Archive for March, 2011
Another Day in the Life of the IRS
A previous post of mine at International Liberty addressed the debate over whether Republicans should trim the IRS’s budget. The following case study should convince everyone that the answer is a resounding yes.
First, some background from a Joe Nocera column in the New York Times. The federal government made a rather troubling decision a few years ago to investigate, prosecute, and ultimately imprison a random home-loan borrower named Charlie Engle for the crime of mortgage fraud.
Mr. Engle is far from blameless in this saga, but I noted in another post that it was rather odd that the government would target a nobody while letting all the big fish swim away. This episode certainly paints a picture of a government that has one set of rules for ordinary people, but an entirely different set of rules for the political elite and those who make big campaign contributions to that ruling class.
But I also noted that I’m not a lawyer or legal expert and was unsure about the degree to which the big players actually broke laws, or whether they simply made stupid business decisions (often encouraged by bad government policy).
The most upsetting part of the story, though, is how the government wound up targeting Mr. Engle. It turns out that an IRS agent, Robert Norlander, must have been competing for the IRS’s Bully-of-the-Year Award because here are some of the things he did:
The First Amendment Protects All Speech
Vermont passed a law prohibiting the exchange of a variety of socially important information. Most notably, the law outlaws the transfer of doctors’ prescription history to facilitate drug companies’ one-on-one marketing — a practice known as “detailing” — because it believes detailing drives up brand-name drug sales and, in turn, health care costs. The state knew that the First Amendment prevented it from banning detailing itself, so it made the practice more difficult indirectly.
Yet data collection and transfer are protected speech — think academic research, or the phone book — and government efforts to regulate this type of speech also runs afoul of the First Amendment. See, e.g., Solveig Singleton, Cato Policy Analysis No. 295, “Privacy as Censorship: A Skeptical View of Proposals to Regulate Privacy in the Private Sector” (January 22, 1998). The First Circuit had earlier upheld a similar New Hampshire law, somehow finding that the statute regulates conduct rather than speech and that, in any event, the judiciary should defer to the legislative branch’s judgment.
When the Supreme Court declined to review that case (which cert petition Cato supported), Cato joined the Pacific Legal Foundation and a number of individuals on a brief asking the Second Circuit to split with its First Circuit brethren and reject this dangerous narrowing of protection for free expression. The Second Circuit did just that and 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.”
Vermont filed a petition asking the Supreme Court to review the case, which its adversaries supported in order to more quickly resolve the circuit split. Cato, again joining PLF, filed a brief supporting the respondents, two companies that collect and sell health information and analysis. Our brief argues that the Second Circuit should be affirmed and the Court should abandon the unworkable distinction between commercial and noncommercial speech set out in a 1980 case called Central Hudson Gas & Electric v. Public Service Commission. Specifically, the Central Hudson approach to commercial speech veers into viewpoint discrimination and should be abandoned in favor of strict scrutiny because innovative and valuable commercial expression deserves full First Amendment protection.
The Supreme Court will hear argument in this new case out of Vermont, Sorrell v. IMS Health, on April 26. Thanks to legal associate Caitlyn McCarthy for her help with Cato’s brief and this blog post.
What Are Republicans Thinking?!?
I posted recently at International Liberty about the stunning political incompetence of Republican Senators, who reportedly are willing to give Obama an increase in the debt limit in exchange for a vote (yes, just a vote) on a balanced budget amendment.
As I explained, there is no way they can get the necessary two-thirds support to approve an amendment, so why trade a meaningless and symbolic vote on a BBA for meaningful and real approval of more borrowing authority for Obama? My analogy yesterday was that this was like trading an all-star baseball player for a utility infielder in the minor leagues.
I did acknowledge that forcing a vote on a BBA was a worthwhile endeavor, but said that the GOP has that power anyhow, so why trade away something valuable to get something you already can get for free?
Little did I realize that Republicans already did force a vote on the balanced budget amendment. Less than one month ago, on March 2, Senator Lee of Utah got a vote on a “Sense of the Senate” resolution in favor of a balanced budget amendment. Senator Lee’s resolution received 58 votes, which is nice, but an actual amendment would need a two-thirds supermajority, so this test vote demonstrated that there is no way to approve an amendment this year.
I’m glad Senator Lee proposed his resolution. I’m glad Senators were forced to go on the record.
But I’m mystified, flabbergasted, and stunned that Republicans apparently are willing to give Obama a bigger debt limit in exchange for something they already got.
Returning to our baseball analogy, this would be like the Yankees giving Derek Jeter to the Red Sox in exchange for a player they already have, such as Alex Rodriguez. I imagine New York sportswriters would be dumbfounded by such stupidity and would rip the team’s management to shreds. So that gives you an idea of how I feel about what’s happening in Washington.
