Archive for April, 2011

Citizens United and Rule by Decree

Posted by John Samples

The Obama Administration seeks to mandate disclosure of campaign spending by government contractors. They wish to do so by an executive order.  The draft of the order may be found here.

The draft order presents one procedural and several substantive issues.

The procedural question concerns consent. Congress and the Federal Election Commission have refused to enact versions of the proposed mandate. The President proposes to do by fiat what Congress refused to do and the FEC has refused to do in implementing Citizens United.

The President claims his authority to issue the mandate from the Constitution and the Federal Property and Administrative Services Act. Yet he cites no specific part of either the Constitution or that law so citizens are left to guess why the president has such power.  Such general gestures toward authority indicate the President assumes his authority to do this should not be controversial.

Appeals to efficiency aside, the President relies on the traditional justifications for campaign finance regulations to support this mandate: disclosure will prevent corruption and the appearance of corruption.

Some of parts of the executive order are confusing to me, at least. The order compels disclosure of campaign contributions by government contractors and their officers. The latter are already disclosed by law. Does this second disclosure offer an administrative or political advantage? Contributions by a contracting business are already illegal so mandating their disclosure makes no sense.

The order also requires contractors and their officers to disclose political spending of the sort at issue in the Citizens United case. In other words, this order responds to Citizens United. An earlier response, the DISCLOSE Act, did not pass Congress. The DISCLOSE Act sought to prohibit independent expenditures by government contractors. This executive order seeks to mandate its disclosure. Progress, of a sort.

But maybe not. One cost of disclosure may be political attacks on a government contractor and its officers. Expecting such attacks, contractors may either refrain from political speech or avoid competing for government business. The latter path would raise taxes (less competition for government services means more spending and thus, more taxes, all things considered).  A government regulation that convinces people to avoid political speech casts a chill on First Amendment rights. It is a reason to invalidate a government rule including an executive order.

Citizens United said independent spending cannot corrupt government. Accordingly, the government can only compel disclosure of independent spending to educate voters who are said to use such information as a shortcut to evaluate the positions of a candidate. Are voters actually likely to seek out such information about the officers of a government contractor?

The executive order seems concerned more with corruption, the possibility that contractors will exchange contributions or political spending for government contracts. But the Court has denied that independent expenditures can corrupt. So the order would seem to require disclosure of spending that is already disclosed and disclosure of spending that cannot be constitutionally required.

Campaign finance regulations are mostly about seeking a political advantage. The politics of this order are transparent. Last year several people argued that most major corporations do business with the United States. Hence, the DISCLOSE Act prohibited independent expenditures by government contractors to overturn Citizens United without direct confronting the Court. This executive order seeks a different path to the same end. The administration hopes that disclosure of spending will raises the costs of participating enough that many businesses will stay clear of the 2012 election.  If not, disclosure might “encourage” contractors to give to the Obama campaign if everyone expects the President to win re-election.

In many ways, the presidential fiat should be the most troubling aspect of all this.  The President is legislating here contrary to Article I of the Constitution which vests the legislative authority in Congress. The rule of law fits uneasily with rule by decree.

See also this comment on the order by Hans von Spakovsky.  Sen. Mitch McConnell denounces the proposed order. Will that be enough to shoot down this trial balloon?

Public Choice and Spending Cuts

Posted by Caleb O. Brown

The Institute for Humane Studies Learn Liberty project continues to offer clear-headed analysis in video form. The latest effort features Ben Powell of Suffolk University explaining the concept of concentrated benefits and diffuse costs in the context of ongoing budget fights.

Cato recently produced two short videos on complementary aspects of the budget fights. For a more detailed treatment of many aspects of public choice, get your free (cheap!) copy of Cato’s excellent book, Government Failure: A Primer in Public Choice.

