Archive for November, 2010
First Amendment Victory in Second Circuit
As the legal battle against Obamacare continues, we got good constitutional news today in another aspect of health care law. The Second Circuit Court of Appeals, based in New York City, ruled that statutes restricting commercial speech about prescription drug-related data gathering are unconstitutional. The court emphasized that the First Amendment protects “[e]ven dry information, devoid of advocacy, political relevance, or artistic expression.”
The case, IMS Health v. Sorrell, concerned a Vermont law that sought to constrain various aspects of prescriber-identifiable data gathering, dissemination, and use. The state argued that such information collection and exchange could induce doctors to alter their prescribing practices in ways that impose additional costs on the state’s budget. Most notably, the law outlawed the transfer of doctors’ prescription history to facilitate drug companies’ one-on-one marketing—a practice known as “detailing” —because the state believed detailing drives up brand-name drug sales and, in turn, health care costs. Thus, the Vermont law would have eliminated a key part of the market by hindering economic incentives to comprehensively gather the data. The state argued that the data sharing isn’t “traditional journalistic activity,” it’s not protected by the First Amendment.
Cato joined the Pacific Legal Foundation, the Progress & Freedom Foundation, and two trade associations to file an amicus brief in the case in support of the plaintiffs challenging the law. The Vermont Prescription Restraint Law (and the similar laws enacted in New Hampshire and Maine) imposed unprecedented censorship on a broad swath of socially important information. We are gratified that the Second Circuit upheld First Amendment protections here and congratulate the plaintiffs on their victory.
You can read Cato’s brief here and the Second Circuit’s decision here.
University Speech Codes, Reborn As “Anti-Bullying” Rules?
The Foundation for Individual Rights in Education (FIRE) is out with this timely warning about the “Tyler Clementi Higher Education Anti-Harassment Act,” a bill introduced in Congress by Sen. Frank Lautenberg and Rep. Rush Holt, both New Jersey Democrats:
…the bill redefines [campus-based] harassment in a manner that is at odds with the Supreme Court’s exacting definition of student-on-student harassment, which successfully balances the need to respond to extreme behavior with the importance of free speech on campus. In Davis v. Monroe County Board of Education, 526 U.S. 629 (1999), the Court defined student-on-student harassment as conduct that is “so severe, pervasive, and objectively offensive, and that so undermines and detracts from the victims’ educational experience, that the victim-students are effectively denied equal access to an institution’s resources and opportunities.” This definition has been relied upon by courts for more than a decade and has been adopted by many institutions across the country, including the entire University of California system.
Flouting the Supreme Court’s carefully crafted balance, the bill removes the requirement that the behavior in question be objectively offensive. The loss of this crucial “reasonable person” standard means that those most interested in silencing viewpoints they don’t like will effectively determine what speech should be banned from campus. Unconstitutional definitions of “harassment” have already provided the most commonly abused rationale justifying censorship, having been applied to a student magazine at Tufts University that published true if unflattering facts about Islam, a Brandeis professor who used an epithet in order to explain its origins and condemn its use as a slur, and even a student at an Indiana college simply for publicly reading a book.
Because this bill has the potential to be a powerful tool for censorship, it would likely be ruled unconstitutional were it to become law. Indeed, since 1989 there have been at least sixteen successful challenges to campus codes that included similarly broad and vague harassment provisions. Every one of those lawsuits has resulted in the challenged policy either being declared unconstitutional or revised as part of an out-of-court settlement. If passed, the bill is likely to violate students’ rights while leading colleges into expensive, embarrassing, and unsuccessful litigation.
As FIRE President Greg Lukianoff points out, existing law gives universities (and civil authorities) ample authority to punish the serious breach of student privacy alleged in the Clementi case. Daniel Luzer of the Washington Monthly notes that Rutgers already had in place an anti-bullying policy of the sort envisioned by the bill.
Also of concern is the Lautenberg-Holt bill’s requirement that administrators move against off-campus or online student behavior. This provision, says FIRE, in practice “is likely to compel universities to monitor student behavior in unprecedented ways — including close and comprehensive monitoring of social networking sites like Facebook and Twitter — in order to ward off potential lawsuits.”
The Campaign Finance Crusade of The New York Times
In a barely coherent editorial this morning, The New York Times continues its decades-long crusade against free speech — except its own, of course — with yet another blast at the Supreme Court over its campaign finance decision last January in the Citizens United case. And again, the Times misstates the decision: it did not overturn “a century of precedent.” Perhaps its editorialists can be forgiven for that, even after nearly a year to get it right: after all, the president himself continues to misstate the decision, and that’s good enough for them.