As I noted in my earlier post, I’ll soon write about the fiscal reforms fiscal conservatives should demand in exchange for a higher debt limit.
“To Declare [Kinetic Military Action]“
Recently, I’ve been blogging over at the Washington Examiner‘s lively “Beltway Confidential” site, mostly on the subject of congressional war powers and President Obama’s Libyan adventure. Today’s post, “Obama Makes ‘Kinetic Military Action’ on the English Language” has a little fun with the administration’s wordgames and the legal rationales behind them. Other posts and a column on the subject are here, here, and here.
Today also brings a pair of columns–in the Wall Street Journal and the Washington Post, respectively–from conservative luminaries defending the notion that Obama has the constitutional power to bomb Libya without congressional authorization. Yoo, the legal architect of George W. Bush’s Terror Presidency, chides Tea Party Republicans like Jason Chaffetz of Utah and Justin Amash of Michigan for questioning Obama’s authority to launch a nondefensive war:
Their praiseworthy opposition to the growth of federal powers at home misleads them to resist Washington’s indispensable role abroad. They mistakenly read the 18th-century constitutional text through a modern lens—for example, understanding “declare war” to mean “start war.” When the Constitution was written, a declaration of war served diplomatic notice about a change in legal relations between nations. It had little to do with launching hostilities. In the century before the Constitution, for example, Great Britain fought numerous major conflicts but declared war only once beforehand.
Similarly, in the Post, David B. Rivkin, Jr., and Lee A. Casey write:
As commander in chief, the president has the authority to determine when and how U.S. forces are used…. When the Constitution was adopted, the power to “declare war” was not equivalent to permitting the use of military force.
The president certainly can’t derive the authority to bomb Libya from the commander-in-chief clause. As Hamilton explained in Federalist 69, that provision merely indicates that the president is the “first General and admiral” of US military forces. Important as they are, generals and admirals don’t get to decide whether and with whom we go to war.
It’s more common for presidentialists to combine a broad reading of Article II, sec. 1′s “executive Power” with an exceptionally narrow interpretation of Article I, sec. 8′s congressional power “to declare War,” to conclude that the president can start wars, leaving it up to Congress to make it official if they so choose.
One problem with that view is that virtually no one from the Founding Generation seems to have understood the clause in that way. For example, James Wilson told the Pennsylvania ratifying convention that ‘‘this system will not hurry us into war; it is calculated to guard against it. It will not be in the power of a single man, or a single body of men, to involve us in such distress; for the important power in declaring war is vested in the legislature at large.’’ Pierce Butler, like Wilson, had been a delegate to the Philadelphia Convention, and–to the dismay of some delegates–had actually argued for vesting the power to go to war in the president. Yet during the ratification debates, Butler assured the South Carolina legislature that the proposed constitution prevented the president from starting wars: ‘‘Some gentlemen [i.e., Butler himself] were inclined to give this power to the President; but it was objected to, as throwing into his hands the influence of a monarch, having an opportunity of involving his country in a war whenever he wished to promote her destruction.’’
The Economy Tanked but, Hey, Wealth Inequality Declined
I just read through a new report from the Federal Reserve, “Surveying the Aftermath of the Storm: Changes in Family Finances from 2007 to 2009,” on how the Great Recession of 2007–2009 impacted the balance sheets of American households. The short and unsurprising answer is: very negatively. The average net worth of U.S. households fell by nearly 20 percent between 2007 and 2009.
A less intuitive finding was that the more wealthy households took a bigger hit, not just in dollars but in percentage of wealth. As the survey put it, there were “progressively larger decreases at the higher percentiles” of net wealth.
The survey also found progressively larger declines in income during the recession. The higher a household’s income in 2007, the steeper the decline on average by 2009. As the survey put it:
On the whole, events of the 2007–09 period tended to have an equalizing effect on income, although most of the changes in income were relatively modest. All the measures of income change presented here suggest that income increased for families with income below the 2007 median and income fell for families with income near or above the 2007 median.
The reason for the decline in inequality during the downturn isn’t all that mysterious, I suppose. Households with higher net worth tend to have more invested in stocks and real estate, which both took a big hit. And, as the report explained, their income is more dependent on capital gains, and farm, business, and self-employment income, which all fluctuate more with the business cycle.
Still, it is kind of jarring to see that even during a recession, income rose for families in the lower half of the income spectrum and fell for those in the top half. The curse of “rising inequality” and the rich getting richer at the supposed expense of the poor was temporarily suspended from 2007 to 2009, but at the cost of the deepest downturn since the Great Depression.
If forced to choose between a deep recession and rising inequality, I would gladly accept the latter.
This Week in Government Failure
Over at Downsizing the Federal Government, we focused on the following issues this week:
- Sen. Rand Paul introduces a practical, common sense budget that recognizes that the federal government’s growth has become unsustainable, and thus a threat to our economic well-being and future living standards.
