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The IRS Scandal: Who's Really Being Gullible?

Cato Op-Eds - Fri, 06/27/2014 - 17:57

Walter Olson

Some figures on the left have aggressively sought to dismiss the renewed Internal Revenue Service scandal as unserious. Rep. Lloyd Doggett (D-Tex.) captured this mood at one recent Capitol Hill hearing when he suggested that after questioning whether the loss of emails was truly accidental, his GOP colleagues might go on next to quiz the IRS’s leadership about the president’s birth certificate and space aliens in Roswell, N.M. It’s not a “serious inquiry,” Rep. Doggett said. “I believe it’s an endless conspiracy theory here.”

And yet many Americans who do not care about space aliens do doubt the IRS’s account of what has happened. While we covered the story a year ago as well as more recently, this might be a good time to recapitulate why.

The IRS grants 501(c)(4) nonprofit status (less favorable than (c)(3) tax status, which affords donors charitable deductibility) to a wide array of “social welfare” organizations–many, like the ACLU, with a definite ideological valence. In recent years the status has been sought and obtained by groups whose missions are closely related to campaign and electoral politics, most notably Organizing for America, whose role on the national scene is to support President Obama’s messaging. Not surprisingly this has excited controversy about whether the eligibility rules for (c)(4) status are being drawn in the right place. Most advocates profess to believe, though, that whatever the right set of rules, they should apply alike to all sides in our political life.

By March 2012 the Associated Press was reporting on a flurry of bizarre and seemingly unprecedented IRS demands that some (c)(4) applicants of a right-of-center valence provide extraordinarily burdensome and intrusive documentation of their activities–things like copies of all books and literature distributed to participants, transcripts of leaders’ radio appearances and live speeches, printouts of all Facebook and Twitter output, and so forth, along with donor lists and names of family members. The IRS was also delaying groups’ approval for long periods–in fact, seemingly indefinitely–without explanation or a firm denial that could be appealed to a court. Defenders of the agency leadership subsequently put out a search for left-of-center groups that might have run into similar treatment, and although they did manage to turn up a few tales of bureaucratic red tape and rigmarole, they were unable to come up with anything remotely comparable.

IRS nonprofit chief Lois Lerner at first denied any targeting, then sought to blame rogue employees at the IRS Cincinnati office for it. But emails soon emerged clearly indicating guidance by high-level IRS managers in Washington. Lerner then declined to testify, asserting her Fifth Amendment privilege against admissions exposing herself to criminal liability.

Through the ensuing scandal, there was little hard proof that Lerner and other IRS insiders had coordinated the targeting with political actors outside the agency–on Capitol Hill, say, or in party organizations, or the White House–although a number of details on the record, such as frequent White House visits by agency insiders and coordination with outside figures on press messaging, made for suggestive circumstantial evidence. To establish that political operatives or officials outside the agency were aware of targeting at the time, or even perhaps instigated or directed it, would be to blow the scandal wide open, perhaps threatening the careers of well-known public figures. If any email documentation of such coordination is to be found, it would most likely be in the “external” (outside the agency) emails of Lerner and other key players in the targeting effort.

Those are the same emails that have now mysteriously vanished, supposedly because of a crash of Lerner’s computer–a crash that happened 10 days after the House Ways & Means Committee wrote her to inquire about targeting. Emails of six other key IRS employees are also said to have vanished in a series of coincidental crashes.

This week, as if to confirm that shabby treatment of politically disliked adversaries was not unheard-of at the Lerner-era IRS, the agency agreed to pay $50,000 to the National Organization for Marriage over an episode in which persons unknown leaked the group’s confidential return and donor list to its ideological adversary, the Human Rights Campaign, which proceeded to have it published. And the Ways & Means Committee has just released an email indicating that when an invitation intended for a congressional opponent wound up by mistake in the hands of Lerner, her immediate reaction was to wonder whether it might be used to generate an IRS investigation embarrassing to the opponent.

After all those revelations, is it really those who distrust the agency’s leadership whose gullibility should be compared to that of flying saucer cultists? Or are the credulous true believers the ones who insist that the latest jaw-dropping IRS revelations must have an innocent explanation, though the earlier ones did not?

[Cross-posted, with minor revisions, from Overlawyered.com.]

Categories: Policy Institutes

Magna Carta and Constitutional Criminal Procedure

Cato Op-Eds - Fri, 06/27/2014 - 15:50

Ilya Shapiro

In United States v. Booker (2005), the Supreme Court held that the Sixth Amendment prohibits a judge from sentencing a convicted defendant to a prison term exceeding the law’s maximum penalty for the crime committed, unless additional aggravating facts are found by the jury (or admitted by the defendant). The Court also held that all sentences must be reasonable.

In a subsequent case, Justice Scalia issued a concurrence in which he expressed concern about situations in which judges issue sentences below the statutory maximum, but which would only be reasonable in light of additional facts found solely by the judge. He proposed an “as-applied” doctrine, in which the reviewing court asks whether the sentence would be reasonable as applied to only those facts that were found by the jury.

The situation that Justice Scalia feared has now become manifest for three criminal defendants who were all convicted of selling small quantities of drugs but acquitted of conspiracy charges relating to the distribution of much larger quantities. Despite the acquittals, all three defendants received sentences four times greater than any other defendant convicted of the same crimes in the post-Booker era using the guidelines issued by the U.S. Sentencing Commission.

The defendants argue—and no prosecutor or judge has disputed—that their sentences would not be deemed reasonable without consideration of the additional evidence of conspiracy. In reviewing the sentences, the U.S. Court of Appeals for the D.C. Circuit adhered to settled precedent and declined to adopt the as-applied doctrine, and so the defendants seek to further appeal their sentences to the Supreme Court and finally resolve the question, under the Sixth Amendment, of whether a judge can base a sentence on facts that the jury did not find beyond a reasonable doubt.

In an amicus brief supporting that petition, the Cato Institute, joined by the Rutherford Institute, argues that the Sixth Amendment prohibits the increased sentencing of defendants based solely on judge-found facts of the crime, regardless of whether the final sentence remains below the statutory maximum. The defendants’ constitutional right to a jury trial can be traced back to Article 39 of the Magna Carta, which is also the historical origin of the Constitution’s prohibition on ex post facto, or retrospective, criminal laws.

Article 39 reflected a deep concern that the government would undermine the jury’s role and imprison defendants without the input of their peers. Given the status of sentencing guidelines as “law” for purposes of the Ex Post Facto Clause, the Sixth Amendment should extend to the defendant’s right to the “lawful judgment of his peers,” meaning that a judge can only render a sentence based on the jury’s factual findings. 

In other words, if it’s unconstitutional to sentence a defendant based on rules issued after he commits the purported crime, it must be unconstitutional to sentence a defendant without the input of his peers.

The Supreme Court will decide whether to take the case of Jones v. United States when it comes back from its summer recess.

Categories: Policy Institutes

Americans Underestimate Government School Spending

Cato Op-Eds - Fri, 06/27/2014 - 15:31

Jason Bedrick

In addition to showing that American parents favor educational choice and are skeptical of Common Core, the new national survey on education policy from the Friedman Foundation demonstrates that Americans still vastly underestimate how much is spent per pupil at government-run schools. 

According to the latest National Center for Education Statistics data, the average total per pupil expenditure in U.S. public schools was $12,136 in the 2009-10 school year. However, 63 percent of respondents thought that government schools spend less than $12,000 per pupil, including 49 percent who estimated that they spend less than $8,000 per pupil. Those findings are consistent with the 2013 Education Next survey, in which the average guess was $6,680 per pupil, barely more than half of what is actually spent.

