challenges.  For two decades concern over Pyongyang’s nuclear program has dominated international attention toward the Korean peninsula. 

What to do about The North Korea Problem has troubled three successive U.S. administrations.  The result is a tentative nuclear state seemingly ruled by an immature third-generation dictator willing to terrorize even his own family. 

Particularly unlucky are the residents of North Korea.  There never has been any question about the extraordinary nature of DPRK tyranny.  But the United Nations just released its own gruesome analysis. 

The finding is simple: “systematic, widespread and gross human rights violations have been and are being committed” by the DPRK.  “In many instances, the violations found entailed crimes against humanity based on State policies.” 

As I point out in my latest article in National Interest:

Yet the challenge facing the U.S. and other nations regarding human rights in the North is a lot like the security problem:  what to do?  The Kim dynasty has demonstrated no interest in disarming.  Nor has it ever hinted at the slightest interest in treating the North Korean people better.  Arguing that human rights should be an international priority doesn’t change matters.

Trying to convince the isolated and militaristic regime that a more pacific policy is in its interest so far hasn’t worked.  Trying to convince the same leadership that it also should dismantle the political system that it dominates is even less likely to succeed. 

However, the human rights report might be more effectively directed at another nation, the People’s Republic of China.  The PRC is North Korea’s chief enabler.  (For a time South Korea shared that title, with its bountiful subsidies as part of the Sunshine Policy.)  

The reasons are understandable if not necessarily laudable.  Washington’s push for Beijing to press the DPRK more seriously, repeated during Secretary of State John Kerry’s recent China visit, founders on the PRC’s perception of its interests. 

The North is unpredictable, except for always being ever unreasonable and difficult.  Nevertheless, Beijing fears destabilizing the peninsula more than it fears North Korea nuclearizing the peninsula.

To change China’s position requires addressing that government’s concerns, particularly regarding the impact of a united Korea allied with America at a time when the U.S. appears committed to a policy of soft containment.  The DPRK’s growing reputation as a human rights outlaw might help.

Beijing obviously is sensitive to the issue, given its own human rights failings.  Nevertheless, there is no comparison between the two nations.  China also has much at stake in the global order, including its reputation, which will be tarnished if it continues to be widely seen as the only reason the Kim regime survives.

Simply bashing Pyongyang won’t be enough.  Washington needs to develop a positive package for a reform North Korean leadership: peace treaty, trade, aid, and integration.  The U.S. also should involve South Korea and Japan.

This approach should directed as much at the PRC as North Korea.  Even Chinese officials frustrated with the DPRK tend to blame the U.S. for creating the hostile threat environment which led the North to develop nuclear weapons.

The PRC still might decide the price of cooperating with America is too high.  But the allies have no better alternative approach.  The DPRK has spent recent years alternating whispers of sweet nothings with screams of blood-curdling threats, tossing in occasional missile and nuclear tests for good measure.  Nothing suggests that the younger Kim has abandoned brinkmanship as Pyongyang’s preferred policy and decided to negotiate away his nation’s most important weapon.

Some day monarchical communism will disappear from the Korean peninsula.  It will do so sooner if China uses its considerable influence—and threatens to withdraw its even more important aid—to press Pyongyang to reform.  The UN’s scathing report on DPRK human rights practices might help win Beijing’s cooperation.

Categories: Policy Institutes

Raise Minimum Wage, Kill Jobs

Cato Op-Eds - Thu, 03/13/2014 - 15:16

Steve H. Hanke

During his State of the Union address, President Obama announced that he intended to raise minimum wages to $10.10/hour for certain workers. Based on data from EU countries, it is clear that minimum wage laws kill jobs. I concluded that hiking the minimum wage will kill jobs in the U.S., too. Executives surveyed in the Duke University/CFO Magazine Global Business Outlook Survey agree.

Chief Financial Officers from around the world were interviewed and the majority of them concurred: a minimum wage increase from $7.25/hour to $10.10/hour would kill a significant number of jobs.

Here’s what the CFOs had to say:

Categories: Policy Institutes

Will Republicans Make a Principled Stand Against Ex-Im Reauthorization in 2014?

Cato Op-Eds - Thu, 03/13/2014 - 12:33

Daniel J. Ikenson

Jobs are good. Exports create jobs. We create exports. Renew our charter.

Such is the essence of the marketing pitch of the U.S. Export-Import Bank, whose officials have begun ramping up their lobbying efforts ahead of a 2014 vote concerning reauthorization of the Bank’s charter, which expires in September.  Last go around, in 2012, Ex-Im ran into some unexpected turbulence when free-market think tanks, government watchdog groups, and limited government Republicans in Congress raised some compelling – but ultimately ignored – objections to reauthorization.

The ostensible purpose of the Ex-Im Bank is to assist in financing the export of U.S. goods and services to international markets. Even if that were a legitimate role of government, the public must keep a watchful eye on how much and to whom loans are made – especially given the current administration’s tendency to bet big on particular industries and specific firms, and in light of its commitment to seeing U.S. exports reach $3.14 trillion in 2014.