Thursday Links

Posted by George Scoville

No Profile in Courage Here, Either

Posted by Neal McCluskey

Yesterday, speaking at Facebook headquarters, President Obama assessed the guts of Rep. Paul Ryan (R-Wisc.) and other congressional Republicans and concluded that their deficit reduction plan isn’t “particularly courageous.” That might be accurate – their plan lacks specificity and could target a lot more for elimination — but it’s pretty rich for the President to throw out such a conclusion. After all, his whole strategy appears to be the bankruptingly lame-but-safe crying of doom for cute kids and other supposedly defenseless people no matter what the size of the proposed cut to a social program or how ineffective the program has been. That, and the constant lamentation that “the rich” – a small and therefore electorally weak group of voters – don’t pay their fair share. (And the constitutionality of federal programs? That doesn’t even get a mention.)

Representative of this cowardly course is the President’s mantra about “investing” more in education-related programs despite blaring evidence that the programs don’t work or, as is the case with federal student aid, actually make the problem they’re supposed to solve much worse. But the President wants votes — like most politicians, he wants lots of people to think he’s giving them great stuff for free – so he’s not doing the mildly courageous thing and telling people “look, these programs don’t work, we have a titanic debt, and I’m going to cut things that might sound good but aren’t.” No, he’s doing things like going to community colleges and, in front of cheering groups of students, talking about mean Republicans and how he wants to protect students just like them by keeping the federal dollars flowing.

That’s no profile in courage, nor is it a responsible way to deal with the federal government’s gigantic problems.

Senator Corker Explains His Plan to Cap Spending and Reduce the Fiscal Burden of Government

Posted by Daniel J. Mitchell

America is in fiscal peril in the short run because of a 10-year spending binge by Bush and Obama and in the long run because of a toxic combination of entitlement programs and demographics.

Congressman Paul Ryan has introduced a budget plan to address America’s fiscal crisis, but Senator Reid and President Obama have summarily rejected his proposal, so it appears the United States will continue to drift in the wrong direction.

Something is needed to compel action. One might think that such an impetus would have been provided by the recent decision by Standard & Poor’s to downgrade the fiscal outlook for the United States. But this development hasn’t affected the spending culture in Washington.

But there is hope. Senator Corker has legislation that would force Congress to act — and automatically impose fiscal discipline if they don’t. His bill caps — and then slowly reduces — government spending as a share of national economic output (gross domestic product).

I’ve already written about the merits of this proposal, including an explanation of the all-important enforcement mechanism of sequestration (automatic spending cuts). Here’s Senator Corker’s description of his plan, as delivered at a Cato Institute conference on the Economic Impact of Government Spending.

To build on the Senator’s comments, there are two things that deserve special emphasis.

  1. He correctly understands that the problem is the size of government. As explained in this video, spending is the problem and deficits are a symptom of that problem.

    Unfortunately, many policy makers focus on the budget deficit, which often makes them susceptible to misguided policies such as higher taxes. At best, such an approach merely substitutes one bad way of financing federal spending with another bad way of financing federal spending. And it’s much more likely that higher taxes will simply lead to more spending, thus exacerbating the real problem.

  2. Senator Corker’s legislation has a real enforcement mechanism. If Congress fails to produce a budget that meets the annual spending cap, there is a “sequester” provision that automatically takes a slice out of almost every federal program.

    Modeled after a similar provision in the successful Gramm-Rudman-Hollings law of the 1980s, this sequester puts real teeth in the CAP Act and ensures that the burden of government spending actually would be reduced.

Some people complain that Senator Corker’s plan is too timid and that it doesn’t balance the budget by 2021. While it would be desirable to impose additional fiscal restraint, the Tennessee Senator has deliberately chosen a more modest goal in order to attract support from colleagues on the other side of the aisle. And he does have Democratic co-sponsors, something that is critical given the composition of the Senate.

Since I’m just a policy wonk, I’ll leave it to the other people to argue about what’s feasible in the current political environment. My final comment, though, is that we’re on an unsustainable path that will lead to the end of American exceptionalism and turn the United States into a decrepit, European-style welfare state. So I’m not going to complain if someone has a plan that finally moves policy in the right direction, albeit not quite as fast as I prefer.