Like the Education Next survey, the Friedman survey asked respondents whether they thought public school spending was too high, about right, or too low, after first randomly assigning the respondents into two groups: one that first heard a prompt explaining that the average U.S. public school spends $10,658 per pupil (this is average operating expenditure per pupil), while the other group was not given any prompt. Whereas 56 percent of the uninformed group thought spending was too low, only 47 percent of the informed group agreed. (It’s likely that the shift would have been even more pronounced had the Friedman Foundation cited the higher total per pupil expenditures in the prompt rather than the partial figure. Indeed, a previous Friedman survey found that the public prefers to know the total figure.) Those findings are consistent with the 2013 Education Next survey, which found that 63 percent of uninformed respondents wanted to increase public school spending but only 43 percent of informed respondents agreed.

At an American Enterprise Institute event discussing the findings, AEI’s Ramesh Ponnuru observed that politicians could loudly promise to spend $9,000 per pupil and most voters would think that they were calling for an increase in school funding rather than a significant cut.

Categories: Policy Institutes

Maybe Deceive-and-Denigrate Isn’t Such a Great Strategy

Cato Op-Eds - Fri, 06/27/2014 - 15:24

Neal McCluskey

Yesterday, I wrote about new survey results from the Friedman Foundation showing that the Common Core, if even close to fairly presented, has either negative, or thinly positive, levels of public support. But I posted that too soon; not long after I wrote it, two new polls came out showing even bigger trouble for the Core.

The first was a Rasmussen survey that revealed plummeting support for the Common Core effort among parents of school-aged children. Support dropped from 52 percent in November 2013 to just 34 percent in yesterday’s release. Opposition now outweighs support 47 percent to 34 percent. Assuming the question was unchanged between surveys, that is a huge drop.

The second survey was a University of Southern California poll of Golden State residents. The Core hasn’t been as controversial there as in many states–at least, there doesn’t seem to be a major groundswell to dump it–but it’s getting drubbed there, too. The USC research showed a marked increase in the percentage of Californians who claimed to know about the Core since the survey’s 2013 administration, and among those who reported knowing something only 38 percent had a positive feeling about the Core. Some 44 percent had negative impressions. Presented with pro- and anti-Core statements, a larger percentage of respondents–41 percent to 32 percent–agreed more with the negative statement. In 2013, the pro statement got the plurality, 36 percent to 25 percent.

The Core has clearly been taking a public relations beating. Why? No doubt largely because most people only started to become aware of the Core a couple of years ago as long-silent implementation hit districts and schools. And the more aware they became, the more they disliked what they saw and learned about how the Core ended up in their schools.  

It is also quite possible that the primary strategy Core proponents have employed in the face of mounting opposition–deceive the public about everything from the federal role in moving the Core, to its impact on curricula, and denigrate opponents as misinformed, loony, or both–has blown up in their faces. Perhaps it has amplified the impression that the Core has been foisted on Americans by a relatively small, well-connected group of elites who hold regular people in contempt. I don’t think that most supporters actually are contemptuous of the average American, but it is almost impossible not to feel they are given how many have used the tactic of belittling Core opponents, who are, in many cases, just concerned citizens.

I have long thought Core supporters should publicly admit the truth about the Core–it is heavily federalized and intended, along with related tests, to direct curricula–and apologize to the public for having dodged those basic truths. Maybe now, for their own cause’s sake, they’ll do that.

Categories: Policy Institutes

Not Just Another Friday in Brussels

Cato Op-Eds - Fri, 06/27/2014 - 12:44

Dalibor Rohac

While a typical summer Friday in the capital of the European Union might sound like a rather dull affair, today brought two significant events–one of them good, the other one less so.

First, the good news. Today, Ukraine, Moldova, and Georgia signed their association agreements with the European Union (EU). The treaties consist of, in part, free trade agreements between the EU and the three countries, and also a roadmap toward a prospective EU membership. Given the economic and political shape these countries find themselves in, the latter will likely take a long time and will not be without hurdles. After all, Turkey signed its association agreement back in 1963 and the country is still not a member.

There can be little doubt that free trade agreements with the EU will do good to these impoverished economies (GDP per capita in Moldova is just a little over $2,000) as well as to the EU. Furthermore, the prospect of a timely EU membership will hopefully serve as an impetus for economic and institutional reforms–just as was the case in the countries of Central and Eastern Europe that joined the EU in the past decade.

Of course, the EU is far from perfect and it is quite possible that these countries will soon grapple with the same problems as Slovakia, Czech Republic, or Bulgaria–namely how to manage the inflow of “structural funds” into their economies without encouraging corruption and entrenchment of venal elites. But arguably, that will not be the worst problem to have, considering that the alternative is the continuation of the status quo, muddling along from one crisis to another and being part of Russia’s zone of influence. Further enlargement, extending the common market and free movement of people further east, will likely prove to be beneficial to the EU as well.

Second, the bad news. The EU leaders have appointed Jean-Claude Juncker as the new head of the European Commission. Although initially the governments of Sweden and Netherlands had misgivings about his presidency, in the end it was only the UK’s prime minister, David Cameron, who decided to openly oppose the nomination.

The issue is not just with the personality of the candidate, but also with the process through which Juncker was selected. For the first time, the European Parliament took the lead in picking the head of the Commission, while no treaty empowers it to do so. While the appointment needs to rely on a parliamentary majority, the choice has always been made by the political leaders of EU member states, not by the Parliament. For those who do not wish to see the accountability of the Commission to national politicians wane completely, the Juncker appointment should be a cause for concern.

Let us hope that these two events are not completely unrelated. Hopefully, the prospect of another eastward enlargement will serve as an impetus for European policymakers to look for a model of European governance that provides the benefits of the common market and effective action on issues of mutual interest, without entrenching an obscure and unaccountable center of power in Brussels. 

Categories: Policy Institutes

Is the Export-Import Bank More Important than Economics?

Cato Op-Eds - Fri, 06/27/2014 - 11:58

K. William Watson

There are many arguments against reauthorization of the Export-Import Bank, a government-run bank that helps finance export sales at below-market rates. Some of these arguments include that it hurts U.S. businesses, that it provides corporate welfare for politically connected companies, and that it distorts and politicizes the U.S. economy. But the New York Times editorial board thinks all those arguments are “ridiculous,” while also agreeing with them:

In one of their odder quests, some Tea Party members have decided that the United States must shut down the Export-Import Bank of the United States, an obscure but important federal agency that helps American businesses sell their goods abroad.

The bank provides loans and loan guarantees to foreign businesses to help them buy American products and services. In an ideal world, businesses would obtain such financing from privately owned banks. But most governments around the world support exports in similar ways, and if the United States dismantled the bank unilaterally, as some lawmakers are advocating, American companies could lose billions of dollars in overseas orders and decide to move their operations to other countries that provide generous export financing. [emphasis added]

The New York Times recognizes that getting rid of the Ex-Im Bank would bring us closer to realizing an ideal world, but they nevertheless support the bank to prevent some U.S. firms from losing businesses to foreign competitors. It’s difficult to read this as anything but a defense of crony capitalism. Indeed, the Times’ Neil Irwin wrote a defense of Ex-Im depressingly titled “Why We’re All Crony Capitalists, Like It or Not.”

There will always be challenges for U.S. companies in a global economy. Small, targeted amounts of mercantilist industrial policy like Ex-Im subsidies will not create growth regardless of the character of those challenges.  In other words, subsidies to counteract subsidies are not more beneficial to our economy  than subsidies to counteract relative disadvantages in climate, terrain, or workforce productivity. 