From the U.S. Export-Import Bank’s 2013 Annual Report:

The Ex-Im Bank’s mission is to support American jobs by facilitating the export of U.S. goods and services. The Bank provides competitive export financing and ensures a level playing field for U.S. exporters competing for sales in the global marketplace. Ex-Im Bank does not compete with private-sector lenders but provides export financing that fill gaps in trade financing. The Bank assumes credit and country risks that the private sector is unable or unwilling to accept. It also helps to level the playing field for U.S. exporters by matching the financing that other governments provide to their exporters. The Bank’s charter requires that the transactions it authorizes demonstrate reasonable assurance of repayment.

The defensive tone of this mission statement anticipates Ex-Im critics’ objections, but it certainly doesn’t answer them. The objectives of filling gaps in trade financing passed over by the private sector and expecting a reasonable assurance of repayment are mutually exclusive – unless the threshold for “reasonable assurance” is more risk-permissive than the private-sector’s most risk-permissive financing entities.  Therefore, Ex-Im is either putting taxpayer resources at risk or it is competing directly with private-sector lenders for customers in need of finance. And if the latter, then as it seeks to create the proverbial “level playing field” for the U.S. companies whose customers it finances, Ex-Im is un-leveling the playing field for the finance industry, as well as for the U.S. firms in industries that compete globally with these U.S-taxpayer financed foreign companies.

The Bank does more harm than good. It assists some – mostly large, politically savvy, deep-pocketed – U.S. companies at the expense of others.  When U.S. taxpayers provide the financing for foreign companies’ purchases from U.S. companies, they are subsidizing the foreign competitors of downstream U.S. companies.  This is analogous to the tariff-rate quotas of the U.S. sugar program, to give one example, which benefit cane and beet producers and refiners, but put U.S. sugar-using firms in the food processing, bakery, and confectionary industries at disadvantages vis-à-vis their foreign competitors, who have access to cheaper sugar.  It is an exercise in picking winners and losers with the winners being those firms and industries with the most effective K Street operations.

Delta Airlines objected and even went to court on the grounds that Ex-Im’s financing of Air India’s purchase of 30 Boeing aircraft subsidized its foreign competition.  Likewise, Cliffs Natural Resources, a mining company that operates three iron ore mines in Minnesota and one in Michigan, continues to object to Ex-Im’s $694 million financing of an Australian iron mine’s purchases of U.S.-made bulldozers and trucks from Caterpillar, locomotives from General Electric and drilling rigs from Copco. According to the Duluth News Tribune, “[t]he Roy Hill project in Australia’s outback is so big and so remote that entire new cities, ocean ports, roads, an airport and a 220-mile railroad are being built for a single mine that annually will produce 55 million tons - more iron ore than all U.S. mines combined. The project is owned by billionaire Gina Rinehart, the richest person in Australia.”

Leaving the question of why U.S. taxpayers should be subsidizing purchases of Australia’s richest person aside, iron ore extracted from Australian mines competes with U.S. iron ore for customers in the steel industry.  In that regard, the Roy Hill project financing benefits some U.S. equipment manufacturers at the expense of U.S. mining interests and U.S. steel producers, whose Asian competitors get cheaper raw materials.  This imbalance, this picking of winners and losers, this battle in the political arena that should be occurring in the marketplace will persist as long as the Ex-Im Bank is open for business.

The validity of these and many other objections notwithstanding, after several months of debate and deliberation in 2012, Republican leadership in Congress not only caved to establishment pressure to reauthorize the Bank’s charter, but also upped its annual allowance by 40 percent to $140 billion.  One “rebellious” Republican who voted against reauthorization in 2012 is Jeb Hensarling, who now chairs the House Financial Services Committee, which will consider the reauthorization bill this session. The Ex-Im reauthorization debate and vote will provide Hensarling and other Republicans the opportunity to distinguish free-market capitalism from the crony variety that has given capitalism a bad name.

In this Washington Examiner column from last week, Tim Carney suggests that by opposing reauthorization of the Ex-Im bank, the GOP can make the 2014 elections a referendum on corporate welfare.  Let’s hope he’s right.