Entitled “Our Constitutional Court,” the editorial’s main point seems to be that the Court is “redefining itself as a constitutional court.” That’s a curious charge. Many countries have “constitutional courts” that give, among other things, advisory opinions about the constitutionality of pending legislation. Our courts, by contrast, decide only “cases or controversies” that are ripe for decision, based on facts that bring the controversy into fairly sharp relief; but they’re still often “constitutional” decisions. The charge here, apparently, is that the Court acted where it needn’t have or, perhaps, had no authority to act. Yet the facts belie that.
Citizens United is a complex decision, but the facts giving rise to it are fairly simple. It arose over the question whether Citizens United, a non-profit corporation, could advertise a film critical of Hillary Clinton in broadcast ads during the 2008 primary season, in apparent violation of the 2002 McCain-Feingold Act. Thus, there was a real controversy here. But in upholding the right of corporations and unions to make independent campaign expenditures supporting or opposing candidates, the Court sustained a “facial challenge” to the statute that the parties had agreed to dismiss, and in so doing reached out to overturn an anomalous and mistaken 1990 decision that was directly on point, even though that case was not before the Court in the initial ’go-round of Citizens United. And that, apparently, is the “judicial activism” that so exercises the Times’ editorialists.
In truth, however, the Court was following a fairly well established practice. In First Amendment speech cases, as here, the Court entertains “facial” rather than “as-applied” challenges for a very simple reason. Were the Court to have found simply that Citizens United’s rights were violated in this instance, based on these particular facts, the statutory provisions restricting those rights would be left standing, unlike with a facial challenge, and the future speech not only of Citizens United but of all others would be chilled. The First Amendment will not stand that, and the Court so ruled.
Of all people, the Times editorialists surely understand that. But in their minds, campaign finance is not speech, and so they use this decision, in light of the “tumultuous change in the recent elections,” with which the editorial begins, to make a much broader point: that the Court decided “a sweeping issue of constitutional law” by “moving past the limited controversy that was actually in the case.” Thus the Court “inserted itself where [it] has said it should be most restrained, deferring to other branches with more competence to decide questions about the workings of politics, including about the role of money.”
That’s rich — the Times championing judicial restraint. One wonders what the response would have been had the Court held that the Great Gray Lady’s corporate wealth could not be put behind campaign editorials, almost all supporting the candidates of a single party. Fortunately, the Court seems to be moving in the opposite direction. The Times editorialists are perfectly free to put their corporate wealth behind candidates, and so, now, are the rest of us — thanks to the Court’s grasping the nettle.
Beijing Key in Controlling North Korea’s Recklessness
Shortly after unveiling a new uranium enrichment facility, North Korea has shelled a disputed island held by the Republic of Korea. A score of South Koreans reportedly were killed or wounded.
These two steps underscore the North’s reputation for recklessness. Unfortunately, there is no easy solution: serious military retaliation risks full-scale war, while intensified sanctions will have no impact without China’s support.
Instead, the U.S. should join with the ROK in an intensive diplomatic offensive in Beijing. So far China has assumed that the Korean status quo is to its advantage. However, Washington and Seoul should point out that Beijing has much to lose if things go badly in North Korea.
The North is about to embark on a potentially uncertain leadership transition. North Koreans remain impoverished; indeed, malnutrition reportedly is spreading. With the regime apparently determined to press ahead with its nuclear program while committing regular acts of war against the South, the entire peninsula could go up in flames. China would be burned, along with the rest of North Korea’s neighbors.
The U.S. also should inform Beijing that Washington might choose not to remain in the middle if the North continues its nuclear program. Given the choice of forever guaranteeing South Korean and Japanese security against an irresponsible North Korea, or allowing those nations to decide on their own defense, including possible acquisition of nuclear weapons, the U.S. would seriously consider the latter. Then China would have to deal with the consequences.
Beijing’s best option would be to join with the U.S. and South Korea in offering a package deal for denuclearization, backed by effective sanctions, meaning the cut-off of Chinese food and energy assistance. Otherwise, Beijing might find itself sharing in a future North Korean nightmare.
The Fed’s Impossible Mandate
The Federal Reserve’s longstanding statutory role is an impossible one, according to Cato Institute Senior Fellow Gerald P. O’Driscoll, Jr., and it’s time for it to end. We discussed the “dual mandate” in today’s Cato Daily Podcast (Subscribe via RSS and iTunes):
Things to Be Thankful For
Not long ago a journalist asked me what freedoms we take for granted in America. Now, I spend most of my time sounding the alarm about the freedoms we’re losing. But this was a good opportunity to step back and consider how America is different from much of world history — and why immigrants still flock here.