The most compelling take down of the “Ex-Im is necessary for competitiveness” argument may have come from leftist economist Dean Baker, who thinks “free traders” who support the Ex-Im Bank are being awfully hypocritical.  He notes the economic case against subsidies—“by diverting capital to the winners picked by the Ex-Im Bank, we are raising the price of capital for other firms”—and questions the motives of Ex-Im supporters who understand that consequence. Specifically in response to Irwin’s piece, Baker writes:

When Irwin tells us that we have to be crony capitalists “whether we like it or not,” why don’t we also have to be crony protectors of workers’ livelihoods? It seems that there is a very fundamental inconsistency here. When it comes to business interests we are prepared to throw the economics textbook theory in the garbage, but when the question is worker’s jobs, that textbook is the Bible.

I don’t think the generally pro-free trade New York Times wants to throw workers under the bus or help big business, but Baker is right that the argument of Ex-Im defenders that we need subsidies to counteract foreign competition could just as easily be used to justify tariffs or any other form of protection in countless other situations. Does every foreign government subsidy warrant a protectionist response? If not, why is the Ex-Im Bank the protectionist program so many “free traders” want to keep?

Categories: Policy Institutes

ObamaCare's Exchanges Perform More than a Dozen Functions Besides Issuing Subsidies

Cato Op-Eds - Fri, 06/27/2014 - 10:12

Michael F. Cannon

One of the issues underlying Halbig v. Sebelius and three similar lawsuits making their way through federal courts is whether Congress intentionally restricted the Patient Protection and Affordable Care Act’s (PPACA) private health-insurance subsidies to individuals who buy coverage through state-established exchanges. If so, that would mean the Internal Revenue Service’s decision to issue subsidies in the 34 states that did not establish exchanges (i.e., that have federally established exchanges) is illegal. For more on the IRS’s attempt to rewrite the PPACA in this fashion, click here.

On Twitter, a skeptic challenges my coauthor Jonathan Adler claim that Congress intended to withhold subsidies in states that did not establish exchanges, arguing “The exchanges serve no purpose at all absent subsidies. Is there no golden rule at all in American jurisprudence?” (Read the entire exchange here.)

In legal jargon, the skeptic argues that a literal interpretation of the statutory language restricting subsidies to those enrolled “through an Exchange established by the State” would be absurd, and the courts should defer to the agency’s reasonable interpretation.

Exchanges, however, are regulatory bureaucracies that perform other functions and serve other purposes besides dispensing subsidies, as the PPACA’s authors and the president acknowledged. In 2009, President Obama said that health insurance exchanges “would allow families and some small businesses the benefit of one-stop-shopping for their health care coverage and enable them to compare price and quality and pick the plan that best suits their needs.” Senate Majority Leader Harry Reid (D-NV) said PPACA “guarantees real choice and competition to keep insurers in check… By creating strong competition, we’ll reduce skyrocketing health care costs.” The PPACA’s Senate drafters wrote, “Insurers that jack up their premiums before the Exchanges begin will be excluded–a powerful incentive to keep premiums affordable.”

In fact, the exchanges are supposed to perform more than a dozen functions besides issuing subsidies. Here are some of the ways PPACA’s health insurance exchanges attempt to serve the goals of “one-stop shopping,” price and quality comparisons, expanding choice and competition, and reducing health insurance premiums, even in the absence of subsidies:

  1. Facilitate the creation of SHOP Exchanges, where premium-assistance tax credits are not available. §1311(b).
  2. Certify, recertify, and decertify qualified health plans. §1311(d)(4)(A).
  3. Maintain a toll-free telephone hotline. §1311(d)(4)(B).
  4. Monitor premiums and require issuers of QHPs to justify premium increases. §1311(e)(2). 
  5. Monitor QHPs’ compliance with hospital quality measures. §1311(h).
  6. Monitor QHPs’ compliance with mental health parity regulations. §1311(j).
  7. Require transparency from issuers of QHPs, including periodic financial disclosures; and oversee compilation of information on enrollment, disenrollment, the number of claims that are denied, rating practices, cost-sharing and payments with respect to any out-of-network coverage, enrollee and participant rights, and “other information as determined appropriate by the Secretary.” §1311(e)(3)(A).
  8. Collect data from QHPs on the quality of care, including “case management, care coordination, chronic disease management, medication and care compliance initiatives…, prevent[ing] hospital readmissions through a comprehensive program for hospital discharge that includes patient-centered education and counseling, comprehensive discharge planning, and post-discharge reinforcement by an appropriate health care professional…, reduc[ing] medical errors through the appropriate use of best clinical practices, evidence based medicine, and health information technology…, [and] the implementation of wellness and health promotion activities [and] activities to reduce health and health care disparities.” §1311(g).
  9. Rate QHPs based on quality, price, and patient satisfaction. §1311(d)(4)(D).
  10. Maintain a website with standardized comparative information on qualified health plans. §1311(d)(4)(C), (E).
  11. Make eligibility determinations and enrolling applicants for Medicaid and SCHIP. §1311(d)(4)(F).
  12. Issue exemptions from the individual mandate, and certify such exemptions to the IRS. §1311(d)(4)(H).
  13. Facilitate the purchase of health insurance across state lines. §1311(f).
  14. Establish a Navigator program and awarding grants to Navigators. §1311(i).
  15. Facilitate the merger of the individual and small-group markets (at each state’s discretion). §1312(c)(3).
  16. Provide an employee benefit (health insurance coverage) for members of Congress. §1312(d)(3)(D).

Nor is PPACA the only piece of legislation Congress debated that would allow for exchanges without premium subsidies. As I have explained elsewhere, the Democrats who controlled the Senate’s Health, Education, Labor, and Pensions (HELP) Committee in 2009 approved a bill that would have withheld similar exchange subsidies in states that failed to implement that bill’s employer mandate. This is true whether the state established its own exchange, or the federal government established one for the state. Since the HELP Committee allowed for the creation of both state-run and federal exchanges without subsidies, its drafters presumably saw the exchange as serving more than just that one purpose. 

Twelve Senate Democrats voted for the HELP Committee bill. Why should we be surprised that they–and the remaining Senate Democrats, and the vast majority of House Democrats, and President Obama–would approve the PPACA’s similar provisions?

Categories: Policy Institutes

California, Drought, and Water Policy

Cato Op-Eds - Fri, 06/27/2014 - 09:31

Chris Edwards

In today’s Wall Street Journal, Stanford economics professor Edward Lazear provides an economist’s view of the California drought situation:

Many parts of the country, notably California and Texas, are experiencing intense drought… Yet weather isn’t the only problem: government-dictated prices, coupled with restrictions on the transfer of water, have made a bad situation much worse.

That is true. Freeing up markets would go a long way toward easing water battles and water shortages throughout the American West. Government controls on water transfers and prices suppress markets, and the resulting distortions harm the economy and the environment.

Lazear’s proposals make sense, but he overlooks one key reform: getting the federal government out of the water business. Much of the water infrastructure in the West is owned by the federal Bureau of Reclamation, and its policies are a fundamental problem, as Peter Hill and I discuss in this essay.

Hill and I examine Reclamation’s history of waste, bureaucratic arrogance, pork barrel politics, and environmental damage. We discuss water rights, water prices, and water economics. We recommend that Reclamation’s assets be transferred to state governments, or even better to the private sector.

Reclamation’s massive Central Valley Project, for example, should be handed over to the State of California. The CVP was originally supposed to be a state project. It was approved by the California legislature and by a state referendum in 1933. But then the state decided to lobby Washington for funding and was successful, so the federal government took it over.

But it is time to stop central-planning America’s water policies. Water issues in the West are far too complex for a distracted Washington to deal with properly. The states have different legal structures for water rights, different types of farming, and different access to groundwater. So the states should be the ones to control their water infrastructure, which would allow them to tailor their policies to the unique challenges they each face.

Categories: Policy Institutes

Drones Risk Putting US on 'Slippery Slope' to Perpetual War

Cato Op-Eds - Thu, 06/26/2014 - 18:06

Benjamin H. Friedman

As the New York Times reports, the Stimson Center today released a report warning that “the Obama administration’s embrace of targeted killings using armed drones risks putting the United States on a ‘slippery slope’ into perpetual war.” The Washington Post, the Guardian and Vox all lead their articles on the report with that warning.