As this issue is likely to become topical in the weeks and months ahead, following is a list of papers, op-eds, and blog posts written by Cato scholars (mostly by Sallie James, who has moved on to new endeavors) over the years.

http://www.cato.org/blog/ex-im-loan-australias-richest-person-attracts-opposition (8/26/13)

http://www.cato.org/blog/wsj-sets-litmus-test-corporate-welfare (6/28/13)

http://www.downsizinggovernment.org/eric-cantor-sprints-after-his-bolted-horse (10/29/12)

http://www.downsizinggovernment.org/export-import-bank (10/12)

http://object.cato.org/sites/cato.org/files/serials/files/regulation/2012/8/v35n2-7.pdf#page=4 (8/21/12)

http://www.cato.org/blog/ppi-considers-ex-im-debate-senseless (5/22/12)

http://www.downsizinggovernment.org/when-bipartisanship-dirty-word (5/16/12)

http://www.cato.org/blog/ex-im-reauthorization-vote-expected-tomorrow (5/8/12)

http://www.cato.org/blog/house-republicans-including-tea-partiers-support-ex-im (4/27/12)

http://www.cato.org/blog/washington-post-pulls-its-punch (4/9/12)

http://www.cato.org/blog/ex-im-shenanigans-contd (3/15/12)

http://www.cato.org/publications/free-trade-bulletin/expanding-exims-mandate-is-big-mistake (3/14/12)

http://www.cato.org/blog/house-gop-leadership-takes-brave-stand-ex-im (3/9/12)

http://www.cato.org/blog/ex-im-bank-crony-capitalism (3/5/12)

http://www.cato.org/blog/end-ex-im-bank (2/14/12)

http://www.cato.org/blog/ex-im-bank-pits-us-industry-against-industry (11/14/11)

http://www.cato.org/blog/more-ex-im-bank (8/30/11)

http://www.cato.org/publications/trade-policy-analysis/time-x-out-exim-bank (7/6/11)

http://www.downsizinggovernment.org/boeings-government-bank (11/9/9)

http://www.cato.org/publications/trade-briefing-paper/rethinking-exportimport-bank (3/12/02)

Categories: Policy Institutes

Progress in De-Escalating the War on Drugs

Cato Op-Eds - Thu, 03/13/2014 - 12:03

Jeffrey Miron

Earlier today, Attorney General Eric Holder asked the U.S. Sentencing Commission to reduce sentences for a broad range of federal drug crimes.  This is a long way from legalization, but it goes in the right direction.  More broadly, Holder’s action signals that drug crime will continue to fade as an enforcement priority for the federal government.  This makes it easier for state and city governments to scale back enforcement as well.

As long as drug prohibition is on the books, it has potential for great harm.  In particular, a new administration can easily reverse the Obama administration’s enforcement priorities.

But the harm from prohibition increases with the level of enforcement, so any de-escalation is welcome. And perhaps political realities dicate that gradualism is the way to eventually eliminate prohibition entirely.

 

Categories: Policy Institutes

On Corrupting the Constitutional Order

Cato Op-Eds - Thu, 03/13/2014 - 11:52

Justin Logan

Michael Gerson, former speechwriter to Bush the Younger and perennial libertarian antagonist, has denounced Rand Paul’s foreign policy views. That should surprise no one, but the manner in which he did so bears discussing.

Gerson’s bill of particulars is as follows:

The younger Paul has proposed defense cuts, criticized foreign aid, led opposition to U.S. involvement in Syria, raised the possibility of accepting and containing a nuclear Iran and railed against “possible targeted drone strikes against Americans on American soil.”

Each of these is its own argument, but what’s more interesting is how Gerson broadens the discussion in an attempt to paint the younger Paul in a conspiratorial light:

His libertarian foreign policy holds that America is less secure because it has been “too belligerent” and that decades of international engagement have both corrupted our constitutional order and corrupted other nations with our largess or militarism.

Reasonable people can disagree about the extent to which U.S. foreign policy has gone off the deep end in recent decades. Also, with due acknowledgment of the victims of U.S. “engagement” in places from Laos to Iraq, people could also disagree about the extent to which our militarism has “corrupted other nations.” But nobody with a lofty perch like Gerson’s should dispute the idea that international engagement has corrupted our constitutional order.

You could fill a library with the volumes that demonstrate how war and preparation for war—which is what Gerson means by “engagement”—have contributed to the growth of the state and the evolution of American political, economic and legal institutions. As that last link shows, influential American legal scholars are hailing Nazi jurist Carl Schmitt as “our hero” in providing the legal case for an unchecked presidency, with James Madison playing the republican bad guy.

And it is the height of irony that Gerson holds up for ridicule the idea that our foreign policy has corrupted our constitutional order the very same week that a U.S. Senator—who is a strong partisan of the CIA—gave a 40 minute speech lambasting the Agency for spying on the legislature in the context of the latter’s investigation of the CIA’s use of torture, or if you prefer, “enhanced interrogation techniques.”

Warrantless NSA spying on Americans, senior Executive Branch officials baldly lying to Congress about it with no consequences, the tortured legal reasoning that led to Guantanamo Bay, the American president claiming the power to assassinate a US citizen with no meaningful legal or legislative oversight on the grounds that he’s talked it over with his legal team, the internment of more than a hundred thousand American citizens for the crime of having had the wrong ancestors… One could go on.

The people who framed our constitution were the sort of people who opposed forming a standing army at a time when European empires were mucking around in the Western hemisphere. So whatever his disagreements with Rand Paul on foreign policy, Gerson could stand to consider—or better yet, do some reading—about how war and militarization have “corrupted our constitutional order.” It’s a bit of an open-and-shut case.