If we ask how life in the United States is different from life in most of the history of the world — and still different from much of the world — a few key elements come to mind.
Rule of law. Perhaps the greatest achievement in history is the subordination of power to law. That is, in modern America we have created structures that limit and control the arbitrary power of government. No longer can one man — a king, a priest, a communist party boss — take another person’s life or property at the ruler’s whim. Citizens can go about their business, generally confident that they won’t be dragged off the streets to disappear forever, and confident that their hard-earned property won’t be confiscated without warning. We may take the rule of law for granted, but immigrants from China, Haiti, Syria, and other parts of the world know how rare it is.
Equality. For most of history people were firmly assigned to a particular status — clergy, nobility, and peasants. Kings and lords and serfs. Brahmans, other castes, and untouchables in India. If your father was a noble or a peasant, so would you be. The American Revolution swept away such distinctions. In America all men were created equal. Thomas Jefferson declared “that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately, by the grace of God.” In America some people may be smarter, richer, stronger, or more beautiful than others, but “I’m as good as you” is our national creed. We are all citizens, equal before the law, free to rise as far as our talents will take us.
Equality for women. Throughout much of history women were the property of their fathers or their husbands. They were often barred from owning property, testifying in court, signing contracts, or participating in government. Equality for women took longer than equality for men, but today in America and other civilized parts of the world women have the same legal rights as men.
Self-government. The Declaration of Independence proclaims that “governments are instituted” to secure the rights of “life, liberty, and the pursuit of happiness,” and that those governments “derive their just powers from the consent of the governed.” Early governments were often formed in the conquest of one people by another, and the right of the rulers to rule was attributed to God’s will and passed along from father to son. In a few places — Athens, Rome, medieval Germany — there were fitful attempts to create a democratic government. Now, after America’s example, we take it for granted in civilized countries that governments stand or fall on popular consent.
Freedom of speech. In a world of Michael Moore, Ann Coulter, and cable pornography, it’s hard to imagine just how new and how rare free speech is. Lots of people died for the right to say what they believed. In China and Africa and the Arab world, they still do. Fortunately, we’ve realized that while free speech may irritate each of us at some point, we’re all better off for it.
Freedom of religion. Church and state have been bound together since time immemorial. The state claimed divine sanction, the church got money and power, the combination left little room for freedom. As late as the 17th century, Europe was wracked by religious wars. England, Sweden, and other countries still have an established church, though their citizens are free to worship elsewhere. Many people used to think that a country could only survive if everyone worshipped the one true God in the one true way. The American Founders established religious freedom.
Property and contract. We owe our unprecedented standard of living to the capitalist freedoms of private property and free markets. When people are able to own property and make contracts, they create wealth. Free markets and the legal institutions to enforce contracts make possible vast economic undertakings–from the design and construction of airplanes to worldwide computer networks and ATM systems. But to appreciate the benefits of free markets, we don’t have to marvel at skyscrapers while listening to MP3 players. We can just give thanks for enough food to live on, and central heating, and the medical care that has lowered the infant mortality rate from about 20 percent to less than 1 percent.
A Kenyan boy who managed to get to the United States told a reporter for Woman’s World magazine that America is “heaven.” Compared to countries that lack the rule of law, equality, property rights, free markets, and freedom of speech and worship, it certainly is. A good point to keep in mind this Thanksgiving Day.
This article originally appeared in the Washington Times in 2004 and was included in my book The Politics of Freedom.
ObamaCare’s ‘Medical Loss Ratio’ Regs Encourage Fraud, Unnecessary Medical Services
Yesterday, the U.S. Department of Health and Human Services issued regulations implementing ObamaCare‘s rule mandating that health insurers maintain minimum “medical loss ratios.”
Opponents of private health insurance have made a fetish of MLRs – a statistic that insurers developed to show investors the share of premiums they spend on claims. (“See? They call it a ‘loss’ when they pay for medical care — that proves they’re evil!”) So the opponents of private health insurance who crafted ObamaCare included a rule requiring carriers to spend at least 80 percent of premium revenue (large employers must spend 85 percent) on “your health care.” What could possibly go wrong?
