Archive for November, 2011
The Christmas Tree Tax Is a Microcosm of What’s Wrong with Constitutional Law
Jim Harper beat me to the punch on the new Christmas tree tax — probably because I initially thought it was a joke — but there’s actually much more to say here beyond the USDA’s claim that it’s not a tax and the general absurdity of the situation. Three quick things:
First, there are obvious Free Exercise and Equal Protection issues here. That is, unless we consider Christmas trees to be wholly secular, this is an obvious burden on the free exercise of Christianity, and one that no other religion faces. Even if it might be reasonable to see Christmas trees as not particularly religious – pine trees played no role in The Greatest Story Ever Told and, e.g., my secular Jewish family always had a traditional Russian New Year’s Tree (which has no ties to Russian Orthodox Christianity) – but do we want courts drawing lines between, say, creches/crucifixes and trees/Santa?
Second, and probably even more important given the times in which we live, where in the Constitution does the federal government get the power to tax the sale of a local agricultural product? Setting aside trees trucked in from out-of-state, there’s no interstate commerce here to regulate. And if it’s a tax (which, again, Ag officials deny) — presumably an excise, which is specified in the Constitution and which courts have construed to be a tax on transactions or privileges – how does assessing it to promote the general welfare or common defense? The administration cites the Commodity Promotion, Research and Information Act of 1996, under which the tax mandatory fee funds a new program to ”enhance the image of Christmas trees and the Christmas tree industry in the United States.” That’s what passes for the general welfare?
Third, even if the tax is a lawful use of federal power, shouldn’t Congress be the body levying it, rather than an agency of the USDA?
I could go on, but this little 15-cent tree tax is a microcosm of what’s wrong with constitutional law, evermore divorced from the Constitution as it is. Yes, under modern doctrine, the Christmas tree tax can be probably justified under either the Commerce Clause or the General Welfare Clause — and Congress can delegate to bureaucrats the power to levy certain “assessments” – but is that the kind of government we signed up for?
h/t Cato legal associate Chaim Gordon
Obama on Record: Supports Internet Regulation
I’m perplexed by the challenge of referring neutrally to legislation moving through Congress dealing with whether or not the government should regulate Internet service. Work with me as I untangle the Standard Federal Obfuscation™ involved here.
The White House has issued a “Statement of Administration Policy” that deals with S.J. Res. 6 (House companion H.J. Res. 37 passed in April.) The bill is a “resolution of disapproval” under the Congressional Review Act. The CRA allows Congress to reject federal regulations for a period of time after they have been finalized. Resolutions like this enjoy expedited procedures in the Senate, making it harder for Senate leadership to stop them moving.
The Federal Communications Commission voted in December to apply public-utility-style regulation to the provision of Internet service. Congress is moving to reject the FCC’s claim of authority using the CRA, and the president has now said he will veto Congress’ resolution that does that.
Well—the obfuscation continues—actually, the Statement of Administration Policy says “[t]he administration” opposes S.J. Res. 6, and, “If the President is presented with S.J. Res. 6, which would not safeguard the free and open Internet, his senior advisers would recommend that he veto the Resolution.”
At some point, it may be an important detail that the president hasn’t promised a veto yet. His advisers have promised to advise him to veto. OK. Whatever. They work for him. It’s a veto threat.
But, but,… Would these regulations safeguard a “free and open Internet”? The statement says, “Federal policy has consistently promoted an Internet that is open and facilitates innovation and investment, protects consumer choice, and enables free speech.” In a sense, that’s true: When the engineers at the Defense Advanced Research Projects Agency created the Internet protocol and when federal policy opened the Internet to commercial use, this made for the open Internet we enjoy today.
But it’s not federal policy driving these values today. It’s the Internet itself—all of us. Tim Lee ably pointed this out some years ago in his paper, “The Durable Internet: Preserving Network Neutrality without Regulation.” The marketplace demands an open Internet. If there are deviations from the “end-to-end principle” that serve the public better, the market will permit them. The Internet is not the government’s to regulate.