Categories: Policy Institutes

Obama's Overtime Edict: Anything But a Free Lunch

Cato Op-Eds - Thu, 03/13/2014 - 10:53

Walter Olson

As the New York Times reported yesterday, President Obama intends to barge unilaterally into a hotly contested area of employment law by ordering the Department of Labor to develop regulations “to require overtime pay for several million additional fast-food managers, loan officers, computer technicians and others whom many businesses currently classify as ‘executive or professional’ employees.” As with the expansion by decree of minimum wage law, it will be interpreted in some quarters as an undiluted boon to the employees it covers – their employers will either raise their pay or limit the hours they are expected to work, or both, and how could they be anything but happy about that? But as the piece quotes Cato’s Dan Mitchell as warning, ”There’s no such thing as a free lunch… If they push through something to make a certain class of workers more expensive, something will happen to adjust.”

At Forbes, Daniel Fisher explains some of the mechanisms by which that will happen. It will probably become harder to retain exempt status, for example, for “management-plus” jobs, such as one where a shift manager is expected to fill in occasionally at the register during a cashier’s break. That will hit smaller establishments especially hard, while yanking away transitional positions by which ambitious hourly hires can cross over to management. Moreover: 

…non-exempt employees will be watched more closely to avoid tripping the sort of litigation threat that increasing numbers of labor lawyers are looking out for. Working at home could become taboo, since the employer has more difficulty monitoring hours and working conditions. Employees who harbor the perhaps foolish idea that by working hard and taking on greater responsibilities they can move up in the organization will instead be told to go home and relax.

Already, wage-and-hour lawsuits are a thriving hub of litigation, since the law sets up a retrospective guessing game as to whether or not exemption will be upheld: “Enterprising plaintiff attorneys have made hundreds of millions of dollars pursuing lawsuits on behalf of stockbrokers, mortgage loan officers and other white-collar professionals not normally associated with punch-the-clock, shop-floor labor.” 

For years, some lawyers have been advising clients not to hand out company-paid cellphones to any workers who lack a lawful overtime exemption, lest a claim later be made that work was done on the phones during evenings and weekends. Where the law is particularly stringent about calculation of lunch breaks, as in California, some lawyers have advised employers to make it a firing offense to do any work during the allotted break.

Obama’s edict is anything but a done deal: it will first enter the slow and contentious Department of Labor regulatory process, and if the Senate turns Republican with this November’s election, the chances of stopping it in Congress will improve. Should it go into effect, however, it will sow widespread disruption in the business sector, deepen suspicion and polarization at the workplace, and frustrate ambitious individuals who willingly tackle long hours to rise into management ranks. Increasingly, Obama’s binge of executive orders and unilateral decrees to bypass Congress is coming to resemble a toddler’s destructive tantrum. 

 

Categories: Policy Institutes

Trade Negotiations Can Be Painful to Watch

Cato Op-Eds - Thu, 03/13/2014 - 10:03

Simon Lester

In an ideal world, governments would recognize the benefits of trade liberalization, and eliminate domestic tariffs on their own.  In the real world, though, much of the tariff reduction process comes through international agreements between countries, which go something like this: We will agree to lower our tariffs if you agree to lower yours.  Most people recognize that this is a silly way to do things, but in the end it leads to lower tariffs and it’s the only way to do so within existing political constraints, so we go along with it.

But it can be really painful to watch in action.  Here’s an article in the FT about the U.S.-EU trade talks:

The US has accused the EU of abandoning a pledge to remove all tariffs applied to goods traded across the Atlantic, in the first substantive row to hit landmark trade negotiations between the two economies.

The EU and US last year launched a push to reach a Trans-Atlantic Trade and Investment Partnership billed as the world’s largest regional trade negotiation covering economies comprising almost half of the global economy.

Much of the focus of the discussions has been on bringing regulations in line to encourage more trade and on reducing other non-tariff barriers. But both sides had also pledged to seek to remove all tariffs on transatlantic trade, and in a sign of the difficult discussions to come the US has accused the EU of backing away from that goal.

In discussions this week in Brussels, EU officials have told their US counterparts that they plan to allow US beef, chicken and pork into the EU only under a quota system. The move amounts to a stick in the eye of US negotiators who face powerful agricultural lobbies at home and a Congress that is appearing ever more sceptical about the value of trade agreements.

It also follows a concerted effort by Karel De Gucht, the EU trade commissioner, to label the US’s original tariff offers tabled last month as less ambitious than the EU’s. The EU’s original offer would eliminate tariffs on 96 per cent of goods traded across the Atlantic while the US offer promised to wipe out tariffs on 88 per cent of goods.

US officials insist they plan to negotiate their offer upward and remain committed to the goal of eliminating all tariffs. However, EU officials, they say, have told their US counterparts that they will not eliminate tariffs on beef, chicken or pork and instead subject them to a sliding system of tariff-rate quotas.