The folly and false compassion of ObamaCare are on full display in the MLR regs, where government bureaucrats have evidently determined that unnecessary and harmful medical services, and even insurance fraud, are in fact good for patients. Okay, HHS bureaucrats don’t actually think that. But ObamaCare’s MLR regs include fraud prevention and utilization review among the administrative expenses on which carriers may spend no more than 20 percent of revenue (15 percent for large employers). That will effectively discourage insurers from policing fraud and conducting utilization reviews that protect patients from the expense and risks of unnecessary medical tests and procedures.
ObamaCare’s fatal conceit is that government bureaucrats can determine and deliver what is good for patients. Consumers will continue to feel the pain – costs will continue to rise and more insurers will flee the marketplace – until Congress gives up that conceit and repeals this law.
Filed under: Cato Publications; General; Government and Politics; Health Care
Secrecy or Privacy? The Power of Language
My friend Kelly Young notes (on Facebook) this Washington Post article on guns used in crimes:
I am awed again by the power of language. The Washingt0n Post today claims that government protection of the identity of lawful purchasers of legal weapons is “secrecy” to be “penetrated” for the sake of the paper’s reporting. It is not “privacy” that is “violated,” as with release of airport scans of travelers, gathering names of minors seeking abortions, and warrantless searches of homes. And how about those secret journalistic sources?
(Language cleaned up slightly, as the original was typed Blackberry-style.) He’s right. The word “privacy” doesn’t appear in the article. Maybe a cynics’ dictionary would read, “Privacy is the ability to keep facts about myself hidden from you. Secrecy is your keeping facts about yourself hidden from me.”
Washington Post-ABC News Push-Poll on Strip-Search Machines
In public opinion research, “salience” is the word often used to describe what is at the forefront of people’s minds. Salience influences people’s responses to polls: If they’ve just thought about something, their responses will reflect what they’ve just thought about.
It makes sense, and it’s one of the theses of Jonathan Zaller’s public opinion reference book The Nature and Origins of Mass Opinion. Most people don’t hold fixed views on most matters of public debate. They merely improvise, when asked, based in part on what issues are salient for them.
A Washington Post-ABC News poll out today finds that most people support the body scanning machines the Transportation Security Administration is installing in airports. The new “enhanced” pat-downs don’t fare so well.
How do strip-search machines get the level of approval they do? The poll itself pushes terrorism to the forefront before inquiring about TSA security measures. The first question goes to frequency of travel. The second two are:
2. Are you personally worried about traveling by commercial airplane because of the risk of terrorism, or do you think the risk is not that great? (IF WORRIED) Would you say you are very worried or only somewhat?
3. What do you think is more important right now – (for the federal government to investigate possible terrorist threats, even if that intrudes on personal privacy); or (for the federal government not to intrude on personal privacy, even if that limits its ability to investigate possible terrorist threats)?
Before being asked about strip-search machines, poll-takers hear cognates of “terror” three times, “privacy” once.
Thinking about the taste of a dirty worm squishing around in your mouth when you bite into an apple, do you think pesticide use should be increased or decreased?
Radley Balko’s thesis that the media are more statist than liberal finds validation in a sampling of opinion pages, finds Matt Welch. You just might find it by sampling poll designs as well.
Tech Lobbying, Entrepreneurship, and the Innovation Economy
Adam Thierer’s lead article in the most recent Cato Policy Report is called “The Sad State of Cyber-Politics.” It goes through so many ways tech and telecom companies are playing the Washington game to win or keep competitive advantage.
It’s a nice set-up to a Washington Post opinion piece from this weekend in which TownFlier CEO Morris Panner talks about the growing riches accruing to Washington influencers:
We are creating so much regulation – over tax policy, health care, financial activity – that smart people have figured out that they can get rich faster and more easily by manipulating rules on behalf of existing corporations than by creating net new activity and wealth. Gamesmanship pays better than entrepreneurship.
Thierer sees some hope for the tech sector, for a few reasons:
Smaller tech companies have thus far largely resisted the urge [to engage with Washington]. Hopefully that’s for principled reasons, not just due to a shortage of lobbying resources. Second, the esoteric nature of many Internet and digital technology policy discussions frustrates many lawmakers and often forces them to lose interest in these topics. Third, the breakneck pace of technological change makes it difficult for regulators to bottle up innovation and entrepreneurialism.
Panner’s broader piece calls for “a national campaign to create transparency in our legislation and a national moratorium on the creation of commissions, regulators and czars. It is time for Congress to do the hard job of saying what lawmakers mean in clear and easy-to-understand language.” He continues, “We should reject bills that are thousands of pages or that delegate vast authority to unelected regulators.”
That would be a start.