Now, some news reporting has things a little backward. Wired‘s Threat Level blog, for example, carries the headline, “Obama Pledges to Veto Anti-Net Neutrality Legislation.” Headlines need to be short, but it could just as easily and accurately read “Obama Pledges to Veto Anti-Regulation Legislation” because the question is not whether the Internet should be open and neutral, but who should ensure that openness and neutrality. Should neutrality be ensured by market forces—ISPs responding to their customers—or by lawyers and bureaucrats in Washington, D.C.?
S.J. Res. 6 would reject the FCC’s claim to regulate the Internet in the name of neutrality. It says nothing about whether or not the Internet should neutral, open, and free. Again, that’s not the government’s call.
Did you follow all that? If you didn’t, you don’t need to. Here’s the summary: President Obama has gone on the record: He supports Internet regulation.
Libertarianism: It Isn’t Just for Books Any More
If you haven’t already visited our new website, Libertarianism.org, you should check it out. And if you have already visited, note that there’s new material going up all the time. One of the most interesting parts of the site for long-time libertarians will be a continuing stream of never-before-seen videos of talks by F. A. Hayek, Milton Friedman, Murray Rothbard, Joan Kennedy Taylor, and more. In his 1983 lecture, Hayek talks about the evolution of morality. In a 1990 talk to the International Society for Individual Liberty, Friedman chides Ayn Rand and Ludwig von Mises for what he considers dogmatism and an absence of humility. I was at that speech, and I remember it generated a lot of discussion afterward.
But there’s more! Weekly columns on the history of libertarian ideas by George H. Smith. Classic essays from Robert Nozick, Julian Simon, and Milton Friedman — not to mention Herbert Spencer, Alexis de Tocqueville, Adam Smith, and Mary Wollstonecraft — on various aspects of liberty. Recommended reading lists on introductory books, libertarian theory, history, and the most incisive critics of libertarianism. And of course I can’t resist recommending my own 20-minute talk, exclusive to Libertarianism.org, “An Introduction to Libertarian Thought,” in our video series Exploring Liberty.
More “Exploring Liberty” videos will be coming soon. Editor Aaron Ross Powell has written an introductory blog post with highlights – but I encourage you to just click over and look around. And over the coming days, weeks, months, and years, we’ll be adding much more to Libertarianism.org, including new videos, books, and essays. If you’d like to stay up to date, we’re on Facebook and Twitter.
Yes, Virginia, There Is a Christmas Tree Tax
Via Heritage’s “The Foundry” blog (and the outraged Facebook posts of former Cato interns), behold the Christmas Tree Tax.
It’s an announcement from the Agriculture Department’s Agriculture Marketing Service that it will be levying a fifteen cent tax on Christmas trees, payable to a new “Christmas Tree Promotion Board.” The tax will raise about $2 million from Christmas tree farmers and importers directly. That money comes indirectly from you.
As noted at The Foundry, the Ag Department claims the fifteen-cents-per-tree “assessment” is “not a tax nor does it yield revenue for the Federal government.” This claim fails both informal and formal analysis.
Informal: Do Christmas tree farmers go to jail if they refuse to pay? Yes. It’s a tax.
Formal: Is it a “non-penal, mandatory payment of money or its equivalent to the extent such payment does not compensate the Federal Government or other payee for a specific benefit conferred directly on the payer”? Bingo. Tax.
The formal definition is from the Taxpayer’s Defense Act, a bill I helped write while a congressional staffer after carefully researching the distinction between taxes and other government revenues, such as fines, legitimate fees, and such.
The Taxpayer’s Defense Act would have barred agencies from establishing or increasing taxes without first getting Congress’ approval. The idea was simple: No taxation without representation. And that idea is violated by the Agriculture Department’s new Christmas Tree Tax.
U.S. v. Jones: The Court’s Search for a Rationale
I attended the Supreme Court’s oral argument in U.S. v. Jones today, the case dealing with the Fourth Amendment constitutionality of using GPS to track individuals’ movements without a warrant. Predicting outcomes is fraught, and you’re getting your money’s worth from the following free observations.
It seemed to me that most members of the Court want to rule that the government does not have free reign to attach GPS devices to cars. Justices Kennedy, Breyer, and Sotomayor, for example, noted the vast consequences if the government were to win the case. Law enforcement could attach tracking devices to people’s overcoats, for example, and monitor their movements throughout society without implicating the Fourth Amendment. Voluble as he often is, Justice Scalia did not say that the Fourth Amendment doesn’t reach GPS because GPS data wasn’t around for the Framers to insulate from government access.