At the end of all this, my hope is that most U.S. and EU tariffs will be eliminated.  But watching everyone haggle about it, and demonstrate so much reluctance to do what is clearly in their interest, is not much fun.

Categories: Policy Institutes

Educational Choice IS Accountability

Cato Op-Eds - Wed, 03/12/2014 - 16:37

Jason Bedrick

There’s been a lot of confusion over what constitutes “accountability” in education lately. In response, representatives of the Cato Institute, Heritage Foundation, Friedman Foundation, Heartland Institute, and the Center for Education Reform have issued a joint open letter explaining why the best form of accountability is directly to parents.

To some, accountability means government-imposed standards and testing, like the Common Core State Standards, which advocates believe will ensure that every child receives at least a minimally acceptable education. Although well-intentioned, their faith is misplaced and their prescription is inimical to the most promising development in American education: parental choice.

True accountability comes not from top-down regulations but from parents financially empowered to exit schools that fail to meet their child’s needs. Parental choice, coupled with freedom for educators, creates the incentives and opportunities that spur quality. The compelled conformity fostered by centralized standards and tests stifles the very diversity that gives consumer choice its value.

This confusion about accountability is not limited just to tests. It even extends to personnel management. An example of this confusion comes to us today from a Republican legislator in Tennesee:

Rep. David Alexander, R-Winchester, a voucher critic, has filed an amendment that would tweak Gov. Bill Haslam’s voucher bill by requiring private schools that take public scholarship dollars to use the controversial Tennessee Evaluator Acceleration Model [TEAM] to grade its teachers.

The reason government schools need such heavy-handed evaluation systems is because tenure and union contracts make it nearly impossible to fire a teacher. According to the National Center for Education Statistics’ “School and Staffing Survey,” during the 2010-11 school year, only 1.9 percent of Tennessee teachers were dismissed or did not have their contracts renewed due to poor performance, up from 1.1 percent in 2007-08.

By contrast, private schools have greater flexibility than government schools over hiring, firing, and evaluating teachers. They’re also held directly accountable to parents, so there is market pressure not to retain teachers who perform poorly.

Moreover, the legislator’s argument that the government should force its evaluation system on private entities because they are accepting students who are publicly subsidized is patently absurd. It’s like arguing that all employees at grocery stores that accept food stamps or hospitals that accept Medicaid must be evaluated according to the same metrics as DMV employees.

State and local governments have the prerogative to devise whatever accountability measures they deem necessary to operate their schools and manage their employees. Private schools should continue to enjoy the freedom to set their own goals and to determine how best to measure their own performance and we should empower parents to choose the school that best meets their children’s needs.

Categories: Policy Institutes

Now You Can Draw Meaningful Time Trends from the SAT. Here's How...

Cato Op-Eds - Wed, 03/12/2014 - 14:40

Andrew J. Coulson

Over the years, countless reporters and even policy analysts have attempted to draw conclusions from changes in state SAT scores over time. That’s a mistake. Fluctuations in the SAT participation rate (the percentage of students actually taking the test), and in other state and student factors, are known to affect the scores.

But what if we could control for those confounding factors? As it happens, a pair of very sharp education statisticians (Mark Dynarski and Philip Gleason) revealed a way of doing just this—and of validating their results—back in 1993. In a new technical paper I’ve released this week, I extend and improve on their methods and apply them to a much larger range of years. The result is a set of adjusted SAT scores for every state reaching back to 1972. Vetted against scores from NAEP tests that are representative of the entire student populations of each state (but that only reach back to the 1990s), these adjusted SAT scores offer reasonable estimates of actual changes in states’ average level of SAT performance.

The paper linked above reveals only the methods by which these adjusted SAT scores can be computed, but next week Cato will publish a new policy paper and Web page presenting 100 charts—two for each state—illustraing the results. How has your state’s academic performance changed over the past two generations? Stay tuned to find out…

Categories: Policy Institutes

Sweden, Spending Restraint, and the Benefits of Obeying Fiscal Policy's Golden Rule

Cato Op-Eds - Wed, 03/12/2014 - 13:33

Daniel J. Mitchell

When I first started working on fiscal policy in the 1980s, I never thought I would consider Sweden any sort of role model.

It was the quintessential cradle-to-grave welfare state, much loved on the left as an example for America to follow.

But Sweden suffered a severe economic shock in the early 1990s and policy makers were forced to rethink big government.

They’ve since implemented some positive reforms in the area of fiscal policy, along with other changes to liberalize the economy.

I’m particularly impressed that Swedish leaders imposed some genuine fiscal restraint.

Here’s a chart, based on IMF data, showing that the country enjoyed a nine-year period where the burden of government spending grew by an average of 1.9 percent per year.

From a libertarian perspective, that’s obviously not very impressive, particularly since the public sector was consuming about two-thirds of economic output at the start of the period.

But by the standards of European politicians, 1.9 percent annual growth was relatively frugal.

And since Mitchell’s Golden Rule merely requires that government grow slower than the private sector, Sweden did make progress.