The Takings Clause Has No Expiration Date II

Posted by Ilya Shapiro

As I wrote last week, a decade ago in Palazzolo v. Rhode Island, the Supreme Court rejected the idea that those who buy property subject to burdensome regulations lose the right the seller otherwise has to challenge those regulations.  The Court ruled that the Takings Clause does not have an “expiration date.”  Sadly, not all government authorities or courts took Palazzolo to heart, and now we have a second such case meriting Cato’s involvement in the span of a week.

In 2000, after the EPA issued a Record of Decision concerning limiting access to a “slough” (a narrow strip of navigable water) on its Superfund National Priorities List, CRV Enterprises began negotiations to buy a parcel of land next to the slough across from a site once occupied by a wood-preserving plant.  CRV hoped to develop that parcel and others it already controlled into a mixed-use development, including a marina, boat slips, restaurants, lodging, storage, sales, and service facilities.  The company eventually bought the land with notice of the EPA’s ROD but the EPA later installed a “sand cap” and “log boom” that obstructed CRV’s access to the slough.

CRV sued the United States in the Court of Federal Claims, which dismissed the case for lack of standing. The Federal Circuit affirmed, finding that CRV’s claim “is barred because [the company] did not own a valid property interest at the time of the alleged regulatory taking.”  The Federal Circuit thus turned two Supreme Court precedents on their head and put that “expiration date” on the Takings Clause.  It did so despite the fact that multiple federal courts have upheld Palazzolo‘s rule and that longstanding California common law recognizes that a littoral (next to water) owner’s access to the shore adjacent to his property is a property right.

Cato, joined by Reason Foundation, the Center for Constitutional Jurisprudence, and the National Federation of Independent Business, filed an amicus brief supporting CRV’s request that the Supreme Court review the Federal Circuit’s decision and reaffirm Palazzolo.  We argue the following: (1) when post-enactment purchasers are per se denied standing to challenge regulation, government power expands at the expense of private property rights; (2) a rule under which pre-enactment owners have superior rights to subsequent title-holders threatens to disrupt real estate markets; (3) the Federal Circuit abrogated the rule of Palazzolo; and (4) this case — viewed in the context of other courts’ rulings — indicates the need for the Supreme Court to settle the spreading confusion about Palazzolo.  Otherwise, the existence of a “post-enactment” rule will create a “massive uncompensated taking” from small developers and investors that would preserve and enhance the rights of large corporations.

Palazzolo put to rest “once and for all the notion that title to property is altered when it changes hands.”  The ability of property owners to challenge government interference with their property is essential to a proper understanding of the Fifth Amendment; the Court must reestablish the principle that transfer of title does not diminish property rights.  Significantly, the Federal Circuit isn’t alone in its misapplication of Palazzolo; the Ninth Circuit in Guggenheim v. City of Goleta (in which Cato also filed a brief) recently issued an opinion severely narrowing Palazzolo‘s scope and deepening a circuit split.

Thanks to legal associate Nick Mosvick and former legal associate Brandon Simmons (acting as our outside counsel in this case) for their work on this case, CRV Enterprises v. United States.

Lobbying Wolves on the Prowl

Posted by Tad DeHaven

The other day I noted that the budget cuts agreed to last week contained lots of familiar faces. Many of the agencies and programs getting a trim were also cut in 1995 in a rescissions package put together by Gingrich Republicans. In the fifteen intervening years, federal spending exploded across the board, which means that an occasional trim job doesn’t accomplish much if the goal is to limit government.

The reason why is that if the scope of government activities isn’t curtailed, the cuts will be short-lived. As long as the agencies and their programs remain, special interests won’t stop agitating Congress to continue, or more likely, increase, funding.

A recent article in The Hill reports that lobbyists are already hard at work:

Groups that advocate for everything from more foreign aid to bolstering the nation’s transportation system saw several of their favorite government programs suffer deep spending cuts in the fiscal year 2011 budget deal.

With millions of dollars now axed from what they consider key federal initiatives, groups are planning to redouble their efforts and lobby to restore as much funding as possible in next year’s budget.