Justice Alito’s thinking seemed to venture the furthest. He noted how insufficient it would be if the Court were to decide the case based on the narrow ground that attaching a GPS device to a car is an unreasonable seizure. Doing so would not account for the vast amount of personal data the government might access without attaching something to a car, clothing, or other property. If not in this case, the Court will soon have to face the (pernicious) third-party doctrine, which holds that a person has no Fourth Amendment interests in information shared with others.
If the Court desires to rule against the government, the one thing it lacks is a rationale for doing so. When it was time for Jones’s counsel to argue, the Justices seemed frustrated not to have a principle on which to base a decision.
Justice Scalia early-on declared his concern with GPS tracking and his dismay that the “reasonable expectation of privacy” test from Katz v. United States (1967) might shrink the zone of privacy the Framers sought to protect in the Fourth Amendment. But he later retreated into a sort of catch-all posture: the Congress can control GPS tracking if it wants. (Jones’s counsel cleverly suggested that there were 535 reasons not to do that.)
Other Justices’ questions danced awkwardly with the “reasonable expectation of privacy” test. Justice Kennedy was equivocal once about whether it would apply. Chief Justice Roberts seemed acutely aware of the Court’s incompetence to make judgments of such broad societal sweep. This is for good reason: there is no way to determine what society thinks, or what is “reasonable” in terms of privacy, when new technologies are applied new ways.
The solution to this conundrum can be found in the Cato Institute’s amicus brief in the Jones case. The Court should not use the “reasonable expectation of privacy” test from Justice Harlan’s Katz concurrence. Rather, it should follow the majority holding, which accorded Fourth Amendment protection to information that Katz had kept private using physical and legal arrangements. The government stands in the same shoes as the general public when it comes to private information—that is, information that can’t be accessed legally or with ordinary perception. When the government accesses information that was otherwise private, those searches and seizures must be reasonable and must almost always be based upon a warrant.
This way of administering the Fourth Amendment is not a snap of the fingers. There will be details to hash out when the Court eventually finds that having a Fourth Amendment interest in information turns on a factual question: whether someone has concealed information about him- or herself.
The biggest impediment to adoption of this rule may be getting lawyers to realize that “reasonable expectation of” is not a prefix required every time they use the word “privacy.”
The Ravages of Antidumping (in a 3.5 Minute Video)
Earlier this year, the Cato Institute published a study of mine titled “Economic Self-Flagellation: How U.S. Antidumping Policy Subverts the National Export Initiative.” The thrust of the paper is that most U.S. antidumping measures restrict and tax the importation of crucial raw materials and intermediate goods used by U.S. producers to make their own final goods. Accordingly, these antidumping measures—imposed for the benefit of one or two or a few firms in less competitive upstream industries—raise the costs of production for downstream U.S. producers and undermine their ability to compete at home and abroad.
The paper contains many statistics and details, and makes a very practical case for antidumping reform. But if you want just the highlights and would prefer to absorb them through a more passive medium, my Cato colleagues Caleb Brown and Austin Bragg have produced an excellent, 3-and-a-half-minute video, which gets straight to the point:
On the other hand, if you can’t get enough original research on U.S. antidumping policy, please visit our growing online library of antidumping resources (most, but not all, of the content there pertains to antidumping policy).
Uh-Oh: Bipartisan Housing Commission Announced
The words “bipartisan” and “commission” usually send a chill down my spine. I felt such a chill when I learned that the Bipartisan Policy Center (BPC) had formed a Housing Commission to “address the long-term challenges facing a struggling housing sector.” My initial reaction was confirmed when I read that it would be chaired by former government officials and politicians of the establishment type:
- Christopher “Kit” Bond – former U.S. senator (R-MO)
- Henry Cisneros – Housing and Urban Development (HUD) secretary under President Bill Clinton
- Mel Martinez – former U.S. senator (R-FL) and HUD secretary under President George W. Bush
- George Mitchell – former Senate majority leader (D-ME) and BPC co-founder
The most disturbing name is Henry Cisneros. Policies implemented by Cisneros’s HUD helped lead to the housing bubble and bust (see this section on Cisneros from a Cato essay on HUD Scandals). What’s next, Dick Cheney on a hunting safety commission?