- According to the Congressional Budget Office, the president’s latest budget proposal would once again leave “our people” with a “mountain of debt.”
- It would be nice if the latest example of FAA bungling woke Congress up to the idea of privatizing our nation’s air traffic control system.
- Instead of tinkering with federal welfare programs, let’s have a public discussion and debate over the fundamental justness and desirability of letting Washington dictate how to meet the needs of the less fortunate.
- Electric vehicle subsidies: The Obama administration apparently believes that it possesses the unique foresight to optimally plan the economy.
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Bonuses for Prosecutors?
A Colorado district attorney is offering bonuses to prosecutors who score a lot of convictions. This is an awful policy that reinforces bad incentives that are already commonly found in law enforcement. That is, the rewards and commendations typically go to those who bring in the big cases. And that encourages a win-at-all-cost mentality to get ahead. The agents who scrupulously respect the constitutional rights of suspects and witnesses do not usually get awards for that—so the wrong people tend to rise to the top.
Even conservative and libertarian writers can get carried away with the idea of bringing market concepts into the government sphere. It would be a nightmare, for example, to give IRS agents a percentage of the money they collect from taxpayers.
For a sensible view of the qualities we should want to see in a prosecutor, read this address by former U.S. attorney general Robert H. Jackson, reprinted in my book, In the Name of Justice.
(H/T to Instapundit for the news story).
Friday Links
- When is an entitlement not an entitlement, but a command? When a federal judge contradicts herself, of course.
- As the Arab League’s influence over its own member states wanes, of course they support the creation of an international no-fly zone over Libya.
- Of course, there’s really no such thing as a “Social Security trust fund.”
- Should the United States and Saudi Arabia remain allies? Of course—but Washington should probably re-think the terms of the partnership.
- Of course, when George W. Bush was president, you couldn’t go anywhere in Washington without seeing an anti-war protest. Where have they all gone?
End Federal Welfare – Don’t Mend It
Rep. Jim Jordan (R-OH), the chairman of the conservative House Republican Study Committee, recently introduced “The Welfare Reform Act of 2011.” The legislation’s two key components are the imposition of work requirements on food stamps recipients and the capping of total spending for 77 welfare programs at 2007 levels (adjusted for inflation going forward) when unemployment drops below 6.5 percent.
From the RSC press release:
Congressional Republicans and President Bill Clinton enacted reforms in 1996 that required beneficiaries of a new welfare program (TANF) to either work or prepare for a job. President Clinton triumphantly declared these reforms would “end welfare as we know it,” and in fact millions of families have since moved off the TANF rolls and begun to provide for themselves.
Still, TANF is only 1 of 77 federal programs that provide benefits specifically to poor and low-income Americans. Despite the success of these reforms, combined state and federal welfare spending has almost doubled since 1996. Since President Lyndon Johnson declared a War on Poverty in 1964, Americans have spent around $16 trillion on means-tested welfare. We will spend another $10 trillion over the next decade based on recent projections. Even with all these resources devoted to assistance for the poor, poverty is higher today than it was in the 1970s.
The bold text is my emphasis. I emphasized it because I have a hard time calling the reform of one welfare program a “success” when dozens of other federal welfare programs more than took its place. In my opinion, it’s analogous to winning a battle but losing the war – badly. Or, in keeping with the military theme, it was a Pyrrhic victory.
The aftermath of TANF is one reason why I’m not enthusiastic about the RSC’s legislation. Assuming the bill becomes law (it won’t anytime soon), will the scope of federal government’s powers have become more limited? Will the now commonplace attitude that the federal government exists to provide for us at our neighbor’s expense begin to recede? Will the tangled mess that is the relationship between the federal government and the states be unsnarled?
While I don’t take issue with the House conservatives’ desire to rein in welfare spending and limit the pathologies that the food stamp program engenders, it’s disappointing that the propriety of the federal government’s role in providing welfare remains virtually unchallenged on Capitol Hill.
The designers of the Constitution gave the federal government a tidy, defined list of powers – everything else was to be left to the states or to the people. Yes, that set-up has gradually been eviscerated. Yes, the federal government isn’t going to return to its more constrained origins in the near future. However, across the country there is renewed interest in reinstituting limits on federal power. Thus, there is hope for the long-term.
Policymakers who claim to share that interest would better serve this long-term hope by introducing legislation that returns powers the federal government has assumed to the states. Instead of tinkering with federal welfare programs, let’s have the public discussion and debate over the fundamental justness and desirability of letting Washington dictate how to meet the needs of the less fortunate.
[See these Cato essays (here, here, and here) for more on federal welfare programs and why both taxpayers and those in need would be better off if they were abolished. See this Cato essay for more on the desirability of fiscal federalism.]