(Note to reporter: A lot of adjectives could be used to describe the spending cuts. “Deep” is not one of them.)

A fellow who lobbies for foreign aid argues that cutting it won’t balance the budget and that “We need to be planting the seeds for future economic prosperity around the world.” It’s true that even eliminating foreign aid wouldn’t balance the budget, but every little bit helps. But what’s striking is his arrogant pronouncement that “we” (taxpayers) need to be forced by the federal government to send our money abroad for the causes he fancies.

A lobbyist with the National League of Cities is relieved that the GOP didn’t get the small cut in local handouts that were originally proposed, but is nonetheless concerned about the “anti-spending climate in Washington”:

‘We’re talking about staff layoffs at the city level. Cities are also going to have completely reorganize their budgets mid-year and prioritize some things out.’

‘In this environment, the numbers from fiscal year 2011 might be the new baseline but our message isn’t going to change,’ Wallace said. ‘We’re focusing on those local programs that create jobs and spur economic growth.’

Cities prioritizing spending? Heaven forbid. Suck more money out of the private sector in order to save bureaucratic deadweight in local government? That doesn’t sound like a recipe for economic growth to me. (See here for more on the problems with federal subsidies to state and local governments.)

Then there are the transportation lobbyists. These folks would probably argue that a giant escalator to nowhere would be a wise use of taxpayer money:

Dean’s group is lamenting spending cuts made to the high-speed rail program, transit security grants as well as funding for “fixed guideway” projects, which include commuter trains, cable cars and ferryboats among other public transit systems.

For the fans of The Simpsons who didn’t catch the escalator reference, see this link for my feelings on government-funded rail projects. (Fans and non-fans should check out these essays on urban transit subsidies and high-speed rail.)

In Washington, it’s the squeaky wheel that gets greased. Lobbyists for government programs exist to make sure that Congress hears their wheel squeaking. Yes, the deck is stacked against those who are forced to foot the bill, but if taxpayers want federal agencies and their programs to get more than a trimming every fifteen years or so, now is the time to make a lot more noise.

Your Tax Dollars at Work (2)

Posted by David Boaz

Public television stations in Washington and elsewhere will be broadcasting live the wedding of Prince William and Catherine Middleton for several hours on Friday, April 29. And if you need more background on the happy couple, they will also broadcast a documentary, “William and Kate: The Royal Wedding,” in the weeks leading up to the big day.

Now some churlish republicans might say that our ancestors fought and died just so we didn’t have to pay attention to the comings and goings of royalty. But I say it’s just this sort of live, breaking-news, current affairs coverage for which we need public broadcasting. Without PBS, where could Americans watch the handsome young prince take the beautiful commoner to be his wife? I mean, other than ABC, NBC, CBS, CNN, Fox, MSNBC, TLC, BBC America, and YouTube?

As they used to say, If PBS doesn’t do it, who will?

AEP v. Connecticut: Global Warming as Political Question

Posted by Walter Olson

Yesterday the U.S. Supreme Court heard oral arguments in American Electric Power v. Connecticut, the massive greenhouse-gas suit. Like the other “big” global warming/climate change suits, this one suffers from a basic and incurable defect: it seeks to undermine the separation of powers established under the U.S. Constitution by inviting the courts to address “political questions” of a sort properly resolved by other branches of government. As Cato’s amicus brief by Ilya Shapiro and Evan Turgeon explained in the case of Comer v. Murphy Oil:

“[W]hile it executes firmly all the judicial powers intrusted to it, the court will carefully abstain from exercising any power that is not strictly judicial in its character, and which is not clearly confided to it by the Constitution.” Muskrat v. United States, 219 U.S. 346, 355 (1911). A dispute is not “judicial in its character” when, among other reasons, the plaintiff does not have “standing” or the claim raises a “political question.” … And the political question doctrine, for which “the appropriateness under our system of government of attributing finality to the action of the political departments and also the lack of satisfactory criteria for a judicial determination are dominant considerations,” Coleman v. Miller, 307 U.S. 433, 454-55 (1939), isolates the judiciary from policy disputes the Constitution assigns to the democratic process.