Christopher “Kit” Bond, former appropriator and proud porker, hangs himself with his statement on the BPC’s website:
Since serving as Missouri’s Governor, and then as a United States Senator, I have worked to be an advocate for improving public housing and advancing community development. Some of my proudest achievements are helping shape housing policy and programs in homelessness, rural housing, public housing, HOPE VI, and affordable housing. None of these successes would have been possible without strong partners on the other side of the aisle.
In fact, my fellow Commission Co-Chair, and former HUD Secretary, Henry Cisneros and I, were referred to in a 1996 Wall Street Journal article as the ‘Odd Couple’ of federal housing policy – a moniker I still wear as a badge of honor. Though it was a different time in our nation’s history, Henry and I were then – as we are now – committed to coming together to address long-ignored problems with immense implications.
The federal government’s abysmal record on housing (see these Cato essays here for more) is a poster child for government failure. But not only does Bond consider his support for these programs to be among his “proudest” achievements, he actually states that collaborating with Cisneros back in the 1990s is a “badge of honor.”
I’m not sure what Mel Martinez has going for him on housing policy other than that his relatively short tenure as HUD secretary under Bush wasn’t marred by scandal like his successor’s, Alphonso Jackson. At least Martinez acknowledges that the Bush administration continued the Clinton administration’s misplaced emphasis on expanding homeownership.
As for George Mitchell, his claim to federal housing policy fame is that he authored the creation of the Low-Income Housing Tax Credit. Here’s what a Cato essay on public housing has to say about the LIHTC:
Another response to the failure of traditional public housing has been the creation of the Low Income Housing Tax Credit in 1986, which currently subsidizes construction or rehabilitation of roughly 70,000 units of low-income housing each year. This is another failed attempt to manipulate markets, and it has a variety of negative effects. For one thing, the structure of the tax credit program encourages the location of projects in particularly low-income areas, thus exacerbating the concentration of poverty in cities, just as traditional public housing did. Also, the method of allocating tax credits to the states results in many subsidies going to areas of the country where few housing affordability problems exist.
Further, the projects built under the LIHTC program have income caps for tenants, which create the same disincentive effects for personal advancement that traditional welfare programs do. Finally, the program essentially functions as a subsidy program for developers. Economists Edward Glaeser and Joseph Gyourko argue that developers effectively pocket the $4 billion or so in annual federal tax credits, while the rents in buildings constructed under the program are generally no lower than they would have been in the absence of the program.
In a nutshell: an establishment commission is planning to “reform the nation’s housing policy by crafting a package of realistic and actionable policy recommendations” for the Beltway establishment’s consideration. Hold onto your wallets, taxpayers.
Trade Law, Trade War, and the Case of Multilayered Wood Flooring from China
Public angst over China’s rise and the threat of populist currency legislation have prompted speculation about a U.S.-China “Trade War.” With the 2012 elections still a whole year away, there is ample opportunity for campaigning politicians to ignite that fuse.
But pyrotechnics aren’t necessary. Rather than a 1930s-style free-for-all, a trade war—if one were to begin—is more likely to be of the lowercase, “rules-based” variety, where trade restrictions are imposed in compliance (or under the pretense of compliance) with global trade rules. Many of the battles would be waged behind the façade of so-called trade remedy laws.
Antidumping and countervailing duty measures are the most commonly invoked forms of “contingent protectionism” permitted under World Trade Organization rules. Those rules allow member governments to maintain and administer national antidumping and countervailing duty laws to remedy—through the imposition of customs duties—the effects of imports determined to be sold at unfairly low prices (antidumping) or determined to be unfairly subsidized by a government (countervailing). But imposing “remedies” under these laws is contingent upon certain conditions being met. Two core conditions are that the administering authorities need to demonstrate that the imports in question are being dumped or subsidized, and that those dumped or subsidized imports are causing or threatening material injury to the domestic industry.