Real progress. It turns out that a little bit of spending discipline can pay big dividends if it can be sustained for a few years.

This second chart shows that the overall burden of the public sector (left axis) fell dramatically, dropping from more than 67 percent of GDP to 52 percent of economic output.

By the way, the biggest amount of progress occurred between 1994 and 1998, when spending grew by just 0.27 percent per year. That’s almost as good as what Germany achieved over a four-year period last decade.

It’s also worth noting that Sweden hasn’t fallen off the wagon. Spending has been growing a bit faster in recent years, but not as fast as overall economic output. So the burden of spending is now down to about 48 percent of GDP.

And for those who mistakenly focus on the symptom of red ink rather than the underlying disease of too much spending, you’ll be happy to know that spending discipline in the 1990s turned a big budget deficit (right axis) into a budget surplus.

Now let’s get the other side of the story. While Sweden has moved in the right direction, it’s still far from a libertarian paradise. The government still consumes nearly half of the country’s economic output and tax rates on entrepreneurs and investors max out at more than 50 percent.

But here are the two most compelling pieces of evidence about unresolved flaws in the Swedish system.

First, the system is so geared toward “equality” that a cook at one Swedish school was told to reduce the quality of the food she prepared because other schools had less capable cooks.

Second, if you’re still undecided about whether Sweden’s large-size welfare state is preferable to America’s medium-size welfare state, just keep in mind that Americans of Swedish descent earn 53 percent more than native Swedes.

In other words, Sweden might be a role model on the direction of change, but not on the level of government.

Categories: Policy Institutes

New NWF Report “Mascot Madness: How Climate Change Is Hurting School Spirit”—They’re Kidding, Right?

Cato Op-Eds - Wed, 03/12/2014 - 13:18

Paul C. "Chip" Knappenberger

The latest from the National Wildlife Federation has to rank among the most absurd global warming reports I have encountered.  And, after 30 years of encountering all sorts of wacky warming hype, this is saying a lot.

This NWF doozey is entitled “Mascot Madness: How Climate Change is Hurting School Spirit” and was timed so as to try to take advantage of the pre-coverage of the upcoming March Madness—the popular annual NCAA college basketball tournament. Apparently linking climate change to negative impacts on sports is a new green tactic.

The NWF’s premise is that human-caused global warming is threatening the natural version of school mascots, and, in some cases, causing them to be dissociated from the region that includes the university that they represent, presumably dampening “school spirit.”

The NWF offered up its solution to this vexing problem:

• Passing effective laws that reduce carbon pollution and other air pollutants that drive climate change and endanger the health of our communities and wildlife.

• Investing in clean, wildlife-friendly, renewable energy sources to replace our dangerous dependence on dirty fossil fuels.

• Practicing “climate-smart conservation” by taking climate change into account in our wildlife and natural resource management efforts.

Of course.

Even if it were true that anthropogenic climate change could be scientifically linked to changes in the location and/or health of the various school mascot species—which it almost certainly can’t—how this impacts “school spirit” is completely beyond me.

If the real-world situation that the mascots find themselves in is reflected in school spirit, can you imagine the level of dejection in the fan base of say the San Diego State Aztecs, the University of Southern California Trojans, the University of Calgary Dinos, or the Indiana University-Purdue University Fort Wayne Mastodons? It is a wonder that a single seat is filled for home games.

And as to the relationship between the natural territory of the mascot and the degree of rah-rahness, consider what must be the struggle facing the booster clubs behind the UC Irvine Anteaters, the Pittsburg (Kansas) State Gorillas, the Youngstown State Penguins, or the University of Missouri-Kansas City Kangaroos. Global warming’s impact is small beans compared to this kind of territorial displacement!

The NWF draws special attention to the worrisome case of the rivalry between the University of Michigan Wolverines and the Ohio State Buckeyes, fretting that climate change is driving the wolverine out of the state of Michigan while simultaneously driving the buckeye tree into Michigan (and out of Ohio).

But, according to this webpage from the University of Michigan athletic association, how the University’s mascot became the Wolverines is a matter of some debate. Interestingly, the page goes on to note that an actual wolverine has never been captured in the state of Michigan, and the first verified sighting of one didn’t occur until 2004!

And a quick peak at the USDA Plant Guide indicates that distribution of the Ohio buckeye tree shows that while the tree may extend is natural boundary northward in a warming climate, there is still plenty of territory south of Ohio to keep the tree in the state for a long time to come.  So, everyone (including the NWF) can rest assured that climate change will not serve to lessen the Michigan/Ohio state rivalry.

In keeping with the ringing the global warming alarm bells, I am a bit surprised that the NWF didn’t compile a companion report titled “Mascot Madness: How Climate Change is Boosting School Spirit to Unhealthy Levels.” In that report, they could have featured the Miami Hurricanes, the University of British Columbia-Okanagan Heat, the Geneva College Golden Tornadoes, the Southeastern Oklahoma Savage Storm, and, of course, the most obvious of all, the Dartmouth College Big Greens.