By its nature, global warming is exactly the sort of policy question traditionally entrusted to the political branches: it is wholly unsuited to individualized justice based on links between particularized emissions and particularized effects, its proposed remedies are much disputed and likely to be the result of inevitably arbitrary compromise, sovereign negotiations with foreign actors play a crucial role, and so forth. As the courts have long recognized, one does not generate a case for judicial action simply by piling atop each other the propositions “something needs to be done” and “the political branches have not done it.” Indeed, the Obama administration itself has more or less invited the Supreme Court to dismiss the action on political-question grounds.

The Cato Institute filed an amicus brief urging the Supreme Court to review the American Electric Power case and then filed another amicus brief on the merits. Anyone interested in how the complexities of the Court’s “political question” doctrine apply in this case should read — in addition to Ilya Shapiro’s blog posts here and here — this new article in the Federalist Society’s publication Engage by Megan L. Brown of Wiley Rein LLP, who has served as Counsel of Record to the Cato Institute in its amicus briefs in this area. Brown provides a thorough explanation of why all three of the major warming suits fail the justiciability test, why Justices Kennedy and Breyer may be worth watching as “swing” votes in AEP, and how the new case affords the court a chance to revisit its problematic pro-regulatory holding in Massachusetts v. EPA (2007). (More from Brown in this Christian Science Monitor op-ed.)

Also worth reading on this subject: Harvard professor Laurence Tribe, by no means known as a general skeptic of environmental regulation, who has assisted the defense side in this litigation and explains some of the reasons in a new Boston Globe op-ed.

Your Tax Dollars at Work (1)

Posted by David Boaz

The District of Columbia pays outside lobbyists hundreds of thousands of dollars, but its top in-house lobbyist, who heads a staff of nine, doesn’t know about them:

The District pays outside lobbyists, who were hired when Adrian M. Fenty (D) served as mayor, but their work has attracted little notice.

U.S. Senate records show that Mitch Butler — a former Interior Department official in the Bush administration — has lobbied on behalf of the District since October 2009 on “public lands issues” and “land development.” Through the end of 2010, the city paid Butler at least $100,000 for his efforts.

Separately, the D.C. Office of the Deputy Mayor for Planning & Economic Development has paid the firm Van Ness Feldman $200,000 since November 2009 for “Anacostia Waterfront Initiative appropriations, St. Elizabeths development matters and federal land transfers,” according to registration forms.

Neither [Del. Eleanor Holmes] Norton nor Janene D. Jackson, the director of the District’s Office of Policy and Legislative Affairs, was aware the city had lobbyists on the payroll until they were informed by a reporter.

Maybe if nobody knows about them, the city could save a few bucks by terminating their contracts. But then again, maybe the best lobbyists are the ones who slip money silently out of the appropriations process and then melt away in the night, drawing no attention to themselves.

Response to Joe Weisenthal’s Critique of My Politico Opinion Piece

Posted by Jagadeesh Gokhale

Yesterday I had an op-ed in Politico suggesting that U.S. lawmakers should consider not raising the federal debt limit (at least for now). I argued that freezing the ceiling would assure investors that the United States is serious about reducing its debt, and that it would serve as a commitment device for lawmakers and President Obama to forge and follow a serious debt-reduction strategy.

A financial website writer named Joe Weisenthal strongly disagreed with my column. He seems to misunderstand several of the points that I was making, and so I offer the following response to his comments:

From Weisenthal’s post:

Another day, another economist advocating that the US default on its debt.

The latest is Jagadeesh Gokhale of the Cato Institute, who has a big piece advocating an immediate freeze of the debt ceiling.

It’s so convoluted, we hardly know where to begin, but let’s just address a few sloppy parts.