A determination expected tomorrow from the U.S. International Trade Commission offers a case in point. The Commission will vote on the question of whether dumped and subsidized imports of multilayered wood flooring (MLWF) from China are causing or threatening material injury to the U.S. MLWF industry. An affirmative determination could invite Chinese retaliation because the evidence of a causal connection between imports from China and injury to the U.S. industry is weak to non-existent. If the U.S. government is going to stretch or skirt the evidentiary standards established by domestic law and international treaty, the Chinese government may be inclined to do the same. (In fact, the Chinese government is already alleged to have broken those rules – and the United States is seeking recourse in the WTO – when it imposed antidumping and countervailing duties on U.S. chicken exports in 2010.)
Multilayered wood flooring is a floor covering product—used for the same practical purposes as hardwood flooring, tile, and carpeting. Sales of MLWF are highly dependent upon new housing starts and remodeling expenditures, both of which tanked when the housing bubble burst in 2008. As a result of U.S. housing starts declining from a seasonally adjusted annual rate of 1.1 million units in February 2008 to just 505,000 units in March 2009, as well as the large decline in remodeling activity over the same period, MLWF industry prices, shipments, revenues, and profits declined substantially, as did imports from China and other countries. But since the second quarter of 2009, housing starts have been stable at about 600,000 units per year and remodeling activity has been steady at about $112 billion per year.
Importantly for the injury analysis, this period of stability in housing starts and renovation activity enables an analysis that isolates the effects of imports on the domestic industry. And what is evident is that, as domestic consumption of MLWF picked up, so did U.S. imports, producer shipments, revenues, and profits (from -9.9 percent in 2009 to -1.0 percent in the first half of 2011). Increasing volumes of subject imports correlate with an improving condition of the domestic industry. Throughout the period of stabilization, prices in the U.S. market have been steady, as well. If imports from China were to have an injurious effect on the domestic industry, one would expect the increasing volume of such imports to drive down prices in the United States. But imports from China, on average, do not underprice domestic MLWF. According to the public version of the USITC Staff Report in this matter:
…prices for MLWF from China were below those for U.S.-produced MLWF in 60 of 110 instances; margins of underselling ranged from 1.5 to 36.4 percent. In the remaining 50 instances, prices for MLWF imported from China were above those for U.S.-produced MLWF; margins of overselling ranged from 0.1 to 30.4 percent.
An affirmative finding of injurious dumping and/or subsidization from the USITC tomorrow would require disregard of these and other crucial facts and would warrant closer scrutiny of the antidumping regime. It would also invite similar actions from Chinese trade remedies authorities and then who know where it will lead.
Reefer Madness Here and Abroad
In the New York Times, Ethan Nadelmann takes aim at the “reefer madness” of the Obama administration, which despite promises and expectations has stepped up the war on marijuana:
But over the past year, federal authorities appear to have done everything in their power to undermine state and local regulation of medical marijuana and to create uncertainty, fear and confusion among those in the industry. The president needs to reassert himself to ensure that his original policy is implemented.
The Treasury Department has forced banks to close accounts of medical marijuana businesses operating legally under state law. The Internal Revenue Service has required dispensary owners to pay punitive taxes required of no other businesses. The Bureau of Alcohol, Tobacco, Firearms and Explosives recently ruled that state-sanctioned medical marijuana patients can not purchase firearms.
United States attorneys have also sent letters to local officials, coinciding with the adoption or implementation of state medical marijuana regulatory legislation, stressing their authority to prosecute all marijuana offenses. Prosecutors have threatened to seize the property of landlords and put them behind bars for renting to marijuana dispensaries. The United States attorney in San Diego, Laura E. Duffy, has promised to start targeting media outlets that run dispensaries’ ads.
President Obama has not publicly announced a shift in his views on medical marijuana, but his administration seems to be declaring one by fiat.
As bad as the drug war is in the United States, it’s wreaking far more havoc in Mexico and Latin America. That’s why the Cato Institute is holding an all-day conference next week, “Ending the War on Drugs,” featuring:
- the former president of Brazil
- the former drug czar of India
- the former foreign minister of Mexico
- the author of Cato’s study on decriminalization in Portugal
- the Speaker of the House in Uruguay
- plus video presentations by former Secretary of State George Shultz and former Mexican President Vicente Fox.