The slippery slope point probably isn’t new to most readers. But it’s worth focusing on here, both because the argument is often misstated or misunderstood, and because, in this case, I helped make it. The report’s task force, co-chaired by retired General John Abizaid, former head of U.S. Central Command and Rosa Brooks of Georgetown Law, included working groups. I was on one that considered, among other things, what danger drones create for U.S. foreign policy. The report largely reflects those we identified: the erosion of sovereignty, blowback from those in targeted countries, drone strikes’ tendency to undermine democratic oversight, and the slippery slope problem.

The report puts those concerns in context. It points out that: drones can serve wise or dumb policies; that most drones are for surveillance or other non-strike uses; and that it is drone strikes that occur off declared battlefields that have generated the most controversy. The report notes that past military innovations, like cruise missiles, raised similar concerns by making waging war easier.

The report rejects several common complaints about drones. It denies that they create a reckless, “playstation mentality” among pilots. It explains that drones are not more prone than other weapons cause civilian casualties.

Having delimited the circumstances where drones raise concerns, the report goes into considerable causal detail, at least compared to most reports of this kind, about what the trouble is. The blowback, oversight, and sovereignty problems are relatively easy to understand, in theory. The tricky part is measuring the harm.

The slippery slope point is easier to confuse. What the report says is essentially that drones encourage us to get into avoidable fights without winning them. And that failure invites escalation:

The seemingly low-risk and low-cost missions enabled by UAV technologies may encourage the United States to fly such missions more often, pursuing targets with UAVs that would be deemed not worth pursuing if manned aircraft or special operations forces had to be put at risk. For similar reasons, however, adversarial states may be quicker to use force against American UAVs than against US manned aircraft or military personnel…increasing the risk of tit-for-tat escalation. UAVs also create an escalation risk insofar as they may lower the bar to enter a conflict, without increasing the likelihood of a satisfactory outcome. For example, the terrorists that US UAVs tend to be used to hunt are often mostly motivated by localized conflicts occurring in states with fractured political orders. The use of UAVs to track and kill such individuals does not repair the political rifts that give rise to terrorist violence. If US targeted killing campaigns fail to eradicate all threats of extremism, this may create a perceived policy failure. This, in turn, may create domestic political pressures to continue or escalate the use of lethal force, leading US UAV hunter-killer missions to continue indefinitely.

The standard rejoinder is that drones are not causing wars; they are preventing more costly wars involving traditional U.S. airpower, raids, or ground force. The report says no, in many case the alternative is doing nothing.

If lethal UAVs were not an option, we doubt that the United States would have engaged in nearly as many targeted strikes against suspected terrorists in places such as Pakistan and Yemen. In such contexts, airstrikes using manned aircraft would generally be viewed as creating an unacceptably high risk of civilian casualties. Raids involving US forces on the ground — including special operations forces— would create a similar risk of unintended civilian casualties, and would also create a risk of significant US casualties. Finally, the relative invisibility of UAVs enables relative deniability, often a convenience to host nations that are unwilling to appear to have welcomed a US military presence inside their territory. The existence of weaponized UAVs did not “cause” the United States to engage in targeted killings of terror suspects outside of traditional territorially bounded battlefields, but it seems reasonable to conclude that their existence enabled a significantly expanded US campaign of targeted cross-border strikes against suspected terrorists.

So drones encourage us to think we can repair problems we cannot, feeding our tendency to see U.S. military power as the answer to distant political conflicts. That tendency is an obstacle to peace. It also should cause us to ask whether military options are always worth having. As Bernard Brodie notes, the U.S. Constitution says otherwise. The Stimson report deserves credit for focusing us on that point amid all the clamor about drones.

Note that the report also deals with less controversial issues: FAA drone regulation and U.S. export controls. I should add that I don’t endorse all of the report’s analysis or recommendations. Two recommendations particularly trouble me. Forming another bipartisan commission to review drone policy seems like a waste of time born of a tendency to confuse report writing with policy-making. And an interagency or centralized approach to developing drone technology is liable to disrupt the development of diverse technologies and programmatic competition that encourages innovative uses of drones.

Categories: Policy Institutes

Outer Banks Sea Level Rise: Worth Getting Exercised Over?

Cato Op-Eds - Thu, 06/26/2014 - 14:31

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

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

The Washington Post, yesterday, fanned the flames of a dispute over how much sea level rise the residents of the North Carolina Outer Banks should plan upon for this century.

The dispute arose when, a few years ago, politicians in Raleigh decided to get involved in the business of climate forecasting,  and decreed that the Outer Banks region should expect a 39-inch sea level rise by the year 2100 and that people need to plan for a  future based upon this number. Some of the rumored plans include abandonment of the region’s major roadways, stopping new construction, and re-zoning the land to declare all property at an elevation less than 39 inches to be uninhabitable. The state government under then-governor Beverly Perdue (D) was “helping” by preparing a website that showed all property that would be under water by the year 2100, deep-sixing the equity held in many beach houses.

It’s no surprise that there’s a pushback against the state’s 39-inch forecast, which was based on a selection of outdated science that foretold a much more alarming story than newer scientific studies.

For example, the latest (fifth) assessment report from the U.N.’s Intergovernmental Panel on Climate Change (IPCC) projects that the global average sea level rise over the course of the 21st century would be in the range of 10 to 32 inches, with a mean value of about 19 inches.  This is only about 50% of the 39-inch projection.

And, the IPCC projection is probably too high because it was driven by a collection of climate models which new science indicates produce too much warming given a rise in atmospheric carbon dioxide levels.  If the models were forced to run with a lower sensitivity to carbon dioxide emissions, their sea level rise projections would decline proportionally,  down to about 13 inches.  This arguably better value is only 1/3rd of the 39-inch value forwarded by the NC state government.  No wonder the realtors and mortgage bankers were up in arms about Bev Purdue’s map.

Not so fast, said the supporters of the 39-inch rise, pointing to a 2012 by Asbury Sallenger and colleagues from the U.S Geological Survey (USGS), which identified a sea level rise “hot spot” that stretched from Cape Hatteras northward to Maine.  It showed that the rate of sea level rise in the “hot spot” was substantially greater than the global average, and postulated that it was the result of an anthropogenic climate change-induced slowdown of the Gulf Stream.  This slowdown was only expected to get worse in the future (according to the same climate models that can’t get the climate response to carbon dioxide level increases correct) and therefore, the Outer Banks should expect substantially more sea level rise than the average experienced by the rest of the world.

Unfortunately, Sallenger et al. was typical of so many climate projections that seem to thrive in a data-poor environment. Six months ago, we highlighted a study by Tom Rossby and colleagues which looked directly and more completely at the recent behavior of the Gulf Stream. Rossby identified no slowdown at all, and directly questioned the Sallenger explanation for the “hot spot”:

Recently, two papers have suggested that the [Gulf Stream] may be weakening based on the well-documented accelerated Sea Level Rise (SLR) along the U.S. east coast (Sallenger et al., 2012; Ezer et al., 2013). …In contrast to these recent assertions of a weakening Gulf Stream our direct measurements of Gulf Stream currents for the past 20 years indicate no such trend…”

The Rossby study did not dispute the existence of the “hot spot,” but, rather, the very shaky hypothesis that it was due to a slowdown of the Gulf Stream resulting from global warming, and even more warming would make things (warning:  familiar meme ahead) worse than we thought!

In fact, one only needs logic to refute the hypothesis.  The Gulf Stream is the principal transporter of tropical warmth to high latitudes in the western hemisphere.  If it were significantly weaker, that would obviously increase the temperature gradient (difference) between the pole and the tropics, something that is obviously happening in the opposite direction (unless all those stories about disproportionate north polar warming are hooey).