Federal Reserve to Hold Press Conferences
Today Federal Reserve Chair Ben Bernanke announced he would hold four annual press conferences, after select meetings of the Federal Open Market Committee. The first such meeting will be on April 27 and will be webcast.
While I generally haven’t been a fan of Bernanke’s policy decisions, many of his “process” decisions, such as holding these press conferences, have been moves in the right direction of greater Fed communication with the public. The Fed took some bold moves during and since the financial crisis — often without a word to the public. Indeed, it is interesting that this announcement comes only a few days after the Supreme Court refused to hear the appeal of the Bloomberg suit demanding Fed disclosure of banks assisted during the crisis.
It remains to be seen, however, if these press briefings provide any real substance or explanation of the Fed’s actions. After all, I don’t think Bernanke’s appearance on “60 Minutes” really changed anyone’s mind. But then again, the interview was fairly devoid of actual substance. For these future press briefings to have any real value, the reporters involved are going to have to ask tough, insightful questions, rather than the fluff Bernanke is used to.
Then perhaps the real problem with the Fed’s communication strategy is that it has been only one-way. By now we all know that Bernanke didn’t want to be the Fed chair that oversaw “Great Depression II,” or that he’s just a simple guy from Dillon, SC. But how about some sense that Bernanke is not just lecturing, but listening? Where’s the evidence that he understands the squeeze that rising food and gas prices put on the middle class? Where’s the evidence that he gets that the “Phillips Curve” isn’t real?
I am going to hold out for the best. Maybe these briefings will provide some substance where previous appearances have not.
New Jersey Canceled for Lack of Funds
New Jersey is broke. In an effort to get the state back on its financial feet, governor Chris Christie has made across-the-board cuts–including cuts to public school spending. This week, a judge ruled that his school cuts are unconstitutional, in light of state supreme court precedents dating back decades.
Basically, New Jersey’s highest court has ruled that the state must spend a fantastically large sum of money in order to meet its constitutional requirement of providing a “thorough and efficient” school system.
Slight problem: by definition, a system that spends outrageous sums of money for outcomes that are merely “thorough” cannot also be “efficient.” The courts seem to have resolved this logical contradiction by ignoring the word efficient. So now they just demand that the state spend more money on public schools, while acknowledging how futile that is. In Judge Doyne’s words:
Despite spending levels that meet or exceed virtually every state in the country, and that saw a significant increase… from 2000 to 2008, our “at-risk” children are now moving further from proficiency.
Spending more on public schools will do one thing for the state, though: bankrupt it. Unless something changes soon, we could well see the Detroitification of New Jersey: an exodus of residents fleeing failed government services and rising taxes, creating a death spiral as the shrinking tax base exacerbates the fiscal problems and perpetuates the exodus.
The only way that I can see for New Jersey to survive the court-mandated burden of its public school systems is to provide families and taxpayers with an alternative to them.
The state legislature is currently considering a k-12 school choice program that would subsidize private school tuition for poor kids by giving businesses a tax break if they donate to non-profit scholarship organizations. Florida has a program like this and it saves taxpayers $1.49 for every dollar it reduces tax revenues. That’s because monopoly public schooling is so much less efficient (there’s that word again) than parent-chosen private schooling.
If the state doesn’t enact this program–and make it large enough to make a difference… fogettaboutit
Graduating Law Students – Come Work for Liberty!
For almost two year now, Cato has been running a highly successful legal associate program. Talented recent law school grads have come to work for us during the time that their law firms have “deferred” their start dates (from a few months to a full year), with commensurate stipends. The firm deferral phenomenon seems to be mostly played out as firms have adjusted their employment policies, but some law schools are now picking up the slack by creating post-grad fellowships with similar conditions.
Now that we’re again approaching graduation season, I thought I’d put out another call for more potential legal associates. We can always use the extra brain, you can always use Cato on your resume, and your firms/schools can always use your getting substantive legal experience/counting as “employed” for US News rankings – we all win!
And so, the Cato Institute invites graduating (and recently graduated) law students and others with firm deferrals or post-grad funding – or simply a period of unemployment – to apply to work at our Center for Constitutional Studies. This is an opportunity to assist projects ranging from Supreme Court amicus briefs to policy papers to the Cato Supreme Court Review. Start/end dates are flexible. Interested students and graduates should email a cover letter, resume, transcript, and writing sample, along with any specific details of their availability to Jonathan Blanks at jblanks@cato.org. Note again that this announcement is for a non-paying job: we’ll give you a workspace, good experience, and an entree into the DC policy world, but we will not help your financial bottom line. You don’t have to be a deferred law firm associate or funded by your school, but you do have to be able to afford not being paid by us.
Please feel free to pass the above information to your friends and colleagues.
For information on Cato’s programs for non-graduating students — or graduates who would like to be part of our internship program (which does come with some minimal compensation) – contact Joey Coon at jcoon@cato.org.
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