Categories: Policy Institutes

Lessons from the New Transit Data

Cato Op-Eds - Wed, 03/12/2014 - 08:43

Randal O'Toole

The American Public Transportation Association (APTA) argues that a 0.7 percent increase in annual transit ridership in 2013 is proof that Americans want more “investments” in transit–by which the group means more federal funding. However, a close look at the actual data reveals something entirely different.

It turns out that all of the increase in transit ridership took place in New York City. New York City subway and bus ridership grew by 120 million trips in 2013; nationally, transit ridership grew by just 115 million trips. Add in New York commuter trains (Long Island Railroad and Metro North) and New York City transit ridership grew by 123 million trips, which means transit in the rest of the nation declined by 8 million trips. As the New York Times observes, the growth in New York City transit ridership resulted from “falling unemployment,” not major capital improvements. 

Meanwhile, light-rail and bus ridership both declined in Portland, which is often considered the model for new transit investments. Light-rail ridership grew in Dallas by about 300,000 trips, but bus ridership declined by 1.7 million trips. Charlotte light rail gained 27,000 new rides in 2013, but Charlotte buses lost 476,000 rides. Declines in bus ridership offset part or all of the gains in rail ridership in Chicago, Denver, Salt Lake City, and other cities. Rail ridership declined in Albuquerque, Baltimore, Minneapolis, Sacramento, and on the San Francisco BART system, among other places. 

APTA wants people to believe that transit is an increasingly important form of transportation. In fact, it is increasingly irrelevant. Although urban driving experienced a downward blip after the 2008 crash, it is now rising again, while transit outside of New York City is declining. Source: Urban driving data from Federal Highway Administration, urban population from the Census Bureau, and transit numbers from APTA. Transit PM = transit passenger miles.

Rail and bus ridership have grown in Seattle and a few other cities, but the point is that construction of expensive transit projects with federal funds is not guaranteed to boost transit ridership. In many cases, overall transit ridership declines because the high costs of running the rail systems forces transit agencies to cut bus service.

APTA wants more federal funding because many of its associate members are rail contractors who depend on federal grants to build obsolete transit systems. Light-rail lines being planned or built today cost an average of more than $100 million per mile, while some cities have built new four-lane freeways for $10 million to $20 million per mile, and each of those freeway lanes will move far more people per day than a light-rail line. 

Congress will be reconsidering federal funding for highways and transit this year, and APTA wants as much money as possible diverted to transit. President Obama has proposed a 250 percent increase in deficit spending on transportation, most of which would go to transit.

Transit only carries about 1 percent of urban travel, yet it already receives more than 20 percent of federal surface transportation dollars. Since most of those federal dollars come out of gas taxes, auto drivers are being forced to subsidize rail contractors, often to the detriment of low-income transit riders whose bus services are cut in order to pay for rail lines into high-income neighborhoods.

The real problem with our transportation system is not a shortage of funds, but too much money being spent in the wrong places. New York City transit was the only major transit system in the country that covered more than half its operating costs out of fares in 2012; the average elsewhere was less than 30 percent. Funding transportation out of user fees, such as mileage-based user fees and transit fares, would give transportation agencies incentives to spend the money where it is needed by transport users, not where it will create the most pork for politicians. 

Categories: Policy Institutes

The SAT Commits Suicide

Cato Op-Eds - Wed, 03/12/2014 - 08:40

Andrew J. Coulson

The College Board announced this week that it is dropping the more arcane words and more advanced mathematics from its SAT test, among other changes. This, however noble its intentions, seems counterproductive and institutionally suicidal.

The purpose of the SAT is to help predict success in college. It does this in the same way as every other test: by distinguishing between those who know the tested content and those who do not. Not surprisingly, most modern tests are designed using something called “Item Discrimination Analysis.” That unfortunately-named technique has nothing to do with racism or classism. It is simply a mathematical formula. What it does is measure, for every question, the difference between the percentage of high-performers who got the question right and the percentage of low-performers who got it right. In general, the higher this “Discrimination Index” (DI) rises, the more useful the question is and therefore the more likely it is to be retained.

The problem with the College Board’s announced revisions is that they seem likely to eliminate questions with high DI values in favor of others with lower DI values. You might guess that reducing the SAT’s ability to distinguish between high and low performers would inhibit its ability to predict college success. But you don’t have to guess, because there’s already at least one recent study that looked at this question. What the authors found is that the DI value of SAT mathematics questions is usually the strongest contributor to the test’s ability to predict college success—by a wide margin.

There’s a good chance that the College Board is aware of this study since two of its three authors work for the College Board and the Board hosts a presentation about the study on its own website.

The Board’s changes are intended to make the SAT more fair. In practice, they seem likely to make it less useful. And as its usefulness diminishes, so will the number of colleges using it. If this proves to be the case—and we’ll know for sure in just a few years—the College Board will have succeeded in doing something that its critics have been unable to accomplish despite decades of effort: killing the SAT.