Another recent study by Rutgers University’s Robert Kopp took the “hot spot” analysis further and found that, while it has existed since the mid-1970s, it was largely explained by natural  variability present within various patterns of atmospheric circulation. No need to invoke global warming.  Kopp went so far as to calculate that it would take another 20 years or so of a continuation of the “hot spot” sea level rise before the rate would even rise about the level of natural variability observed during the 20th century. In other words, it is way too soon to tell whether  the Outer Banks will experience a sea level rise greater than the global average.

Recognizing this, and that the level of uncertainty is large and grows larger the further out into the future, the current North Carolina governor Pat McCrory (R) and Republican-led state legislature rescinded the 39-inch projection and are working on new guidance that reportedly extends out only 30 years with projections of no more than 8 inches of rise during that time (which is still probably on the high side of what will occur).

It doesn’t take a rocket scientist to notice that the Outer Banks is a pretty unstable environment to begin with, one that is continually reshaped by ocean currents, hurricanes, nor’easters, and more recently, human engineering.

All these shaping forces will continue into the future—with or without climate change.

So, too, will fancy houses on stilts out in the waves.  That is part and parcel of the dynamic environment there and our desire to live (or vacation) as close to the edge of the sea as possible.

The degree to which that unstable environment will be preserved, reshaped or shored up is best left to the locals, although the situation is infinitely more complicated in that many of those large vacation homes would not exist if it weren’t for federal subsidies in the form of reduced flood insurance rates.

This is a complex system, partly of our own making. Managing it going forward isn’t exactly helped by scare-mongering. Proclaiming a 39-inch sea level rise in the face of a large body of contradictory science will only further rachet up the public’s distrust of gloomsaying scientists.

In closing, it’s appropriate to remember President Dwight Eisenhower’s telling paragraph in his iconic 1961 Farewell Address:

Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite. 

…as in the publicly-funded bureaucrats and cherry-pickers in Raleigh.

References:

Kopp, R. E., 2013. Does the mid-Atlantic United States sea level acceleration hot spot reflect ocean dynamic variability? Geophysical Research Letters, 40, 3981–3985, doi:10.1002/grl.50781

Rossby, T., et al., 2013. On the long-term stability of Gulf Stream transport based on 20 years of direct measurements. Geophysical Research letters, doi: 10.1002/2013GL058636

Sallenger Jr., A. H., K. S. Doran, and P. A. Howd, 2012. Hotspot of accelerated sea-level rise on the Atlantic coast of North America. Nature Climate Change, 2, 884-888.

 

Categories: Policy Institutes

Military Cooperation with China: RIMPAC as a Model for the Future

Cato Op-Eds - Thu, 06/26/2014 - 14:23

Doug Bandow

The Rim of the Pacific Exercise recently concluded in waters near Hawaii.  For the first time China joined the drills.  It was a small but positive step for integrating Beijing into more international institutions.

RIMPAC started in 1971.  This year there are 23 participants, including the People’s Republic of China, which explained that the maneuvers are “an important mission of military diplomacy” and a means to strengthen “friendly relations with countries of the South Pacific through public diplomacy.”

Beijing’s participation comes at a time of significant regional tension.  The PRC’s more aggressive stance in asserting its territorial claims in the South China Sea and Sea of Japan have led to dangerous maritime confrontations. 

RIMPAC offers an opportunity to create some countervailing pressure in favor of a less threatening regional naval environment.  At the political level inviting Beijing to participate demonstrates respect for China’s increased military power and international role.   Doing so also counters the charge that Washington is seeking to isolate and contain the PRC.

Moreover, inclusion hints at the benefits for Beijing of a civil if not necessarily friendly relationship with its neighbors as well as America.  No doubt, the direct pay-off for China from RIMPAC is small. 

But to be treated as an equal and regular participant in international affairs is advantageous.  Although any great power must be prepared to accept unpopularity when necessary, in general a friendly environment is more conducive to ensuring both peace and prosperity. 

Military cooperation also is important.  Beijing can play a more important role in peacekeeping, anti-piracy patrols, counter-proliferation searches, search-and-rescue efforts, and other international operations.  This demonstrates to Chinese naval officers that there are missions other than challenging the U.S. or other states as enemies.

The PRC’s participation in RIMPAC also will provide some valuable human interaction among naval personnel.  It is harder to hate an entire people when you’ve had a drink with individuals.

Of course, participation in one or more military maneuvers is not enough to maintain the peace, especially when the respective governments have been only too willing to play games of international chicken over emotional claims to territory.  But including the PRC can be seen as an aspect of a larger allied strategy of inclusion.

Today Beijing remains a revisionist power, determined to overturn past decisions seen as unfair and unreasonable.  Its challenges likely will ebb only if it perceives the cost of acting to be greater than the benefit of the status quo, or at least a more modest reform course achievable through negotiation.

Costs already are rising for China as Japan begins to take a more active military role and affected countries attempt to pull Washington more directly into their affairs.  At the same time, the U.S. and the PRC’s neighbors should think creatively about other activities and organizations which might entice greater Chinese involvement. 

The more invested the PRC in the existing order, the less likely Zhongnanhai’s residents would be to risk disrupting the system.  To the extent the People’s Liberation Army and other services can be shown the benefits of peaceful cooperation, so much the better.

Of course, a little friendship diplomacy cannot close the gulf between China and America.  But the best sales force for America tend to be Americans, including in the military—at least when participants are not shooting at each other, of course.

As I point out in my latest article on China-US Focus:  “The U.S. and China’s neighbors increasingly look at Chinese naval vessels as a threat.  However, RIMPAC showcases them in a different role.  It will be up to Beijing, its Pacific neighbors, and the U.S. to find other opportunities to further invest the PRC in the existing geopolitical order.”

Doing so won’t be enough to keep the peace in the decades ahead.  But it would nonetheless be useful step in the right direction.

Categories: Policy Institutes

A Win, But a Major Missed Opportunity: NLRB v. Canning

Cato Op-Eds - Thu, 06/26/2014 - 13:24

Roger Pilon

To expand on Ilya’s earlier post, the Supreme Court today did indeed check President Obama’s unprecedented expansion of his recess appointments power when in January 2012 he filled three vacancies on the National Labor Relations Board with nominees that the Senate, then in “pro-forma” session, had to that point refused to confirm. In NLRB v. Noel Canning, the Court ruled unanimously in upholding the unanimous January 2013 decision of the D.C Circuit, which had vacated an NLRB order against the Noel Canning company, finding the three appointments to be unconstitutional. At issue, therefore, was the scope of president’s recess appointments power, his power “to fill up all Vacancies that may happen during the Recess of the Senate” by granting temporary commissions.

That power, however, is subsidiary to the president’s main appointments power, which is to make major appointments to his administration only “by and with the Advice and Consent of the Senate.” It was granted because, for much of our history, the Senate was in session only during certain periods of the year. If important vacancies should “happen” when the Senate was not in session, the president would be able to fill them so that the business of government could continue. Recess appointments were thus the exception, not the rule. In particular, the power was not meant to enable the president to make an end-run around the advice and consent of the Senate.

Unfortunately, in writing for the Court today, Justice Breyer has made a hash of Judge David Sentelle’s well-argued opinion below, as Justice Scalia makes clear in his concurrence for himself, Chief Justice Roberts, and Justices Thomas and Alito. As Scalia writes, the Recess Appointments Clause restricts the president’s power in two main ways. First, “it may be exercised only in ‘the Recess of the Senate,’ that is, the intermission between two formal legislative sessions. Second, it may be used to fill only those vacancies that ‘happen during the Recess,’ that is, offices that become vacant during the intermission.” The text is clear, Scalia says, and both conditions were clearly understood at the founding. But, he continues:

Today’s Court agrees that the appointments were invalid, but for the far narrower reason that they were made during a 3-day break in the Senate’s session. On its way to that result, the majority sweeps away the key textual limitations on the recess-appointment power. It holds, first, that the President can make appointments without the Senate’s participation even during short breaks in the middle of the Senate’s session, and second, that those appointments can fill offices that became vacant long before the break in which they were filled.