Check it out. And be there November 15.
When Is $28,000 per Pupil Not Enough?
…Apparently, when you are the District of Columbia public school system. The Washington Times reports today on a candle-light vigil beseeching the federal government for extra cash for new computers. The group organizing the vigil, OurDC, shares this “horror story” from former technology teacher Toval Rolston:
I’ve been in D.C. schools where the computers are so antiquated that you can’t even download a basic pdf file; our children don’t have the tools to compete in today’s high tech world.
The twin implications of this plea are that DC schools are underfunded and that more money will actually be spent wisely. The first statement is false and the second is decidedly unlikely. The last time I calculated total spending on K-12 education in DC, from the official budget documents, it came out to over $28,000 per pupil (the linked post points to a spreadsheet with all the numbers).
How do you manage to spend $28,000 per pupil and not manage to keep your computer hardware up to date? Or, for that matter, manage to have among the worst academic performance in the country? Maybe, just maybe, it has something to do with not being capable, or perhaps even inclined, to spend the money on what works.
The Washington Times, by the way, points out that OurDC is headquartered at the same address as the Service Employees International Union. Go figure.
Of Presumptions and Principles
Having quickly read the D.C. Circuit’s ObamaCare decision that came down this morning upholding the statute’s individual mandate, I’m struck by this line from Judge Laurence Silberman’s majority opinion:
No Supreme Court case has ever held or implied that Congress’s Commerce Clause authority is limited to individuals who are presently engaging in an activity involving, or substantially affecting, interstate commerce.
I should think that in a free society, living under a Constitution of enumerated and thus limited powers, that the point should be stated precisely the other way around, namely:
No Supreme Court case has ever held or implied that Congress’s Commerce Clause authority reaches individuals who are not presently engaging in an activity involving, or substantially affecting, interstate commerce.
In other words, is America’s fundamental political principle “everything that is not given (to the government) is retained,” or is it rather “everything that is not retained is given”? What is the presumption, and who has the burden of proof? Since the New Deal Court’s “constitutional revolution,” of course, we’ve lived, unfortunately, under the latter, and paid the price.
D.C. Circuit Paves Way for Supreme Court Consideration of Obamacare
Today the D.C. Circuit ruled that the individual mandate is a constitutional exercise of federal power under the Commerce Clause. Senior Judge Laurence Silberman (Reagan appointee) wrote the opinion, which was joined by Senior Judge Harry Edwards (Carter appointee). Judge Brett Kavanaugh (George W. Bush appointee) dissented on jurisdictional grounds without reaching the merits, finding that the Anti-Injunction Act barred the suit until the individual mandate/penalty/tax goes into effect. (The case is Seven-Sky v. Holder; see Cato’s amicus brief and a quick breakdown by Tim Sandefur.)
Sure, this is a loss for our side but it’s not a big deal. Every development in the Obamacare litigation has been anticlimactic since the Eleventh Circuit split with the Sixth, guaranteeing that the Supreme Court would take the case. Today’s ruling, therefore, is notable not so much for its result — upholding the individual mandate — as for the reluctance with which it reached it.
After acknowledging the novelty of the power Congress is asserting, the court expressed concern at “the Government’s failure to advance any clear doctrinal principles limiting congressional mandates that any American purchase any product or service in interstate commerce.” In other words, the majority saw itself bound by the Supreme Court’s broad reading of federal power under the Commerce Clause but felt “discomfort” at reaching a result that seemingly had no bounds.
Indeed, the government has yet to tell any court in any of the cases what it cannot do under the guise of regulating interstate commerce. But rest assured that the Supreme Court will ask again, and soon — it considers the myriad cert petitions later this week. And if the high court is as unsatisfied with the government’s jurisprudential non-theory as the D.C. Circuit was, it will not hesitate to strike down this expansion of federal power.
“Federalism is more than an exercise in setting the boundary between different institutions of government for their own integrity,” wrote Justice Kennedy for a unanimous Court last term (United States v. Bond). “Federalism secures the freedom of the individual.”
I am confident that the Supreme Court will not allow this unprecedented invasion of individual liberty.
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