Many knowledgeable federal officials, like Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, as well as left-leaning lawmakers, insist that the answer lies in lifting the debt limit. They warn Congress about the dire consequences if it fails to do so. President Barack Obama has chimed in — though he voted against raising it when he was a senator.

They all assert that failing to increase the debt limit could sharply undermine the economic recovery.

But that view could be wrong. A temporarily frozen debt limit could instead signal U.S. lawmakers’ resolve to get our fiscal house in order. It may even reassure investors about long-term U.S. economic prospects.

This line about “reassuring investors” is nonsense. Investors are already reassured, which is why interest rates have only fallen amidst all the squawking from the political class about this “crisis.”

From the start, Weisenthal doesn’t follow my argument. I am not concerned about the state of market confidence today, but what it would be if the debt limit were frozen. The contrarian view that I expressed in my op-ed is that participants would interpret a debt-limit freeze positively, just as they appear to have interpreted the recent downgrade of the U.S. economic outlook by Standard and Poor’s positively — U.S. equities, U.S. treasuries, and the dollar are up less than 48 hours after S&P’s downgrade announcement.

He also misunderstands why interest rates have declined. It is because of the Federal Reserve’s sustained intervention in bond markets, not because there is little investor concern over the United States’ long-term fiscal outlook.

Read the rest of this post »

Why I’m Boycotting PolitiFact

Posted by Michael F. Cannon

Reporters at PolitiFact.com have used me as a resource half a dozen times or so when fact-checking something someone said about health care reform. Sometimes we disagree about where the truth lies, but I’ve always been happy to help. That changed recently, and I should let PolitiFact’s reporters know why.

At the end of each year, PolitiFact sifts through the many claims its reporters have deemed untrue and selects one to be their Lie of the Year. The Lie of the Year award is easily PolitiFact’s biggest publicity-generator. In 2009, they picked Sarah Palin’s “death panels” claim. In 2010, they picked the claim that the new health care law is a “government takeover” of health care.

Looking at those two Lies of the Year together brought a couple of things home for me.

The first is not so much that each of those statements is actually factually true; it is rather that they are true for reasons that PolitiFact failed to consider. PolitiFact’s “death panels” fact-check never considered whether President Obama’s contemporaneous “IMAC” proposal would, under standard principles of administrative law, enable the federal government to ration care as Palin claimed. (In an August 2009 oped for the Detroit Free Press, I explain how the IMAC proposal would do just that.) PolitiFact’s “government takeover” fact-check hung its conclusion on the distinction between “public” vs. “private” health care, without considering whether that distinction might be illusory. (In a January 2011 column for Kaiser Health News, I cite well-respected, non-partisan sources – and even one of President Obama’s own health care advisors – to demonstrate that this distinction is illusory.) Aside from whether they arrived at the truth, each of these fact-checks was woefully incomplete.

Second, PolitiFact’s decision to go further by declaring those statements lies highlights a logical flaw in their Lie of the Year award. For a statement to be a lie, the speaker must know or believe it to be false. In neither the case of “death panels” nor “government takeover” has PolitiFact offered any evidence that the speakers knew or believed their statements to be false. Until PolitiFact offers such evidence, it has no factual basis for calling either statement a lie. Moreover, if PolitiFact’s reporters believe that Sarah Palin et alia believe that what they said was true – and I would be willing to bet good money that they do – then PolitiFact’s reporters know that their past two Lies of the Year aren’t really lies.

I have concluded that the errors in those two fact-checks, plus the fundamental (and rather ironic) error at the heart of PolitiFact’s Lie of the Year award, are serious enough that until PolitiFact addresses them I can no longer serve as a resource for PolitiFact in good conscience. Since January, I have declined maybe four requests for help from PolitiFact reporters, and will politely continue to do so until they address these errors.

Some conservatives think PolitiFact is a left-wing outfit. I don’t think that’s true, and I have defended PolitiFact against that charge. I believe that PolitiFact’s reporters are earnestly doing their best to get at the truth. But there’s a tension between that belief and these errors. Whether PolitiFact recognizes and addresses that tension will tell us a lot about PolitiFact.