What was Breyer’s rationale for so watering down the clear constitutional text and so expanding the president’s power? To trump the text he offers what can only be called a tendentious reading of historical practice, to which Scalia answers: “What the majority needs to sustain its judgment is an ambiguous text and a clear historical practice. What it has is a clear text and an at-best-ambiguous historical practice.” Indeed,

The majority replaces the Constitution’s text with a new set of judge-made rules to govern recess appointments. Henceforth, the Senate can avoid triggering the President’s now-vast recess-appointment power by the odd contrivance of never adjourning for more than three days without holding a pro forma session at which it is understood that no business will be conducted. How this new regime will work in practice remains to be seen.

Scalia concludes sadly that today’s decision “will have the effect of aggrandizing the Presidency beyond its constitutional bounds and undermining respect for the separation of powers”—just what we need as the House considers whether to bring suit to try to check an increasingly out-of-control presidency. The decision today was a win, but it was also a major missed opportunity to restrain a power that for too long has been abused, flagrantly in this case. At least it illustrates, as we look to future elections, how important a question who sits on the Court is.

Categories: Policy Institutes

Common Core Pufferfish II: This Time, Poison’s Mentioned!

Cato Op-Eds - Thu, 06/26/2014 - 13:20

Neal McCluskey

Last week, I examined a Wall Street Journal/NBC News poll that found 59 percent of respondents favored implementing the Common Core national curriculum standards, 31 percent opposed. Of course, as has often been the case, that response came after a description of the Core was read that was biased both in what it said, and what it did not. It gave a positive spin to the Core while ignoring, in particular, federal coercion behind it.

Today, a survey was released by the Friedman Foundation for Educational Choice that, among many matters, asked people about the Core. Unlike many previous polls, this one tried to offer a balanced description of the Core. After first finding that without a description respondents opposed the Core 39 to 34 percent, the pollsters asked the following:

The objective of the Common Core State Standards Initiative is to establish similar academic standards and comparable tests across all states for students in grades K-12. The standards were initially developed by the National Governors Association and Council of Chief State School Officers. States and districts have adopted the common standards and tests in association with U.S. Department of Education incentives. In general, do you favor or oppose the “Common Core”?

The results? 50 percent supported the Core, 41 percent opposed. It switched support, but the margin was a fraction of the WSJ/NBC survey: 9 points instead of 28. And the wording is still dubious, featuring the awkward phrasing “in association with U.S. Department of Education incentives.” Make the wording more straightforward – and accurate – such as, “many States adopted the common standards and tests at the same time the federal government made doing so important to compete for federal funds,” and the gap might be smaller, or even reversed. Indeed, the Friedman poll found that a sizeable 74 percent of respondents thought the feds were doing a “fair” or “poor” job in K-12 education, versus only 22 percent saying “good” or “excellent.”

Drilling down a bit, the survey revealed some more interesting information about the how the public may truly feel about the Core. First, while respondents without children in school favored the post-description Core 52 to 38 percent, school parents opposed it 49 to 44 percent. Second, while the majority of respondents said it would make no difference in their vote if “a candidate for Governor, State Senator or Representative” supported the Common Core, 24 percent said it would make them less likely to support the candidate, versus 16 percent more likely.

So what does all this tell us? For one thing, polling is an inexact science. More importantly, the public is probably not nearly as supportive of the Core as many polls have suggested – indeed, without a description the plurality opposed it – and just mentioning the Pufferfish poison appears to make a difference.

[Programming note: Look for more coverage of the Friedman Foundation’s poll coming soon from Jason Bedrick. There’s a lot more to talk about!]

Categories: Policy Institutes

Oops: Got the Sign Wrong Trying to Explain Away the Global Warming “Pause”

Cato Op-Eds - Thu, 06/26/2014 - 12:16

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

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

A couple of years ago, when it was starting to become obvious that the average global surface temperature was not rising at anywhere near the rate that climate models projected, and in fact seemed to be leveling off rather than speeding up, explanations for the slowdown sprouted like mushrooms in compost.

We humbly suggested a combination of natural variability and a lower “sensitivity” of surface temperature to rising carbon dioxide.

Now, several years later, the “pause” continues. Natural variability is now widely accepted as making a significant contribution and our argument for a lowered climate sensitivity—which would indicate that existing climate models are not reliable tools for projecting future climate trends—is buoyed by accumulating evidence and is gaining support in the broader climate research community. Yet is largely rejected by federal regulators and their scientific supporters.  These folks prefer rather more exotic explanations that seek to deflect the blame away from the climate models and thus preserve their over-heated projections of future global warming.

The problem with exotic explanations is that they tend to unravel like exotic dancers.

Such is the case for the explanation—popular with the press when it was first proposed—that an increase in aerosol emissions, particularly from China, was acting to help offset the warming influence of anthropogenic carbon dioxide emissions.

The suggestion was made back in 2011 by a team of researchers led by Boston University’s Robert Kaufmann and published in the Proceedings of the National Academy of Sciences. Shortly after it appeared, we were critical of it in these pages, pointing out how the explanation was inconsistent with several lines of data.

Now, a new paper appearing in the peer-reviewed scientific literature takes a deeper view of aerosol emissions during the past 15 years and finds that, in net, changes in aerosol emissions over the period 1996-2010 contributed a net warming pressure to the earth’s climate.

Kühn et al. (2014) write:

Increases in Asian aerosol emissions have been suggested as one possible reason for the hiatus in global temperature increase during the past 15 years. We study the effect of sulphur and black carbon (BC) emission changes between 1996-2010 on the global energy balance. We find that the increased Asian emissions have had very little regional or global effects, while the emission reductions in Europe and the U.S. have caused a positive radiative forcing. In our simulations, the global-mean aerosol direct radiative effect changes 0.06 W/m2 during 1996–2010, while the effective radiative forcing (ERF) is 0.42 W/m2.

So in other words, rather than acting to slow global warming during the past decade and a half as proposed by Kaufmann et al. (2011), changes in anthropogenic aerosol emissions (including declining emissions trends in North America and Europe) have acted to enhance global warming (described as contributing to a positive increase in the radiative forcing in the above quote).

This means that the “pause,” or whatever you want to call it, in the rise of global surface temperatures is even more significant than it is generally taken to be, because whatever is the reason behind it, it is not only acting to slow the rise from greenhouse gas emissions but also the added rise from changes in aerosol emissions.

Until we understand what this sizeable mechanism is and how it works, our ability to reliably look into the future and foresee what climate lies ahead is a mirage. Yet, somehow, the Obama Administration is progressing full speed ahead with regulations about the kinds of cars and trucks we can drive, the appliances we use, and the types of energy available, etc., all in the name of mitigating future climate change.

As we repeatedly point out, not only will the Obama Administration’s actions have no meaningful impact on the amount of future climate change, but it is far from clear that the rate of future change will even be enough to mitigate—or even to worry about.