Tax Loopholes Are Corrupt and Inefficient, but They Should only Be Eliminated if Every Penny of New Revenue Is Used to Lower Tax Rates
There’s been a lot of heated discussion about various preferences, deductions, credits, shelters, and other loopholes in the tax code. Some of this debate has revolved around whether it is legitimate to refer to these provisions as “tax expenditures” or “subsidies.”
Michael Cannon vociferously argues that subsidies and expenditures only occur when the government takes money from person A and gives it to person B. On the other side of the debate are people like Josh Barro of the Manhattan Institute, who argues that tax preferences are akin to subsidies or expenditures since they can be just as damaging as government spending programs when looking at whether resources are efficiently allocated.
Since I’m a can’t-we-all-get-along, uniter-not-divider kind of person, allow me to suggest that this debate should be set aside. After all, we all agree that tax preferences can lead to inefficient outcomes. So let’s call them “tax distortions” and focus on the real issue, which is how best to eliminate them.
This is an important issue because both the Domenici-Rivlin Task Force and the Chairmen of the Simpson-Bowles Commission have unveiled plans that would reduce or eliminate many of these tax distortions and also lower marginal tax rates. That’s the good news.
The bad news is that their plans result in more revenue going to Washington. In other words, the tax increase resulting from fewer tax distortions is larger than the tax decrease resulting from lower tax rates. To put it bluntly, the plans would increase the overall tax burden.
Some argue that this is an acceptable price to pay. They point out, quite correctly, that lower tax rates will help the economy by improving incentives for productive behavior. And they also are right in arguing that fewer tax distortions will help the economy by improving efficiency. Seems like a win-win situation. What’s not to like?
The problem is on the spending side of the fiscal ledger. The Simpson-Bowles Commission and the Domenici-Rivlin Task Force were charged with figuring out how to reduce red ink. We already know from Congressional Budget Office data, however, that we can balance the budget fairly quickly by limiting the growth of government spending. As the chart illustrates, the deficit disappears by 2016-2017 with a hard freeze and goes away by 2019-2020 if spending increases by two percent each year (and this assumes all the 2001 and 2003 tax cuts are made permanent).
If tax revenue is increased, that simply means that the budget gets balanced at a higher level of spending. And since government spending, at current levels and composition, hinders economic growth by diverting labor and capital to less productive (or unproductive) uses, any proposal that enables higher levels of government spending will further undermine economic performance.
It goes without saying (but I’ll say it anyhow) that this analysis is overly optimistic since it assumes that politicians actually will balance the budget. In all likelihood, as explained in today’s Wall Street Journal, any tax increase would probably be followed by even more spending. So if politicians raise the tax burden, we might still have a deficit of $685 billion in 2020 (CBO’s most-recent estimate assuming all programs are left on auto-pilot), but the overall levels of both spending and taxes would be higher. This modified cartoon captures this real-world effect.
This is why revenue-neutral tax reform, like the flat tax, is the only pro-growth way of eliminating tax distortions.
Fed Can’t Serve Two Masters
Last week Congressman Pence and Senator Corker announced a bill to end the Federal Reserve’s dual mandate of price stability and maximum employment. Before getting into why this is a good start, what exactly is the dual mandate? Section 2a of the Federal Reserve Act, which sets the Fed’s monetary policy objectives, directs the Fed to:
maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
Building upon the notion of the Phillips curve, which suggests an historical relation between inflation and unemployment, some have read 2a as implying that the Fed should pick an inflation-unemployment trade-off that improves social welfare. It is this perceived “trade-off” that dominates the current actions of the Federal Reserve. Quite simply, Fed leaders, such as Bernanke, believe with a little extra inflation we can get more employment.
The problem is that this isn’t so. As soon as policymakers tried to exploit this trade-off, in the 1960s and 1970s, it disappeared. From about 1961 to 1966, it did indeed appear that one could choose a mix of inflation and unemployment. But from 1966 until 1980, when Volcker moved to bring down inflation, inflation and unemployment were positively correlated. It appeared that all we got was more inflation and more unemployment.
Despite the painful experiences of the 1970s, Bernanke seems intent on repeating those mistakes. Which gets to me to the point of removing the dual mandate. It forces the Fed to focus on the only thing it really has any influence over: inflation. It also removes the temptation to exploit an inflation-unemployment trade-off that never existed in the first place.
Now given Bernanke’s views on price stability, eliminating the dual mandate can only be a first step. We ultimately need to remove the discretion of the government to indulge in the Phillips curve fantasy.
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