Categories: Policy Institutes

The FBI versus the Citizens

Cato Op-Eds - Tue, 03/11/2014 - 16:45

Gene Healy

This Thursday at Cato, we’re hosting an event for a remarkable new book: Betty Medsger’s The Burglary: The Discovery of J. Edgar Hoover’s Secret FBI (RSVP here). As I explain in the Washington Examiner today, it’s a story as riveting as any heist film, and far more significant:  

Forty-three years ago last Saturday, an unlikely band of antiwar activists calling themselves “The Citizens Commission to Investigate the FBI” broke into a Bureau branch office in Media, Pennsylvania, making off with reams of classified documents. Despite a manhunt involving 200 agents at its peak, the burglars were never caught, but the files they mailed to selected journalists proved that the agency was waging a secret, unconstitutional war against American citizens.  

As a young Washington Post reporter, Medsger was the first to receive and publish selections from the files—over the protests of then-attorney general (and later Watergate felon) John Mitchell, who called the Post three times falsely claiming that publication would jeopardize national security and threaten agents’ lives. 

Four decades later, those claims echo in former NSA head Michael Hayden’s assertion that the US is “infinitely weaker” because of Snowden’s leaks. Like the apocryphal old saw suggests, if history doesn’t repeat itself, at least it rhymes.

“As if arranged by the gods of irony,” Medsger writes, the very morning Hoover learned of the break-in, then-assistant attorney general William H. Rehnquist (later Chief Justice), in testimony the FBI had helped prepare, told a Senate subcommittee that what little surveillance the government engaged in did not have a “chilling effect” on constitutional rights. Among the first documents Medsger reported weeks later, was a memo urging agents to “enhance the paranoia… get the point across there is an FBI agent behind every mailbox.”

Ironies abound. The burglars timed the heist for March 8, 1971, when the country would be distracted by the “Fight of the Century” between Muhammad Ali and Joe Frazier. Medsger notes the “poetic justice” that the much-spied upon Ali would unwittingly help provide cover for exposure of FBI spying. Oddly, it’s acting attorney general Robert Bork–survivor of the “Saturday Night Massacre” and nobody’s idea of a civil libertarian)–who orders the release of key documents on the COINTELPRO program and urged the incoming attorney general to investigate the program. There’s another vignette where President Nixon speaks to an FBI Academy graduating class about “reestablishing respect for the law”–and the next evening orders Haldeman to have someone break into the Brookings Institution and steal a purloined copy of the Pentagon Papers (a zealous Chuck Colson suggested firebombing the think tank to create a distraction).  

The book is full of “truth is stranger” moments: if a historical novelist made up a scenario where, two days before the burglary, the ringleader, Haverford physics professor William Davidon, goes to the White House for a sit-down with Henry Kissinger to argue about the Vietnam War (thanks, ultimately, to an introduction made by Shirley MacLaine), there’s no way I’d have bought it. Stranger still, at the time, Davidon was an unindicted co-conspirator in a bogus kidnapping case engineered by Hoover in which Catholic peace activists had supposedly plotted to hold Kissinger hostage. Kissinger didn’t take it very seriously, having joked to the press that the plot had been engineered by “three sex-starved nuns.” As the meeting began, Medsger reports, “Kissinger immediately turned to Sister Beverly, sitting on his other side, and apologized for his flippant ‘sex-starved nuns’ comment.”

Last week, an indignant Rep. Mike Pompeo (R.-KA) chastised the organizers of Austin’s South by Southwest conference for inviting Edward Snowden to address the group via video feed: Snowden is “a traitor and a common criminal,” he railed, “whose only apparent qualification is a willingness to steal from his own government.” As I’ve said before, the debate over the content of Snowden’s character is a sideshow: what’s important is what he revealed: secret, unlawful surveillance capabilities that J. Edgar Hoover could hardly have imagined 40+ years ago. Unless we’ve made radical improvements in human nature in the interim, those capabilities–and the temptations they represent–should concern us greatly.

The legacy of the Citizens’ Commission shows that their “willingness to steal from their own government” may have been the only way to stop much greater lawlessness. Here’s what the FBI’s own website says about the burglars:

A radical group called “Citizens’ Committee to Investigate the FBI” broke into the office in Media and stole a wide array of domestic security documents that had not been properly secured. Some of the documents mentioned “Cointelpro”, or Counterintelligence Programs—a series of programs aimed to disrupt some of the more radical groups of the 1950s and 1960s. The leaking of those documents to the news media and politicians and the subsequent criticism, both inside and outside the Bureau, led to a significant reevaluation of FBI domestic security policy.

Medsger quotes Neil Welch, one of the few top agents within the Bureau to oppose COINTELPRO at the time:

“If [the burglars] had been convicted, I would have recommended that they should be given suspended sentences because of the major contribution they made to their country.”

 

 

Categories: Policy Institutes

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