References

Kaufmann, R. K., et al., 2011. Reconciling anthropogenic climate change with observed temperature 1998–2008. Proceedings of the National Academy of Sciences. doi: 10.1073/pnas.1102467108

Kühn, T., et al., 2014. Climate impacts of changing aersol emission since 1996. Geophysical Research Letters, doi: 10.1002/2014GL060349

Categories: Policy Institutes

Unanimous Supreme Court Slaps Down President Obama on Recess Appointments, Should've Gone Further

Cato Op-Eds - Thu, 06/26/2014 - 12:01

Ilya Shapiro

For the 12th time since January 2012, the Obama Justice Department has lost unanimously at the Supreme Court. This time it was over recess appointments, with all justices agreeing with that the Senate gets to determine when it’s not in session – which triggers the president’s power to appoint federal officials without Senate confirmation. (Indeed, that’s what we argued in the brief we filed). And that’s no surprise: based on oral argument, everyone was expecting the government to lose NLRB v. Noel Canning and lose big. For example, my colleague Nicholas Quinn Rosenkranz predicted a unanimous ruling at a Cato debate in January.

Unfortunately, the conventional wisdom about a narrow ruling was also proven correct. The only “rule” that emerges from Justice Breyer’s controlling opinion is that a three-day recess, the longest the Senate can adjourn without the House’s consent, isn’t long enough to enable recess appointments. That’s a very pragmatic decision and seems to confirm executive practice prior to recent years. It also happens to lack any connection to constitutional text (as Justice Scalia points out for four justices in concurrence), whose best reading indicates that only recesses between Senate sessions – not when, e.g., the Senate takes two weeks off around Christmas – count for purposes of activating the recess-appointment power. Moreover, that power is only textually justified to fill vacancies that arise during the recess itself, not for openings that the president didn’t happen to fill while the Senate was sitting. In other words, Justice Breyer’s unprincipled opinion, while limiting recent presidential practice, cements a much more expansive reading of that power than the Constitution allows. For practical purposes, we’ll see many more “pro forma” Senate sessions and also the empowerment of those who control the House – because, again, the Senate can’t recess without the House’s consent. Speaker Boehner, call your office.

To be sure, this ruling is a strong rebuke to this administration in this case, but the most that can be said for it more broadly is what Justice Scalia did in reading his concurrence from the bench this morning: “The Court’s decision will be cited in diverse contexts, including those presently unimagined, and will have the effect of aggrandizing the Presidency beyond its constitutional bounds and undermining respect for the separation of powers.”

Categories: Policy Institutes

The Case against 8

Cato Op-Eds - Thu, 06/26/2014 - 11:21

Robert A. Levy

In the video clip below, Chad Griffin, then Board President of the American Foundation for Equal Rights, discusses the battle for gay rights with Ted Olson, who successfully litigated California’s Prop 8 case.  Griffin suggests, in an apparent attempt at humor, that he might re-think his support for same-sex marriage after hearing that the Cato Institute and I, as Cato’s chairman, are outspoken advocates for marriage equality.

Regrettably, statements such as Griffin’s are too often misunderstood by less diligent members of the media and other casual observers who conflate libertarians and conservatives.  Cato has consistently embraced civil liberties, including but not limited to the right to same-sex marriage.  By contrast, conservatives – with whom we are mistakenly equated – have been selective in their endorsement of personal freedom.  Indeed, some conservatives, who vigorously promote federalism, have also promoted a Federal Marriage Amendment.  That amendment, which defines marriage throughout the country as “the union of a man and a woman,” would prohibit states from recognizing same-sex marriage within their own borders, even if desired by the state’s citizens.  What could be less compatible with fundamental principles of federalism?

More generally, conservatives agree with Cato on some issues – such as the right to bear arms, lower taxes, reduced spending, free trade, and less economic regulation.  Liberals agree with us on other issues – such as immigration reform, drug legalization, marriage equality, and a non-interventionist foreign policy.  Does that indicate libertarians are philosophically inconsistent?  No, it indicates quite the reverse – conservatives and liberals are philosophically inconsistent.  Conservatives want smaller government in the fiscal sphere, but they condone bigger government when it comes to empire building and regulating personal behavior.  Liberals want fewer government restrictions in the social sphere, but they embrace strict limits on economic liberties.  Unlike liberals and conservatives, Cato scholars have a consistent, minimalist view of the proper role of government.  We want government out of our wallets, out of our bedrooms, and out of foreign entanglements unless America’s vital interests are at stake.

Categories: Policy Institutes

Big Business Clashes with Libertarians and Tea Party over Ex-Im Bank

Cato Op-Eds - Thu, 06/26/2014 - 09:52

David Boaz

Two weeks ago I wrote about the efforts of big business to defeat libertarian-leaning legislators in states across the country. To confirm my point, on the same day the article appeared the Michigan Chamber of Commerce endorsed the opponent of Rep. Justin Amash, the one of whom I had written, “Most members of Congress vote for unconstitutional bills. Few of them make it an explicit campaign promise.”

Now a battle is brewing in Congress that pits libertarians and Tea Party supporters against the country’s biggest businesses. The Wall Street Journal headlines, “GOP’s Attack on Export-Import Bank Alarms Business Allies.” The “rise of tea-party-aligned lawmakers” is threatening this most visible example of corporate welfare, and David Brat’s attacks on “crony capitalism” in his surprise defeat of Eric Cantor have made some Republicans nervous. Amash told the Journal, “There are some large corporations that would like corporate welfare to continue.”

The biggest beneficiaries of Ex-Im’s billions are companies such as Boeing, General Electric and Caterpillar,  according to Veronique de Rugy, a senior research fellow at the Mercatus Center. Cato scholars have made the same point, including Aaron Lukas and Ian Vasquez in 2002 and Sallie James in 2011.

Matthew Yglesias of Vox notes, “The Export-Import Bank is a great example of the kind of thing a libertarian populist might oppose. That’s because the bank is a pretty textbook example of the government stepping in to arbitrarily help certain business owners.” And he points out that supporters of the Bank include the U.S. Chamber of Commerce, the National Association of Manufacturers, the AFL-CIO, Haley Barbour, and Dick Gephardt. He could have added Tom Donnelly of the American Enterprise Institute.

Rep. Adam Kinzinger (R-IL) said he worried about “a libertarian theology that’s really starting to creep in.” I hope he’s right.

Categories: Policy Institutes

Making Sense of Federal Housing Law, Once More With Feeling!

Cato Op-Eds - Thu, 06/26/2014 - 08:39

Ilya Shapiro

The Fair Housing Act was enacted to prevent discrimination in the buying, selling, and renting of homes on the basis of certain protected categories, including race. While it’s clear that the Act bars discriminatory intent, such as refusing to deal with members of a certain racial group, it remains an open question whether it covers claims of “disparate impact,” where the effects of a neutral policy—say, requiring a credit check—disproportionately harms members of the protected class.

In a new brief, Cato, along with the Pacific Legal Foundation and five other groups seeks to have this question answered in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project. This case involves a Texas program that allocates federal tax credits to developers to build low-income housing projects. The Inclusive Communities Project, which places low-income tenants in predominately white suburban neighborhoods, sued the Texas Department of Housing and Community Affairs because it disproportionately gave the credits to properties in minority-populated areas. ICP’s claim relied on the disparate impact theory, which reaches “conduct that has the necessary and foreseeable consequences of perpetuating segregation” and “disproportionately burden[s] a particular racial group.” The district court found for ICP after applying a ruling from another lower court that required defendants to justify their actions with a compelling governmental interest and prove that there were no less discriminatory alternatives.

While the case was on appeal, the U.S. Department of Housing and Urban Development issued regulations establishing a similar standard for Fair Housing Act disparate-impact claims. Under the new HUD regulations, the burden of proof shifts to the defendant if the plaintiff shows that the challenged practice “caused or predictably will cause a discriminatory effect.” The defendant must then prove that the challenged practice is “necessary to achieve one or more substantial, legitimate, nondiscriminatory interests,” but the plaintiff may still prevail upon showing that there was another practice with a less discriminatory effect. The Fifth Circuit panel adopted the HUD standard and remanded the case back to the district court, at which point Texas asked the Supreme Court to step in and answer two questions: (1) Whether disparate-impact claims are cognizable under the Fair Housing Act; and (2) what are the standards and burdens of proof that should apply if such claims are cognizable?

The Supreme Court previously granted cert. in two cases dealing with these issues—Magner v. Gallagher and Mount Holly v. Mount Holly Gardens Citizens in Action—but both settled before a ruling on the merits. While the Court has never explicitly considered the use of disparate impact under the FHA, the circuit courts have developed diverging jurisprudence. The D.C. Circuit has yet to address these issues at all, and HUD’s new regulations further confuse everything. The issue is ripe and the Court should rule in order to settle this split by recognizing that the text of the FHA doesn’t support disparate-impact claims.

The relevant provision makes it unlawful to “refuse to sell or rent … because of race.” Such language connotes a purposeful, causal connection between the refusal to deal and the person’s race. Compare that language to the Age Discrimination in Employment Act, which prevents an employer from taking action against an employee that would “adversely affect his status as an employee, because of such individual’s age.”  The Supreme Court allowed disparate-impact claims to proceed under that provision, contrasting it with another section of the ADEA that forbids “discriminat[ing] against any individual … because of such individual’s age.” Whereas the first section focused on the effect on the employee, the second focuses on the action of the employer. This finding is consistent with Title VI of the Civil Rights Act, which forbids intentional discrimination but not disparate impact. Review by the Court is needed to resolve the conflict between disparate impact and equal protection.

Subjecting defendants to liability for disparate impact forces them into unconstitutional race-conscious decision making, resulting in a de facto quota system. The Supreme Court should take this case and resolve the issue once and for all.

Categories: Policy Institutes

Small is Beautiful

Cato Op-Eds - Wed, 06/25/2014 - 16:46

Chris Edwards

Thank you for reading the Cato blog and doing what you do to help spread freedom. Now you have the chance to advocate liberty every day while you are going to work or running errands.

New at the Cato store is this handsome DownsizingGovernment.org bumper sticker.

 

The sticker is appropriate for bumpers, hoods, fenders, and windshields, or even around your home on garage doors and mailboxes.

And here’s a special deal for Cato blog readers: the first 25 people to email my assistant Nick (nzaiac [at] cato [dot] org) with their street address will receive a free sticker.

And there’s more: members of Congress and top White House aides are eligible for as many free stickers as will fit on their Lexus and BMW bumpers! More than anybody else, these folks need a daily reminder that Small is Beautiful When It Comes to Government.

Categories: Policy Institutes

Sugar from Mexico: Who's Being Injured?

Cato Op-Eds - Wed, 06/25/2014 - 15:47

Daniel R. Pearson

On March 28, 2014, the U.S. sugar industry filed antidumping and countervailing duty (AD/CVD) petitions against imports of sugar from Mexico.  From the time that NAFTA’s sugar provisions were fully implemented in 2008, Mexico has been the only country in the world with unfettered access to the U.S. sugar market.  Sugar interests now are hoping to clamp the fetters back on.  It is not at all clear whether that effort will succeed.

Both the Commerce Department and the U.S. International Trade Commission (ITC) play important roles in this process.  Commerce must determine the extent of any dumping margin (selling at “less than fair value” due to pricing practices of individual firms) and any countervailing duty margin (benefit received by Mexican exporters from subsidies provided by their government).  The estimated dumping margins for the preliminary phase of the investigation range from 30 to 64 percent; they are likely to be adjusted based on additional information gained in the final phase of the investigation.  Commerce has not yet had an opportunity to establish CVD margins.  Given the degree of government involvement in Mexico’s sugar business, a CVD margin at some level seems likely.

The job of the ITC is to determine whether the domestic sugar industry has been “injured” by the imported sugar.  In its preliminary determination, the commission voted unanimously in the affirmative, which means that the investigation will go forward into its final phase.  This vote was not at all a surprise.  The legal standard for a negative vote in a preliminary determination is quite high.  To have voted in the negative, the ITC would have had to conclude that there was no “reasonable indication that a domestic industry is materially injured or threatened with material injury.”  That is a very difficult standard to meet on the basis of the somewhat limited preliminary record – often with inconclusive evidence – that must be compiled not more than 45 days after the case has been filed. 

So Commerce can be expected to impose temporary AD/CVD duties this fall at a level equal to their preliminary margins. The ITC is likely to hold its hearing as part of the final-phase investigation sometime early in 2015, with the vote taking place about a month later. 

What issues will the commission deal with as it makes a final determination on injury?  The statute requires that findings be made on three key issues:  (1) Volume.  Was the absolute volume of sugar imports from Mexico, or the increase in volume, significant?  (2)  Price.  Have there been significant price effects – underselling of U.S. prices by imported sugar, or price depression or suppression in the U.S. market?  (3) Impact.  Has the U.S. sugar industry experienced negative impact, such as declines in output, sales, market share, profitability, employment, etc? 

The public (non-confidential) version of the ITC’s opinion (Investigation Nos. 701-TA-513 and 731-TA-1249 can be accessed for free on the ITC website by registering here) makes clear that the commissioners found evidence of volume and price effects, as well as some impact on the domestic industry.  However, a similar outcome in the final investigation is far from preordained.  One of the reasons is that the legal standard is different in the final.  Instead of finding only a “reasonable indication” of material injury, the commission actually has to determine that the domestic industry has been materially injured, or is threatened with such injury. 

Another difference is that the three-year “period of investigation” (POI) will change.  Instead of beginning Oct. 1, 2010, the POI in the final will begin a year later.  In other words, marketplace trends are likely to be different.  A three-year downtrend in world sugar prices appears to have bottomed out in December 2013, with prices higher since then.  United States’ sugar prices also have been stronger.  So, in its final determination, the ITC will be working with an updated record and a more rigorous legal standard.

Another important issue is the question of “causation.”  Was any injury experienced by the domestic sugar industry actually caused by imports of sugar from Mexico?  The record shows that the market share of U.S. producers rose 4.2 percentage points over the POI. Were U.S. producers injured by a smaller 2.4-percentage-point increase in the share of imports from Mexico–especially when the big losers appear to have been producers in other countries, who lost 6.6 percentage points? 

There also are doubts as to whether any price effects were caused by imports from Mexico.  The preliminary record shows underselling of U.S. sugar by Mexican imports in 65.8 percent of measured transactions.  However, making those price comparisons no doubt was difficult because most of the imports from Mexico are of a grade called “estandar” (“standard,” in English), which has an intermediate purity range not produced in the United States. Comparing prices of products that are not identical can be tricky. Parties are actively contesting this issue.  How it is resolved could have a big influence on the case. 

A final uncertainty is the possibility that the sugar industries on both sides of the Rio Grande could enter into a “suspension agreement,” which would suspend the AD/CVD investigation.  In this scenario, Mexican and U.S. producers would consent to some form of managed trade in sugar, agreeing to restrictions on the volume of trade or the price at which imports could be sold. This approach would need to be blessed by Commerce, which tends to listen closely to the preferences of U.S. industries.  There are a number of precedents for such an arrangement, including one regulating shipments of Mexican tomatoes into the United States. 

What to say about such a suspension agreement?  Managed trade always will limit the gains that can be achieved by open and competitive markets, thus causing deadweight losses to consumers and the broader economy.  However, an agreement that allows some imports from Mexico clearly is preferable to large AD/CVD levies that allow none. 

Those who support economic growth and opportunity should hope that no suspension agreement is reached, and that the ITC ends the threat of AD/CVD duties by concluding that Mexican sugar has not injured the U.S. sugar industry.  The real injury in this marketplace is caused by the barrier between producers and consumers created by the U.S. sugar program.  It’s time to end that injury by taking those fetters off.

Categories: Policy Institutes

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